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The Collaborative Clearinghouse for Lawsuits and Other Claims Against ACE Group Insurance Companies

WESTCHESTER FIRE INSURANCE COMPANY et al v. LALO DRYWALL, INC. et al

ATTENTION: It is possible that this information may no longer be current and therefore may be inaccurate. The index contains both open and closed cases and is not a complete list of cases in which an ACE Insurance Group company is involved. This information is provided to give interested persons an idea of the issues disputed in the indexed cases. For a full understanding of a case, one should read the rest of the court file, including the response. For the most up-to-date and complete information on a case, visit www.pacer.gov or contact the clerk of the relevant court.

Case Number: 
7:16-cv-00124 Search Pacer
ACE Group party(s): 
Court Type: 
Federal
US District Court: 
Southern District of New York
Date Filed: 
Jan 7 2016


Plaintiffs Westchester Fire Insurance Company (“WFIC”) and Philadelphia Indemnity
Insurance Company (“PIIC”, and, together with WFIC, “Plaintiffs” or the “Sureties”) by their
undersigned attorneys, for their Complaint against defendants Lalo Drywall, Inc. (“Lalo”),
Sergio Raymundo (“Raymundo”) and Luis Martinez (“Martinez”, and together with Lalo and
Raymundo, “Defendants” or the “Indemnitors”), allege, upon information and belief, as
follows:

PARTIES AND JURISDICTION

  1. WFIC is a corporation organized and existing pursuant to the laws of the State
    of Pennsylvania, with its principal place of business in Philadelphia, Pennsylvania.
  2. PIIC is a corporation organized and existing pursuant to the laws of the State of
    Pennsylvania, with its principal place of business in Bala Cynwyd, Pennsylvania.
  3. Lalo is a corporation organized and existing pursuant to the laws of the State

ofNew York, with its principal place of business in New Paltz, New York.

  1. Raymundo is a citizen of the State of New York, and resides in New Paltz,

New York.

  1. Martinez is a citizen of the State of New York, and resides in New Paltz, New

York.

  1. This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1332, as it

is between citizens of different states and the amount in controversy exceeds $75,000,
exclusive of interest and costs.

  1. Venue is proper in this Court pursuant to 28 U.S.C. § 1391(b)(1), as each of

the Defendants resides in this judicial district.

FACTS COMMON TO ALL COUNTS

The WFIC Bonds

  1. On or about August 23, 2012, Defendants, in connection with their request that

WFIC issue surety bonds on behalf of Lalo for certain construction contracts into which Lalo
was to enter, executed an Agreement of Indemnity (the “WFIC Indemnity Agreement”) in
favor of, among others, WFIC. A copy of the WFIC Indemnity Agreement is annexed hereto as
Exhibit A.

  1. The WFIC Indemnity Agreement provides, among other things, that the

Indemnitors shall indemnify WFIC for any and all liability for losses, costs and expenses of any
kind including, but not limited to, interest, court costs, counsel fees and consulting fees that
WFIC may incur as a result of having executed surety bonds on Lalo’s behalf and/or enforcing
WFIC’s rights under the WFIC Indemnity Agreement.

  1. Paragraph “Third” of the WFIC Indemnity Agreement provides, in relevant

part:

THIRD: PRINCIPAL(s) and INDEMNITOR(s) shall exonerate, hold
harmless, indemnify and keep indemnified SURETY from and against any and
all claims, demands and liability for losses, costs, and expenses of whatsoever
kind or nature, including but not limited to court costs, counsel fees, costs of
investigation, consultant fees, accountant fees, engineer or construction
management fees, together with interest thereon at the maximum rate allowed
by law, which SURETY may sustain or incur by reason of or in consequence of
the:

  1. Execution or procurement of the execution of BOND(s);
  2. Failure by PRINCIPAL(s) or INDEMNITOR(s) to perform or comply
    with any of the covenants of this AGREEMENT;
  3. Any Event of Default herein;
  4. Enforcement of any covenant of this AGREEMENT;
  5. Performance of any investigation, attempt or attainment of any release in
    connection with any BOND(s) or any loss or unpaid premium in
    connection with any BOND(s);
  6. Prosecution or defense of any action or claim in connection with any
    BOND(s), whether SURETY, at its own discretion, elects to employ
    counsel of its own selection or permits or requires PRINCIPAL(s) or
    INDEMNITOR(s) to make arrangements for SÜRÉTY(s) legal
    representation; and
  7. Attempt to recover losses or expenses paid or incurred in connection with
    this AGREEMENT', CONTRACT(s) and/or BOND(s).

