United States District Court, E.D. New York
October 3, 2005.
RELIANCE INSURANCE COMPANY, a Pennsylvania Corporation, Plaintiff
POLYVISION CORPORATION, a New York Corporation f/k/a/ INFORMATION DISPLAY TECHNOLOGY, INC., Defendant.
The opinion of the court was delivered by: LEONARD WEXLER, Senior District Judge
MEMORANDUM AND ORDER
In this diversity case, the Plaintiff insurance company seeks
reimbursement for payments allegedly made as a surety on certain
performance bonds. The payments sought to be reimbursed were made in connection with a school construction project that
was begun in 1987. A tortuous state court history, lasting nearly
ten years, precedes this federal litigation. That litigation
culminated in a dismissal holding, essentially, that Reliance
Insurance Company of New York ("Reliance NY"), the palintiff
named in the state court proceedings, was a corporate entity that
did not issue the bonds and therefore never had a claim.
Plaintiff here, Reliance insurance Company, the parent company to
Reliance NY, thereafter commenced this federal action, alleging
that it is the surety entitled to reimbursement.
Presently before the court is Defendant's motion to dismiss.
The motion seeks dismissal on statute of limitations grounds as
well as for improper venue and failure to state a claim. For the
reasons set forth below, the court holds that this action is,
indeed, time barred. Accordingly, the case is dismissed and the
merits of the remainder of the motion need not be reached.
I. Factual Background
The facts recited herein are derived from the allegations of
the complaint, taken as true at this point in the proceedings, as
well as the state court record all matters properly before the
court in the context of this motion to dismiss.
A. The Parties and the Construction Project
Plaintiff Reliance Insurance Company ("RIC") is a Pennsylvania
corporation alleging that it was a surety with respect to a
construction project under which the claims here are alleged to
arise. Defendant Polyvision Corporation ("Polyvision") is a
corporation alleged to have been formerly known as Information
Display Technology, Inc. ("IDTI"). The construction project
underlying this coverage litigation arises from a 1987 contract
between the Lindenhurst school board (the "School") and Park Industries, Inc. ("Park"), pursuant
to which Park agreed to perform window and curtain wall
replacement at the Lindenhurst senior and junior high schools
(the 1987 Contract"). RIC, as surety, issued bonds binding RIC
with regard to Park's performance under the 1987 Contract.
SWS Industries ("SWS"), a subcontractor for Park, thereafter
agreed to purchase insulated curtain wall panels, manufactured by
Polyvision's corporate predecessor. In June of 1988, after
partially completing the project, SWS and Park filed voluntary
petitions for bankruptcy protection. In connection with the
bankruptcy, both companies rejected all executory contracts and
RIC thereafter succeeded to all of the rights and interests of
Park and SWS under the 1987 Contract. RIC alleges that it
thereafter entered into a "takeover agreement" with the School
pursuant to which RIC agreed to furnish all labor and materials
required to perform the balance of the 1987 Contract.
In July of 1990, RIC was advised that the panels installed at
the schools and furnished by IDTI were defective. IDTI took the
position that any defects were the result of faulty installation
and not any manufacturing defect. RIC thereafter purchased
additional panels and paid to have the new panels installed so as
to cure the defects identified by the School. After further
defects were identified, RIC demanded that IDTI remedy the
problems. IDTI, however, disavowed any responsibility, again
pointing to faulty installation as the culprit.
B. State Court Litigation
In 1994, Reliance NY commenced an action against IDTI and
others seeking indemnification for amounts spent as surety in
connection with the 1987 Contract (the State Court Litigation").
Specifically, Reliance NY identified itself as the issuer of
performance bonds that obligated it to complete the construction project the School
contracted for in 1987. In an order dated March 30, 1995, certain
of Reliance NY's claims, which arose out of purchases made in
1987, were dismissed on statute of limitations grounds. Claims
arising from purchases made in 1991 and 1992 were allowed to
In March of 2001, an order granting Reliance NY leave to amend
to add certain claims of indemnification was entered in the State
Court Litigation. These claims arose from a settlement reached
with the School in connection with separate litigation initiated
by Reliance NY against the School, seeking payment in connection
with the 1987 Contract.
In 2002, a company known as Reading Company ("Reading") sought
leave to intervene in the State Court Litigation. Intervention
was sought on the ground that Reading made payment to Reliance NY
on amounts it spent as surety on the 1987 Contract. Supreme Court
granted the motion to the extent of substituting Reading as the
plaintiff, in place of Reliance NY.
