Nesterczuk v Golden Mgt., Inc.

[*1] Nesterczuk v Golden Mgt., Inc. 2007 NY Slip Op 52245(U) [17 Misc 3d 1133(A)] Decided on November 20, 2007 Supreme Court, Kings County Partnow, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. As corrected in part through January 3, 2008; it will not be published in the printed Official Reports.

Decided on November 20, 2007
Supreme Court, Kings County

Christopher Nesterczuk, et ano, Plaintiffs,

against

Golden Management, Inc., et al., Defendants. Alisa Construction Co., Inc., Third-Party Plaintiff, JW Rufolo and Associates, Inc., Third-Party Defendant.



237446/04

Mark I. Partnow, J.

Upon the foregoing papers, the motion by defendants Goldin Management, Inc. (Goldin) and Park Slope Terrace, LLC (Park) for an order, among other things, granting partial summary judgment in their favor and against defendant Alisa Construction Co., Inc. (Alisa) is granted only to the extent of granting partial summary judgment with respect to the claims of Park for contractual indemnification.

This negligence action arises out of a claim by plaintiff Christopher Nesterczuk for personal injuries resulting from an assault upon him on June 16, 2004 in the rear of the Park Slope Terrace Condominium at 875 Sackett Street in Brooklyn. Named as defendants herein are, among others, Park, (the sponsor and developer of the condominium), Goldin, (the managing agent), and Alisa (a general contractor which had been doing work at the condominium on the date of the assault). Alisa's work as a general contractor was performed pursuant to a written Construction Contract Agreement with Park which was executed in 2002. According to Article 9 of the contract, Alisa agreed to indemnify and save Park and its "representatives" harmless against all claims or liability for damages arising out of the execution of its work and to defend any action brought against Park and its representatives founded upon claims of such damage. In their answer, Goldin and Park asserted cross claims against Alisa for contractual indemnification and contribution. In 2006, Park moved for conditional summary judgment against Alisa on the [*2]claim for contractual indemnification. By order dated June 21, 2006, Park's motion was denied. A subsequent motion for leave to reargue was also denied. Park's appeal of the order is pending. In January 2007, plaintiffs settled their claims against Goldin and Park for $475,000. Three months later, this matter proceeded to trial. In order to preserve its contractual indemnity claim, Park did not seek a stipulation of discontinuance from plaintiffs and participated in the trial. According to movants, the unrebutted testimony at trial established that Alisa had violated various provisions of the New York City Building Code, including one which required it to post a guard or night watchman at the building site. At the conclusion of the liability phase of the trial, the jury rendered a unanimous verdict against Alisa, finding that it was negligent, that such negligence was a substantial factor in causing the assault and that Alisa was 100% at fault for the happening of the occurrence. On July 19, 2007, the parties were prepared to begin a hearing on damages; i.e., movants' damages under the indemnification provision of the construction contract. Because Alisa indicated it would object to any evidence of Goldin's damages at the hearing, the Judicial Hearing Officer recommended that the court "clarify" the issue of the scope of the damages in the order of referral. The instant motion followed.

In their motion, Goldin and Park assert that they are both entitled to recover damages under the Construction Contract Agreement which Park had with Alisa. Should the court find that Goldin was not Park's "representative" at the time of the attack (and, hence, not covered by Article 9 of the contract), they maintain that Goldin should nevertheless be entitled to common law indemnification from Alisa for its losses and for expenses incurred in defending this action.

In opposition to the motion, Alisa argues that neither Park nor Goldin are entitled to common law or contractual indemnity for their settlement payment of $475,000 to plaintiffs and, in addition, Goldin (unlike Park) is not entitled to its defense costs. Alisa asserts that it has no liability for Park's defense costs because plaintiffs' claims did not arise directly or indirectly as a result of Alisa's contracted work, an issue regarding which Alisa intends to pursue on appeal. Nevertheless, Alisa concedes that, unless the jury verdict is disturbed on appeal, it would be liable to pay Park's defense costs under the terms of its contract with Park. It requests, therefore, that the Judicial Hearing Officer be directed to consider only "the fair and reasonable amount expended by [Park] in defense of plaintiffs' claims." With respect to the settlement payment by Goldin and Park for which they seek indemnity from Alisa, Alisa characterizes said defendants as "volunteers" because they were not required to pay any money to plaintiffs , the jury having absolved Park and Goldin of liability. Alisa further notes that the jury charges (to which Goldin and Park did not object) only asked the jury to determine defendants' respective negligence, not any cause of action that would have resulted in the vicarious liability of Park or Goldin. Consequently, since any liability which Park or Goldin could have had to plaintiffs would have been based upon their own culpable conduct, a claim for common law or contractual indemnity would not be viable. Alisa adds that, according to the stipulation of discontinuance between Goldin and Park, on one hand, and plaintiffs , on the other, the action was discontinued with prejudice "as to Goldin." Since Goldin discontinued the action as to it and the action concerning Goldin encompassed plaintiffs' claims and Goldin's own cross claims, Alisa contends that the stipulation of discontinuance that Goldin tendered to Alisa was the equivalent of a release. Alisa asserts that Goldin's intent to abandon its indemnity claims [*3]against Alisa, as reflected in the stipulation of discontinuance, is confirmed by its conduct - - -Goldin's failure to participate in the trial. Insofar as Goldin argues that it was Park's "representative" and, thus, entitled to contractual indemnification, Alisa maintains that "the evidence does not bear out that assertion." Alisa cites the deposition testimony of Martin Goldin, Goldin's principal, that Goldin was hired by the condominium, rather than Park, to manage the building. Even if Goldin was Park's "representative," Alisa argues that Goldin is not entitled to recover its defense costs from Alisa since the indemnification provision of the contract provides that Alisa was to indemnify and save Park and its representatives harmless from liability for damages, but Alisa's liability for "costs, disbursements and expenses, including attorney's fees" is limited to those incurred by the owner, not its representative.

