Batavia Kill Watershed District v. Charles O. Desch, Inc.

The Batavia Kill Watershed District (Batavia) (plaintiff) contracted with Charles O. Desch, Inc. (Desch) (defendant) for Desch to build a dam. The Travelers Indemnity Company (Travelers) (defendant) issued a performance bond guaranteeing Desch’s work. Batavia subsequently terminated the contract due to Desch’s alleged poor work. Batavia also asked Travelers to complete the contract, which Travelers refused to do. Desch then sued Batavia, seeking payment. Batavia did not assert a counterclaim for damages but did assert as an affirmative defense that Batavia was justified in terminating the contract because Desch would not perform the job on time. Batavia declined the supreme court’s invitation to implead Travelers. The jury found that Desch incurred $63,000 in damages but also found that Batavia’s termination of the contract was justified by Desch’s untimely performance. Batavia then sued Desch and Travelers, seeking damages caused by Desch’s nonperformance. Desch and Travelers moved for summary judgment on numerous grounds, including waiver. Batavia cross-moved for summary judgment against Desch with respect to Batavia’s justification for terminating the contract. The supreme court granted summary judgment to Desch and Travelers, ruling that Batavia waived its claims by failing to assert them in a counterclaim in Desch’s suit against Batavia. Batavia appealed.