Payment shall be made to SURETY by the PRINCIPAL(s) and/or
INDEMNITORS(s) as soon as liability exists or is asserted against SURETY,
whether or not SURETY shall have made any payment therefore. Such
payment shall be equal to whatever amount SURETY, in its judgment, shall
deem sufficient to protect it from loss. SURETY shall have the right to use the
payment or any part thereof, in payment or settlement of any liability, loss or
expense for which PRINCIPAL(s) and/or INDEMNITOR(s) would be
obligated to indemnify SURETY under the terms of this AGREEMENT.

In the event of payment by SURETY, SURETY shall be entitled in any
accounting with PRINCIPAL(s) or INDEMNITOR(s) to reimbursement for
any and all disbursements made by it in good faith and about the matters
contemplated by this AGREEMENT under the belief that it was liable for the
sums and amounts so disbursed, or that it was necessary or expedient to make
such disbursements, whether or not such liability, necessity or expediency
existed. Vouchers or other evidence of any such payments made by SURETY
shall be prima facie evidence of the fact and amount of liability to SURETY.
PRINCIPAL(s) and INDEMNITOR(s) shall pay to SURETY interest on all

disbursements made by SURETY at the maximum rate permitted by law

calculated from the date of each disbursement.

  1. On or about June 12, 2012, Lalo, as subcontractor, entered into a subcontract
    with Mountco Construction & Development Corp. (“Mountco”), as contractor, in the amount of
    $2,750,000, for Lalo to perform certain work in connection with the construction of a 124-unit
    affordable housing project located at 404 West 155th Street, New York, New York, known as
    the “Sugar Hill Project” (the “Sugar Hill Subcontract”). The price of the Sugar Hill
    Subcontract was subsequently adjusted to $3,756,594.
  2. At Lalo’s request, on or about August 30, 2012, WFIC, as surety, issued a
    Performance Bond and a Payment Bond, each bearing Bond No. K08719147, in the penal sum
    of $2,750,000, in connection with the Sugar Hill Subcontract, on behalf of Lalo, as principal,
    and in favor of Mountco, as obligee (the “WFIC Performance Bond” and the “WFIC Payment
    Bond, respectively, and, collectively, the “WFIC Bonds”). A copy of the WFIC Bonds is
    annexed hereto as Exhibit B.
  3. Construction of the Sugar Hill Project was funded, in part, with funds provided
    by the federal government. As a condition of such federal funding, the Sugar Hill Project is
    subject to the prevailing wage and other requirements of the Davis Bacon Act, 40 U.S.C. §
    3141, et seq.
  4. The New York City Department of Housing Preservation and Development
    (“FIPD”) was responsible, in part, for administering the federal funding for the Sugar Hill
    Project and monitoring compliance with, among other things, prevailing wage laws. Toward
    that end, annexed and made a part of the Sugar Hill Subcontract is a United States Department
    of Housing and Urban Development (“HUD”) Form HUD-4010, entitled “Federal Labor
    Standards Provisions”. A copy of the HUD Form HUD-4010 is annexed hereto as Exhibit C.
  1. On April 8, 2015, HPD sent Mountco, among others a “Notice of Withholding
    of Funds” (the “First Sugar Hill Notice of Withholding”), advising that “per paragraph ‘2.
    Withholding’ of the Federal Labor Standards Provisions affixed to your contract, HPD/LMU is
    herein withholding [$4,700,000] to satisfy presumed wage underpayments and/or estimated
    liquidated damages under the Contract Work Hours and Safety Standards Act.” HPD also
    stated that it “is compelled to retain the withheld amount pending resolution of the labor
    investigation.” A copy of the First Sugar Hill Notice of Withholding is annexed hereto as
    Exhibit D.
  2. Upon information and belief, the “presumed wage underpayments” referred to in
    the First Sugar Hill Notice of Withholding relate solely to wage underpayments of Lalo’s
    employees.
  3. On the same date, April 8, 2015, the New York State Attorney General’s Office
    issued a press release (the “Press Release”) announcing the arrest of Raymundo, one of Lalo’s
    principals, “for allegedly cheating eight workers at the Sugar Hill housing project out of
    approximately $800,000 in wages during a 17-month period.” A copy of the Press Release is
    annexed hereto as Exhibit E.
  4. On May 27, 2015, Mountco sent WFIC a letter demanding that, pursuant to the
    Payment Bond, “[WFIC] promptly and at its expense defend, indemnify and hold Mountco
    harmless from and against the matters of th[e] [First Sugar Hill Notice of Withholding].” A
    copy of Mountco’s May 27, 2015 letter to WFIC is annexed hereto as Exhibit F.
  5. On July 30, 2015, HPD sent Mountco a “First Notice of Underpayment for
    Unpaid Wages” (the “First Sugar Hill Notice of Underpayment”), advising that HPD “has
    determined that the certified payroll records submitted on behalf of Lalo...do not accurately

