Lamela v. Verticon, Ltd.

• Decision Date: 23 July 2020
• Docket Number: 529714
• Parties: James LAMELA et al., Plaintiffs, v. VERTICON, LTD., et al., Defendants and Third- Party Plaintiffs–Respondents, and Cooler Panel Pros, Inc., Respondent, et al., Defendant; Lamela & Sons, Inc., Third–Party Defendant–Appellant.
• Court: New York Supreme Court — Appellate Division

185 A.D.3d 1319

128 N.Y.S.3d 91

James LAMELA et al., Plaintiffs,

v. VERTICON, LTD., et al., Defendants and Third- Party Plaintiffs–Respondents,andCooler Panel Pros, Inc., Respondent, et al., Defendant;Lamela & Sons, Inc., Third–Party Defendant–Appellant.

529714

Supreme Court, Appellate Division, Third Department, New York.

Calendar Date: May 18, 2020

Decided and Entered: July 23, 2020

MEMORANDUM AND ORDER

Pritzker, J. Appeal from an order of the Supreme Court (Gilpatric, J.), entered June 13, 2019 in Ulster County, which granted a motion by defendant Verticon, Ltd. for summary judgment dismissing third-party defendant's cross claims.

Plaintiffs were injured when an unsecured wall collapsed, displacing a motorized scissor lift that plaintiffs operated while performing demolition work on a construction site. During the course of their work, plaintiffs moved the lift in close proximity to the unsecured wall. Plaintiffs were employed by third-party defendant, Lamela & Sons, Inc. (hereinafter Lamela), and the accident occurred in a warehouse that was owned by defendant Satin Realty Associates, LLC and leased to defendant Satin Fine Foods, Inc. (hereinafter collectively referred to as Satin). Defendant Verticon, Ltd. was the general contractor and contracted with Lamela, as well as defendant Accurate Refrigeration Design, LLC, to serve as subcontractors. Employees of Accurate's subcontractor, defendant Cooler Panel Pros, Inc., were constructing the wall that collapsed when the accident occurred. Plaintiffs commenced this action alleging negligence and violations of the Labor Law.

In July 2014, Supreme Court granted plaintiffs' motion for partial summary judgment, finding Verticon and Satin strictly liable pursuant to Labor Law § 240(1). Defendants, thereafter, agreed to a settlement of plaintiffs' claims – specifically, defendants and plaintiffs agreed on a total payment of $3.2 million, to be apportioned under an agreement by which Verticon and Satin would pay $2,199,999,¹ Accurate would pay $1 and Cooler would pay $1 million. Although Lamela did not participate in or contribute to the settlement, its counsel was present at the time that the settlement was announced and objected. Releases were thereafter signed providing that plaintiff James Lamela would receive $500,000 and plaintiff Robert Lamela would receive $2.7 million.

Subsequently, Verticon and Satin filed an amended third-party complaint seeking contractual indemnity against Lamela based upon the indemnification clause contained in the contract, which required Lamela to indemnify both Verticon and Satin. Lamela answered the amended third-party complaint and, among other things, asserted cross claims against Verticon seeking common-law indemnity and contribution. Lamela then moved for summary judgment dismissing the amended third-party complaint, and Verticon and Satin cross-moved for summary judgment on the indemnity claim. Verticon withdrew its motion prior to decision and Supreme Court granted that aspect of the motion in which Satin sought contractual indemnity and denied Lamela's motion for summary judgment. Lamela appealed, and this Court affirmed, noting in dicta that "the fact that Satin is entitled to enforcement of the contract by seeking payment from Lamela does not operate to negate or determine Lamela's cross claims against the other parties" ( 162 A.D.3d 1268, 1272, 79 N.Y.S.3d 698 [2018] ).

Following the appeal, Lamela remitted approximately $2 million to Satin, thereby satisfying its contractual indemnity obligation to that entity.² Soon thereafter, Verticon moved for summary judgment seeking dismissal of Lamela's cross claims asserting, among other things, that the indemnification provision contained in the contract between Lamela and Verticon bars Lamela from seeking common-law indemnity. Supreme Court granted Verticon's motion and dismissed Lamela's cross claims. Lamela appeals.

Although this appeal stems from the dismissal of Lamela's cross claim seeking common-law indemnity, we would be remiss not to address the background of this case relative to this issue. As made abundantly clear by Lamela, both in this appeal and the prior appeal before this Court ( id. ), Lamela is dissatisfied with the allocation of the settlement proceeds between Satin and Verticon and how the allocation impacted Lamela's indemnity obligation to Satin. Lamela's claim stems from its belief that the insurance company, which represented both Satin and Verticon, acted in bad faith by apportioning the larger share of the settlement to Satin, which was concededly not negligent and only vicariously liable as the owner (see Labor Law § 240[1] ). Lamela asserts that this is unfair because it posits that if Verticon was actually negligent, and if an accurate – larger – share of the settlement was allocated to Verticon based upon its negligence, Lamela's contractual indemnity obligation to Satin would have been decreased proportionately. However, even if all of this were true, we cannot fashion a common-law indemnity right where none exists, since we would be weaving an obligation out of whole cloth, one that was neither bargained for nor is permissible under the law. Here, Lamela's novel upstream common-law indemnity claim fails for two reasons: (1) indemnification is governed by the contract and only goes one way – in favor of Verticon; and (2) Lamela is seeking indemnity for a voluntarily assumed contractual obligation flowing to Satin, rather than one imposed vicariously, or otherwise, by operation of law. As such, Supreme Court properly granted Verticon's motion for summary judgment and dismissed Lamela's cross claim for common-law indemnity.

