F.M.C. Constr., LLC v Heartland Dev. Corp.

[*1] F.M.C. Constr., LLC v Heartland Dev. Corp. 2009 NY Slip Op 50683(U) [23 Misc 3d 1109(A)] Decided on April 14, 2009 Supreme Court, Richmond County McMahon, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on April 14, 2009
Supreme Court, Richmond County

F.M.C. Construction, LLC, Plaintiff,

against

Heartland Development Corporation a/k/a HEARTLAND DEVELOPMENT CORP., PARK TYSEN ASSOCIATES, LLC, THE STOP & SHOP SUPERMARKET COMPANY, LLC, TRAVELERS CASUALTY AND SURETY COMPANY OF AMERICA, WESTCHESTER FIRE INSURANCE COMPANY, and JOHN AND JANE DOES 1 THROUGH 100, the names John and Jane Doe being fictitious, representing the holders of mortgages or liens the subject premises, the true names of, defendants being currently unknown, Defendants.



THE STOP & SHOP SUPERMARKET COMPANY LLC, individually and as subrogee of B & G ELECTRICAL CONTRACTORS OF NY INC., GATOFF MECHANICAL GROUP, INC. and ARTISAN TILE & MARBLE COMPANY, individually and in a representative capacity on behalf of all beneficiaries of a Lien Law Article 3-A Trust, Plaintiff, -

against

HEARTLAND DEVELOPMENT CO., INC., RONALD PALUMBO, WARREN EVANKO, JAMES MACKEY and RICHARD HAGUE, Defendants.



103025/2005

Judith N. McMahon, J.

FMC Construction, LLC [hereinafter FMC], commenced this action to recover money allegedly not paid after it performed, inter alia, concrete work at the defendant's premises. The work was performed in connection with the construction of a Super Stop & Shop Supermarket [hereinafter "Stop & Shop"] located at 2712-2754 Hylan Boulevard, Staten Island, New York. In accordance with the contract with Stop & Shop, general contractor, Heartland Development Corporation [hereinafter "Heartland"] obtained a bond, entitled "Payment and Performance Bond" from co-defendant Westchester Fire Insurance Company [hereinafter "Westchester Fire"]. The contract explicitly required that

"[b]efore commencing the Work hereunder, Contractor shall, as part of the Contract Sum, or as indicated in the Bidding Requirement, furnish Owner a performance bond in the full amount of the Contract Sum, on forms approved by Owner, Owner's lender(s) and Owner's title insurers, with Owner named as obligee, issued by a bonding company qualified to do business in the state where the Project Site is located and which is satisfactory to Owner".

Heartland obtained the bond, in the amount of $11,550,000.00 (the amount of the original contract price), and named co-defendant, owners of the property, Park Tysen Associates, LLC as the Obligee. The "Payment and Performance Bond" specifically indicates, in relevant part, that

NOW, THEREFORE, THE CONDITION OF THIS OBLIGATION IS SUCH that if construction of the Building and Site Improvement Work shall be substantially completed (as "substantial completion" is defined in Section 7.1 of the Lease) in accordance with the terms of the Lease on or before June 19, 2005, and if all payments due for labor, materials and equipment furnished or used in the construction of the Building shall be paid when due under the Contract, then this obligation shall terminate and be null and void; otherwise this obligation shall remain in full force and effect, subject, however, to the following conditions: [*2]

1.This obligation shall terminate in its entirety upon substantial completion (i) of the Building (as "substantial completion" is defined in Section 7.1 of the Lease) and (ii) the Site Improvement Work, on or before June 19, 2005 and in accordance with the terms of the Lease, and payment for all amounts due under the Contract for labor, materials and equipment furnished or used in the performance thereof.

2.No right or action may be commenced under this Bond as a result of any failure by Contractor to pay any amount due for labor, materials or equipment furnished or used in the construction of the Building unless (a) a lien has been filed against the Property by the subcontractor or material supplier claiming payment to be due, and (b) thirty (30) days have elapsed following notice from Obligee to Principal of such lien and such lien has not been removed by bonding or otherwise.

3.No right or action may be commenced under this Bond by any person, corporation or other entity other than the Obligee named herein or its successors or assigns.

4.No right or action maybe commenced under this Bond, as a result of any failure by Contractor to pay any amounts due for labor, materials or equipment furnished or used in the construction of the Building after one (1) year from the date of the last services, labor or materials were provided under the Contract.

