Hamlet at Willow Creek Dev. Co., LLC v. Northeast Land Dev. Corp.
| Decision Date | 21 April 2009 |
| Docket Number | 2007-04626.,2006-05693.,2006-05694. |
| Citation | 2009 NY Slip Op 03136,878 N.Y.S.2d 97,64 A.D.3d 85 |
| Parties | HAMLET AT WILLOW CREEK DEVELOPMENT CO., LLC, et al., Respondents-Appellants, v. NORTHEAST LAND DEVELOPMENT CORPORATION et al., Respondents, and PAV-CO ASPHALT, INC., et al., Appellants-Respondents, et al., Defendant. (Appeals No. 1 and 2.) HAMLET AT WILLOW CREEK DEVELOPMENT CO., LLC, et al., Appellants-Respondents, v. NORTHEAST LAND DEVELOPMENT CORPORATION et al., Appellants-Respondents, and FIDELITY AND DEPOSIT COMPANY OF MARYLAND, Respondent-Appellant, et al., Defendant. (Appeal No. 3.) |
| Court | New York Supreme Court — Appellate Division |
SPOLZINO, J.P.
These appeals and cross appeals arise from the excavation work undertaken in anticipation of the construction of a residential subdivision and golf course in the Town of Brookhaven. The appeals and cross appeals present two principal questions. First, are the defendants responsible for the reimbursement of the owner, the plaintiff Hamlet at Willow Creek Development Co., LLC (hereinafter the Hamlet), for certain fees and costs it paid to the Town, and additional fees and costs it may be required to pay to the Town, in connection with the excavation? Second, can the defendants be held liable to the Hamlet in tort for material removed from the site in excess of that provided for in the plans and specifications? We conclude that the Hamlet is entitled to recover the excavation fees as the equitable subrogee of the Town under certain bonds posted with respect to the excavation and that the defendants may be liable in conversion for the excess material that was removed. A trial is required, however, to determine the amount of excess material that was removed, if any.
On July 1, 2002, the Hamlet entered into an excavation agreement with the defendant Northeast Land Development Corporation (hereinafter Northeast), pursuant to which Northeast undertook to perform excavation work with respect to the Hamlet's 186-acre development project. The excavation agreement apparently was entered into in anticipation of the conditional approval of the subdivision that ultimately was granted by the Planning Board of the Town of Brookhaven (hereinafter the Planning Board) on July 8, 2002. Among the conditions imposed in connection with that approval was the requirement that the Hamlet implement certain mitigation measures identified in a findings statement that had been adopted by the Planning Board on October 1, 2001, in satisfaction of the requirements of the State Environmental Quality Review Act (ECL art 8 [hereinafter SEQRA]). One of those measures was the payment of fees required by chapter 53 of the Brookhaven Town Code.
The excavation agreement specified that Northeast would be required to remove from the site and haul away approximately 1.65 million cubic yards of material in accordance with the SEQRA findings statement and the final engineering plan. It also specifically obligated Northeast to pay "any municipal fee ... pursuant to the Town of Brookhaven requirements," making specific reference to "the Town of Brookhaven Joseph Macchia Environmental Preservation Capital Reserve Fund." The agreement also provided that Northeast "shall not over excavate any area." With respect to Northeast's compensation for its services, the excavation agreement provided that the Hamlet would have "no financial obligation to [Northeast] other than [Northeast] shall own any and all excess material taken from the site in conformance with the approved plan." The excavation agreement further provided, however, that Northeast would be paid $1.5 million to excavate the drainage and sewers for the development. The excavation agreement was signed by Northeast's principal, the defendant Carl Zorn.
