Colonial Sur. Co. v. Millenium Constr., Inc., Index No. 650379/2012, 8/12/14 (Bransten, J.)

By Michael Ferri | Staff Writer

Construction Contract; surety indemnification.

Defendant contractor was retained by non-party New York Housing Authority to perform construction services. Defendant procured multiple performance and payment bonds in connection with the work. Plaintiff surety issued the bonds on Defendant’s behalf and executed an indemnity agreement with Defendant whereby Defendant would indemnify Plaintiff for any payments the Plaintiff made in connection with the bonds. Section 4.D of this agreement contained a “Prima Facie” clause, which provided that “[i]n any claim or suit hereunder, an itemized statement of the aforesaid loss and expenses, sworn to by an officer of Surety, … shall be prima facie evidence of the fact and extent of the liability hereunder of Indemnitor.” Section 6.B of the agreement provided that, in the event Defendant was to default, Plaintiff would “assume the administration of any Contract and arrange for its completion.” Defendant’s president executed the agreement both in his personal capacity and as Defendant’s president. Defendant defaulted on the projects, and signed several settlement agreements with replacement contractors, subcontractors, and suppliers to complete the work. Defendant’s default triggered Plaintiff’s bond obligations to administer the Defendant’s contracts, arrange for completion, and to make payments thereof. Plaintiff had to make payments that exceeded Defendant’s settlement agreements because, in at least one case, extra-contractual work was demanded by the bond obligee. Specifically, after Defendant entered an agreement with a replacement contractor, the project owner and obligee required additional “non-conforming and emergency work,” which increased the project’s cost. Plaintiff later filed this action against Defendant and its president (“Defendants”) seeking contractual indemnity from Defendants, among other causes of action. Plaintiff filed a motion for summary judgment for contractual indemnity seeking the amounts paid by Plaintiff which included payments made in excess of Defendant’s settlement agreements. The court found that the indemnity agreement between the parties “unquestionably reflects an intention on the part of the defendant to indemnify the plaintiff.” The court held that the prima facie clause in the contract was enforceable, and found Plaintiff, in its affidavit, complied with the clause and successfully made a prima facie showing of an entitlement to $451,413.43. Having satisfied the clause, the burden of proof shifted to Defendants to show payments were made in bad faith. Defendants failed to submit a proper Commercial Division Rule 19-a statement of fact opposing Plaintiff’s motion. Regardless, the court still considered Defendants’ arguments. Defendants claimed that Plaintiff failed to substantiate the amounts sought, and failed to include proof of payment of such amounts. However facts to the contrary that were included in Plaintiff’s motion were deemed admitted by the court since they were not specifically controverted by a corresponding 19-a submission in opposition. The court then stated that Defendants’ unsupported self-serving affidavits were insufficient to raise a triable issue of fact, and held that Defendants failed to provide any evidence that payments made by Plaintiff to others “were made in bad faith or were unreasonable in amount.” The court granted the motion for partial summary judgment for the full amount plus interest.

Colonial Sur. Co. v. Millenium Constr., Inc., Index No. 650379/2012, 8/12/14 (Bransten, J.).

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