The opinion of the court was delivered by: RANDOLPH TREECE, Magistrate Judge
MEMORANDUM DECISION AND ORDER*fn1
Originally, the Plaintiff had moved for summary judgment
against the Defendants, pursuant to FED. R. CIV. P. 56(a), based
upon an indemnification agreement. Dkt. Nos. 21-23. At the time
of the Motion for Summary Judgment, the Court had before it a
Complaint which was premised upon a indemnification agreement and
a single construction contract (Contract 1-99) of which it is
alleged that the Defendants' had defaulted causing the Plaintiff
to assume responsibility to complete the contract and incur
expenses. Dkt. No. 1, Compl. Such reliance was in error because
the Plaintiff's damages actually arose out of three, not one,
construction contracts, albeit the contracts are inextricably
related and the Plaintiff is suing Defendants on this specific
indemnification agreement. Id. Once this error in the Complaint
was revealed by Defendants' opposition to the Summary Judgment
Motion, the Plaintiff readily acknowledged this inadvertence and
asked, in the alternative, to amend its Complaint so that it
accurately reflect the true events and confirms the facts set
forth in the statements of facts. The Court was prepared to
address the Motion for Summary Judgment but deferred and accepted
the more cautious route of permitting the Plaintiff to amend its
Complaint and further supplement the request for damages by
providing an appropriately detailed affidavit for attorney fees
and costs. Dkt. No. 30, Order, dated Sept. 30, 2003.
Plaintiff complied with the Court's directive and submitted an
Amended Complaint that identifies the two underlying contracts
(1-99 & 2-99). Dkt. No. 31, Am. Compl. An Amended Answer ensued
shortly thereafter (Dkt. No. 33), however, the next turn in this
litigation was quite unexpected. Since the Defendants initially
raised the issue of factual deficiencies in the Complaint
compelling an amendment thereto which was ultimately completed as
requested, one would have expected that the Court would quickly
return to the original Motion for Summary Judgment and decide the Motion, notwithstanding the Court's
observation in the order that by inviting the filing of an
amended complaint that the parties would not lose any remedies or
challenges. Dkt. No. 30. It then came as quite a surprise when
the Defendants filed a Motion to Dismiss the Amended Complaint
based upon both personal and subject matter jurisdiction which
had not been previously raised. Dkt. No. 37 & 38. Surprise
notwithstanding, the Court will not consider these two
dispositive Motions independently but rather interdependently.
Judicial economy requires us to do so, therefore, the Defendants'
Motion to Dismiss will be viewed in the context of the Motion for
Summary Judgment and deemed as the Defendants' Cross Motion to
Dismiss and opposition to the initial Motion.*fn2 For all of
the reasons stated below, the Plaintiff's Motion for Summary
Judgement is Granted and the Defendants' Cross Motion to
Dismiss is Denied.
First National Insurance Company of America is an affiliate of
SAFECO Insurance Companies with whom the Defendants, a
corporation and two individuals, executed a General Agreement of Indemnity For Contractors (Agreement) on June 30,
1998. Dkt. No. 31, Ex. 1 (the Indemnity Agreement). Because of
the nature of the exhaustive list of defenses raised by the
Defendants to this Motion for Summary Judgment, implicating
various provisions of the Agreement, it is incumbent upon us to
reveal, in some detail, the most salient and relevant terms of
the Agreement, an agreement which the Defendants agreed upon in
order to have this Plaintiff-Surety underwrite performance bonds
on their construction contracts.
[F]or the purpose of indemnifying the SAFECO
Insurance Companies from all loss and expense in
connection with any Bonds for which any SAFECO
Insurance Company now is or hereafter becomes
Surety. . . .
Any one or combination of the following: SAFECO . . .
First National Insurance Company of America. . . .
Contractor shall be deemed to be in default . . . in
the event: (1) Is declared to be in default by the
Obligee of any Bond; (2) Actually Breaches or
abandons any Contract; (3) Fails to pay . . . claims,
bills, or indebtedness incurred in connection with
the performance of any contract. . . .
