Opinion
No. 102748/2007.
11-10-2016
STONE CAST, INC., Plaintiff, v. FEDERAL INSURANCE COMPANY, Defendant.
DECISION AND ORDER
I. BACKGROUND
Plaintiff, a subcontractor at a construction project on premises owned by nonparty Fordham University, sues to recover $452,574.00 with interest against defendant surety under a Payment Bond issued by defendant and posted by third party defendant Jeffrey M. Brown Associates, Inc., the general contractor for the construction project. Plaintiff moves for summary judgment on plaintiff's claim against defendant and, even if the court denies that relief, for summary judgment dismissing defendant's affirmative defenses. C.P.L.R. §§ 3211(b), 3212(b). If the court grants summary judgment on plaintiff's claim, plaintiff moves to sever the third party action so that plaintiff may enter a judgment against defendant in the main action. C.P.L.R. § 603. While defendant opposes summary judgment on plaintiff's claim, no party opposes a severance. Plaintiff also moves for attorneys' fees and expenses, but presents no contractual or other legal or evidentiary support for fees or expenses. Mount Vernon City School Dist. v. Nova Cas. Co., 19 NY3d 28, 39 (2012) ; Baker v. Health Mgt. Sys., 98 N.Y.2d 80, 88 (2002).
Defendant cross-moves for summary judgment dismissing the complaint or, alternatively, for partial summary judgment dismissing plaintiff's claim for prejudgment interest, C.P.L.R. § 3212(b) and (e), to compel disclosure, C.P.L.R. § 3124, and for penalties due to plaintiff's nondisclosure. C.P.L.R. § 3126. For the reasons explained below, the court grants plaintiff's motion for summary judgment to the extent set forth, C.P.L.R. §§ 3211(b), 3212(b), and denies defendant's cross-motion except insofar as it seeks to limit the accrual of prejudgment interest before the date from which the court awards plaintiff interest. C.P.L.R. §§ 3124, 3126, 3212(b) and (e).
II. SUMMARY JUDGMENT STANDARDS
To obtain summary judgment, the moving parties must make a prima facie showing of entitlement to judgment as a matter of law, through admissible evidence eliminating all material issues of fact. C.P.L.R. § 3212(b) ; Voss v. Netherlands Ins. Co., 22 NY3d 728, 734 (2014) ; Vega v. Restani Constr. Corp., 18 NY3d 499, 503 (2012) ; Smalls v. AJI Indus., Inc., 10 NY3d 733, 735 (2008) ; JMD Holding Corp. v. Congress Fin. Corp., 4 NY3d 373, 384 (2005). Only if the moving parties satisfy this standard, does the burden shift to the opposing parties to rebut that prima facie showing, by producing evidence, in admissible form, sufficient to require a trial of material factual issues. De Lourdes Torres v. Jones, 26 NY3d 742, 763 (2016) ; Morales v. D & A Food Serv., 10 NY3d 911, 913 (2008) ; Hyman v. Queens County Bancorp, Inc., 3 NY3d 743, 744 (2004). At oral argument, the parties stipulated that the Payment Bond was authenticated and admissible for the purposes of summary judgment.
In evaluating the evidence for purposes of the motions, the court construes the evidence in the light most favorable to the opposing parties. De Lourdes Torres v. Jones, 26 NY3d at 763 ; Vega v. Restani Constr. Corp., 18 NY3d at 503 ; Cahill v. Triborough Bridge & Tunnel Auth., 4 NY3d 35, 37 (2004). If the moving parties fail to meet their initial burden, the court must deny them summary judgment despite any insufficiency in the opposition. Voss v. Netherlands Ins. Co., 22 NY3d at 734 ; Vega v. Restani Constr. Corp., 18 NY3d at 503 ; Smalls v. AJI Indus., Inc., 10 NY3d at 735 ; JMD Holding Corp. v. Congress Fin. Corp., 4 NY3d at 384.
