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)
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.
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
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
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