Opinion
7053-04.
Decided July 5, 2005.
Precision seeks to recover under two material and labor payment bonds issued by Delcon Construction Corp. ["Delcon"], as principal, and defendant Hartford Fire Insurance Company, as surety, pursuant to State Finance Law § 137 in connection with two separate public improvement contracts, i.e., Westchester County Courthouse and Scarsdale Middle School. Delcon — the prime contractor on both projects — did not have a direct contractual relationship with Precision. Rather, Precision was a subcontractor to C.M.D., Ltd. ["CMD"], which was a subcontractor to Delcon on the projects.
Laborers and material suppliers who work for a subcontractor — rather than directly for the general contractor — are permitted to assert claims under the payment bond but first must give the general contractor notice of their claim. Section 137(3) requires that the person having a direct contractual relationship with a subcontractor of the contractor furnishing the payment bond but no contractual relationship express or implied with such contractor shall not have a right of action upon the bond unless he shall have given written notice to such contractor within one hundred twenty days from the date on which the last of the labor was performed or the last of the material furnished, for which his claim is made, stating with substantial accuracy the amount claimed and the name of the party to whom the material was furnished or for whom the labor was performed. The notice shall be served by delivering the same personally to the contractor or by mailing the same by registered mail, postage prepaid, in an envelope addressed to the contrctor at any place where he maintains an office or conducts his business or at his residence; provided, however, that where such notice is actually received by the contractor by other means, such notice shall be deemed sufficient.
Plaintiff Precision admitted that it did not deliver timely notices of its claim to Delcon either personally or by registered mail and Delcon's Chief Operating Officer (Thomas D'Iorio) denied that Delcon received any notice of claim from Precision within the statutory 120-day period. According to D'Iorio, during the relevant period, it was the established practice at Delcon that all written claims received by Delcon, whether in the form of demand letters, notices of liens, or summons would be brought to his attention for evaluation and response. The only written notice to Delcon of Precision's claims came in the form of two notices of lien, both dated April 14, 2004, well after expiration of the 120-day statutory period. Prior to receipt of these liens, D'Iorio was unaware that Precision worked on the projects for CMD.
With respect to the Westchester County Courthouse project, Precision last performed labor on June 30, 2003. Precision's president Pelly Collasuonno averred that on August 1, 2003, within the statutory 120-day period, he "personally sent, by regular mail, a demand letter to Delcon, requesting payment of $54,255.48 due and owing from CMD. This letter was sent by mail, with postage prepaid, to Delcon at 33 W. Main Street., Elmsford, New York. With respect to the Scarsdale Middle School Project, Collasuonno averred that labor was last performed by it on March 3, 2003 and on May 1, 2003, within 120 days after completing work, "Precision forwarded" Delcon a demand letter requesting payment of $36,417.06 for labor owed from CMD. This letter was sent by mail.
To establish receipt, plaintiff Precision seeks to rely on the common-law presumption of regularity, that is that if an item is properly stamped, addressed and mailed, it is presumed to be received by the addressee ( News Syndicate Co v. Gatti Paper Stock Corp., 256 NY 211; New York New Jersey Products Dealers Coop v. Mocker, 59 AD2d 970) and that Delcon's simple denial of receipt is insufficient to rebut this presumption of delivery ( Countrywide Home Loans, Inc v. Brown, 305 AD2d 626).
Initially, the Court notes that with respect to the Scarsdale Middle School Project, Precision's president does not claim that he personally mailed the demand letter to Delcon. Nor did he testify to a course of business and office practice according to which it naturally would have been mailed, in order to give rise to the common law presumption that the letter was in fact mailed ( cf. AB Service Station, Inc v. State of New York, 50 AD2d 973, 974; see also Croscutt v. Aldridge, 309 AD2d 1143).
In any event, Precision cannot utilize the common law presumption to meet its burden of proof that Delcon received the demand letters.
