Stonington Water St. Assoc. Llc v. Hodess Bldg. Co. Inc.

• Court: U.S. District Court — District of Connecticut
• Writing for the Court: STEFAN R. UNDERHILL, District Judge.
• Citation: Stonington Water St. Assoc. Llc v. Hodess Bldg. Co. Inc., 792 F.Supp.2d 253 (D. Conn. 2011)
• Decision Date: 09 March 2011
• Docket Number: No. 3:08cv1359 (SRU).,3:08cv1359 (SRU).
• Parties: STONINGTON WATER STREET ASSOC., LLC, Plaintiff,v.HODESS BUILDING CO., INC., and National Fire Ins. Co., Defendants.

792 F.Supp.2d 253

STONINGTON WATER STREET ASSOC., LLC, Plaintiff,

v.HODESS BUILDING CO., INC., and National Fire Ins. Co., Defendants.

No. 3:08cv1359 (SRU).

United States District Court, D. Connecticut.

March 9, 2011.

Dennis J. Artese, James R. Serritella, Anderson Kill & Olick, Finley T. Harckham, New York, NY, for Plaintiff.Bradford R. Carver, Hinshaw & Culbertson LLP, Boston, MA, Thomas A. Kaelin, Woodbury, CT, for Defendants.

RULING ON MOTION FOR SUMMARY JUDGMENT

STEFAN R. UNDERHILL, District Judge.

On May 28, 2003, plaintiff Stonington Water Street Assoc., LLC (“Stonington”) entered into a contract with Hodess Building Company, Inc. (“Hodess”) for the construction of a condominium complex (“the project”) on Water Street in Stonington, Connecticut. The project had a contract cost $20,095,100 and a substantial completion date of November 22, 2004. National Fire Insurance Company of Hartford (“National Fire”) executed an American Institute of Architects (“AIA”) A–312 performance surety bond on behalf of Hodess for the project. The project experienced a number of delays and Hodess suffered from a financial inability to complete the project and pay its subcontractors. In November 2006, Stonington notified National Fire that Hodess had defaulted on the construction contract. Stonington then sought to invoke coverage under the performance bond and demand that National Fire undertake and complete Hodess's remaining obligations under the construction contract. National Fire denied coverage on the grounds that Stonington failed to comply with the performance bond's terms and, even if Stonington had complied, the claims filed were for damages not recoverable under the terms of the performance bond.

In September 2008, Stonington filed this suit against Hodess and National Fire.¹ Hodess has not appeared. The nine-count complaint (doc. # 1) alleges that National Fire has failed to perform under the terms of the performance bond, failed to reimburse under the terms of the bond, breached the implied covenant of good faith and fair dealing, and violated the Connecticut Unfair Insurance Practices Act (“CUIPA”), and the Connecticut Unfair Trade Practices Act (“CUTPA”).

On March 5, 2010, National Fire moved for summary judgment on each of Stonington's claims against it.² (Doc. # 27). National Fire argues that Stonington's hiring of replacement contractors and failure to comply with the terms of the construction contract and the performance bond's conditions precedent has rendered the bond null and void, thereby excusing National Fire's performance under the bond.

Case law in Connecticut and the Second Circuit favors strict compliance with a surety bond's terms, and the record at summary judgment, including Stonington's July 26, 2010 letter, demonstrates that Stonington has failed, in a number of ways, to comply with the terms of the construction contract and the performance bond's conditions precedent. Those failures by Stonington have prejudiced National Fire, thereby discharging National Fire's obligations to perform under the bond. Accordingly, summary judgment is granted in favor of National Fire.

I. Standard of Review

Summary judgment is appropriate when the evidence demonstrates that “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (plaintiff must present affirmative evidence in order to defeat a properly supported motion for summary judgment).

When ruling on a summary judgment motion, the court must construe the facts in the light most favorable to the nonmoving party and must resolve all ambiguities and draw all reasonable inferences against the moving party. Anderson, 477 U.S. at 255, 106 S.Ct. 2505; Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Adickes v. S.H. Kress & Co., 398 U.S. 144, 158–59, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); see also Aldrich v. Randolph Cent. Sch. Dist., 963 F.2d 520, 523 (2d Cir.1992) (court is required to “resolve all ambiguities and draw all inferences in favor of the nonmoving party”). When a motion for summary judgment is properly supported by documentary and testimonial evidence, however, the nonmoving party may not rest upon the mere allegations or denials of its pleadings, but must present significant probative evidence to establish a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Colon v. Coughlin, 58 F.3d 865, 872 (2d Cir.1995).