The municipal fees to which the excavation agreement referred (hereinafter the Environmental Fund fees) are imposed by the Town of Brookhaven Joseph Macchia Environmental Preservation Capital Reserve Fund Law (Brookhaven Town Code ch 15; § 53-3 [H]). The law in effect at the time required the applicant for an approved grading plan incident to residential development to pay Environmental Fund fees in the sum of 25¢ per cubic yard of material removed from a site for drainage and other town-required improvements and $1 per cubic yard of material removed for all other improvements (see Brookhaven Town Code § 53-3 [H] [1]; § 29-7 [C] [1] [a] [former (1), (2)]). The law further provides that the Environmental Fund fees are due "upon final conditional approval" of the subdivision section or site plan and reserves to the Commissioner of the Department of Planning, Environment and Development the "final determination of the amount of material subject to the fees" (see Brookhaven Town Code § 53-3 [H] [3]; § 29-7 [C] [1] [c]). Prior to commencement of the excavation, the applicant "must post a bond in such form as shall be approved by the Town Attorney and in an amount to be specified by the Planning Board to guarantee performance in accordance with the approved site plan or the approved subdivision plan" (Brookhaven Town Code § 53-5).
To satisfy its obligations under the excavation agreement, Northeast entered into an oral agreement with the defendant Pav-Co Asphalt, Inc. (hereinafter Pav-Co). According to Pav-Co's principal, the defendant William Fehr, Northeast agreed to sell Pav-Co approximately 471,425 cubic yards of excess fill at $3.50 per cubic yard, or approximately $1.65 million, which Northeast would dedicate to the payment of the Environmental Fund fees due to the Town. According to Zorn, however, Pav-Co was to make the payments for the fill directly to the Town.
On December 19, 2002, the defendant Fidelity and Deposit Company of Maryland (hereinafter Fidelity) issued a "payment bond" (hereinafter the first payment bond) to the Town in the amount of $500,000. Executed by Fehr on behalf of Pav-Co, the first payment bond recited that Pav-Co, as "Principal," was obligated to provide a bond guaranteeing the payment of fees to the Town for the removal of material from the Hamlet site, and bound Fidelity, as "Surety," to pay those fees in the event that Pav-Co failed to do so. The first payment bond was amended on the day of its issuance to add Northeast as a principal. According to Fehr, however, the Town rejected the first payment bond because the amount was insufficient.
Also on December 19, 2002, another "payment bond" in the amount of $1.5 million (hereinafter the second payment bond) was executed by nonparty All County Paving Corp. (hereinafter All County), as "Principal," and Fehr and nonparty Ronald Fehr as "Sureties." The second payment bond recited that All County "has applied to mine property located at the Hamlet at Willow Creek" and provided that the principal and sureties "hereby undertake and become bound in the sum of $1,500,000 to the Town of Brookhaven for the payment of any sum due the Town of Brookhaven by All County Paving Corp. for the mining of property at the Hamlet at Willow Creek, Mount Sinai, New York, incidental to the development of said site as required by Section 53-3 (H) (1) (b) [sic] of the Code of the Town of Brookhaven." According to Fehr, the Town rejected the second payment bond because it was not issued by a bonding company.
The Hamlet disputes Fehr's contention that the Town rejected the first and second payment bonds, citing the deposition testimony of Gregg Kelsey, the Assistant Town Engineer, that he had seen a copy of the second payment bond in the Town's file and had not come across any town document in which any payment bond had been cancelled or returned to the maker. Mr. Kelsey, however, testified that he did not see any resolution accepting the second payment bond which, in his experience, was typically done.
On March 17, 2003, Northeast and Pav-Co, as "Principals," and Fidelity, as "Surety," executed a "Performance (Completion) Bond" (hereinafter the performance bond). According to its terms, Fidelity was obligated to the Town, up to the sum of $1.665 million, to satisfy the obligation of Northeast and Pav-Co to remove approximately 1.6 million cubic yards of fill at the Hamlet site "in accordance with the construction specification of the Town of Brookhaven all in conformance with the plot and drainage plan approved by the Town of Brookhaven Planning Board and to the satisfaction of the Town of Brookhaven."
According to Fehr, the performance bond replaced the first and second payment bonds, was intended to comply with the bonding requirement of Brookhaven Town Code § 53-5, and was accepted by the Town. The Town Attorney required, however, that the performance bond be relabeled a "restoration bond," and that the language of the bond be modified to provide for Fidelity's guaranty of the principals' obligation to remove the fill "in accordance with the construction specifications of the Town of Brookhaven and the Town of Brookhaven Planning Board, as approved, pursuant to the Town...
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