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First Indemnity of America Insurance Company v. Kemenash

February 10, 2000

FIRST INDEMNITY OF AMERICA INSURANCE COMPANY, PLAINTIFF/RESPONDENT,
v.
DAVID KEMENASH, DEFENDANT/THIRD-PARTY PLAINTIFF/APPELLANT AND KATHLEEN KEMENASH, NICOLE KEMENASH, DAVINA KEMENASH, AND NDK GENERAL CONTRACTORS, INC., DEFENDANTS/THIRD-PARTY PLAINTIFFS,
v.
PATRICK LYNCH, THIRD-PARTY DEFENDANT.



Before Judges Keefe, A.A. Rodr¡guez and Lintner.

The opinion of the court was delivered by: Keefe, J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPR1OVAL OF THE APPELLATE DIVISION

Argued: November 29, 1999

On appeal from Superior Court of New Jersey, Law Division, Cumberland County.

Defendant David Kemenash appeals from an order granting partial summary judgment to plaintiff First Indemnity of America Insurance Company (FIA) in the amount of $3,248,171.17, plus prejudgment interest. The judgment was on "fewer than all the claims as to all parties," but was certified as final. R. 4:42-2. Although defendant did not move for leave to appeal as required by the Court Rules, we now grant leave to appeal on our own motion. See Pressler, Current N.J. Court Rules, comment on R. 2:5-6 and R. 4:42-2 (19). We affirm.

Defendant owned a corporation, D. Kemenash & Associates, Inc. (DKA), a general contractor. DKA defaulted on two municipal construction projects for which plaintiff had acted as surety. Plaintiff completed the projects under separate takeover contracts with the municipality. Then, relying on an indemnity agreement signed by defendant and his wife, plaintiff alleged it was entitled to reimbursement from defendant and his wife personally. Defendant, however, asserted that he had never provided plaintiff with an indemnity agreement for his construction business, and that the agreement on which plaintiff relied was signed in favor of another surety and placed in the possession of his insurance broker.

On appeal, defendant argues that the trial judge erred in denying his summary judgment motion premised on the six year statute of limitations, and erred in granting plaintiff summary judgment because he improperly applied the summary judgment standard, by failing to grant defendant all favorable inferences and ignoring numerous areas of factual dispute. Finally, defendant challenges the judge's award to plaintiff of over $650,000 in prejudgment interest.

DKA was a commercial construction company that did a considerable portion of its work on large federal government and public works projects. It was in business from May 31, 1978, until mid-1991 when the company ceased work, having filed for bankruptcy.

As a standard requirement for each public works project on which DKA submitted a successful bid, DKA was required to obtain a performance bond. Although the precise date is unclear from the record, from at least the spring of 1984 until the spring of 1989, DKA obtained its bonds exclusively through a bonding agency, Comsur, Inc. ("Comsur"). Also during the same period, Travelers Insurance Company of Hartford ("Travelers") acted as the exclusive bonding company for DKA. As a guarantee for the bonds issued by Travelers, defendant and his wife signed indemnity agreements. Sometime in the spring of 1989, Travelers informed defendant that it no longer would be able to act as commercial surety for DKA because it had sold its surety bonding division.

On May 4, 1990, plaintiff executed performance and payment bond #026696 for DKA in the amount of $5,289,000 on behalf of the Cape May County Municipal Utilities Authority ("MUA"). The space designated for the description of the bonded project is blank, but the parties agree that this project involved construction of a sanitary landfill ("the landfill project"). On May 9, 1990, plaintiff executed performance and payment bond #026689 for DKA in the amount of $1,848,000 on behalf of the MUA with respect to DKA's construction of a bulky waste sorting/recycling facility and transfer station ("the bulky waste project"). These were the only two performance bonds plaintiff issued on DKA's behalf.

On April 2, 1991, defendant and his wife filed a voluntary petition for bankruptcy, and DKA also filed for bankruptcy. At or about the same time, DKA ceased work and abandoned the two MUA projects. Thereupon the MUA declared DKA to be in default, terminated its right to proceed under the contract and demanded that plaintiff, as surety, complete DKA's work on both projects.

On June 6, 1991, plaintiff and the MUA entered into takeover contracts whereby plaintiff became the "replacement contractor" and agreed to assume responsibility to complete both projects to the extent of the penal sums of each related bond. The contracts required the MUA to dedicate the remaining construction funds to completion of the projects, specifically the sum of $1,974,004.48 on the landfill contract and $575,849.26 on the bulky waste project, subject to reductions for expenses incurred as a result of DKA's default and the ensuing delay. Plaintiff agreed to discharge any mechanics liens against the project.

Plaintiff certified to the trial court in this action that, as to plaintiff's costs on the landfill project, it paid a total of $3,684,233.56 to claimants and received proceeds from the MUA of $1,716,459.51. As to the bulky waste project, it paid $973,444.25 and received $438,734.66 from the MUA. Thus, plaintiff's loss for the two projects totaled $2,502,483.64. *fn1

In January 1992, defendant was convicted in federal court of submitting fraudulent bank statements and served thirty-nine months in prison. On July 19, 1993, an order was entered denying discharge in the bankruptcy cases. The order was based on the terms of a settlement between defendant and the bankruptcy trustee wherein defendant agreed to consent to the denial of his discharge if he were unsuccessful in appealing his criminal conviction, which he was.

On December 30, 1997, plaintiff filed its complaint in this matter asserting that defendant and his wife owed plaintiff over $3,000,000. The basis for its allegations was an indemnity agreement defendant and his wife signed on June 11, 1984. The complaint alleged in paragraph 6 that on "June 11, 1984, in consideration for, and as a precondition of FIA's executing surety bonds on behalf of DKA, Kemenash, his wife and DKA executed an Agreement of Indemnity ...


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