Arred Enterprises Corp. v. Indemnity Ins. Co. of North America

• Decision Date: 07 February 1985
• Citation: 108 A.D.2d 624,485 N.Y.S.2d 80
• Parties: ARRED ENTERPRISES CORPORATION, Plaintiff-Respondent, v. INDEMNITY INSURANCE COMPANY OF NORTH AMERICA, Defendant-Appellant, and Bank of New York, Necessary Defendant.
• Court: New York Supreme Court — Appellate Division

Page 80

485 N.Y.S.2d 80

108 A.D.2d 624

ARRED ENTERPRISES CORPORATION, Plaintiff-Respondent, v.INDEMNITY INSURANCE COMPANY OF NORTH AMERICA, Defendant-Appellant and Bank of New York, NecessaryDefendant.

Supreme Court, Appellate Division First Department.

Feb. 7, 1985.

C. Haydon, New York City, for plaintiff-respondent.

R.D. Friedman, New York City, for defendant-appellant.

W.T. Glover, Valley Stream, for necessary defendant.

Before ASCH, J.P., and BLOOM, FEIN and KASSAL, JJ.

MEMORANDUM DECISION.

Order of Supreme Court, Bronx County, entered June 14, 1984 denying the motion of defendantIndemnity Insurance Company of North America (INA) to dismiss the complaint on grounds of a prior action pending, and denying its motion to vacate a default judgment against it, unanimously modified on the law and the facts and in the exercise of discretion, to the extent of vacating the defendant's default and directing a joint trial with an action pending in New York County entitled "Indemnity Insurance Company of North America v. Arred Enterprises Corporation, et al.", New York County Clerk'sNo. 2528/84, and otherwise affirmed, without costs.

Prior to December 1982, defendant INA was the surety on a performance bond issued to the S.L.A. Construction Corp. for the completion of two construction contracts.When S.L.A. was declared to be in default, INA, pursuant to the option provided in the performance bond, hired plaintiff(Arred) as construction manager to complete the projects.Arred and INA entered into an agreement on or about January 19, 1983 under which Arred agreed to assume the obligations of S.L.A. that had existed by agreement between S.L.A. and INA prior to the default.On February 23, 1983 the surety bonding agent, "attorney-in-fact", for INA advised the Bank of New York (Bank) that in order "to induce" the Bank "to arrange working capital advances to 'ARRED' ", INA WOULD HOLD THE BANK HARMLESs tO the extent thAT "contract proceeds are inadequate to reimburse the bank for such advances".

On or about February1, 1984 INA served Arred with a summons in an action in the Supreme Court, New York County, naming Arred and other defendants, together with an order to show cause and supporting affidavit seeking preaction discovery in order to frame a complaint against Arred for breach of contract, breach of fiduciary relationship, fraud and related causes of action.Arred served a notice of appearance dated March 9, 1984 in the New York County action, and opposed the motion for discovery.

On March 21, 1984, while the motion for discovery was pending, Arred instituted this action in Bronx County by the service of a summons and complaint upon one of the agents for INA, the agent who had advised the Bank of New York that INA would hold it harmless.This action, allegedly brought by Arred as a third party beneficiary on behalf of the Bank of New York, named as a "necessary defendant", seeks judgment in favor of the Bank in the sum of $300,000 for advances made by the Bank to Arred allegedly used by Arred on the projects.INA did not timely answer this complaint.It now alleges that its counsel had discussed both the New York County action and this action with Arred's counsel, and they had agreed that time limitations would not be an issue between the parties and that the actions would be continued.Nonetheless, Arred entered a default judgment in this action in Bronx County on April 25, 1984 for "the benefit of plaintiff and the Necessary Defendant, Bank of New York" in the sum of $300,000, the amount sought in the complaint.

On April 26, 1984, unaware of the entry of the default judgment in the previous day, INA moved to dismiss the complaint in this action on several grounds, including the pendency of its prior New York County action, or, in the alternative, to consolidate both actions.In the interim, on March 21, 1984, an order had been entered in the New York County action denying INA's ...