State v. U.S. Fidelity and Guar. Co.

• Decision Date: 22 November 1995
• Citation: 633 N.Y.S.2d 874,221 A.D.2d 849
• Parties: STATE of New York, Appellant-Respondent, v. UNITED STATES FIDELITY AND GUARANTY COMPANY, Respondent-Appellant.
• Court: New York Supreme Court — Appellate Division

Page 874

633 N.Y.S.2d 874

221 A.D.2d 849

STATE of New York, Appellant-Respondent, v. UNITED STATES FIDELITY AND GUARANTY COMPANY, Respondent-Appellant.

Supreme Court, Appellate Division,

Third Department.

Nov. 22, 1995.

Dennis C. Vacco, Attorney General (Denise A. Hartman, of counsel), Albany, for appellant-respondent.

Becker & Becker, Albany (Jane Landes Foster of Stradley, Ronon, Stevens & Young, Philadelphia, Pennsylvania of counsel), for respondent-appellant.

Before MIKOLL, J.P., and CREW, CASEY, YESAWICH and SPAIN, JJ.

CASEY, Justice.

Cross appeals from an order of the Supreme Court (Kahn, J.), entered June 24, 1994 in Albany County, which, inter alia, partially granted plaintiff's motion for summary judgment on the issue of liability.

Plaintiff commenced this action to recover on a performance bond issued by defendant to Colebrook Farms Inc., a company that contracted with plaintiff to produce prepared foods by processing raw food ingredients donated by the Federal government for school lunch programs. It is undisputed that defendant is liable to plaintiff as a matter of law under the performance bond for the value of the actual inventory of donated commodities in the possession of Colebrook during the one-year bonded period. In support of its motion for summary judgment, plaintiff submitted evidentiary proof in admissible form to establish the amount of defendant's liability. Included in plaintiff's submission were Colebrook's certified monthly reports, which showed Colebrook's inventory balances during the bonded period. Based upon defendant's claims that the inventory shown on the reports included "paper carryovers" from periods not covered by the performance bond, Supreme Court concluded that a question of fact existed as to the amount of Colebrook's inventory during the bonded period. We conclude that plaintiff's motion for summary judgment should have been granted in its entirety.

Defendant submitted the affidavit of an accountant it retained for the purposes of this litigation, who reviewed Colebrook's books and records and spoke with Colebrook's representatives. As a result of certain accounting practices engaged in by Colebrook over the years, the accountant was of the opinion that the starting inventory balances shown on Colebrook's report for the first month of the bonded period did not represent actual donated food on hand at the beginning of the period, but represented an accrued liability far greater than the actual donated food in Colebrook's possession. The accountant explained that upon the expiration of each one-year donated food processing agreement between plaintiff and Colebrook, Colebrook did not return the donated food on hand or pay plaintiff the value of the food, but instead carried over the value of the food on its accounts as an inventory liability to plaintiff. The accountant also noted that prior to the bonded period, Colebrook assumed the liabilities of another processor, B & H Food Company, whose inventory liabilities were also carried over into the bonded year on Colebrook's books.

Absent from the record, however, is any evidentiary proof in admissible form to demonstrate that Colebrook did not actually have in its possession the donated foods represented by the inventory liabilities shown in Colebrook's records. For example, the accountant stated that B & H Food Company "did not deliver to Colebrook physical commodities equal to the liabilities Colebrook was assuming, but, on the contrary, delivered significantly less commodities". The accountant's opinion was based upon his ...