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Breeze Construction Inc. v. CGU Insurance Co.

February 5, 2010

BREEZE CONSTRUCTION INC., CROSS-CLAIM PLAINTIFF AND DEFENDANT,
v.
CGU INSURANCE COMPANY, CROSS-CLAIM DEFENDANT, AND XL SPECIALTY INSURANCE COMPANY, CROSS-CLAIM PLAINTIFF AND DEFENDANT.



The opinion of the court was delivered by: VIKTOR V. Pohorelsky United States Magistrate Judge

FINDINGS OF FACT AND CONCLUSIONS OF LAW

Upon the evidence adduced at trial, the court makes the following findings of fact and reaches the following conclusions of law:

FINDINGS OF FACT

1. The crossclaims at issue here arise from an action brought by a union and various associated welfare benefit funds*fn1 (hereinafter sometimes referred to as "the plaintiffs") in which all the crossclaimants here were named as defendants.

2. The crossclaimant Breeze Construction Inc. is a masonry contractor whose principal is Tariq Khokar.

3. In approximately 2002 and 2003, Breeze served as a subcontractor to Phoenix Services Corporation on school construction projects for the New York City School Construction Authority (the "SCA") in Queens at P.S. 40 and P.S. 84. Khokar and Breeze worked with Phoenix on various other SCA school construction projects as well.

4. Phoenix Services Corporation is an approved contractor for SCA projects whose principal is Edward Lama.

5. CGU Insurance Company ("CGU") executed a bond under which it served as surety for any obligations owed by Phoenix to its subcontractors for labor and materials provided by subcontractors on the project at P.S. 40.

6. The crossclaimant XL Specialty Insurance Company ("XL") executed a bond under which it served as surety for any obligations owed by Phoenix to its subcontractors for labor and materials provided by subcontractors on the project at P.S. 84.

7. In the main action, the plaintiffs alleged that Breeze had failed to comply with its obligations under a collective bargaining agreement to make contributions to the welfare benefit funds and to pay dues owed to the union by Breeze's employees in connection with a number of projects on which Breeze had worked. The plaintiffs further alleged that as the bonding companies for Phoenix on the projects at P.S. 40 and P.S. 84, CGU and XL were liable for the amounts owed by Breeze with respect to any work done on those projects. The claims of the plaintiffs have all been resolved by settlement, leaving the crossclaims here.

BREEZE'S CLAIMS

8. Breeze contends that Phoenix failed to pay the full amounts owed to it as a subcontractor on the construction projects at P.S. 40 and P.S. 84, and that CGU and XL are therefore liable to Breeze under the surety bonds they issued, respectively, in connection with the work done on those projects.

P.S. 40

9. Pursuant to bidding, Phoenix was awarded a contract for certain renovations at P.S. 40 in Queens, including masonry and windows. Phoenix thereafter entered into an agreement with Breeze concerning masonry work to be done at the school. The agreement was oral, and its terms were sharply disputed in the testimony.

10. Khokar testified that he was supposed to be listed as the subcontractor, but that another contractor would actually do the work. For his service as a figurehead he was to be paid $2,500 per week, and Phoenix would take care of all other aspects of the job. Tr. 58-59.

11. Lama testified that the masonry work at P.S. 40 was initially undertaken by Phoenix, but when Phoenix's masonry apprenticeship program did not meet SCA requirements, Phoenix sought out Breeze to complete the work. Breeze met SCA requirements because it was an approved contractor and had union affiliation. Lama further testified that his agreement with Breeze was not a lump sum contract, but rather a "time and materials" contract under which Phoenix paid Breeze $2,500 for managerial oversight and also separately paid for labor and materials Breeze supplied to the jobsite, including any union obligations. Tr. 241-42. Checks submitted in evidence by Phoenix disclose that over a period of time from late May 2002 to mid-August 2002 Phoenix made ...


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