represent the wages paid to and hours worked by its employees and that Lalo...did not pay its
employees prevailing wage rates and/or overtime rates as required under the [Davis Bacon
Act], Lalo Drywall owes its employees $2,706,937.65.” A copy of the First Sugar Hill Notice
of Underpayment is annexed hereto as Exhibit G.

  1. The First Sugar Hill Notice of Underpayment includes alleged underpayment
    schedules which conclude, in large part, that Lalo paid its workers $20 per hour in violation of
    the prevailing wage requirements of the Davis Bacon Act.
  2. On August 11, 2015, Mountco sent WFIC a second letter demanding that,
    pursuant to the Payment Bond, “[WFIC] promptly and at its expense defend, indemnify and
    hold Mountco harmless from and against the claim of this [First Sugar Hill Notice of
    Underpayment].” A copy of Mountco’s August 11, 2015 letter to WFIC is annexed hereto as
    Exhibit FI.
  3. On October 1, 2015, HPD sent Mountco an “Amended First Notice of
    Underpayment for Unpaid Wages” (the “Second Sugar Hill Notice of Underpayment”),
    advising that HPD “has received new allegations and consequently, is amending the Amended
    First Notice of Underpayment. Based on the additional enclosed underpayment schedules, Lalo
    Drywall, Inc. owes employees $2,918,962.77”. A copy of the Second Sugar Hill Notice of
    Underpayment is annexed hereto as Exhibit I.
  4. On October 1, 2015, FIPD also sent Mountco a second “Notice of Withholding
    of Funds” (the “Second Sugar Hill Notice of Withholding”), advising that “[b]ased on new
    information, [HPD] is increasing the current withholding to $2,918,962.77, along with a
    reissued underpayment notice for the sum of $2,918,962.77.” A copy of the Second Sugar Hill
    Notice of Withholding is annexed hereto as Exhibit J.

The PIIC Bonds

  1. On or about May 29, 2014, Defendants, in connection with their request that
    PIIC issue surety bonds on behalf of Lalo for certain construction contracts into which Lalo
    was to enter, executed a General Indemnity Agreement (the “PIIC Indemnity Agreement” and,
    together with the WFIC Indemnity Agreement, the “Indemnity Agreements”). A copy of the
    PIIC Indemnity Agreement is annexed hereto as Exhibit K.
  2. The PIIC Indemnity Agreement provides, among other things, that the
    Indemnitors shall indemnify PIIC for any and all liability for losses, costs and expenses of any
    kind including, but not limited to, interest, court costs, counsel fees and consulting fees that
    PIIC may incur as a result of having executed surety bonds on Lalo’s behalf and/or enforcing
    PIIC’s rights under the PIIC Indemnity Agreement.
  3. Paragraphs 3 and 4 of the PIIC Indemnity Agreement provide, in relevant part:

3. INDEMNITY - Indemnitors agree to indemnify and hold harmless
Surety from and against any Loss sustained or incurred: (a) by reason of having
executed or being requested to execute any and all Bonds; (b) by failure of
Indemnitors or Principals to perform or comply with any of the covenants or
conditions of this Agreement or any other agreement; and (c) in enforcing any
of the covenants or conditions of this Agreement or any other agreement. The
Indemnitors’ obligation to indemnify the Surety shall also apply to any Bond
renewals, continuations or substitutes therefore. In the event of payments by
Surety, Indemnitors agree to accept vouchers, a sworn itemization, or other
evidence of such payments as prima facie evidence of the fact and extent of
liability of Indemnitors to Surety in any demand, claim or suit by Surety
against Indemnitors. Separate suits may be brought under this Agreement as
causes of action accrue, and the pendency or termination of any such suit shall
not bar any subsequent action by Surety. The Surety may, but shall not be
obligated to, join any or all of the Indemnitors or Principals as parties to any
action relating to any Bonds or this Agreement, and Surety shall have no
obligation to exhaust any remedies against any person or entity prior to
pursuing any such action against one or more Indemnitors or Principals. All
Principals and Indemnitors waive and subordinate all rights of indemnity,
subrogation, and contribution against each other until all obligations due to the

Surety under this Agreement, at law, or at equity have been fully satisfied. The
Surety shall be entitled to intervene in any action between one or more
Principals or Indemnitors in order to enforce this provision.