III. THE MOTION AND CROSS–MOTION FOR SUMMARY JUDGMENT
A. The United States Bankruptcy Court's Findings
An action by Jeffrey M. Brown Associates against Stone Cast, Inc., plaintiff here, was removed to the United States Bankruptcy Court for the Southern District of New York. The Bankruptcy Court (Drain, J.) in a decision dated November 17, 2014, after a trial, found in favor of Stone Cast on its claim against Jeffrey M. Brown Associates that it owed Stone Cast $452,211.20 for labor, materials, and equipment under their construction contract and awarded that amount "plus post-judgment interest at the federal rate" to Stone Cast. Aff. of Mark W. Couch Ex. B, at 22. After considering the parties' subsequent positions on prejudgment interest under C.P.L.R. §§ 5001 and 5004, the Bankruptcy Court entered a judgment in favor of Stone Cast and against Jeffrey M. Brown Associates for $762,168.58, "which includes pre-judgment interest at the rate of 9%," plus postjudgment interest at the federal rate. Id. Ex. C.
B. Defendant's Affirmative Defenses
In a stipulation dated September 17, 2015, defendant agreed that it was not pursuing its second affirmative defense that plaintiff's work under the construction contract was defective, entitling defendant to an offset, or its third affirmative defense that plaintiff was overpaid. Defendant does not oppose dismissal of those defenses.
Nor does defendant demonstrate how the complaint fails to state a claim, defendant's first affirmative defense, nor support with evidence its fourth affirmative defense that plaintiff's work was delayed or fifth affirmative defense that plaintiff was not owed money for its work. Ullmann–Schneider v. Lacher & Lovell–Taylor, P .C., 121 AD3d 415, 416 (1st Dept 2014) ; 308 W. 78th Corp. v. 360 9 Rest, LLC, 115 AD3d 464, 465 (1st Dep't 2014) ; 518 E. 80th St. Co. v. Smith, 251 A.D.2d 215, 216 (1st Dep't 1998). See Boies, Schiller & Flexner LLP v. Modell, 129 AD3d 533, 535 (1st Dep't 2015). The Bankruptcy Court's findings definitively establish that its award of damages is only for work completely, adequately, and timely performed, delivered, and stored, without deficiency, defect, or delay.
Consequently, the court grants plaintiff summary judgment dismissing defendant's first through fifth affirmative defenses. C.P.L.R. §§ 3211(b), 3212(b). Summary judgment dismissing defendant's sixth affirmative defense that plaintiff has failed to comply with the Payment Bond's notice requirements turns on whether plaintiff has demonstrated its compliance with those requirements and defendant has raised any material factual dispute regarding plaintiff's compliance.
C. The Payment Bond's Notice Requirements
In the Payment Bond, defendant and Jeffrey M. Brown Associates bound themselves to pay the owner of the construction project premises, nonparty Fordham University, for labor, materials, and equipment furnished for use in the performance of the construction contract. Under the Payment Bond ¶ 4.1, defendant owed no obligation to plaintiff until it (1) provided notice to defendant and (2) "sent a copy, or notice thereof to the Owner." Couch Aff. Ex. A, at 2; Aff. of Richard E. Towle Ex. A, at 2. Thus plaintiff's notice to both defendant and the owner is a condition precedent to defendant's obligation to pay plaintiff. Tishman Westwide Constr. LLC v. ASF Glass, Inc., 33 AD3d 539, 539–40 (1st Dep't 2006) ; 153 Hudson Dev., LLC v. DiNunno, 8 AD3d 77, 78 (1st Dep't 2004) ; Clurman v. Bronfman, 245 A.D.2d 201, 202 (1st Dep't 1997). See 135 E. 57th St. LLC v. Daffy's Inc., 91 AD3d 1, 5 (1st Dep't 2011) ; Provident Loan Socy. of N.Y. v. 190 E. 72nd St. Corp., 78 AD3d 501, 502 (1st Dep't 2010). Since the Payment Bond does not require notice before commencing an action on the bond, notice is not a condition precedent to suit as defendant contends. Walter Concrete Constr. Corp. v. Lederle Labs., 99 N.Y.2d 603, 605 (2003).
The Payment Bond ¶ 12 provides:
Notice to the Surety, the Owner or the Contractor shall be mailed or delivered to the address shown on the signature page. Actual receipt of the notice by Surety, the Owner or the Contractor, however accomplished, shall be sufficient compliance as of the date received at the address shown on the signature page.
