Resmac 2 Llc v. Capital

• Decision Date: 07 July 2011
• Parties: RESMAC 2 LLC, Plaintiff–Appellant,v.MADISON REALTY CAPITAL, L.P., et al., Defendants,Stewart Title Insurance Company, Defendant–Respondent.[And a Third–Party Action].
• Court: New York Supreme Court — Appellate Division

86 A.D.3d 440

927 N.Y.S.2d 328

2011 N.Y. Slip Op. 05876

RESMAC 2 LLC, Plaintiff–Appellant,

v.MADISON REALTY CAPITAL, L.P., et al., Defendants,Stewart Title Insurance Company, Defendant–Respondent.[And a Third–Party Action].

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

July 7, 2011.

Wachtel & Masyr, LLP, New York (Howard Kleinhendler of counsel), for appellant.

Sanders, Gutman & Brodie, P.C., Brooklyn (D. Michael Roberts of counsel), for respondent.MAZZARELLI, J.P., CATTERSON, DeGRASSE, ABDUS–SALAAM, ROMÁN, JJ.

Order and judgment (one paper), Supreme Court, New York County (Charles E. Ramos, J.), entered November 1, 2010, granting defendant Stewart Title Insurance Company's motion for summary judgment and dismissing the complaint as against it, and bringing up for review an order, same court and Justice, entered on or about October 29, 2010, which denied plaintiff's motion for summary judgment on its claims for defense costs and indemnification as against defendant, unanimously modified, on the law, the order and judgment vacated, defendant's motion denied and plaintiff's motion granted to the extent of declaring that defendant is obligated to reimburse plaintiff for defense costs, and otherwise affirmed, without costs. Appeal from October 29, 2010, order unanimously dismissed, without costs, as subsumed in the appeal from the November 1, 2010 order and judgment.

Plaintiff's failure to notify defendant of the adversary proceeding commenced in the bankruptcy court is not excused by the fact that defendant received notice of the pending litigation from another source ( see Travelers Ins. Co. v. Volmar Constr. Co., 300 A.D.2d 40, 43, 752 N.Y.S.2d 286 [2002] ). However, defendant did not establish that it was prejudiced by plaintiff's failure, and thus, pursuant to the terms of the policy, plaintiff's failure “shall” not prejudice plaintiff's rights under the policy. Defendant received notice from plaintiff of its potential liability under the policy, as well as a copy of the complaint in the bankruptcy proceeding. Yet, instead of exercising its right under the policy to take action to prevent or reduce loss or damage to its insured, defendant “chose to stay on the sidelines and to allow [plaintiff] to defend the suit on its own” ( see Deutsche Bank Trust Co. of Ams. v. Tri–Links Inv. Trust, 74 A.D.3d 32, 42, 900 N.Y.S.2d 246 [2010]; American Tr. Ins. Co. v. Hashim, 68 A.D.3d 618, 892 N.Y.S.2d 78 [2009], lv. denied 14...