-against- C. RYAN EBCOM/H&G LLC SHORT FORM ORDER

Transcription

1 s; SHORT FORM ORDER SUPREME COURT STATE OF NEW YORK Present: HON. JOHN P. DUNNE. Justice TRIAL/lAS, PART 8 C. RYAN EBCOM/H&G LLC Plaintiff( s) Index No. 2219/04 Motion Seq. 2 Motion for summary judge -against- VAN-TAG CONTRACTING CORP., MICHAEL McGRATH, CARMINE TUFANO, LUMBERMAN' MUTUAL CASUALTY COMPANY and NOVA CASUALTY COMPANY Defendant( s) The following papers read on this motion: Notice of Motion... x Answering Affidavits... Reply x Memo.... Upon the foregoing papers, it is hereby ordered that the motion pursuant to CPLR 3212 by the plaintiff JC Ryan EBCO/H & G, LLC for (1) summary judgment as against co-defendant Lumbermans Mutual Casualty Company on its Tenth Cause of Action; (2) for summary judgment as against co-defendant Nova Casualty

2 , ", " Company on its Tenth, Twelfth, and Fourteenth Causes of Action; (3) an order severing the First through Third, and the Fifth through Ninth Causes of Action; and (4) an order severing and discontinuing the Fourth and Eleventh Causes of Action is decided as follows: In September of 2001, co-defendant V an- Tag Contracting Corp. ("V an- Tag entered into a contract with the East Wiliston Union Free School District. Thereafter V an- Tag, entered into a subcontract with the plaintiff JC Ryan EBCOM/H &G, LLC Ryan" or the "plaintiff' ) A. Cmplt ) In December of200 1, Van Tag entered into a contract with the Franklin Square Union Free School District and executed a second subcontract with Ryan. Pursuant to the two subcontracts, Ryan was to supply certain wood and metal and doors together with other related accessories (A. Cmplt., 28-29). In accordance with the requirements of the contracts and as required by law (cf., State Finance Law 137), V an- Tag obtained performance and payment bonds from the co-defendant surety, Lumbermans Mutual Casualty Company Lumbermans ) (Lumbermans' Opp. at Exh. According to Ryan, it supplied the materials required for the project and received only partial payment from Van-Tag, in the amount of$ , leaving an alleged, unpaid balance of $ (Englander Aff. 7). In November of2003, and when payment of the sums allegedly due was not forthcoming, Ryan filed three "Notices of Mechanics Lien for Account of Public Improvement " in the amounts of$13,424., $ and $ (Cmplt., 89-90; 97-98; 104 (Cmplt., Exh. J). In May of2003, co-defendant Nova Casualty Company ("Nova ) issued certain 21 (5J(a). Significantly, bonds discharging the liens in accordance with Lien Law

3 the three discharge bonds annexed to the plaintiffs papers are unsigned (Pltffs Exh. According to Nova, V an-tag initially requested that Lumbermans issue the discharge bonds, but that Lumbermans allegedly declined to do so (Frailey Aff. ~ II). Moreover, Nova contends that the underlying contract between V an-tag and the District required that Van-Tag complete the project "free of mechanic s liens" and that Lumbermans ' bonds incorporated the terms and conditions of the contract (Frailey Aff., ~ 8-11). In August of2003, co-defendant Michael Magrath - a principal of Van-Tag - executed an agreement personally guaranteeing the outstanding amounts allegedly due to Ryan from Van-Tag (Pltffs Exh. Thereafter, in March of2004, Ryan commenced the within action against inter alia Van-Tag, Lumbermans, Magrath, and Nova, interposing breach of contract claims and causes of action on the bonds and under the Lien Law to recover the amounts allegedly due. V an- Tag and Magrath failed to answer or appear with respect to the complaint and by order dated July 19, 2004, this Court granted the plaintiffs motion for a default judgment as against Defendants Van-Tag and McGrath. (Ziska Aff., Exh. Nova and Lumberman s have both answered and denied the material allegations of the complaint. Although Lumbermans answer does not assert a cross claim against Nova Nova s first cross claim alleges that Lumbermans - as payment bond surety - is the party primarily liable to the plaintiff for Van-Tag s alleged default (Ans. ~~ 15-17). The plaintiff now moves for inter alia summary judgment as against Lumbermans on its tenth cause of action (with respect to Lumbermans' bond) and