Couch Aff. Ex. A, at 2. When plaintiff has satisfied ¶ 4.1's notice requirement, ¶ 6 requires defendant to respond to the claim within 45 days and pay any undisputed amounts.
A failure to comply with notice conditions precedent warrants dismissal of a claim under the Payment Bond against the surety. High Tech Enters. & Elec. Servs. of NY, Inc. v. Expert Elec., Inc ., 113 AD3d 546, 547 (1st Dep't 2014) ; 150 Nassau Assoc., LLC v. Liberty Mut. Ins. Co., 36 AD3d 489, 489 (1st Dep't 2007) ; Tishman Westwide Constr. LLC v. ASF Glass, Inc., 33 AD3d at 539–40 ; 153 Hudson Dev., LLC v. DiNunno, 8 AD3d at 78. See HRH Constr., LLC v. Elite Constr. of NY, Inc., 36 AD3d 560, 560 (1st Dep't 2007). Here, only plaintiff's attorney attests that plaintiff sent notices to defendant and the owner by certified mail, without demonstrating plaintiff's regular mailing procedures or the attorney's personal knowledge of the mailing. Hermitage Ins. Co. v. Zaidman, 107 AD3d 579, 580 (1st Dep't 2013) ; Tower Ins. Co. of N.Y. v. Ray & Frank Liq. Store, Inc., 104 AD3d 482, 483 (1st Dep't 2013) ; People v. Torres, 99 AD3d 429, 430 (1st Dep't 2012). See Badio v. Liberty Mut. Fire Ins. Co., 12 AD3d 229, 229 (1st Dep't 2004). His authentication of the return receipts by defendant and the owner of the mailings, returned to plaintiff's attorney, the author of the mailed notices, by the United States Postal Service, however, demonstrate receipt of notice by defendant December 7, 2006, and by the owner February 24, 2015, after the litigation in the Bankruptcy Court concluded. E.g., Tower Ins. Co. of N.Y. v. Ray & Frank Liq. Store, Inc., 104 AD3d at 483 ; Matter of State Farm Mut. Auto, Ins. co (Kankam), 3 AD3d 418, 419 (1st Dep't 2004) ; 8112–24 18th Ave. Realty Corp. v. Aetna Cas. & Sur. Co., 240 A.D.2d 287, 288 (1st Dep't 1997) ; Gelbart v. Borglum, 195 A.D.2d 416, 416 (1st Dep't 1993).
Although defendant's witness, its Manager of its Surety Claims Department, does not attest that he was employed by defendant in 2006, he denies that defendant received the notice dated November 29, 2006, that plaintiff shows was received December 7, 2006. Insofar as defendant's witness raises a factual issue regarding receipt of this notice, however, the witness resolves the issue by admitting that "Federal actually received notice that a claim was being made by Plaintiff Stone Cast under the Bond ... in or about March 2007," when plaintiff served its complaint in this action. Towle Aff. ¶ 8. No one demonstrates on personal knowledge or with admissible documentary evidence that this notice did not satisfy the Payment Bond's requirements.
Nor does anyone demonstrate on personal knowledge or with admissible documentary evidence that the owner did not receive notice from plaintiff February 24, 2015, as required by the Payment Bond. Therefore the court grants plaintiff summary judgment on plaintiff's claim and denies defendant summary judgment dismissing plaintiff's claim for $452,211.20 based on the Bankruptcy Court's findings and plaintiff's satisfaction of the notice requirements under the Payment Bond as of February 24, 2015.
D. Prejudgment Interest
Defendant contends that plaintiff is not entitled to prejudgment interest added to the judgment against Jeffrey M. Brown Associates because the Payment Bond only covered labor, materials, and equipment. As set forth above, however, the Bankruptcy Court awarded damages only for labor, materials, and equipment. In breach of contract actions such as that one for breach of the construction contract and this one for breach of the Payment Bond, the court must award interest to make the injured party whole. C.P.L.R. § 5001(a) ; J. D'Addario & Co., Inc. v. Embassy Indus., Inc., 20 NY3d 113, 117–18 (2012) ; St. Stephen Community A.M.E. Church v. 2131 8th Ave ., LLC, 123 AD3d 642, 642–43 (1st Dep't 2014).
