City of Rye v. Public Service Mutual Insurance Co. case brief

City of Rye v. Public Serv. Mut. Ins. Co. case brief summary
315 N.E.2d 458 (1974)

CASE SYNOPSIS

Appellant city challenged a ruling of the Appellate Division of the Supreme Court in the Second Judicial Department (New York) that denied the city's motion for summary judgment to enforce a surety bond.

CASE FACTS
Appellant city sued appellees, developers and their surety, to recover on a bond appellees gave to the city in order to secure timely completion of six buildings. The appellate division affirmed the trial court's denial of the city's motion for summary judgment, stating that the bond was penal in nature and, therefore, unenforceable.

DISCUSSION

• The court affirmed the appellate division's ruling, explaining that the bond was a penalty because it did not reflect a reasonable estimate of city's damages. 
• Because no statute authorized the city to penalize appellees for not completing the buildings on time, the liquidated damages laws applied. 
• Because the amount of the bond was grossly disproportionate to city's damages, the bond was unenforceable.

CONCLUSION
The court affirmed the denial of appellant city's motion for summary judgment to enforce a surety bond because the amount of the bond was grossly disproportionate to the city's damages and was, therefore, unenforceable under liquidated damages laws.


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