4 as against Nova on its Twelfth through Fourteenth Causes of Action with respect to its lien discharge bonds and lien foreclosure claims. The motion should be granted to the extent indicated below. The plaintiffhas established its primafacie entitlement to judgment as a matter oflaw as against Lumbermans on its payment bond (American Bldg. Supply Corp. v. Avalon Properties, Inc., 8 AD3d ; Spancrete Northeast, Inc. v Elite Assoc., Inc., 184 AD2d 562). bils for A labor and materials payment bond guarantees the owner that all labor and materials contracted for and used by the contractor will be paid by the surety if the contractor defaults " (11 NY Jur2d, Bonds, 63; 3 Bruner & 8:152 see generally, Connor, Construction Law, Quantum Corporate Funding, Ltd. v. Westway Industries, Inc., 4 NY3d211, 214 (2005) cf., West-Fair Elec. Contractors v. Aetna Cas. & Sur. Co., 87 NY2d 148 (1995)). Notably, State Finance Law ~ 137 "requires general contractors on public works projects to purchase payment bonds, which work like insurance policies designed to guarantee payment to the general contractor s suppliers, employees and subcontractors" (Quantum Corporate Funding, Ltd. v. Westway Industries, Inc. supra, at 214). Moreover, a "payment bond * * * runs to the State as obligee" and ensures that those for whose benefit the bond is exacted, shall be paid in full, without regard to the status of what may be due the contractor under the contract or what may be due to the State, from the surety, under the performance " (Tri-City Elec. Co., Inc. v. People, 96 AD2d 146, 150 affd 63 NY2d 969 (1984)). Significantly, " (t)he remedy on the payment bond is * * * is dependent neither on the existence of a lien fund or a Lien Law trust fund for its utilization or enforcement" (Tri-City Elec. Co., Inc. v. People, supra, 96 AD2d at 150 see Quantum Corporate Funding, Ltd. v. Westway Industries, Inc., supra; 11 NY

5 Jur2d, Bonds, ~ 98). Here, it is undisputed that the subject payment bonds were issued by Lumberman s and that they are expressly applicable to the work performed and materials supplied by the plaintiff. Lumbermans does not dispute that the plaintiff supplied the materials in question or that the plaintiff in failed any respect to adequately perform the work for which payment is now sought (ef., Spancrete Northeast, Inc. v Elite Assoc., Inc., supra). Accordingly, the plaintiff has established its entitlement to judgment as a matter oflaw as against Lumbermans the bonds it issued in connection with the project. However, that branch of the plaintiff's motion which is for summary judgment as against Nova on the tenth, twelfth and fourteenth causes of action, is denied. Pursuant to Lien Law ~ 5, a person performing labor or furnishing materials to a contractor who has a contract with the State or a public corporation for a public improvement, has a lien ' to the extent of the amount due or to become due on such contract''' (Hempstead Concrete Corp. v. Elite Associates, Inc., 203 AD2d quoting from Lien Law ~ 5 see also West-Fair Elec. Contractors v. Aetna Cas. & Sur. Co., supra). The Lien Law authorizes the discharge ofamechanic s lien upon the posting an appropriate undertaking (Lien Law (See Tri-City Elec. ~ 21) Co., Inc. v. People, supra). Upon the posting of an bond discharging the lien pursuant to Lien Law ~ 21 a ' shifting' occurs and the lien detaches from appropriated funds or property and attaches to the substitute, the bond"' (Bat-Jac Contracting, Inc. v. Italia Const. Co. 262 AD2d 314 quoting from Tri-City Elec. Co., Inc. v. People, supra, 96 AD2d at 150; M. Gold & Son Inc. v. A.J. Eckert Inc., 246 AD2d 746, 747). A valid lien must be judicially established before a surety may be made to pay pursuant to its bond" (J. Castronovo, Inc. v. Hillside Development Corp. 160 AD2d 763, 765 see also Sette-Juliano Contracting, Inc./Halcyon Const. Corp. v. Aetna Cas. and Sur. Co. 246 AD2d 142, ; Royal Ins. Co. of America v.

