International Fidelity Ins. v. County of Rockland

• Decision Date: 18 May 2000
• Docket Number: No. 97 CIV. 3711(LMS).,97 CIV. 3711(LMS).
• Citation: 98 F.Supp.2d 400
• Parties: INTERNATIONAL FIDELITY INSURANCE COMPANY, Plaintiff, v. COUNTY OF ROCKLAND, SWCF Architects Engineers Planners, Maniktala Associated, P.C., and Fidelity and Guaranty Insurance Company, Defendants.
• Court: U.S. District Court — Southern District of New York

98 F.Supp.2d 400

INTERNATIONAL FIDELITY INSURANCE COMPANY, Plaintiff, v. COUNTY OF ROCKLAND, SWCF Architects Engineers Planners, Maniktala Associated, P.C., and Fidelity and Guaranty Insurance Company, Defendants.

No. 97 CIV. 3711(LMS).

United States District Court, S.D. New York.

May 18, 2000.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Thomas J. Demski, Sills Cummis Zuckerman Radin Tischman Epstein & Gross, P.A., New York City, for Plaintiff International Fidelity Insurance Co.

Gregory E. Ronan, Goddard, Ronan & Dineen, New York City, for Defendant County of Rockland.

Cecil Holland, Jr., Hart & Hume, New York City, for Defendant Fidelity and Guaranty Insurance Company.

MEMORANDUM DECISION AND ORDER

LISA MARGARET SMITH, United States Magistrate Judge.

Plaintiff International Fidelity Insurance Company ("IFIC") and defendant Fidelity and Guaranty Insurance Company ("F & G") have both submitted motions for summary judgment in this action, in which several of the parties involved in a construction project dispute who is liable for which portion of the damages resulting from a construction delay. Pursuant to the provisions of 28 U.S.C. § 636(c), the parties have consented to conduct all proceedings in this case before me.

Plaintiff IFIC is a surety company that took over the construction contract of its principal, a construction company, after that principal defaulted. Defendant County of Rockland (the "County") is the entity for whom the construction was being performed. As a result of the initial default and the ensuing delays, the County now asserts that IFIC is responsible for millions of dollars in delay damages. Plaintiff IFIC, on the other hand, says that it owes the County nothing because the County's claim is time-barred, and that the County owes IFIC over $100,000 in unpaid funds that were due to IFIC under the contracts between them.

IFIC's motion for summary judgment asks three things: (1) that the Court dismiss as time-barred the counterclaims for delay damages brought against it by the County; (2) that the Court award to IFIC the funds, constituting the remaining balance of the initial contract price, that IFIC says are due to it from the County under the contracts between those parties; and (3) that if the County's claims are not dismissed, the Court limit IFIC's liability to the County to the penal sum of the performance bond that IFIC executed as surety to the initial contractor (minus those unreimbursed sums that IFIC has already paid in completion of the project).

Defendant F & G is also a surety company, and it provided the performance bond for the contractor IFIC hired to complete the construction project after IFIC's original principal defaulted. Because F & G's principal also failed to complete its performance on time, IFIC brought "claims over" against F & G, demanding that F & G reimburse IFIC for any money IFIC may ultimately owe to the County because of the construction delays. In F & G's summary judgment motion, F & G reiterates two of IFIC's requests — that the County's counterclaims against IFIC be dismissed, and that alternatively IFIC's liability be limited to the penal sum of its bond — and adds two others: (1) that the Court dismiss any "claims over" that IFIC may ultimately bring against F & G, because IFIC assertedly failed to comply with certain conditions precedent in the F & G bond; and (2) that if those claims over are not dismissed, the Court limit F & G's liability to IFIC to a sum that does not exceed the penal sum of F & G's bond, as well as to damages accrued only during a certain specified time period.

For the reasons discussed below, IFIC's motion for summary judgment is granted in part and denied in part, and F & G's motion for summary judgment is also granted in part and denied in part.

STANDARD FOR SUMMARY JUDGMENT IN A CONTRACT ACTION

In accordance with Federal Rule of Civil Procedure 56(c), "[a] motion for summary judgment may not be granted unless the court determines that there is no genuine issue of material fact to be tried and that the facts as to which there is no such issue warrant judgment for the moving party as a matter of law." Cronin v. Aetna Life Ins. Co., 46 F.3d 196, 202 (2d Cir.1995); see generally Celotex Corp. v. Catrett, 477 U.S. 317, 320-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "[A]ll ambiguities and inferences to be drawn from the underlying facts should be resolved in favor of the party opposing the motion, and all doubts as to the existence of a genuine issue for trial should be resolved against the moving party." Brady v. Town of Colchester, 863 F.2d 205, 210 (2d Cir.1988); see also Celotex, 477 U.S. at 330 n. 2, 106 S.Ct. 2548.

