Opinion ID: 1191028
Heading Depth: 1
Heading Rank: 3

Heading: The Financing and Surety Contracts

Text: Interworks entered into two related contracts in connection with the data and cabling services contracts that provide the basis for the underlying lawsuit in this case: One provided for financing of the data and cabling services contracts, and one provided a surety should Interworks prove unable to perform its obligations under those contracts. In order to obtain financing, Interworks entered into a security agreement with Merchant on February 23, 2001 under the terms of which Merchant promised to lend Interworks money [1] in return for a first priority lien on substantially all of Interworks' personal property, including all accounts receivables. As a result, all instruments representing payments under the data and cabling contracts were made out to Interworks but sent directly to Merchant. Interworks alleges that Merchant received at least $1,000,000 in its capacity as a lien holder over its accounts receivable. New York law generally requires a contractor like Interworks to enter into a surety agreement to ensure completion of its contracts. See Titan Indem. Co. v. Triborough Bridge and Tunnel Auth., Inc., 135 F.3d 831, 834 (2d Cir.1998). To meet this obligation, Interworks contracted with Colonial to act as a surety on its public improvement contracts, pursuant to which Colonial would issue performance and payment bonds for the public improvement contracts.