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RED BALL INTERIOR DEMOLITION CORP. v. PALMADESSA

December 4, 1996

RED BALL INTERIOR DEMOLITION CORP. and JOHN PALMADESSA, Plaintiffs, against DANIEL PALMADESSA, DONALD PALMADESSA, WILLIAM PALMADESSA, SUPREME RECYCLING, INC., and FORTUNE INTERIOR DISMANTLING CORP., Defendants.


The opinion of the court was delivered by: SWEET

Sweet, D.J.

 Defendants Daniel Palmadessa ("Daniel"), Donald Palmadessa ("Donald"), William Palmadessa ("William"), Supreme Recycling, Inc. ("Supreme"), and Fortune Interior Dismantling Corp. ("Fortune") (collectively, the "Defendants") have moved for an order: (1) holding Plaintiffs Red Ball Interior Demolition Corp. ("Red Ball") and John Palmadessa ("John") (collectively, "Plaintiffs") in contempt for failure to comply with this Court's June 25, 1996 Order; (2) ordering Defendants released pursuant to the terms of a release submitted by Defendants to Plaintiffs; and (3) awarding counsel fees and costs.

 Defendant Daniel Palmadessa ("Daniel") has also moved to compel Plaintiffs to indemnify Daniel Palmadessa the amount of $ 9,956, as well as counsel fees and costs. Plaintiffs have opposed on various grounds and demand a jury trial on the issue of whether the notice of claim was untimely under an indemnity agreement between the parties.

 For the reasons set forth below, Defendants' motions for contempt, for an order of release, and for counsel fees and costs will be denied. Daniel's motion for indemnification will be granted, and his motion for counsel fees and costs will be denied. John's request for a jury trial will be denied. In addition, the June 25 Order will be amended to clarify the obligations of the parties thereunder.

 The Parties

 Plaintiff John founded the family carting and demolition business which became Red Ball in 1958. He is Red Ball's sole shareholder at present. Defendant Daniel is John's brother and was his partner in several family businesses, including Red Ball. Daniel and John both reside in New Jersey. Daniel's sons, defendants Donald and William, were employed by Red Ball and later incorporated Supreme and Fortune, both of which are New Jersey corporations.

 Facts and Prior Proceedings

 The factual and procedural background of this case is fully described in the prior opinions of this Court, familiarity with which is assumed. See Red Ball Interior Demolition Corp. v. Palmadessa, 874 F. Supp. 576 (S.D.N.Y. 1995); Red Ball Interior Demolition Corp. v. Palmadessa, 908 F. Supp. 1226 (S.D.N.Y. 1996); Red Ball Interior Demolition Corp. v. Palmadessa, 1996 U.S. Dist. LEXIS 4231, No. 94 Civ. 4158, 1996 WL 159066 (S.D.N.Y. April 5, 1996). These parties have also been engaged in litigation before the Honorable Robert J. Ward since 1990. See Palmadessa v. Palmadessa, 90 Civ. 2429, 1994 WL 191933 (S.D.N.Y. 1996); 1992 U.S. Dist. LEXIS 11193, 1992 WL 188329 (S.D.N.Y. July 30, 1992). Those facts relevant to the decision of these motions are set forth below.

 On May 7, 1996, the parties entered into a settlement agreement (the "Settlement") that was placed on the record before this Court. The Court stated its intention to retain jurisdiction to enforce the Settlement. An order of dismissal (the "Dismissal") "pursuant to the settlement hearing held in Court 5-7-96" was signed by this Court on May 8, 1996 and entered by the Clerk on May 9, 1996.

 The Settlement included provisions calling for payment of a sum of money by Daniel Palmadessa, the execution of a release of claims by all parties, and the indemnification of Daniel Palmadessa by John and Red Ball for liabilities arising from the business of Red Ball and several other business ventures in which the parties were involved. The indemnification provision expanded the scope of an existing "Agreement of Indemnification" between John and Daniel Palmadessa, entered into on June 2, 1994 (the "June 1994 Agreement"). The June 1994 Agreement provided that it would be governed by New York law. The Settlement also provided that the sums paid by Daniel under the Settlement would go into trust to be used to satisfy Daniel's claims for indemnification. Upon expiration of the trust term, the trust remainder is payable to John Palmadessa as beneficiary.

 Paragraph 2 of the preexisting June 2 Agreement provides:

 
Claim Procedure. If any indemnified claim shall be asserted, notice of such claim shall be given by Daniel to John (and vice versa) as soon as practicable after Daniel (or John) receives knowledge thereof . . .
 
If Daniel requests, John shall litigate or otherwise contest such claim on behalf of Daniel, in good faith and without unnecessary delay at his own expense and with counsel of his choice . . .
 
If Daniel fails to litigate or otherwise contest such claim, John shall have the right, acting in good faith and without unnecessary delay, to litigate or otherwise contest such claim . . .

 On or about May 24, 1996, Defendants transmitted a certified check in the amount of $ 492,641.19, payable to "William Dunnegan as attorney for Red Ball Interior Demolition and John Palmadessa." They also transmitted a Release and a Stipulation of Settlement and Discontinuance.

 Plaintiffs refused to execute the Release and refused to negotiate the check. On June 7, 1996, plaintiff John moved: (1) to have the release proposed by Daniel redrawn, on the ground that the proposed Release was overly broad; (2) to have the check redrawn, on the ground that it granted Red Ball a property right in the trust account, when that was not the intent of the Agreement; and (3) to compel Daniel to deliver the original notes to John. On June 19, 1996, Defendants filed a cross motion to compel John Palmadessa, individually and as corporate officer of Red Ball and several other corporate entities named as releasors in Defendants' proposed Release, to accept the tendered check and execute the Release.

 By order dated June 25, 1996 (the "June 25 Order"), this Court denied Plaintiffs' motion and granted Defendants' cross-motion. The Order, in its entirety, read:

 
Plaintiffs having moved and Defendants having cross-moved on June 25, 1996, for enforcement of their settlement agreement of May 7, 1996, Plaintiff's motion is denied. Defendants' motion for counsel fees and costs is denied. Defendants' motion is otherwise granted.

 Plaintiffs subsequently failed to comply with the June 25 Order, but placed an executed Release complying with the Order in escrow, pending the outcome of Plaintiffs' anticipated appeal. They also proposed an alternative release.

 By letter dated July 10, 1996, Daniel Palmadessa requested indemnification from John for Red Ball tax liabilities deducted from Daniel's personal income tax refund by the State of New York. The State notified Daniel in October 1995 that he would be held liable for the Red Ball taxes, ...


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