In contract disputes, the Second Circuit has repeatedly held that

summary judgment may be granted only where the language of the contract is unambiguous. See, e.g., Sayers v. Rochester Tel. Corp., 7 F.3d 1091, 1094 (2d Cir.1993). Under New York law, whether a written contract is ambiguous is a question of law for the trial court whose determinations will be reviewed de novo. W.W.W. Assoc., Inc. v. Giancontieri, 77 N.Y.2d 157, 163, 565 N.Y.S.2d 440, 443, 566 N.E.2d 639 (1990). Contract terms are ambiguous if they are

capable of more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement and who is cognizant of the customs, practices, usages and terminology as generally understood in the particular trade or business.

Sayers, 7 F.3d at 1095 (internal quotation marks omitted). When the relevant language has "a definite and precise meaning, unattended by danger of misconception in the purport of the [contract] itself, and concerning which there is no reasonable basis for a difference of opinion," no ambiguity exists. Breed v. Ins. Co. of North America, 46 N.Y.2d 351, 355, 413 N.Y.S.2d 352, 355, 385 N.E.2d 1280 (1978).

Nowak v. Ironworkers Local 6 Pension Fund, 81 F.3d 1182, 1192 (2d Cir.1996).

In Sayers, the Second Circuit added that, even where parties dispute the meaning of specific contract clauses, a court's task

is to determine whether such clauses are ambiguous when "read in the context of the entire agreement." W.W.W. Assocs., 77 N.Y.2d at 163, 565 N.Y.S.2d 440, 566 N.E.2d 639; see also Williams Press, Inc. v. State, 37 N.Y.2d 434, 440, 373 N.Y.S.2d 72, 335 N.E.2d 299 (1975). By examining the entire contract, we safeguard against adopting an interpretation that would render any individual provision superfluous. See Two Guys from Harrison-N.Y., Inc. v. S.F.R. Realty Assocs., 63 N.Y.2d 396, 403, 482 N.Y.S.2d 465, 472 N.E.2d 315 (1984).... Parties to a contract may not create an ambiguity merely by urging conflicting interpretations of their agreement.

Sayers, 7 F.3d at 1095 (some internal citations omitted); see also General Authority for Supply Commodities, Cairo, Egypt v. Ins. Co. of North America, 951 F.Supp. 1097, 1108 (S.D.N.Y.1997).

New York courts have held that "The interpretation of a contract of suretyship is governed by the standards which govern the interpretation of contracts in general." General Phoenix Corp. v. Cabot, 300 N.Y. 87, 92, 89 N.E.2d 238 (1949). As far back as 1889, the Court of Appeals said that "No citation of authorities is needed to show that the contracts of sureties are to be construed like other contracts so as to give effect to the intention of the parties. In ascertaining that intention, we are to read the language used by the parties in light of the circumstances surrounding the execution of the instrument, and, when we have thus ascertained their meaning, we are to give it effect[.]" People v. Backus, 117 N.Y. 196, 201, 22 N.E. 759 (1889). The Backus court then added, "when the meaning of the language used has been thus ascertained, the responsibility of the surety is not to be extended or enlarged by implication or construction, and is strictissimi juris." Id.

When applying the Backus standard to a case governed by New York law that involves a compensated surety,

[t]he rule that the liability of a surety is strictissimi juris does not in any sense mean that a suretyship contract is subject to rules of interpretation different from those applicable to any other contract. It simply means that once the intention of the parties to a suretyship agreement has been ascertained, the courts will guard the right of the surety, and protect him [, her, or it] against a liability which is not strictly within the terms of his [, her, or its] contract.

63 N.Y. Jur 2d, Guaranty & Suretyship § 117 (1987) (citing id. at § 88; Argyle v. Plunkett, 226 N.Y. 306 [, 310], 124 N.E. 1 (1919) ("a surety is not entitled to any particular tenderness in the interpretation of the language of a contract which it has executed.... When, however, the contract has thus been interpreted the surety is entitled to a strict limitation of its obligations in accordance with such interpretation")). In fact, in cases in which New York courts have suggested that any deviation from the general rules of interpretation should apply when interpreting surety bonds, they have counseled, at least in the case of compensated sureties, interpretation against the surety. See, e.g., McClare v. Massachusetts Bonding & Ins. Co., 266 N.Y. 371, 377, 195 N.E. 15 (1935) ("where a compensated surety has issued a standard form of bond, it is to be interpreted liberally, and all ambiguities are to be resolved in favor of those for whose benefit the bond is given"); see also Novak & Co. v. Travelers Indem. Co., 85 Misc.2d 957, 381 N.Y.S.2d 646 (N.Y.Sup.Ct.1976), aff'd, 56 A.D.2d 418, 392 N.Y.S.2d 901 (2d Dep't 1977) (bond of compensated surety is to be construed liberally in the interest of promisee and beneficiary rather than strictissimi juris, and ambiguities are to be resolved in favor of beneficiary); Dupack v. Nationwide Leisure Corp., 73 A.D.2d 903, 905, 424 N.Y.S.2d 436 (1st Dep't 1980).

The rule of...