The "actually received" exception to the statutory manner of service requirement was enacted in 1972 in response to the holding in Ulster Electric Supply Co., Inc v. Maryland Casualty Co., 35 AD2d 309, aff'd 30 NY2d 712) that receipt by the contractor of supplier's notice, sent by ordinary mail within the statutory period, did not comply with the statutory requirement respecting the manner of serving the notice. The Appellate Court concluded that in enacting the statute, the legislature had created a cause of action "where one did not otherwise exist" and that the legislature "prescribed certain conditions precedent "for pursuing such a cause of action," one of which is that the notice be delivered personally or by mailing the same by registered mail. Under the 1972 amendment, the required manner of servicing notice remained exactly the same, i.e., requiring personal service or registered mail. However, a new exception was added for cases, such as Ulster Electric where the notice is "actually received" by the contractor "by other means." The legislature, in enacting and later amending section 137(3), established a particular statutory scheme for service or a notice of claim on the contractor. It requires personal service of service by registered mail, with an exception in the case the contractor actually receives a notice of claim sent by some other means. However, in this Court's opinion, plaintiff cannot graft the common law presumption on the specific statutory exception to the general service provisions of subdivision 3. Rather, in the case of service by ordinary mail plaintiff must prove actual receipt in order to avail itself of the exception to the service provisions of 137(3). ( cf. Mater of Riverhead Transit Mix Corp v. Walsch Construction Corp., 1995 WL 1051649 (Bankr. S.D.NY) [sent by certified mail, return receipt]; USA Bridge Construction of NY v. National Railroad Passenger Corp., 1999 WL 718078 (E.D.NY) [certified mail]). To hold otherwise would permit the common law presumption of regularity to extend subdivision 3's exception to the extent of engulfing the entire service scheme of section 137(3) of the Finance Law, a result not contemplated by the legislature when it amended the statute ( see e.g., Krieger v. City of NY, 118 Misc 2d 537, 539 [service addressed provision of General Municipal Law § 50-e(3)(c)]; Dattilo v. Urbach, 222 AD2d 28 [addressed service provision of Tax Law § 691(a)),
Assuming arguendo, the presumption is applicable, Delcon's denial of receipt was substantiated by a settlement agreement Delcon negotiated with CMD in August of 2003 with respect to the Scarsdale Middle School Project. According to D'Iorio, a concern in negotiating a settlement with subcontractor CMD was to address liens or claims that Delcon might face from CMD's subcontractor in the event that CMD failed to pay them for their work on the Scarsdale Middle School project. As part of the settlement agreement, dated August 6, 2003, Delcon agreed to pay $75000 to ESP Products (a subcontractor of CMD), which payment would be credited toward Delcon's settlement with CMD. Had Delcon received written notice of Precision's claim (allegedly mailed on May 1, 2003), who was also a subcontractor of CMD, D'Iorio maintains that Delcon would have required that Precision's claim be resolved as part of Delcon's settlement with CMD, just as Delcon did with respect to ESP Products. The fact Precision was not referenced in Delcon's settlement agreement substantiates that Delcon had not received notice of Precision's claim. Nor were Precisions' claims with respect to either project listed in Delcon's August 22, 2003 amended schedule of creditors holding secured and unsecured claims against Delcon, which Delcon filed in its bankruptcy proceeding.
It is also noteworthy, that Precision undisputedly never wrote a single follow-up letter nor made a phone call to Delcon after the alleged demand letters were purportedly mailed to Delcon. The aforenoted facts suffice to rebut the common law presumption of receipt.
Precision's failure to comply with the notice of claim requirement of State Finance Law § 137(3), precludes recovery against the payment bond issued by defendant/surety. Accordingly, summary judgment in favor of defendant/surety is warranted ( Willets Point Asphault Corp v. RLI Ins. Co., 294 AD2d 356; see Lynbrook Architectural Metals Corp v. Elite Assoc., 225 AD2d 525).