Summary
interpreting New York law and granting summary judgment in favor of surety because owner failed to make progress payments to the principal, resulting in a default under the performance bond
Summary of this case from Enterprise Capital, Inc. v. San-Gra Corp.Opinion
February 11, 1999
Appeal from the Supreme Court (Dawson, J.).
Plaintiff Roel Partnership (hereinafter Roel), as owner, and defendant D.K. House Construction (hereinafter House), as contractor, entered into an October 22, 1994 contract for the construction of a supermarket in the Town of Schroon Lake, Essex County. In connection therewith, defendant Amwest Surety Insurance Company (hereinafter Amwest) issued a performance bond ensuring House's prompt and faithful performance under the contract. In the midst of the project, Grand Union, the intended lessee, filed chapter 11 bankruptcy causing Roel, House and defendant Richard E. Jones Associates, the architect, to agree to suspend all work on the project. This agreement was memorialized in an April 7, 1995 change order by which the project was closed and House was relieved "of all contractual duties". On April 17, 1995, Jones certified two applications for payment submitted by House seeking a total of $102,177.80 for work performed prior to the date of the suspension. It is undisputed that Roel paid less than one third of this amount.
After Grand Union expressed a renewed interest in leasing the property, Roel undertook efforts to revive the construction project during the course of which alleged structural problems with the building were discovered. Roel notified defendants of the alleged deficiencies. When neither House nor Amwest took steps to correct same, Roel and its successor in interest commenced this action seeking, as relevant here, recovery against Amwest on the performance bond. At issue on appeal is Supreme Court's order granting summary judgment to Amwest.
For the first time on appeal, plaintiffs argue that, because Amwest failed to outline with specificity or particularly any condition precedent not met by Roel under the contract or bond (see, CPLR 3015 [a]), performance of all conditions precedent by it have "been admitted". Having failed to raise this argument before Supreme Court in response to Amwest's motion for summary judgment, it cannot be raised at this juncture (see generally, First N. Mortgagee Corp. v. Yatrakis, 154 A.D.2d 433). In any event, it lacks merit.
If a plaintiff fails to allege performance of a contractual condition precedent, then a defendant must specifically deny compliance with the condition precedent with particularity and the failure to do so constitutes a waiver of that defense (see, CPLR 3015 [a]; Igbara Realty Corp. v. New York Prop. Ins. Underwriting Assn., 63 N.Y.2d 201, 218). Conversely, where a plaintiff does allege compliance with a condition precedent, a general denial will suffice to place these allegations at issue (see, CNY Mech. Assocs. v. Fidelity Guar. Ins. Co., 212 A.D.2d 989, 990). Here, plaintiffs allege in the complaint that Roel "has performed all conditions precedent under [the construction] contract and [performance] bond". Having specifically alleged such compliance, the general denial by Amwest was sufficient to place these allegations at issue (see, Allis-Chalmers Mfg. Co. v. Malan Constr. Corp., 30 N.Y.2d 225, 233; CNY Mech. Assocs. v. Fidelity Guar. Ins. Co., supra). Moreover, we are satisfied that Amwest's answer in any event satisfies the specificity requirements of CPLR 3015 (a) in that it alleges, inter alia, that Roel breached the construction contract by failing to tender payments in accordance with its terms.
Turning to the substantive issue of whether Supreme Court properly granted summary judgment to Amwest under the terms of the bond, we conclude that it did. The performance bond clearly and unambiguously required Amwest to act only in the event that "Contractor shall be, and declared by Owner to be in default under the Contract, the Owner having performed Owner's obligations thereunder" (emphasis supplied) (compare, Facilities Dev. Corp. v. Nautilus Constr. Corp., 156 A.D.2d 911). Pursuant to the construction contract, Roel was obligated to, inter alia, make progress payments to House within 30 days of certification by Jones. It is uncontradicted that Roel failed to make full payment on the two applications certified by Jones on April 17, 1995. Since Amwest's obligation under the bond was conditioned on Roel's performance of its contractual obligations and it failed to comply with, at the least, one such obligation, summary judgment was properly granted to Amwest.
Plaintiffs' remaining contentions are either unpreserved for review or lacking in merit.
Cardona, P. J., Peters, Spain and Graffeo, JJ., concur.
Ordered that the order is affirmed, with costs.