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GREENBLATT v. DELTA PLUMBING & HEATING CORP.

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK


September 29, 1993

WILLIAM GREENBLATT and PETER N. SALZARULO, as Chairman and Co-Chairman, respectively and Trustees of the JOINT INDUSTRY BOARD OF THE PLUMBING INDUSTRY OF THE CITY OF NEW YORK and Funds Administered by JOINT INDUSTRY BOARD OF THE PLUMBING INDUSTRY OF THE CITY OF NEW YORK, PETER N. SALZARULO, in his capacity as President of LOCAL UNION NO. 2 OF THE UNITED ASSOCIATION OF JOURNEYMEN AND APPRENTICES OF THE PLUMBING AND PIPE FITTING INDUSTRY OF THE UNITED STATES AND CANADA, AFL-CIO, PETER N. SALZARULO, Individually and LOCAL UNION NO. 2 OF THE UNITED ASSOCIATION OF JOURNEYMEN AND APPRENTICES OF THE PLUMBING AND PIPE FITTING INDUSTRY OF THE UNITED STATES AND CANADA, AFL-CIO, Plaintiffs,
v.
DELTA PLUMBING & HEATING CORP. and NEW YORK SURETY COMPANY, Defendants.

SWEET

The opinion of the court was delivered by: ROBERT W. SWEET

OPINION

Sweet, D.J.

 This action by Plaintiffs William Greenblatt and Peter N. Salzarulo as Chairman and Co-Chairman, respectively, and Trustees of the Joint Industry Board of the Plumbing Industry of the City of New York and Funds Administered by Joint Industry Board of the Plumbing Industry of the City of New York ("the Board"), Peter N. Salzarulo, ("Salzarulo") in his capacity as President of Local Union No. 2 of the United Association of Journeymen and Apprentices of the Plumbing and Pipe Fitting Industry of the United States and Canada, AFL-CIO, Peter N. Salzarulo, individually, and Local Union No. 2 of the United Association of Journeymen and Apprentices of the Plumbing and Pipe Fitting Industry of the United States and Canada, AFL-CIO (the "Local") (collectively, the "Plaintiffs") against Defendant Delta Plumbing & Heating Corp. ("Delta") and Defendant New York Surety Company ("New York Surety") was tried to the Court on May 10, 1993. Upon the following findings and conclusions, judgment will be entered on the complaint.

  Prior Proceedings

 This action was commenced on November 20, 1989 against Delta to enforce an obligation to the Board arising out of the Collective Bargaining Agreement ("CBA") between the Association of Contracting Plumbers of the City of New York, Inc. and the Local by the filing of a complaint. Service was made through the Secretary of State.

 The Board previously filed actions against Delta in the Southern and Eastern Districts to enforce its rights on April 27, 1987, November 4, 1988, and November 20, 1989. Delta filed a petition in bankruptcy on March 21, 1991, and the action was stayed against it. New York Surety moved for summary judgment dismissing the complaint, which motion was denied on May 23, 1991, familiarity with which is assumed.

 Following the trial on May 10, 1993, a briefing schedule was set, and final submissions were completed on July 7, 1993.

 Findings of Fact

 The Board is the agent of Local Union No. 2 under the CBA with respect to the collection and administration of the various benefits provided under the CBA. Delta is a plumbing contractor subject to the terms and provisions of the CBA which required the posting of a surety bond containing certain guarantees as a condition of supplying union labor to the contractors covered by the CBA.

 The CBA provides, among other things, as follows:

 

16. FRINGE BENEFITS PAID TO PLUMBING INDUSTRY BOARD: The Employer must pay the aforementioned Fringe Benefits, Supplemental Benefits and Contributions, Holiday Fund Benefits and Security benefits to the Plumbing Industry Board as administrative and/or collection agency of the various trust funds herein mentioned . . .