4. POSTING OF COLLATERAL - Indemnitors agree to deposit
immediately upon demand by Surety an amount equal to the greater of: (a) the
amount of any reserve established by Surety in its sole discretion to cover any
actual or potential liability for any Loss or potential Loss for which indemnitors
would be obliged to indemnify Surety hereunder; or (b) the amount of any Loss
or potential Loss (including legal, professional, consulting, and expert fees and
expense) in relation to any claim or claims or other liabilities asserted against
Surety as a result of issuing any Bond, as determined by the Surety in its sole
discretion. Surety may, in its sole discretion, either retain or use any part or all
of the collateral in settlement or payment of any claim made under any Bond,
as reimbursement for any actual Loss already incurred, as reserve to cover the
amount of any potential Loss, or for any other purpose related to any Loss,
liability, or expense for which the Indemnitors would be required to reimburse
the Surety under the terms of this Agreement. The Principals and Indemnitors
shall be obligated to deposit the amount of collateral demanded by the Surety
regardless of whether they dispute their liability for any Loss or potential Loss
or assert any defenses to the validity or enforcement of this Agreement...

  1. On or about June 10, 2014, Lalo, as subcontractor, entered into a subcontract
    with Mountco, as contractor, in the amount of $2,310,725, for Lalo to perform certain work in
    connection with the construction of a 154-unit affordable housing project located at 1191
    Boston Road, Bronx, New York, known as the “Boston Road Project” (the “Boston Road
    Subcontract”). The price of the Boston Road Subcontract was subsequently adjusted to
    $2,457,115.
  2. At Lalo’s request, on or about June 18, 2014, PIIC, as surety, issued a
    Performance Bond and a Payment Bond, each bearing Bond No. PB11518100005, in the penal
    sum of $2,310,725, in connection with the Boston Road Subcontract, on behalf of Lalo, as
    principal, and in favor of Mountco, as obligee (the “PIIC Performance Bond” and the “PIIC
    Payment Bond, respectively, and, collectively, the “PIIC Bonds”, and together with the WFIC
    Bonds, the “Bonds”). A copy of the PIIC Bonds is annexed hereto as Exhibit L.
  1. Construction of the Boston Road Project was funded, in part, with funds
    provided by the federal government. As a condition of such federal funding, the Boston Road
    Project is subject to the prevailing wage and other requirements of the Davis Bacon Act, 40
    U.S.C. § 3141, et seq.
  2. FIPD was responsible, in part, for administering the federal funding for the
    Boston Project and monitoring compliance with, among other things, prevailing wage laws.
    Toward that end, annexed and made a part of the Boston Road Subcontract is a HUD Form
    HUD-4010, entitled “Federal Labor Standards Provisions”. See Exhibit C.
  3. On April 7, 2015, HPD sent Mountco, among others a “Notice of Withholding
    of Funds” (the “Boston Road Notice of Withholding”), advising that “per paragraph ‘2.
    Withholding’ of the Federal Labor Standards Provisions affixed to your contract, HPD/LMU is
    herein withholding [$2,900,000] to satisfy presumed wage underpayments and/or estimated
    liquidated damages under the Contract Work Hours and Safety Standards Act.” HPD also
    stated that it “is compelled to retain the withheld amount pending resolution of the labor
    investigation.” A copy of the Boston Road Notice of Withholding is annexed hereto as Exhibit
    M.
  4. On April 7, 2015, HPD sent a letter, a copy of which is annexed hereto as
    Exhibit N, requesting that Mountco suspend Lalo’s work on the Boston Road Subcontract as of
    April 7, 2015.
  5. Upon information and belief, the “presumed wage underpayments” referred to in
    the Boston Notice of Withholding relate solely to Lalo’s underpayments of wages to its
    employees on the Project.