“Only when reasonable minds could not differ as to the import of the evidence is summary judgment proper.” Bryant v. Maffucci, 923 F.2d 979, 982 (2d Cir.1991); see also Suburban Propane v. Proctor Gas, Inc., 953 F.2d 780, 788 (2d Cir.1992). If the nonmoving party submits evidence that is “merely colorable,” or is not “significantly probative,” summary judgment may be granted. Anderson, 477 U.S. at 249–50, 106 S.Ct. 2505.

The mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact. As to materiality, the substantive law will identify which facts are material. Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.

Id. at 247–48, 106 S.Ct. 2505. To present a “genuine” issue of material fact, there must be contradictory evidence “such that a reasonable jury could return a verdict for the non-moving party.” Id. at 248, 106 S.Ct. 2505.

If the nonmoving party has failed to make a sufficient showing on an essential element of its case with respect to which it has the burden of proof at trial, then summary judgment is appropriate. Celotex, 477 U.S. at 322, 106 S.Ct. 2548. In such a situation, “there can be ‘no genuine issue as to any material fact,’ since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial.” Id. at 322–23, 106 S.Ct. 2548; accord Goenaga v. March of Dimes Birth Defects Found., 51 F.3d 14, 18 (2d Cir.1995) (movant's burden satisfied if it can point to an absence of evidence to support an essential element of nonmoving party's claim). In short, if there is no genuine issue of material fact, summary judgment may enter. Celotex, 477 U.S. at 323, 106 S.Ct. 2548.

The Second Circuit has articulated a more specific standard applicable in contract actions. “In determining a motion for summary judgment involving the construction of contractual language, a court should accord that language its plain meaning giving due consideration to the surrounding circumstances and apparent purpose which the parties sought to accomplish. Where contractual language is ambiguous and subject to varying reasonable interpretations, intent becomes an issue of fact and summary judgment is inappropriate. The mere assertion of an ambiguity does not suffice to make an issue of fact. Ambiguity resides in a writing when—after it is viewed objectively—more than one meaning may reasonably be ascribed to the language used. Only where the language is unambiguous may the district court construe it as a matter of law and grant summary judgment accordingly.” Palmieri v. Allstate Ins. Co., 445 F.3d 179, 187 (2d Cir.2006) (quoting Thompson v. Gjivoje, 896 F.2d 716, 721 (2d Cir.1990)).

II. BackgroundA. The Relevant Documents

1. The Performance Bond

The AIA 312 performance bond is an American Institute of Architects standard document (“AIA 312”). Doc. # 1, ex. B (Bond. No. 929273517). Under the bond's terms, National Fire is the Surety, Hodess is the Contractor and Stonington is the Owner. The terms most relevant to this motion appear in sections 3 through 6. Section 3 sets forth the steps the Owner must take in order to invoke the Surety's obligation to perform in the event of a contractor default. Section 4 details the obligations of the Surety once the Owner has satisfied the conditions of section 3. Section 5 lays out the remedies available to the Owner if the Surety fails to perform. Section 6 describes the nature of damages payable by the Surety in the event the Contractor fails to perform. A contractor default is defined as a “failure of the contractor, which has neither been remedied nor waived, to perform or otherwise to comply with the terms of the construction contract.”

2. The Construction Contract

The performance bond incorporates the terms and conditions of the construction contract. Doc. # 1, ex. B. The construction contract is a two-part document. Doc. # 1, ex. A at 3–76. The first part is an AIA form 121 standard agreement between Owner and Contractor (“AIA 121”). Doc. # 1, ex. A at 3–28. It sets forth, in basic terms, the relationship and obligations of the parties. Article 8 specifies the various insurances required, with section 8.3 addressing the performance bond. Article 10 concerns termination of the contract.

The second part of the construction contract is the AIA A201, which sets forth general conditions of the contract for construction (“AIA A201”). Doc. # 1, ex. A at 29–76. The relevant provisions are Article 4 (administration of the contract); Article 9 (final completion and payment); Article 12 (uncovering and correction of work); and Article 14 (termination), notably sections 14.2–14.2.1. Termination after the setting of the guaranteed maximum price can be accomplished only as set forth in Article 14 of the AIA A201.

B. Factual Background

Resolving all ambiguities and drawing all inferences in favor of the nonmoving party, here Stonington, the facts concerning whether Stonington complied with the bond's conditions precedent are as follows. On...