James McKinney & Son, Inc. v. Lake Placid 1980 Olympic Games, Inc.

• Decision Date: 21 February 1984
• Court: New York Court of Appeals Court of Appeals
• Parties: , 462 N.E.2d 137 JAMES McKINNEY & SON, INC., Appellant-Respondent, v. LAKE PLACID 1980 OLYMPIC GAMES, INC., Respondent, and Gilbane Building Company, Respondent-Appellant, et al., Defendants.

Page 960

473 N.Y.S.2d 960

61 N.Y.2d 836, 462 N.E.2d 137

JAMES McKINNEY & SON, INC., Appellant-Respondent, v. LAKE PLACID 1980 OLYMPIC GAMES, INC., Respondent, and Gilbane Building Company, Respondent-Appellant, et al., Defendants.

Court of Appeals of New York.

Feb. 21, 1984.

[462 N.E.2d 138] James F. Downs, Albany, for appellant-respondent

Julius L. Schapira, George N. Toplitz and Kalvin Kamien, New York City, for respondent-appellant.

Michael P. Shanley, Albany, for respondent.

OPINION OF THE COURT MEMORANDUM.

The order of the Appellate Division, 92 A.D.2d 991, 461 N.Y.S.2d 483, should be modified, with costs to defendant Gilbane Building Company against plaintiff, by granting defendant Gilbane's motion for summary judgment dismissing the complaint as against it. As so modified, the order should be affirmed, with costs to defendant Lake Placid 1980 Olympic Games, Inc., against plaintiff. The certified question should be answered in the negative.

In May, 1977, plaintiff James McKinney & Son, Inc., contracted with defendant Lake Placid 1980 Olympic Games, Inc. (LPOG), to fabricate and erect certain steel structures for use in the construction of the Olympic Field House. LPOG separately contracted with defendant Gilbane Building Company to act as project manager to supervise and inspect the construction. On March 31, 1978, LPOG terminated the contract with plaintiff because the latter was encountering great difficulties in meeting the design specifications. On April 7, 1978, McKinney initiated a Federal bankruptcy proceeding.

Reliance Insurance Company, as plaintiff's surety, had provided performance and payment bonds on an ongoing basis since at least 1974, including bonds on the field house project. In order to protect itself from any losses in connection with these instruments, Reliance had obtained a continuing indemnification agreement from plaintiff. This agreement provided that "all rights" of plaintiff "in, or growing in any manner out of" a contract guaranteed by any Reliance bond would be completely and automatically assigned to the surety in the event that plaintiff failed or was unable to complete a contract guaranteed by any bond or became involved in any proceeding of bankruptcy. Reliance was also empowered to execute any release of property which it received by assignment under the agreement and to sign "any other paper or contract necessary or desired to carry into effect the purposes of [the indemnification] Agreement."

Pursuant to this agreement, Reliance took over plaintiff's field house contract after plaintiff was no longer able to perform. Reliance also was unable to complete performance and on June 13, 1978, it settled with LPOG. Under the settlement, Reliance released LPOG "from all...