In reply, movants assert that the "not-fully-executed" stipulation of discontinuance did not address their single cross claim against Alisa and was not accompanied by a release. Movants dismiss Alisa's contention that they were "volunteers" as "chimerical," given the subsequent settlement by Alisa's insurer after the liability phase of the trial.

A party which voluntarily settles an action without being legally liable may not obtain indemnification from a third party for the amount of the settlement (see Midura v 740 Corp., LLC, 31 AD3d 401 [2006]). A defendant which voluntarily pays without waiting for judgment assumes the risk of being able to prove the actionable facts upon which its liability depends, as well as the reasonableness of the amount it pays, when it seeks recovery by way of indemnity from the party ultimately determined to be liable (see McGurran v DiCanio Planned Development Corp., 251 AD2d 467, 468 [1998]; Parseghian v Golden Plum Fruit Corp., 186 AD2d 546 [1992]). In this case, recovery of the settlement payment is precluded because the jury found that there was no justification for the imposition of liability on Park and Goldin. Therefore, said defendants are unable to prove the actionable facts upon which their liability depended (see Trojak v Wrynn, 45 AD2d 770 [1974]). Promenade v Schindler Elevator Corp., (39 AD3d 221 [2007]), which is cited by movants, is inapposite. That case involved a settlement by an indemnitee, an assignment by the indemnitee to the plaintiff of its claim for indemnification, and the plaintiffs' right to pursue the indemnitee's claims for damages against the indemnitor (and not simply the right to be indemnified). Unlike the settlement between movants and plaintiffs herein, as part of the monetary value of the settlement in Promenade, the indemnitee apportioned some part of the settlement as its own share of liability for the plaintiff's damages and assigned its right to prove and recover damages caused by the indemnitor up to that amount.

Article 9 of the Construction Contract Agreement provides, in part, that Alisa agrees

"to indemnify and save OWNER . . . [and] OWNER's representatives harmless against all claims, demands, or liability for damages (including attorney's fees) to persons or to property arising out of the execution of its work and at its own expense to defend any suit or action brought against OWNER . . . [and] OWNER's representatives founded upon the claim of such damage."

Although movants assert that it "is clear and obvious that Goldin Management was operating as the representative of [Park] as of June 19, 2004 in its capacity as the [*4]managing agent of the condominium, the evidence is to the contrary. According to the deposition testimony of Martin Goldin, it was the condominium, rather than Park, which hired Goldin to manage the premises. For the purposes of construing the language of the Agreement, it is of no importance that principals of Park may have also been members of the Board of Directors of the condominium. Therefore, to the extent that Goldin seeks indemnification pursuant to that Agreement, such relief is denied.

Movants alternatively contend that, if no construction contract existed (or, more accurately, if the contract did not apply to Goldin), Alisa would still be obligated to reimburse Goldin under common law indemnity principles. The key element of a common law cause of action for indemnification is not a duty running from the indemnitor to the injured party, but "a separate duty owned the indemnitee by the indemnitor" (Mas v Two Bridges Assocs., 75 NY2d 680, 690 [1990]). The duty that forms the basis for the liability arises from the principle that "every one is responsible for the consequences of his own negligence, and if another person has been compelled . . . to pay the damages which ought to have been paid by the wrongdoer, they may be recovered from him" (Oceanic Steam Nav. Co. v Compania Transatlantica Espanola, 134 NY 461, 468 [1892]). In this case, Goldin has not been compelled to pay any damages as a result of Alisa's negligence. Its settlement was voluntary and there is no obligation, contractual or otherwise, for Alisa to pay Goldin's defense costs. Accordingly, that branch of the motion that seeks common law indemnification by Goldin is likewise denied.

Under the circumstances, the Judicial Hearing Officer is directed to hear and report solely with respect to Park's defense costs.

The foregoing constitutes the decision, order and judgment of this court.

E N T E R,

J. S. C.