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Philadelphia Indemnity Insurance Co. v. Five Star Restaurants, LLC

United States District Court, D. Nevada

March 31, 2017

PHILADELPHIA INDEMNITY INSURANCE COMPANY, a Pennsylvania Corporation; Plaintiff,
FIVE STAR RESTAURANTS, LLC, a Nevada limited liability company; WESTBURY MANOR ENTERPRISES, Inc. a Delaware foreign business corporation; VINCENT SCOTTO, an individual; MICHELINA SCOTTO, an individual; DOE INDIVIDUALS 1 through 10, inclusive; ROE BUSINESS ENTITIES 11 through 20, inclusive; Defendants.



         Plaintiff Philadelphia Indemnity Insurance Company ("Philadelphia") moved for a Temporary Restraining Order and Preliminary Injunction restraining the defendants from selling, transferring, disposing of, or liening their assets and property and certain sale proceeds of Five Star Restaurants, LLC, until requested collateral is posted by the Indemnitors. ECF No. 5. I have reviewed the pleadings and the papers on file and considered the arguments of counsel at the March 30, 2017 hearing on the motion.

         1. This Court has jurisdiction over this case, and venue is proper in this district.

         2. On or about February 10, 2016, Five Star Restaurants, LLC ("Five Star") entered into a construction contract with TCD Construction to build out retail space at Tintoretto located at the Venetian Hotel & Casino, 3377 Las Vegas Blvd., Space #2085, Las Vegas, NV 89109 (the "Project"). The owner of property required Five Star to obtain a bond.

         3. On or around April 12, 2016, Philadelphia issued lien release bond no. PB11772900576 (the "Bond") as surety in the amount of $1, 679, 277.00 in connection to the Project and for the benefit of "all prospective and existing lien claimants who have provided or hereafter provide materials, equipment or work under the prime contract, from which such the principal and surety will pay the lien claimants the lienable amount that a court of competent jurisdiction may determine is owed to each lien claimant, and such additional amounts as may be awarded pursuant to NRS 108.237, but the liability of the surety may not exceed the penal sum of the surety bond."

         4. In consideration for the issuance of the Bond and to induce Philadelphia to issue the Bond, defendants Five Star, Westbury Manor Enterprises, Vincent Scott and Michelina Scotto (the "Indemnitors") entered into an Indemnity Agreement wherein they each agreed, jointly and severally, as follows:

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; (by failure of Indemnitors or Principals to perform or comply with 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 the liability of Indemnitors to Surety in any demand, claim or suit by Surety against Indemnitors. . . .

         5. The Indemnitors further agreed to provide collateral security upon Philadelphia's demand:

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 direction to cover any actual or potential liability for any Loss or potential Loss for which Indemnitors would be obliged to indemnity Surety hereunder; or (b) the amount of any Loss or potential Loss (including legal, professional, consulting, and expert fees and expenses) 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. . . .

         6. The Indemnitors also agreed to provide documentation and information to Philadelphia:

11. ACCESS TO BOOKS & RECORDS - Surety, including its designated agents, shall, at any and all times, have unrestricted access upon reasonable notice to review all books and records of Principal and Indemnitors, including all books and records pertaining to their financial condition, and to the status of each unbonded and Bonded Contract. Principal and Indemnitors agree to provide updated financial statements upon the Surety's request. Principal and Indemnitors hereby authorize those with whom such Bonded Contracts are made to furnish to Surety all information such contracts and the work thereunder. Principal and Indemnitors also hereby authorize any bank, financial or lending institution, or depository to provide Surety with access to bank statements or financial records or any other information or documents requested by Surety.

         7. The Principal and Indemnitors also agreed to obtain written consent from Philadelphia prior to any changes in status/transfer of assets outside the ordinary course of business or that shielded any Indemnitor from liability:

15. EFFECT OF CHANGE IN STATUS/TRANSFER OF ASSETS - Each Principal and Indemnitor agrees not to change or convert its respective individual, corporate or partnership status to the extent such change has the effect of limiting, reducing or shielding the liability of either the entity or its partners and/or officers hereunder, without the prior, express, written consent of Surety. Should any Principal or Indemnitor so change its respective corporate or partnership status without the prior, express, written consent of Surety, Principal or Indemnitor agrees that such change in its status shall not limit, reduce or otherwise shield its obligations, its partners' and/or officers' obligations, to Surety which arise from this Agreement. The Principal and Indemnitors hereby expressly waive as against Surety any and all defenses which may arise from such a conversion to a LLC, LLP or similar status. Principal and Indemnitors acknowledge that the Surety relies upon the ...

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