Preverdict interest "shall be computed from the earliest ascertainable date the cause of action existed." C.P.L.R. § 5001(b) ; Village of Ilion v. County of Herkimer, 23 NY3d 812, 821 (2014). See Levin & Glasser, P.C. v. Kenmore Prop., LLC, 70 AD3d 443, 445 (1st Dep't 2010). Defendant admits that it received its required notice of plaintiff's claim under the Payment Bond at least by March 2007 and does not dispute that the owner received its required notice of plaintiff's claim February 24, 2015. Based on these facts, the earliest date defendant was obligated to pay plaintiff under the Payment Bond was April 10, 2015, 45 days after the owner received plaintiff's notice. Singer Asset Fin. Co., LLC v. Melvin, 33 AD3d 355, 359 (1st Dep't 2006) ; Siegel v. Laric Entertainment Corp., 307 AD3d 861, 863 (1st Dep't 2003).
The Payment Bond does not impose a time limit on when plaintiff may notify the owner of plaintiff's claim. Therefore plaintiff did not forfeit any right to payment by its delayed notice. Any time after defendant answered the complaint served in March 2007, before February 24, 2015, defendant was free to move for summary judgment dismissing plaintiff's claim due to its failure to satisfy the condition precedent of notice to the owner. High Tech Enters. & Elec. Servs. of NY, Inc. v. Expert Elec., Inc., 113 AD3d at 547 ; 150 Nassau Assoc., LLC v. Liberty Mut. Ins. Co., 36 AD3d at 489 ; Tishman Westwide Constr. LLC v. ASF Glass, Inc., 33 AD3d at 539–40 ; 153 Hudson Dev., LLC v. DiNunno, 8 AD3d at 78.
Since the Bankruptcy Court's decision was November 17, 2014, well before the earliest date defendant was obligated to pay plaintiff under the Payment Bond, April 10, 2015, defendant's further contention that interest did not accrue until conclusion of the action between Jeffrey M. Brown Associates and plaintiff is academic. Plaintiff may not claim interest on plaintiff's claim against defendant from the same date as awarded on its claim against Jeffrey M. Brown Associates or even from the conclusion of that action, because defendant was not a party to that action, City of New York v. Welsbach Elec. Corp., 9 NY3d 124, 128 (2007) ; Juan C. v. Cortines, 89 N.Y.2d 659, 672 (1997) ; Green v. Santa Fe Indus., 70 N.Y.2d 244, 253 (1987) ; Commercial Ins. Co. of Newark, N.J. v. Popadich, 68 AD3d 401, 401 (1st Dep't 2009), and it adjudicated Jeffrey M. Brown Associates' default under the construction contract, not defendant's default under the Payment Bond. Weiss v. Manfredi, 83 N.Y.2d 974, 976 (1994) ; Lind v. Greenspan, 101 AD3d 428, 429 (1st Dep't 2012) ; World City Found., Inc. v. Sachetti, 48 AD3d 213, 213–14 (1st Dep't 2008). Most importantly, plaintiff had not at that point satisfied a condition precedent to plaintiff's claim against defendant and established defendant's default. NY Gen. Oblig. Law § 7–301 ; Tri–City Elec. Co. v. People, 63 N.Y.2d 969, 971 (1984) ; Casa Redimix Concrete Corp. v. Cosner Constr. Corp., 68 AD3d 673, 673 (1st Dep't 2009).
On the other hand, defendant has not contended, let alone shown, that it was unaware when plaintiff provided notice to the owner and that any such unawareness would toll the accrual of interest. The Payment Bond nowhere requires plaintiff to notify defendant that plaintiff has provided notice of plaintiff's claim to the owner. Since plaintiff has established that both defendant and the owner received the requisite notice as of February 24, 2015, and raises no factual issue regarding earlier satisfaction of the notice requirements, that date determines when interest accrues on the Bankruptcy Court's damages award of $452,211.20 for labor, materials, and equipment under the construction contract.
