METROPOLIS A.C. CORP. v. MOUNTBATTEN SURETY CO. INC.

This is an action for, among other things, a breach of contract. On or about January 25, 1998, in consideration of the defendant’s (Mountbatten Surety Co., Inc., to be referred to hereinafter as Mountbatten) agreement to issue surety bonds on behalf of the Jodinan Plumbing and Heating Corp. (“Jodinan”), in connection with certain commercial construction contracts, Jodinan and certain individual indemnitors executed a General Indemnity Agreement. Thereafter, on February 23, 1999, Mountbatten issued a Payment and Performance Bond on behalf of Jodinan and in favor of the defendant, the New York City Housing Authority (“NYCHA”), in connection with a certain contract for which Jodinan was the successful bidder. The project was known as the “Renovation and Expansion of the Surfside Gardens Community Center, Coney Island, New York” (“Surfside Project”). On November 7, 2001, NYCHA declared Jodinan in default under the contract and demanded that Mountbatten, in accordance with its obligations to it under the Performance Bond, complete performance of the contract. Therefore, by agreement dated February 21, 2002, Mountbatten entered into a completion contract with the plaintiff, Metropolis A.C. Corp. (“Metropolis”) whereby Metropolis agreed to complete the remainder of the contract work in exchange for $ 416,000. Metropolis was required to provide payment and performance bonds to secure its obligations to Mountbatten as bond obligee. Oriska Insurance Company and Folksamerica Reinsurance Company (the co-sureties) issued surety bonds on behalf of Metropolis.

On June 2, 2003, NYCHA advised Mountbatten of certain alleged breaches of Metropolis’ contractual obligations and insisted that metropolis be terminated from the Surfside Project and that Mountbatten provide a new completion contractor. Mountbatten served Metropolis with a Notice of Default on June 9, 2003. Under the terms of their performance bond, the co-sureties were to have commenced performance within 20 days of the obligee’s demand to perform and to complete performance within 20 days thereafter. On July 1, 2003, the co-sureties advised Mountbatten of their intention to propose Metropolis as the completing contractor but with certain added assurances. NYCHA disapproved of the co-sureties’ proposal.