The order substituting Reading as plaintiff was appealed to the
Appellate Division of the Supreme Court, Second Department, which
reversed the order of the trial court. In its opinion, dated
December 22, 2003, the Appellate Division held that Reading
failed to make a proper showing as to its interest in the
litigation. Specifically, the Appellate Division stated that "the
evidence submitted by Reading Company in support of its motion
fell far short of establishing that it was the real party in
interest." Reliance Ins. Co. v. Information Display Technology,
Inc., 769 N.Y.S.2d 593, 954 (2d Dep't. 2003). Because Reading
had failed to show that it had a "real and substantial interest
in the outcome" of the State Court Litigation, the appellate
court held that the motion to intervene should have been denied.
In an order dated January 4, 2005, the state trial court
addressed a motion to dismiss on the ground that the State Court Litigation was commenced by the
wrong plaintiff. The court noted the uncontroverted fact that the
performance bonds forming the basis of the action were issued not
by the named plaintiff Reliance NY, but by its parent company,
RIC. Because Reliance NY did not issue the bonds, it was held to
have no right to seek indemnification in connection with any
payments made thereon. Accordingly, the court granted the motion
to dismiss the State Court Litigation. The order granting the
motion was noted to be a "final disposition" of the matter. The
filing of this federal action followed.
C. The Motion to Dismiss
As noted, Defendant now moves to dismiss this action. In
support of the motion, Defendant argues that Plaintiff is not
entitled to take advantage of a "savings" provision of New York
law and this action is therefore time barred. Defendants further
argue that venue is improper and that the case should be
dismissed for failure to state a claim. After outlining relevant
legal principles the court will turn to the merits of the motion.
I. Legal Principles: CPLR 205
In this diversity case, it is the law of the State of New York
that governs the time in which the action must be commenced as
well as any applicable toll. Cantor Fitzgerald v. Lutnick,
313 F.3d 704, 709 (2d Cir. 2002). The question here is whether
Section 205(a) of New York's Civil Practice Law and Rules ("CPLR
205") can be applied to render this action timely commenced by
CPLR 205 is a "savings" provision that allows a plaintiff whose
action has previously been dismissed, six months in which to
commence a new action based upon the same transaction or occurrence, despite the running of the applicable statute of
limitations. See Carrick v. Central General Hospital,
434 N.Y.S.2d 130, 135 (1980). Cases that may take advantage of CPLR
205 are, generally, those that have "suffered dismissals of a
generally technical type." Winston v. Freshwater Wetlands
Appeals Board, 646 N.Y.S.2d 565, 566 (2d Dep't 1996). The six
month extension does not apply to all dismissed actions. Rather,
the statute provides for the extension only in cases where the
first action was timely commenced and was "terminated in any
other manner than by a voluntary discontinuance, a failure to
obtain personal jurisdiction over the defendant, a dismissal of
the complaint for failure to prosecute the action, or a final
judgment upon the merits." CPLR 205(a). The use of the phrase
"final judgment on the merits" does not mean, necessarily, that
the first action reached the actual merits of the dispute.
Instead, it "is a corollary of the principle of res judicata that
`once a claim is brought to a final conclusion, all other
claims arising out of the same transaction or series of
transactions are barred, even if based upon different theories or
if seeking a different remedy.'" Yonkers Contracting Co., Inc.
v. Port Authority Trans-Hudson Corp., 690 N.Y.S.2d 512, 516
(1999), quoting, O'Brien v. City of Syracuse, 445 N.Y.S.2d 687,
688 (1981) (emphasis added).
CPLR 205 has been applied to allow a plaintiff to newly
prosecute an action dismissed due to an error relating to the
plaintiff's identity. E.g., McGuire v. Southside Hosp.,
753 N.Y.S.2d 380, 380 (2d Dep't. 2003); Chase Manhattan Bank. N.A.
v. Wolowitz, 708 N.Y.S.2d 342, 343 (2d Dep't. 2000). This "error
in plaintiff's identity" can arise when an action is commenced,
either in the name of a deceased individual or a survivor prior
to an appointment of an executor or administrator. In such cases,
dismissal occurs because the named plaintiff is not technically
empowered to pursue the action. See, e.g., Carrick,
434 N.Y.S.2d at 252 (CPLR 205 extension applied where prior action dismissed due to failure to
appoint administrator); George v. Mt. Sinai Hospital,
417 N.Y.S.2d 231, 236-37 (1979) (same); Mingone v. State of New
York, 474 N.Y.S.2d 557, 560-61 (2d Dep't. 1984) (same). These
cases are routinely dismissed but may thereafter be re-commenced
by a duly appointed representative who is empowered to pursue an
action based upon the same transaction or occurrence as the
dismissed action. CPLR 205(a). McGuire, 753 N.Y.S.2d at 380;
Brown v. Huntington Medical Group, 657 N.Y.S.2d 333, 333 (2d
Similarly, a trustee in bankruptcy has been held entitled to
the six month grace period where a prior action, improperly
(although timely) commenced by the bankrupt individual was
dismissed. Genova v. Madani, 725 N.Y.S.2d 141, 142 (3d Dep't.
