FIDELITY AND DEPOSIT COMPANY OF MARYLAND v. GOLDMAN RIO (2002)

Order dated November 14, 2000 (Rolando T. Acosta, J.) modified to grant partial summary judgment to plaintiff on the issue of liability only and to remand the matter for a hearing on the issue of damages;  as modified, order affirmed, without costs.

Appeal from order denying reargument entered March 22, 2001 (Rolando T. Acosta, J.) dismissed, without costs, as taken from a nonappealable order.

Defendants, a law firm and its two principals, applied for and procured an appeal bond in connection with an ultimately unsuccessful appeal from an adverse monetary judgment entered against them, as stakeholders, in a prior lawsuit involving their client's failed transfer of a parcel of real estate.   In the present action seeking reimbursement for the plaintiff surety's payments under the appeal bond, plaintiff was properly awarded summary judgment on the liability aspect of the case.   The defendants' attempt to avoid liability under the appeal bond on agency principles was properly rejected, since the record clearly demonstrates that the defendant law firm sought issuance of the appeal bond not as an agent for a disclosed principal (cf., Urban Ct. Reporting v. Davis, 158 A.D.2d 401, 551 N.Y.S.2d 235), but in its capacity as a defendant stakeholder in the underlying litigation, pledging the individual credit of one of its named partners, defendant Goldman.

There exists a triable issue, however, with respect to the contemplated amount of defendants' indebtedness under the appeal bond, in view of the conflict between the boilerplate terms of the October 22, 1993 bond and defendant Goldman's letter of that same date, “confirm[ing]” the parties' alleged agreement to limit defendants' indemnification obligations “up to” the specified amount of the escrow fund then held by defendants.   Since the circumstances and chronology of the issuance and receipt of defendant Goldman's letter remain unclear on this record, the proper legal effect of the document on the parties' relationship cannot now be determined with certainty.   Indeed, the only evidentiary detail concerning when and why defendant Goldman wrote the October 22, 1993 letter comes from Goldman himself, who alleges that he wrote the “indemnification letter” after defendants submitted their bond application and before plaintiff issued the bond;  that the letter was written at the “specific request” of an identified representative (Blaikie) of the plaintiff;  and that plaintiff “never objected” to the liability limiting provisions of the letter.   Accepting the truth of these allegations, particularly Goldman's representation that he wrote the “indemnification letter” at plaintiff's insistence as a condition of plaintiff's issuance of the appeal bond, it cannot be said on this record that the bond constituted a complete and integrated writing of the type required to invoke the parol evidence rule.   Unlike the guaranty at issue in Braten v. Bankers Trust Co., 60 N.Y.2d 155, 468 N.Y.S.2d 861, 456 N.E.2d 802, cited by the dissent, the appeal bond here involved was not a “specially drawn document” (id., at 163, 468 N.Y.S.2d 861, 456 N.E.2d 802), but rather a form document which, so far as shown, was intended to incorporate the terms of separate correspondence demanded by the plaintiff itself.   Further, considering the defendant law firm's undisputed status as a stakeholder in the underlying litigation, it would hardly be an “unreasonable result[ ]” (dissenting opn., at 523) for plaintiff to have agreed to limit defendants' liability to the amount of the escrow fund held by defendants at the time the appeal bond was issued (as reflected in the letter that plaintiff itself apparently solicited), and to agree to look to defendants' client, the party truly aggrieved by the adverse judgment in the underlying lawsuit, for payment of the subsequently accruing judgment interest for which recovery is now sought in this action.

Although the damages issue was not directly raised in defendants' initial submission opposing summary judgment, we think it appropriate to consider this fundamental issue on appeal since plaintiff had an opportunity to respond to it in the context of defendants' reargument motion below (see, Held v. Kaufman, 91 N.Y.2d 425, 430, 671 N.Y.S.2d 429, 694 N.E.2d 430;  Tonkonogy v. Seidenberg, 63 A.D.2d 587, 404 N.Y.S.2d 853).

I respectfully dissent.   The plaintiff issued an appeal bond to the defendants which obligated them to reimburse the plaintiff for any payment made under the bond up to $28,500.00 plus interest and costs.   The plaintiff made a payment and seeks reimbursement from the defendants.   The Majority has affirmed the finding that the defendants are personally liable but hold that there is an issue of fact as to whether a letter sent by the defendants to the plaintiff prior to the issuance of the bond modified the language of the bond as to interest and costs so as to deny indemnification for interest and costs accrued after the date of the letter.   The sequence of events was that the defendants submitted the application for the bond, followed by the letter and the issuance of the bond.

The bond was a complete contract containing all the essential terms.   The Majority does not seek to supply a missing term but to vary a clear and unambiguous essential term by a prior inconsistent writing.   This would violate the parole evidence rule.  Braten v. Bankers Trust Company, 60 N.Y.2d 155, 162, 468 N.Y.S.2d 861, 456 N.E.2d 802 (1983).   The Majority does not cite any legal authority for such result.

Furthermore, the clear and unequivocal language of the bond reads $28,500.00 plus interest and costs without any reference to a cutoff date for interest or costs.   This is the customary language and it is generally understood that the amount of the interest and costs due under a bond can only be determined at the time of the final judgment and not when the bond is issued.   The position advanced by the defendant would mean that the bonding company agreed in advance to forego a right to indemnification of a part of the interest and costs it would pay on the bond from a responsible party.   The construction of a contract which leads to unreasonable results should be avoided.  Nassau Chapter v. County of Nassau, 77 A.D.2d 563, 564, 430 N.Y.S.2d 98 (2nd Dept.1980) aff'd. 54 N.Y.2d 925, 445 N.Y.S.2d 152, 429 N.E.2d 831 (1981).   The escrow amount referred to in the letter was security for the bond but not a limitation of the defendants' monetary liability.   The defendant, an attorney, never objected to the language of the bond until payment was requested.   He cannot now argue that the clear language of the bond did not express his intentions when the bond was issued.

The role of the court is to interpret a contract and not to rewrite it.   Tri-Messine Const. Co. v. Telesector Resources Group, Inc., 287 A.D.2d 558, 731 N.Y.S.2d 648 (2nd Dept.2001).   Since the language of the bond is clear and unambiguous, the issue is one of law for the court.  Berghold et al. v. Kirschenbaum, 287 A.D.2d 673, 731 N.Y.S.2d 764 (2nd Dept.2001).   There is no factual issue present requiring a trial.

The Judgment should be affirmed.

PER CURIAM.