  1. On April 28, 2015, HPD sent Mountco a letter, a copy of which is annexed
    hereto as Exhibit O, advising that “HPD has information that Lalo committed significant
    prevailing wage violations on the Project, which are still under investigation.”
  2. On April 29, 2015, Mountco sent Lalo a letter declaring that Lalo was in default
    of the Boston Road Subcontract and sent PIIC a letter demanding that PIIC complete Lalo’s
    work under the Boston Road Subcontract and “obtain a retraction of the Boston Road Notice of
    Withholding”. Copies of Mountco’s letters of April 29, 2015 are annexed hereto as Exhibit P.
  3. On May 29, 2015, Mountco sent PIIC a letter demanding that, pursuant to the
    Payment Bond, “[PIIC] promptly and at its expense defend, indemnify and hold Mountco
    harmless from and against the matters of th[e] [Boston Road Notice of Withholding].” A copy
    of Mountco’s May 29, 2015 letter to PIIC is annexed hereto as Exhibit Q.
  4. On August 6, 2015, PIIC and Mountco, among others, filed a Verified Petition
    against HPD, pursuant to Article 78 of the New York Civil Practice Law and Rules,
    challenging the amount of the withholding set forth by HPD in the Boston Road Notice of
    Withholding as arbitrary and capricious (the “Article 78 Proceeding”). A copy of the Verified
    Petition is annexed hereto as Exhibit R.
  5. On September 4, 2015, HPD sent Mountco a “First Notice of Underpayment
    for Unpaid Wages” (the “Boston Road Notice of Underpayment”), advising that HPD “has
    determined that the certified payroll records submitted on behalf of Lalo...do not accurately
    represent the wages paid to and hours worked by its employees and that Lalo...did not pay its
    employees prevailing wage rates and/or overtime rates as required under the [Davis Bacon
    Act]. Lalo Drywall owes its employees $1,484,402.98.” A copy of the Boston Road Notice of
    Underpayment is annexed hereto as Exhibit S.
  1. The Boston Road Notice of Underpayment includes alleged underpayment
    schedules which conclude, in large part, that Lalo paid its workers $20 per hour in violation of
    the prevailing wage requirements of the Davis Bacon Act.
  2. In light of HPD’s issuing the Boston Road Notice of Underpayment, on
    October 9, 2015, PIIC and Mountco, among others, discontinued the Article 78 Proceeding.
    Attached as Exhibit T is a copy of the filed Stipulation of Discontinuance for the Article 78
    Proceeding.
  3. On October 28, 2015, Mountco sent PIIC a letter demanding that PIIC
    reimburse Mountco for the excess cost to complete the Boston Road Subcontract (i.e., in excess
    of the remaining subcontract balance due Lalo) in the amount of $666,746. Mountco
    additionally demanded that PIIC either pay Mountco or deposit with HPD the sum of
    $1,484,402.98 withheld by HPD pursuant to the Boston Road Notice of Underpayment. A
    copy of Mountco’s October 28, 2015 letter is annexed hereto as Exhibit U.
  4. On November 13, 2015, Mountco sent PIIC a letter advising that Mountco’s
    letter of October 28, 2015 “only included cost through October 18, 2015 and had omitted
    certain other cost items.” As such, Mountco increased its demand for reimbursement to PIIC in
    connection with excess completion costs of the Boston Road Subcontract from $666,746 to
    $893,134. A copy of Mountco’s November 13, 2015 letter is annexed hereto as Exhibit V.

The Transfer of Property

  1. When Raymundo executed the PIIC Indemnity Agreement, Raymundo
    indicated that he resided at 109 Dubois Road, New Paltz, New York (the “Dubois Road
    Property”).
  2. On or about July 22, 2015 Raymundo transferred to Andrew D. Titus and
    Carolin H. Titus, husband and wife, the Dubois Property (the “Transfer”). The deed reflecting
    the Transfer was recorded on or about August 12, 2015, a copy of which is annexed hereto as
    Exhibit W.
  3. The Transfer was made for the sum of $450,000.