6 , " Citizens Developers of Oneonta, Inc., 200 AD2d 804; 76A NYJur. 2d Mechanics Liens ~~ 140, 172; 53 Am Jur2d, Mechanic s Liens, ~ 314). It is well established that the burden is on the lienor to show that there is a sum due to which its lien could attach" (M. S. Homes Inc. v. Chiodo, 277 AD2d 1056, 1057; Strober Bros., Inc. v. Kitano Arms Corp., 224 AD2d see also Brainard v. Kings County, 155 NY (1898)). More particularly, " subcontractor bears the burden of demonstrating that there is money due and owing to the general contractor from the owner based on the primary contract" (Timothy Coffey Nursery/Landscape, Inc. v. Gatz, 304 AD2d ; LHV Precast Inc. v. Woodstock Lawn & Home Maintenance, 296 AD2d 736, 737; Hempstead Concrete Corp. v. Elite Associates, Inc., supra; Electric City Concrete Co., Inc. v. Phillips, 100 AD2d 1). Here, the plaintiff s submissions do not establish that there were funds due and owing to V an- Tag from the school district at the time the mechanic s liens were filed and accordingly, the plaintiff has failed to demonstrate the validity of the lien on which Nova s bonds are based (LHV Precast Inc. v. Woodstock Lawn & Home Maintenance, supra). Lumbermans ' argument that - as between the two sureties - Nova is purportedly the "principal" surety in connection with the plaintiff's claim and is therefore exclusively liable in the first instance payment of that claim in its entirety is moot at this time. (See generally, Restatement (3 ) Suretyship & Guaranty 53, 59-61; Restatement (first) Security, ~ 145 (1941); Allstate Ins. Co. v. American Bankers Ins. Co. of Florida, 882 F2d 856, 861 (4 Cir. 1989); Colonial Am. Nat. Bank v. Kosnoski, 617 F2d 1025, (4 Cir. 1980)). The Court agrees, however, that since the bonds issued by Nova have discharged the plaintiff s mechanic s liens there is no longer in existence * * * an action against real property" and accordingly, the school district is not a necessary (see M. Gold & Son, party insofar as recovery is sought on the bonds themselves Inc. v. A.J. Eckert Inc., 246 AD2d 746; Norden Elec., Inc. v. Ideal Elec. Supply

7 Corp., 154 AD2d 580; Melniker v. Grae, 82 AD2d 798, 799; Lien Law ~~ 37(7), 44 ef., Riverhead Transit Mix Corp. v. Walsh Const. Co., _ (NOR), 1995 WL (Bankruptcy Court, SDNY 1995); Royal Ins. Co. of America v. Citizens Developers of Oneonta, Inc., supra, at 806). Lastly, those branches of the plaintiff's motion which are to: (1) discontinue and dismiss the Fourth and Seventh Causes of Action; and (2) to "continue" the First through Third and Fifth through Ninth Causes of Action, are granted without opposition. Accordingly, it is ORDERED, that the plaintiffs motion for summary judgment as against codefendant Lumbermans Mutual Casualty Company on its Tenth Cause of Action is granted, and it is further ORDERED the Fourth and Eleventh Causes of Action are discontinued and dismissed, and it is further ORDERED, that the plaintiff's motion is otherwise denied. It is so Ordered. Dated: April ENTERED MAY a NAMAU COUY COUNTY Cl 6fJICE