At present, defendant Westchester Fire is moving for summary judgment against plaintiff FMC's fourth cause of action and cross claims, based upon claims asserted against the aforementioned Bond on the ground that such Bond does not provide for the claims of the subcontractors. In addition, co-defendant Active Sprinkler, as subcontractor at the site, is moving, pursuant to CPLR § 3025(b) for leave to serve and file an amended summons and complaint to increase the ad damnum clause.

I.Active Sprinkler's motion to amend [Motion 009]

CPLR § 3025(b) provides that the court "shall freely' grant a party leave to amend a pleading upon terms as may be just" (Commissioners of State Ins. Fund v. Service Unlimited USA, 50 AD3d 1085, 1085 [2d. Dept., 2008]). Further, it is well settled that "motions for leave to amend a pleading should be granted unless the proposed amendment is palpably insufficient or patently devoid of merit, or where the delay in seeking the amendment would cause prejudice or surprise'" (id.; Lucido v Mancuso, 49 AD3d 220, 222 [2d Dept., 2008]). With respect to increasing the ad damnum clause, such amendment is permissible where there is no prejudice to any party (id.).

Here, defendant Westchester Fire's motion seeks to increase the ad damnum clause from $129,814.00 to $238,145.30, due to an alleged six month delay in beginning the project. The defendants who oppose the motion, do not present any evidence that the proposed amendment is palpably insufficient or patently devoid of merit, and have further failed to establish any prejudice. It is clear that "[w]hile the amended ad damnum clause will expose the defendant to additional liability, this fact, standing alone, does not amount to prejudice" (Commissioners of State Ins. Fund v. Service Unlimited, USA, Inc., 50 AD3d 1085, 1085 [2d Dept., 2008]). As a result, defendant Active Sprinkler's motion for leave to serve and file and amended summons and complaint is hereby granted.

II.Westchester Fire's motion for summary judgment [Motion 012] [*3]

It is well settled that summary judgment is a drastic remedy that should not be granted where there is any doubt as to the existence of triable issues of fact (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]; Herrin v Airborne Freight Corp., 301 AD2d 500, 500-501 [2d Dept 2003]). The party moving for summary judgment bears the initial burden of establishing its right to judgment as a matter of law (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]), and in this regard " the evidence is to be viewed in a light most favorable to the party opposing the motion, giving [it] the benefit of every favorable inference" (Cortale v Educational Testing Serv., 251 AD2d 528, 531 [2d Dept 1998]). Nevertheless, upon a prima facie showing by the moving party, it is incumbent upon the party opposing the motion to produce "evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial of the action" (Alvarez v Prospect Hosp., 68 NY2d at 324; Zuckerman v City of New York, 49 NY2d 557, 562 [1980]).

It is well settled in New York that a surety bond shall be interpreted like other contracts which gives effect to the intention of the parties (United States v. Suffolk Constr. Co., No. 95 Civ. 9363(SS), 1998 WL 241628, at *3 (S.D.NY May 12, 1998); First Merchant Bank v. Village Roadshow Pictures, No. 01 Civ. 8370, 2002 U.S. Dist LEXIS 11769, at *35 [S.D.NY June 28, 2002]; Grafton v. U.S. Fidelity & Guaranty Co., 227 NY 162, 166 [1919]). As a result, in New York, the interpretation of any contract requires that "the document must be read as a whole to determine the parties' purpose and intent, giving a practical interpretation to the language employed so that the parties' reasonable expectations are realized" (Aivaliotis v. Continental Broker-Dealer Corp., 30 AD3d 446, 447 [2d Dept., 2006]; Snug Harbor Sq. Venture v Never Home Laundry, 252 AD2d 520, 521 [2d Dept., 1998]). "When the terms of a written contract are clear and unambiguous, the intent of the parties must be found within the four corners of the contract" (Franklin Apt. Assoc., Inc. v. Westbrook Tenants Corp., 43 AD3d 860, 861 [2d Dept., 2007]). With specific reference to payment and performance bonds, whether a third party has a right to sue under the bond "depends upon whether [the bond] manifests a clear intent to grant that right to the third party" (Novak & Co. v. Travelers Indemnity Co., 56 AD2d 418, 423 [2d Dept., 1997]).

The determination of whether a contract is unambiguous is an issue of law for the courts to decide and will be determined based upon whether the language provides "a definite and precise meaning, unattended by danger of misconception in the purport of the [agreement] itself, and concerning which there is no reasonable basis for a difference of opinion" (Computer Assocs. Int'l Inc. v. US Balloon Mfg. Co., 10 AD3d 699, 700 [2d Dept., 2004]l; Breed v Insurance Co. of N. Am., 46 NY2d 351, 355 [1978]). Further, "extrinsic evidence of the parties' intent may be considered only if the agreement is ambiguous" and at which point "any ambiguity in contract language must be construed against the party that drafted the contract" (Computer Assocs. Int'l, Inc. v. U.S. Balloon Mfg. Co., 10 AD3d 699, 700 [2d Dept., 2004]).