FIRST COUNT
(Specific Performance - Deposit of Collateral Security)

  1. Plaintiffs repeat and reallege Paragraphs 1 through 47 hereof.
  2. By letter dated August 12, 2015, the Sureties demanded that, pursuant to the
    terms of the Indemnity Agreements, the Indemnitors, jointly and severally, deposit the sum of
    $2,706,937.65 with WFIC and the sum of $2,310,725 with PIIC (the “Collateral Demand”).
    The amounts represented, respectively, the amounts set forth in HPD’s First Sugar Hill Notice
    of Underpayment and the penal sum of PIIC’s Payment Bond, which is the limit of PIIC’s
    exposure in connection with the Boston Road Notice of Withholding. A copy of the Collateral
    Demand is annexed hereto as Exhibit X.
  3. Since the time that the Sureties issued the Collateral Demand, HPD issued the
    Second Sugar Hill Notice of Underpayment in the amount of $2,918,962.77 and the Boston
    Road Notice of Underpayment in the amount of $1,484,402.98. In addition, in its November
    13, 2015 letter, Mountco has demanded that PIIC reimburse Mountco in the amount of

$893,134, representing Mountco’s alleged excess costs to complete the Boston Road
Subcontract. In sum, the Indemnitors are currently required to deposit the sum of
$2,918,962.77 with WFIC and $2,377,536.98 ($1,484,402.98 + $893,134) with PIIC,
respectively.

  1. In material breach of their obligations under the Indemnity Agreements, and
    despite due demand, the Indemnitors have failed and refused to satisfy the Collateral Demand
    and deposit with WFIC collateral in the sum of $2,918,962.77 and with PIIC in the sum of
    $2,377,536.98 (the “Exposure Amounts”).
  2. The Sureties deem the Exposure Amounts to be the minimum amount sufficient
    to protect the Sureties from loss and potential loss, including expenses incurred and to be
    incurred, in connection with the claims that have been asserted against the Sureties under the
    Bonds.
  3. The Sureties are suffering, and will continue to suffer, irreparable injury as a
    result of the Indemnitors’ failure and refusal to deposit with the Sureties collateral security in
    the amount demanded and as required by the Indemnity Agreements.
  4. The Sureties lack an adequate remedy at law.
  5. By reason of the foregoing and pursuant to the terms of the Indemnity
    Agreements, the Sureties are entitled to a judgment and a preliminary injunction directing
    Defendants to specifically and immediately perform their obligations under Paragraph “Third”
    of the WFIC Indemnity Agreement and Paragraph 4 of the PIIC Indemnity Agreement,
    including, but not limited to, their obligation to deposit collateral security with WFIC in the
    amount of at least $2,918,962.77 and with PIIC in the amount of at least $2,377,536.98.

SECOND COUNT
(Contractual Indemnification)

  1. Plaintiffs repeat and reallege Paragraphs 1 through 55 hereof.
  2. WFIC has incurred expenses, including, but not limited to, attorneys’ fees and
    consultants’ fees, as a result of having executed the WFIC Bonds and enforcing and preserving
    its rights under the WFIC Bonds and the WFIC Indemnity Agreement.
  3. PIIC has incurred expenses, including, but not limited to, attorneys’ fees and
    consultants’ fees, as a result of having executed the PIIC Bonds and enforcing and preserving
    its rights under the PIIC Bonds and the PIIC Indemnity Agreement.
  4. The Indemnitors have failed to indemnify the Sureties for any portion of their
    expenses incurred in connection with the Bonds and the Indemnity Agreements, despite due
    demand.
  5. The Indemnitors are therefore in material breach of the Indemnity Agreements.
  6. As a result of the Indemnitors’ breach of the Indemnity Agreements, the Sureties
    have sustained damages, costs and expenses, including but not limited to attorneys’ fees and
    consulting fees.
  7. By reason of the foregoing and pursuant to the terms of the Indemnity
    Agreements, the Sureties are entitled to judgment against the Indemnitors in the amount of all
    losses and expenses including, but not limited to, attorneys’ fees and consulting fees, which the
    Sureties have incurred and continue to incur by reason of having executed the Bonds and/or by
    reason of the failure of the Indemnitors to perform or comply with the covenants and conditions
    of the Bonds and the Indemnity Agreements and/or in enforcing and preserving the Sureties’
    rights under the Bonds and the Indemnity Agreements, together with interest, costs of suit and
    such other and further relief as may be just and equitable.

THIRD COUNT
(Exoneration and Common Law Indemnification)

  1. Plaintiffs repeat and reallege Paragraphs 1 through 62 hereof.
  2. The liability of Lalo under the Bonds, as the principal obligor, is primary and
    active, and that of the Sureties is secondary and passive.
  3. Lalo, as the party with primary liability, is obligated to indemnify and exonerate
    the Sureties and discharge, perform and pay in relief of the Sureties any and all of the Sureties’
    obligations under its Bonds.
  4. By reason of the foregoing, the Sureties demand judgment directing that Lalo
    specifically perform its common law obligations of indemnification and exoneration and
    discharge, perform, and pay any obligation on the part of the Sureties under their Bonds.

