County of Monroe v. Raytheon Co.

• Decision Date: 12 December 1991
• Court: New York Supreme Court
• Parties: COUNTY OF MONROE, Plaintiff, v. RAYTHEON COMPANY et al., Defendants. FEDERAL INSURANCE COMPANY et al., Third-Party Plaintiffs, v. JOHN P. BELL & SONS, INC. and John B. Pike & Son, Inc., a Joint Venture, et al., Third-Party Defendants.

Page 743

602 N.Y.S.2d 743

156 Misc.2d 445

COUNTY OF MONROE, Plaintiff, v. RAYTHEON COMPANY et al., Defendants.

FEDERAL INSURANCE COMPANY et al., Third-Party Plaintiffs, v. JOHN P. BELL & SONS, INC. and John B. Pike & Son, Inc., a

Joint Venture, et al., Third-Party Defendants.

Supreme Court, Monroe County.

Dec. 12, 1991.

[156 Misc.2d 446] Nixon, Hargrave, Devans & Doyle, Rochester (Francis E. Kenny of counsel), for John P. Bell & Sons, Inc., third-party defendant.

Sacks Montgomery, P.C., New York City (Scott D. St. Marie of counsel), for third-party plaintiffs.

HAROLD L. GALLOWAY, Judge.

Third-party defendant John P. Bell & Sons, Inc. (hereinafter Bell) brings this motion (1) to dismiss all four causes of action in the third-party complaint for failure to state a cause of action, and (2) to dismiss the first two causes of action in said complaint because of the Statute of Limitations. For the reasons set forth below the motion is denied.

THE FACTS

Many of the underlying facts relevant herein are not disputed. In 1976 the County of Monroe solicited bids for two contracts relevant to the case at bar, namely contract C for process equipment work and contract D for plumbing work, both as part of the Monroe County Resource Recovery Facility project (project). Bids for contracts C and D were submitted in July of 1976. John B. Pike & Son, Inc. (Pike) was determined to be the low bidder for contract C, and Bell was determined to be the low bidder for contract D. Contract C is "dated" September 16, 1976, though the contract was not actually executed until October 14, 1976. According to an unsigned draft joint venture agreement "dated" October 1, 1976, it appears that Pike and Bell may have been negotiating a joint venture agreement so that they could perform both contracts C and D together even before contract C was executed on October 14, 1976. On October 4, 1976, in pursuance of the requirements for performing contract C, and before contract C was executed, Pike (not Bell) signed a performance bond with Federal Insurance Company, General Reinsurance Corporation and INA Reinsurance Company. (These sureties, together with Cigna Reinsurance Company, a successor-in-interest to INA Reinsurance Company, are hereafter referred to as Federal.) After Pike executed the bond, as indicated above, contract C was actually executed by Pike and the County on October 14, 1976. The very next day, October 15, 1976, was the express "effective date" of the Joint Venture Agreement (JVA) between Pike and Bell executed on November 16, 1976. The JVA additionally says the joint venture would "commence operations" on November 1, 1976.

This time sequence raises an important disputed issue, i.e., when did the joint venture come into existence? Following the chronology of document execution, Bell says the bond was signed, then contract C was signed, then the joint venture was formed. However, Federal's complaint alleges that the joint venture existed before the JVA was signed on November 16, 1976 (eff. Oct. 15, 1976), before contract C was signed on October 14, 1976, and apparently even before the bond was signed on October 4, 1976. As an alternative position, Federal alleges that Bell ratified the bond obtained by Pike.

The sequence of events after the formation of the joint venture is not disputed. On November 18, 1976, the joint venture requested that the County assign contracts C and D to the joint venture officially. However, the County refused. Bell, by letter dated June 13, 1978, again asked for such an assignment. Again the County did not agree. Almost five years later, on March 14, 1983, contract C with Pike was terminated. On February 9, 1989, almost six years after termination and only 23 days before the Statute of Limitations would have run out, the County sued Pike and Federal, claiming Pike defaulted with respect to its performance of contract C. Pike had become insolvent and this led to the third-party action by Federal against the joint venture and Bell alone. This third-party action was sued out in 1990, after the six-year period mentioned above had expired.

