Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Active Fire Sprinkler Corp. v. United States Postal Service and John T. Brady

decided: February 3, 1987.

ACTIVE FIRE SPRINKLER CORP., PLAINTIFF-APPELLANT,
v.
THE UNITED STATES POSTAL SERVICE AND JOHN T. BRADY AND COMPANY, DEFENDANTS-APPELLEES



Appeal from an order of the United States District Court for the Eastern District of New York (Nickerson, J.) which granted appellees' motion for summary judgment, dismissed claims against appellees, and remanded to the state court.

Author: Pierce

Before: NEWMAN, PIERCE and PRATT, Circuit Judges.

PIERCE, Circuit Judge:

This is an appeal from an order of the United States District Court for the Eastern District of New York (Nickerson, Judge) granting the appellees' motion for summary judgment, dismissing appellant's claims against the appellees, and remanding to the state court. Appellant claims that the district court erred in dismissing its equitable lien claim against the United States Postal Service and erred in granting summary judgment to the bond sureties against the Postal Service. We reverse in part and remand for further proceedings consistent with this opinion.

BACKGROUND

1. The Construction Contract

In January 1977, the United States Postal Service ("USPS") contracted with John T. Brady and Company ("Brady" or "general contractor") for the construction of an airmail facility at John F. Kennedy International Airport. The cost of the building was $40.6 million. Brady, as general contractor and principal, furnished a payment bond pursuant to the Miller Act, 40 U.S.C. §§ 270a-270f (1982), for the statutory maximum amount of $2.5 million. Named in the bond were a number of insurance companies which acted as sureties ("the Sureties").*fn1

The Miller Act provides that the general contractor must post a payment bond in an amount equal to a set percentage of the total amount payable on the construction contract, up to a maximum of $2.5 million, for the protection of all persons who supply labor or materials for the project. 40 U.S.C. § 270a(a)(2) (1982). If the general contractor fails to pay, persons who supply labor or materials may sue the surety to recover under the bond. Id. § 270b.

The plumbing and sprinkling system portion of the project was subcontracted by Brady to plaintiff-appellant Active Fire Sprinkler Corporation ("Active") in March 1977. The amount of the subcontract was $1.7 million. It is undisputed that Active completed performance of its obligations under the subcontract during 1981.

Upon completion of the project, before paying the subcontractors (including Active), Brady encountered financial problems and assigned its rights under the government contract to the Sureties in November 1982. Apparently, by mid-1982 numerous unpaid subcontractors, but not Active, had presented claims against Brady and against the Miller Act bond, which in the aggregate exceeded the $2.5 million bond amount.

2. The "Bond Action"

In August 1982, the Sureties commenced an interpleader action (the "Bond Action") in the United States District Court for the Eastern District of New York by depositing $2.5 million, seeking to discharge their liability under the bond. After Brady assigned its rights to the Sureties in November 1982, Active moved in February 1983 to intervene as a defendant in the interpleader action. On March 31, 1983, Judge Nickerson denied Active's motion to intervene on the ground that it had failed to sue timely on the bond since the Miller Act provides that suit must be brought within one year of the last day materials or labor were supplied for the project. 40 U.S.C. § 270b(b) (1982). Although Active completed work on the project in 1981, it had not sought to intervene in the Sureties' interpleader action until February 1983. The Bond Action is not the subject of this appeal.

3. The "Lien Action"

Also in February 1983, Active commenced the present suit (the "Lien Action") against USPS in the New York State Supreme Court for Kings County. In the Lien Action, Active sought to recover from USPS a balance of $256,850.48 allegedly owed by Brady to Active under the subcontract. Active sought to recover this amount by requiring USPS, under an equitable lien theory, to pay over to it any money owed by USPS to Brady as the general contractor. Apparently, at the time the Lien Action was commenced in February 1983, USPS had remaining over $900,000 earmarked to be paid to Brady under the construction contract (the "Contract Balance"). On March 25, 1983, USPS moved the Lien Action to the federal court, where it was assigned to Judge Nickerson, and USPS immediately moved for dismissal of Active's complaint on sovereign immunity grounds.*fn2 It appears that the Bond Action was settled in early 1984. The district court denied USPS's first motion to dismiss the Lien Action in 1983, holding that by enacting the Postal Reorganization Act ("PRA"), Congress had waived sovereign immunity as to USPS. See 39 U.S.C. § 401 (1982).

Meanwhile, in May and December of 1983 -- after Active had commenced its suit against USPS -- USPS made a number of payments from the Contract Balance earmarked for the Brady contract. Interrogatory answers by Brady indicate that these payments totaled $936,021 and were made to the Sureties ($857,779) and to several of Brady's creditors, who apparently were subcontractors on the project ($78,242).

Eventually, Active amended its complaint to join Brady as a defendant. However, since Brady might not have sufficient resources to satisfy a judgment against it, Active primarily sought recovery against USPS.

4. The Summary Judgment Motions in the Lien Action

In August 1985, Active moved for partial summary judgment against USPS and Brady in its Lien Action. In an affidavit by Thomas G. De Luca, Active asserted that between the commencement of its suit in "March [sic] 1983" and the time its motions for partial summary judgment were made in August 1985, USPS paid out of the Contract Balance to Brady's creditors or to the Sureties a total of $936,021, as stated above, and that it believed that USPS still held $36,294 of the Contract Balance. There appears to be no dispute that Brady owes Active at least $82,226.67 of the total amount of $256,850.48 claimed by Active to be owed by Brady under the subcontract.

Active claims that as an unpaid subcontractor on a federal construction project it may, on notice to USPS, assert an equitable lien against any money held by USPS for the account of the general contractor, Brady. Active further asserts that USPS breached its duty as a "stakeholder" by making payments under the contract to Brady's creditors and to the Sureties after Active placed USPS on notice as to Active's claim by commencing this lawsuit. Thus Active contends that it is entitled to summary judgment against USPS for the "undisputed" $82,226.67. Active also believes that it should be allowed to pursue its claims in the Lien Action against USPS and Brady for the remainder of the $256,850.48 it alleges Brady owes Active under the subcontract. Although Active sued for that amount and then moved in August 1985 for partial summary judgment against ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.