Here, the court finds no ambiguity in the parties intentions in drafting the "Payment and Performance Bond". While the Bond only specifically names Park Tysen, as Obligee; Heartland, as Principal; and Westchester Fire, as surety; the language in the Bond clearly [*4]indicates an intention to cover claims by subcontractors. Specifically, in the second paragraph of the enumerated conditions the Bond provides three conditions and even references subcontractors, namely "[n]o right or action may be commenced under this Bond as a result of any failure by Contractor to pay any amount due for labor, materials or equipment furnished or used in the construction of the Building unless (a) a lien has been filed against the Property by the subcontractor or material supplier claiming payment to be due . . .". This paragraph provides a right of subcontractors or material suppliers who are alleging payment was not made pursuant to the contract, to file a claim against the Bond if they (a) file a lien against the property and (b) 30 days have elapsed since notice was provided to the Obligee.

Here, there is no question that the subcontractors placed mechanics liens on the property and the notice requirements are not at issue. As such, claims made by the subcontractors, specifically plaintiff FMC, in this matter against the Bond are precisely the claims the Bond was drafted and intended to cover. Westchester Fire's argument that this language only seeks to protect Park Tysen is contradicted by the language of the Bond. The Bond clearly references subcontractors, the methods for them to recover and was issued to protect their nonpayment as well.

Moreover, the court, in interpreting the four corners of the contract' finds the name of the Bond illustrative as it is titled "Payment and Performance Bond". New York law recognizes a distinction between the two types of bonds and oddly enough this Bond was named to include both areas of recovery. Namely, a performance bond is "an undertaking by the surety to be financially responsible to the owner if the surety's principal does not faithfully perform all of its obligations under the contract" (NY Jur. 2d § 86:9; Novak & Co. v. Travelers Indemnity Co., 56 AD2d 418, 423 [2d Dept., 1997]). This is essentially defendant Westchester Fire's argument that the Bond is limited to protect Park Tysen in the event that Heartland does not comply with the terms of the contract.

In contrast, a "payment bond" (also known as a "labor and material payment bond") is defined as "an undertaking by the surety to compensate unpaid subcontractors, suppliers, and others who furnish labor and material to the surety's principal in connection with the bonded project" and "while a performance bond is intended solely for the owner's protection, a payment bond protects multiple potential claimants who may be forced to compete with each other for a share of the penal sum" (id.; Scaccia v. Hartford Fire Ins. Co., 212 AD2d 225 [2d Dept., 2005]).

Here, the parties clearly intended to cover both options by entitling the Bond as a "Payment and Performance Bond" (emphasis added). Additionally, when the Bond is read in conjunction with the contract, which required the contractor to furnish the owner both a performance bond and labor and material payment bond, the intent to protect subcontractors is evident (Varlotta Constr. Corp. v. Sette-Juliano Constr. Corp., 234 AD2d 183, 183 [1st Dept., 1996]).

Lastly, even considering defendant Westchester Fire's argument that only Park Tysen can recover under the Bond, this court, as with any contract, must resolve any ambiguity against the drafter, which here is Westchester Fire (Computer Assocs. Int'l Inc. [*5]v. US Balloon Mfg. Co., 10 AD3d 699, 700 [2d Dept., 2004]l; Breed v Insurance Co. of N. Am., 46 NY2d 351, 355 [1978]). As a result of the foregoing, defendant Westchester Fire's motion for summary judgment seeking to dismiss plaintiff's causes of action on the Bond is hereby denied.

The court finds any and all additional claims without merit.

Accordingly, it is

ORDERED that Motion 009, by defendant Active Fire, to amend the summons and complaint is hereby granted, and it is further

ORDERED that defendant Active Fire is hereby directed to serve the amended summons and complaint within twenty (20) days, and it is further

ORDERED that Motion 012, by defendant Westchester Fire, for summary judgment is hereby denied, and it is further

ORDERED that any and all additional relief requested is hereby denied.

THIS IS THE DECISION AND ORDER OF THE COURT.

Date: April 14, 2009E N T E R,

_______________________________________

Hon. Judith N. McMahon

Justice of the Supreme Court