Some details of the JVA itself are noteworthy. The JVA recognizes that Pike, after a separate bid of $15,390,000 on contract C, and Bell, after a separate bid of $1,468,000 on contract D, were awarded those contracts. The joint venture agreement sets forth the format of the joint venture on a page resembling a flow chart, with separate columns of comments related to the Pike and Bell contracts respectively merging ultimately into one "SUBCONTRACT", consisting of "Contract C & D", and totaling $16,858,000. The column of information with regard to Pike says, "Contract C Signed Directly with the Owner with Bell Concurrence" while the column with respect to Bell similarly says "Contract D Signed Directly with the Owner with Pike Concurrence". (As noted above, the JVA was made effective only one day after contract C was signed.) The Pike column also says "Bonds to Owner[--]Premium Reimbursable by Joint Venture" while the Bell column says "Bonds to Owners[--]Premium Reimbursable by Joint Venture". The Joint Venture Agreement expressly provided that the "obligations [of the joint venturers] under the Subcontract shall be joint and several." It provides:

"The interests of the parties hereto in and to the Subcontract and in any and all property and equipment acquired in connection with the performance thereof and in and to any and all monies which may be derived from the performance thereof and the obligations and liabilities of each of the parties hereto as among themselves in connection with the Subcontract and with respect to any and all liabilities in connection therewith, shall be in the following proportions:

"John P. Bell & Sons, Inc.--40%

"John B. Pike & Son, Inc.--60%

"Each party does hereby indemnify the other against any loss or liability exceeding the proportion herein above stated by reason of any payments required to be made in and about the performance of the Subcontract."

The JVA also provides that the cost to the parties of the venture shall include the cost of bonds. It says that in the event of the bankruptcy or insolvency of either Bell or Pike, "the insolvent party shall remain liable for its share of any losses and shall be entitled to receive its share of profits".

In this case there is no written subcontract by which Pike contracted with the joint venture in order to have the joint venture perform contract C. Similarly, there is no written subcontract by which Bell contracted with the joint venture in order to have it perform contract D. There is only the JVA which is between Pike and Bell and clearly indicates the joint venture will perform contracts C and D, i.e., the work which it expressly identifies as the "subcontract". The JVA sets forth Pike's and Bell's respective rights and obligations with respect to the "subcontract."

THE COMPLAINT

Indemnity Causes of Action

The first and second causes of action are based on the equitable principle of implied indemnity. (McDermott v. City of New York, 50 N.Y.2d 211, 428 N.Y.S.2d 643, 406 N.E.2d 460.) Federal, as subrogee of Pike, is alleging that the joint venture, and Bell separately, should bear complete responsibility for the loss, if any, which it may incur in the main action. In McDermott v. City of New York, supra, at 216-217, 428 N.Y.S.2d 643, 406 N.E.2d 460, the Court explained indemnity as follows:

"This court has often pointed to the 'fundamental distinction between contribution and indemnity. The right to contribution is not founded on nor does it arise from contract and only ratable or proportional reimbursement is sought in an action for contribution * * * The right to indemnity, as distinguished from contribution, is not dependent upon the legislative will. It springs from a contract, express or implied, and full, not partial reimbursement is sought' (McFall v. Compagnie Maritime Belge [Lloyd Royal], S.A., 304 NY 314 * * *).

"Conceptually, implied indemnification finds its roots in the principles of equity. It is nothing short of simple fairness to recognize that '[a] person who, in whole or in part, has discharged a duty which is owed by him but which as between himself and another should have been discharged by the other, is entitled to indemnity' (Restatement, Restitution, § 76). To prevent unjust enrichment, courts have assumed the duty of placing the obligation where in equity it belongs * * * Thus, the rule developed that '[w]here payment by one person is compelled, which another should have made * * * a contract to reimburse or indemnify is implied by law' ".

The first cause of action in the third-party complaint is captioned as being against both the joint venture and Bell, but is drafted as if it is only against the joint venture. It has language indicating it is a subrogation and indemnification cause of action based on the joint venture failing to properly perform the obligations imposed on Pike by contract C. While Bell indicates this cause of action (together with the second cause of action) may be a breach of contract cause of action subject to dismissal because of the six-year Statute of Limitations, Federal in its memorandum characterizes this as an indemnification cause of action against the joint venture, and accordingly, it will be treated as such for purposes of this decision. No cause of action for breach of contract will be deemed to have been alleged. Furthermore, it is agreed that Federal is subrogated to the rights of Pike (a defendant in the main action) against the joint venture.

The second cause of action incorporates the first cause of action but is specifically against Bell, and claims Bell is "jointly and severally" liable for the obligations of the joint venture, and that accordingly Bell may be liable to the sureties for all or part of any recovery made by the County against the sureties. Again, Federal in its memorandum characterizes this...