FOURTH COUNT
(Quia Timet)

  1. Plaintiffs repeat and reallege Paragraphs 1 through 66 hereof.
  2. The Sureties have reasonable grounds for fearing that their rights are being
    jeopardized and they will incur liability by virtue of the failure of Lalo to discharge its
    obligations under the Bonds.
  3. The Sureties are fearful that, unless they promptly receive funds from Lalo
    sufficient to cover their anticipated losses under the Bonds, Lalo may be ultimately unable to
    satisfy its indemnity and reimbursement obligations.
  4. By virtue of the equitable doctrine of quia timet, Lalo is obligated to place the
    Sureties in funds sufficient to cover these anticipated losses, in the sum of at least the Exposure
    Amounts.
  1. As a result of Lalo’s failure to deposit funds with the Sureties, the Sureties are
    suffering, and will continue to suffer irreparable injury.
  2. Accordingly, the Sureties are entitled to judgment compelling Lalo to deposit
    with WFIC the sum of at least $2,918,962.77 and with PIIC the sum of at least $2,377,536.98
    to cover the current and anticipated future exposure under the Bonds.

FIFTH COUNT

(Specific Performance - Access to Defendants’ Books and Records)

  1. Plaintiffs repeat and reallege Paragraphs 1 through 72 hereof.
  2. Pursuant to Paragraph “Sixteenth” of the WFIC Indemnity Agreement and
    Paragraph 12 of the PIIC Indemnity Agreement, Defendants agreed to provide the Sureties with
    access to Defendants’ books, records and accounts, upon demand.
  3. The Sureties have demanded that Defendants provide access to their books,
    records and accounts. See Exhibit X.
  4. Despite demand, Defendants have failed and refused to give the Sureties
    complete access to their books, records and accounts, in material breach of the Indemnity
    Agreements.
  5. The Sureties lack an adequate remedy at law.
  6. By reason of the foregoing, the Sureties are entitled to a judgment directing
    Defendants to specifically and immediately perform their obligations under Paragraph
    “Sixteenth” of the WFIC Indemnity Agreement and Paragraph 12 of the PIIC Indemnity
    Agreement, respectively, including, but not limited to, their obligation to provide the Sureties
    with immediate access to their books, records and accounts.

WHEREFORE, the Sureties demand the following relief:

  1. on the First Cause of Action, a judgment and a preliminary and permanent
    injunction directing Defendants to specifically and immediately perform their obligations to the
    Sureties under Paragraph “Third” of the WFIC Indemnity Agreement and Paragraph 4 of the
    PIIC Indemnity Agreement including, but not limited to, their obligation to deposit collateral
    security with WFIC in the sum of at least $2,918,962.77 and with PIIC in the sum of at least
    $2,377,536.98; and
  2. on the Second Cause of Action, a judgment against Defendants in the amount of
    all losses and expenses, including, but not limited to, attorneys’ fees and consultants’ fees,
    which the Sureties have incurred and continue to incur by reason of having executed the Bonds
    and/or by reason of the failure of Defendants to perform or comply with the covenants and
    conditions of the Bonds and the Indemnity Agreements and/or in enforcing and preserving the
    Sureties’ rights under the Bonds and the Indemnity Agreements; and
  3. on the Third Cause of Action, a judgment directing that Lalo specifically
    perform its common law obligations of indemnification and exoneration and discharge, perform
    and pay any obligation on the part of the Sureties under the Bonds; and
  4. on the Fourth Cause of Action, a judgment compelling Lalo to deposit with
    WFIC the sum of at least $2,918,962.77 and with PIIC the sum of at least $2,377,536.98 to
    cover anticipated exposure under the Bonds; and
  5. on the Fifth Cause of Action cause of action, a judgment directing Defendants to
    specifically and immediately perform their obligations under Paragraph “Sixteenth” of the
    WFIC Indemnity Agreement and Paragraph 12 of the PIIC Indemnity Agreement, including,
    but not limited to, their obligation to provide the Sureties with access to their books, records
    and accounts; and
  1. costs, disbursements, attorneys’ fees, interest and such other and further relief as

may be just and equitable.

The provided text is an excerpt from a document filed in this case. For a full understanding of the case, one should read the complete court file, including the response.

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