(1) All loss, costs and expenses . . . including
court costs, reasonable attorney fees . . .
consultant fees, investigative costs and any other
losses, costs or expenses incurred by Surety by
reason of having executed any Bond, or incurred by it
on account of any Default under this agreement by any
of the Undersigned. . . .
(5) With respect to Claims against Surety:
Surety shall have the exclusive right for itself and
the Undersigned to determine in good faith whether
any claim or suit upon any Bond shall, on the basis
of belief of liability, expediency or otherwise, be
paid, compromised, defended or appealed. . . .
(6) Surety's Remedies in the Event of Default:
(1) Take possession of the work under any and all
Contracts and to arrange for its completion by others
or by the Obligee of any Bond . . . (4) Take such
other action as Surety shall deem necessary to
fulfill its obligation under any Bond.
(7) Security to Surety:
(c) Monies due or to become due Contractor on any
Contract, including all monies earned or unearned
which are unpaid. . . . (d) Any actions, causes of
action, claims or demands whatsoever which Contractor
may have or acquire. . . .
Dkt. No. 31, Ex. 1.
On October 18, 1999, Defendants entered into a contract with
the Town of Schaghticoke to construct water transmission and
distribution main lines along New York State Route 40 (Contract
1-99). Dkt. No. 25, Wunderlich Aff. at ¶ 2; Dkt. No. 28, Sussman
Aff. at ¶ 3. This contract had a bid price of $1,588,195 and
required performance and labor & material bonds, which were
furnished to the Town on November 9, 1999. Dkt. No. 25,
Wunderlich Aff., at ¶ 3; Dkt. No. 31, Am. Compl., Ex. 2
(Performance Bond #6024599). Among other things, the parties to
these bonds were identified as: (1) the Town as the owner, (2)
the Defendants as contractor and (3) First National Insurance
Company of America as the surety. Dkt. No. 31, Ex. 2. The overall
public work project for the Town was rather large and had other
components or stages of construction.
On January 15, 2000, Defendants entered into another contract
with the Town of Schaghticoke for the construction of water
transmission and distribution main lines (Contract 2-99) for the
stated price of $1,896,196. Dkt. No. 25 at ¶ 3; Dkt. No. 28 at ¶
3. Likewise, performance and labor & material bonds, identifying
the same parties as the previous bonds, were required, which the
Defendants furnished to the Town on February 14, 2000. Dkt. No.
25 at ¶ 3; Dkt. No. 41, Ex. 2 (# 6024606). It appears that Contract
1-99 and 2-99 pertain to construction work on different roads
(town and state) which would eventually intersect when completed.
Additionally, there was another related yet nominal contract
between the Town and Defendants which was entered into on or
about September 12, 2000, for the sum of $59,568 (Contract
3P-99). Dkt. No. 25 at ¶ 3; Dkt. No. 41 at p. 4. There remains a
question whether performance and labor & material bonds were
required for Contract 3P-99. With respect to Contract 3P-99,
Defendants argued in the alternative that no bonds were either
sought or waived, or the Town arbitrarily subsumed this Contract
within the parameters of Contract 2-99. Dkt. No. 41 at p. 4; see
also Dkt. No. 25 at ¶ 4.
At some point after all of the bonds were delivered to the Town
on the respective contracts, Defendants commenced the work at
hand on all of these contracts. Approximately more than a year
later, on June 4 and 12, 2001, the Town terminated all of
Defendants' contracts, declaring them in default. Dkt. No. 25 at
¶ 5. Initially, the Town forwarded a letter to an agent of the
Plaintiff, Rose and Kiernan, Inc., expressing its deep concern
about the Defendants' performances on Contracts 1-99 and 2-99.
Dkt. No. 31, Am. Compl., Ex. 3, Lt. of Kenneth Runion, Esq.,
dated Sept. 13, 2000. Approximately nine months later, by a
letter dated June 4, 2001, the Town's attorney advised the
Plaintiff that "Mr. Wunderlich has failed to perform the contract
covered by the  bond . . . [in that] New York State Department
of Transportation revoked the work permit for State Route 40 due
to Mr. Wunderlich's failure to properly perform . . . [and
further] request[ed] that the surety fully perform and complete
the work as provided by [the bond]." Dkt. No. 31, Ex. 4, Kenneth
Runion, Esq., Lt., dated June 4, 2001; Dkt. No. 21 at ¶ 9; Dkt.