2001). CPLR 205 has also served to preserve an otherwise expired
cause of action for a corporate plaintiff that is prohibited from
prosecuting a lawsuit because of non-payment of taxes. Once taxes
have been paid and the right to sue is re-established, the
corporation has been held entitled to take advantage of the six
month extension granted by CPLR 205. See Lorisa Capital Corp.
v. Gallo, 506 N.Y.S.2d 62, 72 (2d Dep't. 1986).
II. Disposition of the Motion
It is argued by Defendant and conceded by RIC that, but for the
application of CPLR 205, Plaintiff's action is time barred. Thus,
as a threshold matter, the court considers whether the statute
applies to this action.
Cases applying CPLR 205 to allow an otherwise expired action to
proceed when brought by a newly appointed administrator, executor
or trustee have used broad language, seized upon by Plaintiff,
stating that a mistake in "the identity of the named plaintiff,"
should not preclude the application of CPLR 205. E.g., Freedman v. New York Hospital
Medical Center of Queens, 780 N.Y.S.2d 366, 367 (2d Dep't 2004)
("an error relating to the identity of the named plaintiff in the
original action will not bar recommencement of the action
pursuant to CPLR 205(a)); McGuire, 753 N.Y.S.2d at 380 (same);
Wolowitz, 708 NY.S.2d at 343 (same); see George,
417 N.Y.S.2d at 236 (referring to naming of deceased rather than
administratrix as an error in "the identity of the named
The common thread running through cases applying CPLR 205 in
cases where the error in the dismissed action lies only in the
"identity" of the plaintiff, is the fact that it is the same
person or entity whose rights are sought to be vindicated in both
actions. Certainly, the plaintiff in the new lawsuit may appear
in a different capacity, such as a duly appointed administrator,
but the identity of the individual on whose behalf redress is
sought, remains the same. See, e.g., Carrick,
434 N.Y.S.2d at 252; George, 417 N.Y.S.2d at 236-37; Mingone,
474 N.Y.S.2d at 561.
Here, on the other hand, Plaintiff is a completely different
entity from that which prosecuted, for almost ten years, the now
dismissed State Court Litigation. While there is a relationship
between RIC and Reliance NY, they are not the same company.
Plaintiffs have failed to cite, and the court's research has not
uncovered, a case in which a related, but separate corporate
entity, has been afforded the six month extension to the statute
of limitations where it was not the plaintiff in the dismissed
action. Indeed, language in George, a case relied upon by
Plaintiff, indicates that CPLR 205 does not apply where, as here,
the plaintiff is the second action is not the same individual or
entity named as plaintiff in the dismissed action. Thus, the New
York Court of Appeals commented in George, that "[u]sually, of
course, the fact that one party commenced an action which is
subsequently dismissed, will not serve to justify application [of CPLR 205] so as to support a later action by a different
claimant." George, 417 N.Y.S.2d at 237. Under these
circumstances, the court concludes that a parent company cannot
take advantage of CPLR 205 where an action commenced by a
subsidiary was dismissed. Thus, the court holds that RIC may not
take advantage of CPLR 205 because it was not "the plaintiff" in
the dismissed action. This holding is supported by the absence of
case law supporting a contrary position and by the language of
CPLR 205 which states, plainly, that it is the plaintiff (or
his appointed executor or administrator) who is entitled to
commence a new action based upon the same transaction as the
dismissed action. CPLR 205(a). Here, the Plaintiff, RIC, was
never a party to the dismissed action and therefore may not take
advantage of the six month savings provision of CPLR 205. Under
these circumstances, the claim of RIC is time barred and
For the foregoing reasons, the motion to dismiss this action on
the ground of the statute of limitations is granted.
The court is aware that an order has been issued granting
Plaintiff seven days following the decision on this motion in
which to amend its complaint. That order recognized that RIC
attached an indemnity agreement issued by Reliance NY, rather
than the agreement issued by RIC, to its complaint and allowed
for amendment to substitute the RIC indemnity agreement.
Amendment of the complaint to substitute indemnity agreements,
however, makes no difference to the disposition set forth here in
the matter would still be time barred and the amendment is
Accordingly, the order granting leave to amend is hereby
rescinded. The motion to dismiss is granted and the Clerk of the
Court is directed to close the file in this case and to terminate any outstanding motions.
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