New York City Hous. Auth. v Olympia Constr., Inc.

[*1] New York City Hous. Auth. v Olympia Constr., Inc. 2004 NY Slip Op 50912(U) Decided on June 28, 2004 Supreme Court, New York County 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 June 28, 2004
Supreme Court, New York County

NEW YORK CITY HOUSING AUTHORITY, Plaintiff,

against

OLYMPIA CONSTRUCTION, INC. And RLI INSURANCE COMPANY, Defendants.



404315/2001

Karla Moskowitz, J.

In this action, a surety seeks indemnification for sums it paid following default on a bid bond. Defendant/third party plaintiff RLI Insurance Company ("RLI") moves for summary judgment (CPLR 3212) in the amount of $179,975, plus interest, costs and attorney's fees against defendant Olympia Construction, Inc. ("Olympia") and third party defendant Vasilios Tsimitras ("Tsimitras") and for a default judgment (CPLR 3215) against defendant Ekaterina Feretzanis ("Feretzanis").

RLI is a surety that issues various types of civil bonds for construction projects. Tsimitras is a principal of Olympia, a construction company. To induce RLI to issue bonds on behalf of Olympia, in December 1999 Olympia, Tsimitras, Feretzanis and others executed an Agreement of Indemnity" (the "Indemnity Agreement"). Paragraph Second of the Indemnity Agreement provided, in pertinent part: [*2] The indemnitors shall . . . indemnify the Surety from and against any and all liability for losses and/or expenses of whatsoever kind or nature (including, but not limited to, interest, court costs and counsel fees) and from and against any and all such losses and/or expenses which the Surety may sustain and incur: (1) By reason of having executed or procured the execution of the Bonds, (2) By reason of the failure of the indemnitors to perform or comply with the covenants and conditions of the Agreement or (3) In enforcing any of the covenants.

* * * In the event of any payment by the Surety, the indemnitors further agree that in any accounting between the Surety and the indemnitors, the Surety shall be entitled to charge for any and all disbursements made by it in good faith in and about the matters herein contemplated by the Agreement under the belief that it is or was liable for the sums and amounts so disbursed, or that it was necessary or expedient to make such disbursements, whether or not such liability, necessity or expediency existed; and that the vouchers or other evidence of any such payments made by the Surety shall be prima facie evidence of the fact and amount of the liability to the Surety.

Additionally, paragraph Twelfth provided as follows: Unless otherwise specifically agreed in writing, the Surety may decline to execute any Bond and the Indemnitors agree to make no claim to the contrary in consideration of the Surety's receiving this Agreement; and if the Surety shall execute a Bid or Proposal Bond, it shall have the right to decline to execute any and all of the bonds that may be required in connection with any award that may be made under the proposal for which the Bid or Proposal Bond is given and such declination shall not diminish or alter the liability that may arise by reason of having executed the Bid or Proposal Bond.

In March 2000, Olympia submitted a bid proposal of $3,599,500 to perform exterior brickwork on a development plaintiff New York City Housing Authority ("NYCHA") owned. Thereafter, in March 2000, RLI issued a bid bond (the "Bid Bond") in favor of Olympia in connection with the proposal. The Bid Bond provided that Olympia and RLI were "held and firmly bound to the [NYCHA]. . . in the penal sum of 5% of amount bid," payable in the event that Olympia failed to furnish a performance bond and a separate payment bond within five days of notification that it was the winning bidder.

By letter of June 21, 2001, the NYCHA accepted Olympia's bid and demanded that it post the additional bonds the Bid Bond required. However, because one of Olympia's co-indemnitors under the Indemnity Agreement, Zanis Construction Corp. ("Zanis"), had defaulted on another construction project, RLI requested that Olympia post collateral as a condition to the issuance of any

further bonds. Olympia failed to do so and RLI declined to post the bonds the NYCHA required.

In July 2001, NYCHA commenced this action against Olympia and RLI for their default under the bid bond. RLI settled with the NYCHA, tendering a check in the amount of $175,975 [*3]in October 2002. RLI now moves on its cross-claims and third-party claims to recover that sum pursuant to the Indemnity Agreement.

The motion is granted. The Indemnity Agreement is fully enforceable under New York law (see, Amer. Home Assur. Co. v Gemma Constr. Co., 275 AD2d 616; N. Amer. Specialty Ins. Co. v Montco Constr. Co., 2003 WL 21383231 [WDNY 2003][construing identical contract language]). RLI has made a prima facie of entitlement to summary judgment by submitting a copy of the contract that the parties executed together with documentation of its settlement payment to NYCHA (Amer. Home Assur., supra; Dramar Constr., Inc. v G and A Renovation and Restoration, Inc., 302 AD2d 487; Int'l Fidelity Ins. Co. v Spadafina, 192 AD2d 637). RLI may also receive the costs of prosecuting this action because the Indemnity Agreement so provides (Int'l Fidelity Ins., supra; Dramar, supra), a matter that the court will refer for an assessment (Int'l Fidelity Ins., supra).

Defendants contend that RLI is estopped from seeking indemnification, because the surety's failure to issue the performance and payment bonds was the direct cause of the default under the Bid Bond. The court rejects this argument, because "[t]his premise is directly refuted by the language of the indemnity agreement which empowers [the surety], at its option, to decline to issue 'any' bond" (Travelers Indemn. Co. v Buffalo Motor & Generator Corp., 58 AD2d 978, 979). Defendants' remaining argument, that RLI should not have settled with NYCHA because the project allegedly came in under budget and the agency suffered no loss, is also without merit. Under the Indemnity Agreement, it was irrelevant whether the surety was actually liable on the underlying debt to the NYCHA (Int'l Fidelity Ins., supra). Further, defendants' conclusory, unsubstantiated affidavits are "insufficient to raise a triable issue as to either the bona fides of the settlement or as to the reasonableness of its amount" (Id.; N. Amer. Specialty Ins. Co., supra; Dramar, supra).

Finally, the court grants the motion for a default judgment against Feretzanis insofar as RLI's attorney's affidavit establishes compliance with the notice requirements of CPLR 3215(g)(3)(I).

Accordingly, it is

ORDERED, that defendant/third party plaintiff's motion for summary judgment is granted, and the Clerk is directed to enter judgment in favor of defendant/third party plaintiff RLI Insurance Company, Inc. and against defendant Olympia Construction, Inc. and third party defendants Vasilios Tsimitras and Ekaterina Feretzanis in the amount of $179,975, plus prejudgment interest from October 10, 2002, to be calculated by the Clerk, and it is further

ORDERED, that that portion of defendant/third party plaintiff's motion that seeks the recovery of the costs of collection including attorney's fees is severed and an assessment thereof is directed, and it is further

ORDERED, that RLI serve a copy of this Order with Notice of Entry within 30 days upon the Trial Support Clerk (Room 158), who is directed upon filing a Note of Issue and a Statement of Readiness and the payment of proper fees, if any, to place this action on the Part 03 trial calendar for an assessment on Thursday, July 29, 2004 at Noon, in room 248, at 60 Centre Street, New York, NY.

If movant fails to timely serve the RJI, then recovery of costs of collection is deemed abandoned.

Dated: June 28, 2004 [*4]

ENTER:

/s/ Karla Moskowitz J.S.C.