"Indemnification is the right of one party to shift the entire loss to another and may be based upon an express contract or an implied obligation. The principle of common-law, or implied indemnification, permits one who has been compelled to pay for the wrong of another to recover from the wrongdoer the damages it paid to the injured party" ( Genesee/Wyoming YMCA v. Bovis Lend Lease LMB, Inc., 98 A.D.3d 1242, 1244, 951 N.Y.S.2d 768 [2012] [internal quotation marks, brackets and citations omitted] ). "Common-law indemnification is generally available ‘in favor of one who is held responsible solely by operation of law because of his [or her] relation to the actual wrongdoer’ " ( McCarthy v. Turner Constr., Inc., 17 N.Y.3d 369, 375, 929 N.Y.S.2d 556, 953 N.E.2d 794 [2011], quoting Mas v. Two Bridges Assoc., 75 N.Y.2d 680, 690, 555 N.Y.S.2d 669, 554 N.E.2d 1257 [1990] ).

First, we address the one-way nature of the indemnity obligation at issue. In support of its motion for summary judgment, Verticon submitted the construction contract,³ dated March 2, 2011, between Verticon and Lamela, which provides for indemnity flowing from Lamela to Verticon, specifically stating, "To the fullest extent permitted by law, [Lamela] shall indemnify, defend and save harmless [Verticon] ... against any and all suits [or] actions ... arising from the use or operation by [Lamela] of construction equipment, tools, scaffolding or facilities furnished to [Lamela] to perform the [w]ork." The provision, as expected, does not provide for indemnification flowing the other way, from Verticon to Lamela, as is being sought by Lamela. Thus, as "the subject of indemnification [is] clearly contemplated and expressly addressed by [Lamela and Verticon] in their contract, ... there [can] only be a one-way obligation to indemnify by [Lamela] as the indemnitor, and any reciprocal obligation is extinguished" ( Service Sign Erectors Co. v. Allied Outdoor Adv., 175 A.D.2d 761, 763, 573 N.Y.S.2d 513 [1991], appeal dismissed 79 N.Y.2d 823, 580 N.Y.S.2d 203, 588 N.E.2d 101 [1991], lv denied 79 N.Y.2d 754, 581 N.Y.S.2d 281, 589 N.E.2d 1263 [1992] ; see Rosado v. Proctor & Schwartz, 106 A.D.2d 27, 30, 483 N.Y.S.2d 271 [1984], affd 66 N.Y.2d 21, 494 N.Y.S.2d 851, 484 N.E.2d 1354 [1985] ; Honeywell, Inc. v. J.P. Maguire Co., Inc., 1999 WL 102762, *6, 1999 U.S. Dist. LEXIS 1872, *17-18 [S.D. N.Y., Feb. 24, 1999, No. 93–CIV–5253 (DAB/HBP) ] ; Bay Bridge Const. Corp. v. Hirani Const. Mgt., Inc., 2013 WL 6217885, *10 [Sup. Ct., N.Y. County, Nov. 27, 2013, No. 653031/2011] ).

The concurrence disagrees with this concept, citing Hawthorne v. South Bronx Community Corp., 78 N.Y.2d 433, 576 N.Y.S.2d 203, 582 N.E.2d 586 (1991) and Felker v. Corning Inc., 90 N.Y.2d 219, 660 N.Y.S.2d 349, 682 N.E.2d 950 (1997). These cases, however, are inapposite, as they do not reach the issue presented in the instant case, as well as in Service Sign Erectors Co. – whether a party to a contract who is subject to a contractual indemnity obligation flowing one way can seek common-law indemnity flowing the other way. Rather, Hawthorne deals with a subcontractor who employed an injured plaintiff. The owner of the property and the general contractor were liable under Labor Law § 240(1) and the subcontractor/employer was liable to the owner and the general contractor under principles of both common-law and contractual indemnity ( Hawthorne v. South Bronx Community Corp., 78 N.Y.2d at 435, 576 N.Y.S.2d 203, 582 N.E.2d 586 ).⁴ The salient issue in that case was whether these principles of indemnity could co-exist for the contractually benefited party, and the Court of Appeals found that they could ( id. at 437–438, 576 N.Y.S.2d 203, 582 N.E.2d 586 ). Hawthorne does not, however, determine whether a subcontractor/employer who has voluntarily assumed a contractual liability to indemnify the general contractor can nevertheless go upstream and seek common-law indemnity from the general contractor. Similarly, Felker did not involve this issue in the instant appeal, but rather answered the question of whether a contractual agreement by a subcontractor to indemnify a general contractor is superseded by any common-law right to indemnity owed to the general contractor by the subcontractor, which the Court of Appeals found...