Summary
holding that surety could assert general contractor's claim against subcontractor because the chain of agreements from the general contractor down to the subcontractor provided the functional equivalent of privity, but noting that "[c]onversely, a subcontractor is not normally a third-party beneficiary of the contract between the owner and the general contractor"
Summary of this case from Stapleton v. Pavilion Bldg. Installation Sys., Ltd.Opinion
98811.
April 6, 2006.
Appeal from that part of an order of the Supreme Court (O'Brien, III, J.), entered May 26, 2005 in Otsego County, which granted plaintiff's motion for summary judgment.
Hinman, Howard Kattell, L.L.P., Binghamton (Harvey D. Mervis of counsel), for appellant.
Breakell Law Firm, P.C., Albany (Walter J. Breakell of counsel), for respondent.
Before: Mercure, J.P., Peters, Spain and Kane, JJ., concur.
Andrew R. Mancini Associates, Inc. (hereinafter ARM), acting as general contractor, subcontracted with third-party defendant RS Steel, LLC to perform all steel work on a construction project. RS, in turn, subcontracted with plaintiff to perform the steel erection work. After completion of its work, plaintiff sought to secure payment by filing a mechanic's lien and commencing this action against defendant, the surety on ARM's payment bond. The bond provided for payment to any supplier or subcontractor who had a lien on the project. In response to the action, defendant asserted various claims and defenses that ARM had against plaintiff for unauthorized and deficient work. Defendant also brought a third-party action against RS and another. When plaintiff moved for summary judgment on its claim under the bond, defendant cross-moved for summary judgment on its claims against plaintiff and against RS in the third-party action. Finding that a lack of privity deprived defendant of standing to assert ARM's claims against plaintiff and that questions of fact precluded summary judgment on ARM's claims against RS, Supreme Court denied defendant's cross motion and granted plaintiff's motion. Defendant appeals.
We find merit in defendant's argument that the chain of subcontracts between ARM and RS and between RS and plaintiff provides sufficient privity to permit defendant, as surety, to assert ARM's claims and defenses against plaintiff. Plaintiff's subcontract with RS identified ARM as the intended beneficiary for whom the steel erection was to be done, it incorporated the terms of the separate subcontract between RS and ARM, and it provided that plaintiff was to assume all of the responsibilities of RS under its separate subcontract with ARM. Thus, plaintiff's subcontract was clearly intended to be performed for ARM's benefit, with plaintiff standing in the shoes of RS. Given plaintiff's role in fulfilling RS's obligations to ARM, the relationship between ARM and plaintiff was so close as to be the functional equivalent of privity ( see City School Dist. of City of Newburgh v. Stubbins Assoc., 85 NY2d 535, 538-539; Johnson City Cent. School Dist. v. Fidelity Deposit Co. of Md., 263 AD2d 580, 582; Rotterdam Sq. v. Sear-Brown Assoc., 246 AD2d 871, 872; R.H. Sanbar Projects v. Gruzen Partnership, 148 AD2d 316, 319; compare Barry, Bette Led Duke v. State of New York, 240 AD2d 54, 56, lv denied 92 NY2d 804 [Conversely, a subcontractor is not normally a third-party beneficiary of the contract between the owner and the general contractor and, for this reason, a liquidating agreement is required to remedy the lack of privity which otherwise precludes a subcontractor from suing the owner]).
Accordingly, we conclude that Supreme Court erred in granting plaintiff's motion. Further, the questions of fact found to exist in defendant's action against RS also preclude summary judgment to either party in plaintiff's action.
Ordered that the order is modified, on the law, without costs, by reversing so much thereof as granted plaintiff's motion; motion denied; and, as so modified, affirmed.