Court Opinion

ID: 5396771
Source: CourtListenerOpinion
Date Created: 2022-01-08 10:19:37.03652+00
Date Added: 2024-06-11T08:30:23.267560
License: Public Domain

Botein, J.
(dissenting). At the close of the entire case, the Trial Justice, sitting without a jury, dismissed the complaint and directed judgment for the defendants on the ground that the plaintiff had not established its right to recover on the payment bond in question. He held in effect that, in this State at least, when a materialman is not named in the bond nor expressly given the right to sue, he must show clearly that the parties entered into the undertaking with the intention of benefiting him (Buffalo Cement Co. v. McNaughton, 90 Hun 74, affd. on opinion below, 156 N. Y. 702; Simson v. Brown, 68 N. Y. 355; Eastern Steel Co. v. Globe Ind. Co., 227 N. Y. 586; Fosmire v. National Sur. Co., 229 N. Y. 44; Von Clief & Sons v. City of New York, 141 Misc. 216; Graybar Elec. Co. v. Seaboard Sur. Co., 157 Misc. 275). Upon the record before us plaintiff, which relied largely on documents to spell out the requisite intent, failed to establish sufficient facts to sustain its burden. On the contrary, the wording of the bonds and the undisputed facts compel the explicit finding made by the trial court — that the bond in this case was executed only to indemnify the general contractor and not for the benefit of the plaintiff or others similarly circumstanced.
The majority opinion (p. 507) concedes that the bond in this case ‘ ‘ was obtained by the general contractor primarily for its own protection ” but characterizes this merely as a motive for securing the undertaking rather than as tending to establish an intent “as to who shall be benefited ”. However, motive often illuminates intent, and I believe that in this case an intent to benefit itself must be spelled out of the general contractor’s conceded desire to protect itself — and furthermore, an intent to protect itself against substantial damage. I cannot agree that the only objective to be fulfilled by the payment bond is to secure reimbursement of materialmen and laborers. While it is true that a materialman’s lien against the general contractor for materials furnished a subcontractor is limited to the moneys *511of the subcontractor in possession of the general contractor, no such restriction applies to the lien which the materialman may assert against the property itself (Lien Law, § 3). It is common practice for owners or principals to provide that they may withhold payments to the general contractors in such contingencies; and evidently one of the reasons the general contractor insisted upon the bonds was to guard against just such contingencies.
There are several factors distinguishing this case from McGrath v. American Sur. Co. (283 App. Div. 693) in which we affirmed an order denying a motion to dismiss a complaint in an action brought by a third party under a payment bond, where, as in this case, a performance bond was also furnished. In that case the general contractor agreed to construct a hospital for the Veterans Administration. Under its agreement and as required by the provisions of the Miller Act (U. S. Code, tit. 40, § 270a et seq.) the general contractor furnished a payment bond for the protection of all persons furnishing labor or materials in the prosecution of the work provided for in its contract. The Federal statute is read into the bond by operation of law (Graybar Elec. Co. v. New Amsterdam Gas. Co., 292 N. Y. 246). Also, in Fosmire v. National Sur. Co. (supra), cited in the majority opinion, Judge Cabdozo said (p. 48): “A different question would be here if the bond had been conditioned for the payment of wages and nothing else. The interest of the state in the welfare of those who labor on its public works might then point to an intention to create a cause of action in their favor (Matter of Int. Ry. Co. v. Rann, 224 N. Y. 83; Williston on Contracts, secs. 372, 402. Cf. 28 U. S. Stat. 278; 33 id. 811; Texas P. Cement Co. v. McCord, 233 U. S. 157).” Where the bond is furnished in connection with a governmental purpose the courts will more readily imply a direct intention to benefit a laborer or materialman (McClare v. Massachusetts Bonding & Ins. Co., 266 N. Y. 371; Johnson Service Co. v. Monin, Inc., 253 N. Y. 417; Strong v. American Fence Constr. Co., 245 N. Y. 48). The plaintiff in this case, however, supplied materials in connection with a private job.
True, McGrath, as an employee of a subcontractor, sued on a payment bond furnished by his employer to the general contractor. The McGrath decision arose from a motion to dismiss the complaint as insufficient at law, and upon such a motion the pleadings are construed liberally. The allegations of the complaint and the copies of the bonds annexed thereto admitted *512of the possibility upon trial of McGrath establishing that the subcontractor’s bond was furnished in further fulfillment of the general contractor’s basic obligation under the law to furnish a bond for the benefit of laborers and materialmen. The complaint and documents also held out the possibility that the plaintiff could establish the requisite clear intent under the law of this State. In the McGrath case the payment and performance bonds were each in the amount of 100% of the subcontractor’s price, eliminating for all practical purposes any question of exhausting either bond. Furthermore, the defendant insurance company also wrote the Miller Act bonds, each in the amount of 100% of the price of the overall job. In the McGrath case the observation in the majority opinion herein (p. 506) that “ there appears to be no objective to be fulfilled by the payment bond except to secure reimbursement of material-men and laborers ” becomes indeed appropriate. But the existence of a companion bond is a factor that I believe must be limited to whatever bearing it may have in ascertaining the intention of the parties to the bond in suit. Otherwise we will invite the ambiguous prospect of construing the provisions of identical undertakings differently, dependent on whether the obligees have entered into other separate and distinct undertakings.
In this case each bond was for 20% of the subcontractor’s price • — • and the premiums were paid by the general contractor. I note this distinction only for its bearing on the intention of the general contractor in insisting upon the subcontractor furnishing the undertaking. The more likely inference to be drawn from this fractional undertaking is that the general contractor had no intention to benefit third-party materialmen. In demanding the bonds in this modest proportion of the entire contract price, the general contractor was probably taking a calculated risk as to what proportion of the material and labor obligations would not be met by the subcontractor; or cushioning it against the subcontractor failing to complete the final one fifth of the job.
Adequate affirmative proof was required of the plaintiff to the effect that the parties to the undertaking intended to benefit it. Far from meeting this standard, at the close of the entire case the inferences to be drawn from the evidence submitted tended to establish that the defendants had entered into this undertaking for the benefit of the general contractor. The Trial Judge properly directed judgment for defendants, and the judgment appealed from should be affirmed.
*513Dose, J. P., and Cohn, J., concur with Callahan, J.; Botein, J., dissents and votes to affirm in opinion.
Judgment modified in accordance with the opinion herein and, as so modified, affirmed. Settle order on notice. [See post, p. 943.]