IV. PENALTIES FOR NONDISCLOSURE
Defendant seeks penalties for plaintiff's failure to attend a preliminary conference July 9, 2015, and respond to defendant's disclosure demands. While plaintiff's service of its motion for summary judgment the day before the preliminary conference stayed disclosure, C.P.L.R. § 3214(b) ; New Hampshire Ins. Co. v. Clearwater Ins. Co., 129 AD3d 99, 107 (1st Dep't 2015) ; Jeffers v. American Univ. of Antigua, 125 AD3d 440, 442 (1st Dep't 2015), the motion did not excuse plaintiff's appearance at the conference. Plaintiff's attorney has, however, shown that he notified defendant of his intention not to appear due to a medical procedure and of his service of the motion, which defendant likely would not have received by regular mail service before the conference the next day.
Disclosure now has been stayed since July 2015, yet no party has sought to lift the stay. C.P.L.R. § 3214(b) ; Polsky v. 145 Hudson St. Assoc., L.P., 100 AD3d 426, 426 (1st Dep't 2012). Even were the court to address plaintiff's failure to respond to defendant's disclosure demands, absent a prior motion to compel the same disclosure and an unstayed order to respond, and absent defendant's showing of plaintiff's willful and unjustified refusal to respond, the court simply would compel a response, without any penalty. C.P.L.R. § 3124 ; Tantaro v. All My Children, Inc., 133 AD3d 491, 491 (1st Dep't 2015) ; Double Fortune Prop. Invs. Corp. v. Gordon, 55 AD3d 406, 407 (1st Dep't 2008) ; Barber v. Ford Motor Co., 250 AD3d 552, 552–53 (1st Dep't 1998). See Williams v. Shiva Ambulette Serv. Inc., 102 AD3d 598, 599 (1st Dep't 2013) ; Perez v. City of New York, 95 AD3d 675, 677 (1st Dep't 2012) ; Henderson–Jones v. City of New York, 87 AD3d 498, 504 (1st Dep't 2011) ; Bryant v. New York City Hous. Auth., 69 AD3d 488, 489 (1st Dep't 2010).
Even regarding plaintiff's nonappearance at the conference, defendant fails to show more than a non-willful misunderstanding by plaintiff's attorney or to show defendant's costs incurred due to the attorney's conduct, particularly when defendant concedes that the preliminary conference proceeded July 9, 2015, and the court entered a Preliminary Conference Order without plaintiff's appearance. Although plaintiff also failed appear for its deposition pursuant to a notice for the deposition May 5, 2015, plaintiff again has shown that it notified defendant of its intention not to appear and its objection to questioning about issues already determined, and defendant nowhere shows that it incurred any expenses for the deposition that did not proceed.
Consequently, now that the court has determined plaintiff's motion and defendant's cross-motion for summary judgment, the court perceives no need for defendant's further disclosure from plaintiff, nor any basis for a penalty for past nondisclosure, and denies defendant's motion for either form of relief. C.P.L.R. §§ 3124, 3126. Although defendant complains about nonparties' nondisclosure, defendant's motion does not seek to compel any nonparty's disclosure, nor to hold any nonparty in contempt for nondisclosure.
V. CONCLUSION
As set forth above, the court grants plaintiff's motion for summary judgment dismissing defendant's affirmative defenses and summary judgment for $452,211.20 in favor of plaintiff and against defendant, with interest at 9% per year from April 10, 2015, based on the Bankruptcy Court's findings and plaintiff's satisfaction of the Payment Bond's notice requirements as of February 24, 2015. C.P .L.R. §§ 3211(b), 3212(b), 5001(a) and (b). Since this order disposes of the main action, the court grants plaintiff's motion to sever the third party action without opposition. C.P.L.R. § 603 ; Maron v. Magnetic Constr. Group Corp., 128 AD3d 426, 427 (1st Dep't 2015) ; Haber v. Cohen, 74 AD3d 1281, 1282 (2d Dep't 2010). See Herskovitz v. Klein, 91 AD3d 598, 599 (2d Dep't 2012). The court denies any further relief sought by plaintiff's motion and denies defendant's cross-motion in all respects, except to the extent of limiting the accrual of prejudgment interest before April 10, 2015. C.P.L.R. §§ 3124, 3126, 3212(b) and (e).