No. 25 at ¶¶ 5-7. Pursuant to the Town's demand, the Plaintiff interceded and
assumed the remainder of the work at hand as to all three
contracts. Dkt. No. 25 at ¶ 7. The Plaintiff hired Cranbrook
Construction and McDonald Engineering to complete and oversee the
work under the three contracts. Dkt. No. 25 at ¶¶ 5-8. Further,
Plaintiff paid Best Paving Company (Best Paving), a
subcontractor, on the outstanding balance due for all three
contracts, particularly Contract 3P-99. Dkt. No. 28, Ex. 1.
However, Best Paving's all-inclusive invoice for $147,509 does
not allocate the cost among the contracts. Dkt. No. 31, Ex. 5.
Similarly, neither Cranbrook nor McDonald, due to the nature and
sequence of their respective work on these contracts, submitted
separate bills or invoices for the work performed on all
contracts. Dkt. No. 31, Ex. 6.; Dkt. No. 28 at ¶ 5.
Through this lawsuit, Plaintiff wishes to recover from
Defendants all monies expended to complete the job(s), pay the
subcontractor, and collect attorney fees and consultant fees less
payments received from the Town upon the completion of the
contracts. The consultant fees are due diligence fees incurred in
the investigation of the reasonableness of the subcontractors'
bills. Total damages claimed by Plaintiff against the Defendants
is $166, 870.41.*fn3 Dkt. No. 31, Am. Compl; Dkt No. 32,
Aff. of Costs and Fees. II. DISCUSSION
A. Summary Judgment Standard
Pursuant to FED. R. CIV. P. 56(c), summary judgment is
appropriate only where "there is no genuine issue as to any
material fact and . . . the moving party is entitled to judgment
as a matter of law." The moving party bears the burden to
demonstrate through "pleadings, depositions, answers to
interrogatories, and admissions on file, together with
affidavits, if any," that there is no genuine issue of material
fact. F.D.I.C. v. Giammettei, 34 F.3d 51, 54 (2d Cir. 1994)
(citing Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)). To
defeat a motion for summary judgment, the non-movant must "set
forth specific facts showing that there is a genuine issue for
trial," and cannot rest on "mere allegations or denials" of the
facts submitted by the movant. FED. R. CIV. P. 56(e); see also
Scott v. Coughlin, 344 F.3d 282, 287 (2d Cir. 2003) ("Conclusory
allegations or denials are ordinarily not sufficient to defeat a
motion for summary judgment when the moving party has set out a
documentary case."); Rexnord Holdings, Inc. v. Bidermann,
21 F.3d 522, 525-26 (2d Cir. 1994). To that end, sworn statements
are "more than mere conclusory allegations subject to disregard . . .
they are specific and detailed allegations of fact, made
under penalty of perjury, and should be treated as evidence in
deciding a summary judgment motion" and the credibility of such
statements is better left to a trier of fact. Scott v.
Coughlin, 344 F.3d at 289 (citing Colon v. Coughlin,
58 F.3d 865, 872 (2d Cir. 1995) and Flaherty v. Coughlin, 713 F.2d 10,
13 (2d Cir. 1983)).
When considering a motion for summary judgment, the court must
resolve all ambiguities and draw all reasonable inferences in
favor of the non-movant. Nora Beverages, Inc. v. Perrier Group
of Am., Inc., 164 F.3d 736, 742 (2d Cir. 1998). "[T]he trial
court's task at the summary judgment motion stage of the litigation is carefully limited to
discerning whether there are any genuine issues of material fact
to be tried, not to deciding them. Its duty, in short, is
confined at this point to issue-finding; it does not extend to
issue-resolution." Gallo v. Prudential Residential Servs., Ltd.
P'ship, 22 F.3d 1219, 1224 (2d Cir. 1994). Mere ...