| City of Yonkers v 58A JVD Indus., Ltd. |
| 2014 NY Slip Op 01428 [115 AD3d 635] |
| March 5, 2014 |
| Appellate Division, Second Department |
| City of Yonkers, Respondent, v 58A JVDIndustries, Ltd., Appellant, et al., Defendant. |
—[*1] Michael V. Curti, Corporation Counsel, Yonkers, N.Y. (Rachel G. Kravitz ofcounsel), for respondent.
In an action, inter alia, to recover upon a performance bond, the defendant 58A JVDIndustries, Ltd., appeals from an order of the Supreme Court, Westchester County(Jamieson, J.), dated April 15, 2013, which denied its motion to dismiss the cause ofaction alleging breach of contract insofar as asserted against the defendant ColonialSurety Company on the ground that it is time-barred.
Ordered that the order is reversed, on the law, with costs, and the motion of thedefendant 58A JVD Industries, Ltd. to dismiss the cause of action alleging breach ofcontract insofar as asserted against the defendant Colonial Surety Company is granted.
In April 2007, the plaintiff, the City of Yonkers, entered into a contract with thedefendant 58A JVD Industries, Ltd. (hereinafter the appellant), pursuant to which theappellant agreed to perform concrete and related work on a project known as the McLeanAvenue Streetscape Improvement Program (hereinafter the Project). Pursuant to thecontract, the appellant executed, along with the defendant Colonial Surety Company(hereinafter Colonial), a performance bond in favor of the City whereby, inter alia,Colonial agreed to perform and complete work under the contract if the appellant failedto do so. The bond provided that "[a]ny suit under this bond must be instituted before theexpiration of two (2) years from the date on which Final Payment is made under theContract." Subsequently, the appellant, by its principals, executed a general indemnityagreement with Colonial, pursuant to which the appellant agreed, inter alia, to holdColonial harmless from and against any claims or liabilities arising out of theperformance bond.
In October 2007, the City notified the appellant that several loads of concretesupplied for the Project did not meet contractual specifications for minimum compressivestrength. Nonetheless, in late October 2008, the City certified that the appellant wasowed $55,866.63, representing 80% of the $69,833.30 then being retained by the City, or4% of the contract price. Thereafter, payment in that amount was made. In March 2009,the City informed the appellant that there had been rapid and premature deterioration ofcertain Project areas and that, pursuant to the contract, the appellant was required torepair, replace, restore, or rebuild the affected areas. The City [*2]notified Colonial on April 16, 2010, that the appellant hadfailed to meet its contractual obligations and that the City was withholding $13,966.67,representing the remaining 20% of the amount retained by the City, or 1% of the contractprice. Shortly thereafter, the City filed a formal claim with Colonial, but Colonialrejected the claim. In January 2013, the City commenced this action. In February 2013,the appellant, as Colonial's indemnitor, moved to dismiss the cause of action allegingbreach of contract insofar as asserted against Colonial on the ground that it istime-barred. The Supreme Court denied the motion. We reverse.
"Surety bonds—like all contracts—are to be construed in accordancewith their terms" (Walter Concrete Constr. Corp. v Lederle Labs., 99 NY2d 603,605 [2003]). " 'Performance bonds are governed by the usual rules of construction ofadhesion contracts, and contractual time limitations contained therein are to be strictlyconstrued against the surety (Comey v United Sur. Co., 217 NY 268 [1916]' " (Incorporated Vil. of N. Hills vAVR Links Dev. Corp., 33 AD3d 588, 588 [2006], quoting MenorahNursing Home v Zukov, 153 AD2d 13, 20 [1989]).
Here, the parties dispute the accrual date of the two-year limitations period set forthin the performance bond. The City contends that, since it never refunded the $13,966.67contractual retainage to the appellant, there has been no "final payment" to trigger thelimitations period, rendering the action timely. The appellant contends that the "finalpayment" triggering the limitations period is specifically defined in the contract as being,in essence, the $55,866.63 payment made by the City in October 2008, not including the$13,966.67 retainage, thus rendering the action untimely.
Article 28 section A of the parties' contract, entitled "Final Payment," provides, inpertinent part, that "[a]s a condition precedent to recovering final payment for all work,the Contractor shall submit all required certificates and documents, together with a finalrequisition for the balance claimed to be due under the Contract, less any amountauthorized to be retained for maintenance subsequent to final acceptance." Pursuant toarticle 18 section C of the contract, the appellant was required to deposit with the City asum equal to 1% of the contract price "[a]s security for the faithful performance of hisobligation." After the filing of all required certificates and documents, article 28 sectionC requires the City's engineer to make a final inspection of the work, and if, at that time,he determined that no further work was necessary, he was required to prepare and certifya voucher for final payment, minus any deductions authorized to be made under thecontract. The same paragraph provides, in relevant part, that "payment pursuant to suchfinal voucher," less any authorized deductions, "shall constitute . . . finalpayment."
Sections A and C of article 28, when read together, contemplate "final payment" onthe contract as occurring upon the City's certification of the work as completed with thetendering of payment thereon, even though it had yet to disburse funds that it retained assecurity pursuant to the contract. Here, it is undisputed that, in October 2008, the Cityissued a certification and paid the appellant all amounts due under the contract, exceptfor the 1% retained as security. Specifically, the City tendered payment to the appellant inthe sum of $55,866.63, and the only amount outstanding was the 1% retained as securityin the sum of $13,966.67. As such, final payment was made in October 2008.
"In moving to dismiss a cause of action pursuant to CPLR 3211 (a) (5) as barred bythe applicable statute of limitations, a defendant bears the initial burden ofdemonstrating, prima facie, that the time within which to commence the action hasexpired" (Matteawan On Main,Inc. v City of Beacon, 109 AD3d 590, 590 [2013]). "The burden then shifts tothe plaintiff to raise an issue of fact as to whether the statute of limitations was tolled orwas otherwise inapplicable, or whether it actually commenced the action within theapplicable limitations period" (id.; see Landow v Snow Becker Krauss, P.C., 111 AD3d 795,796-797 [2013]).
Parties to a contract may agree to limit the period of time within which an actionmust be commenced to a period shorter than that provided by the applicable statute oflimitations (see CPLR 201; White v Continental Cas. Co., 9 NY3d 264, 267 [2007]).Here, the parties do not dispute that the terms of the performance bond requiring that anysuit under the bond be instituted within two [*3]years offinal payment are controlling. The two-year contractual period of limitations contained inthe performance bond is unambiguous and enforceable, measurable from the $55,866.63final payment issued in October 2008, as defined by the parties' contract.
Therefore, the appellant has met its prima facie burden of demonstrating that the timewithin which the City had to commence the action had expired. In response, the Cityfailed to raise a question of fact, as its last payment of $55,866.63 in October 2008triggered the clear and unambiguous two-year period of limitations, irrespective of its$13,966.66 retention for maintenance. Accordingly, the commencement of this action inJanuary 2013 was untimely, and the Supreme Court should have granted the appellant'smotion to dismiss the cause of action alleging breach of contract insofar as assertedagainst Colonial. Skelos, J.P., Dillon, Hall and Roman, JJ., concur.