 * * *

 

18. FRINGE BENEFITS, FAILURE TO PAY: In the event an Employer shall default in payment of fringe benefits provided for by the terms of this Agreement, it shall be considered the same as failure to pay wages, and all Employees shall not be permitted to work for any Employer who is delinquent in the payment of fringe benefits. Failure to pay fringe benefits is a violation of the laws of the State of New York. In addition, if after proper notification an Employee continues to work for a delinquent Employer, the Union will bring the Employee up on charges before the "Local 2" Executive Board.

 * * *

 

22. SURETY BOND TO GUARANTY PAYMENT OF FRINGE BENEFITS: Each Employer shall furnish a bond of an agreed form by a Surety Company approved by the New York State Insurance Department to the benefit of the Joint Plumbing Industry Board to guaranty the payment of the Fringe Benefits herein mentioned, Security Benefits and any and all other benefits and contributions. The amount of the bond shall be in conformity with the action taken by the Joint Finance Committee of the Joint Plumbing Industry Board . . . In the event an Employer fails to pay Fringe Benefits within the prescribed period, the Employer in arrears, in payment of Fringe Benefits, shall be required to pay Fringe Benefits weekly. If delinquent, an Employer shall post a bond double the aforelisted bond requirements. The Plumbing Industry Board shall not issue a job or shop work card to an Employer who is not satisfactorily bonded. All Employers must obtain a current and valid job or shop card from the Plumbing Industry Board, Local 2 in accordance with the customs and regulations of the Board.

 * * *

 

 

83. COMPOSITION OF BOARD: There is a Joint Plumbing Industry Board in the jurisdiction of Local Union No. 2 which consists of an equal number of union representatives and bonafide established contractors . . .

 

84. BOARD TO RECEIVE FRINGE BENEFITS PAYMENT: The Joint Plumbing Industry Board shall continue to receive, beginning with the effective date of this Agreement from each Employer . . . all Fringe and Supplemental Benefits and Contributions mentioned in this Agreement.

 Delta provided a bond to the Board as required by the CBA written by Continental Casualty Company ("Continental") in the amount of $ 80,000 which was effectively cancelled by Continental on or about June 14, 1989. Delta failed to furnish a union benefits bond for the period of June 14, 1989 through January 28, 1990.

 By letter dated August 16, 1989, the Board sent a letter to Delta notifying it that it had no bond and that:

 

Failure to comply with the above bonding regulations makes your firm delinquent. Your jobs may be stopped, your bond will be doubled and, if you are a monthly contractor, you will have to pay weekly. When a contractor is determined to be delinquent, it will be a requirement that a contractor pay weekly -- both wages and fringes -- by check to the employees . . .

 The letter was re-sent on September 21, 1989 and denominated as a "Final Notice."

 By letter dated October 11, 1989 the Board notified Delta that it was in breach of the Agreement and that Delta's "delinquent bond should be (double bond schedule) $ 65,000.00." By letter dated December 27, 1989, the Board again notified Delta that it had no bond and stated as follows:

 

Failure to comply with all BONDING REQUIREMENTS will cause the following:

 

1) YOUR JOB WILL BE STOPPED.

 

2) Your Bond amount WILL BE DOUBLED.

 

3) If you are a monthly payer, YOU WILL HAVE TO PAY WEEKLY.

 The notice was repeated in substantially the same form by a letter to Delta dated January 23, 1990. Copies of the notices were sent by the Board to Salzarulo.

 Delta was furnished with union labor during the period of June 14, 1989 through January 28, 1990, by which time Delta owed the Board the sum of $ 70,316.60.

 During the period of July 1989 through June 1990, the only projects at which Delta utilized Local 2 union labor were the following:

 

(a) East 40th Street Hotel Venture, New York, New York;

 

(b) 520 West 112th Street, New York, New York; and

 

(c) 48-52 Market Street, New York, New York.

 It is the practice under the CBA for the contracting plumbers to file reports monthly and to make estimated payments of benefits which lag behind the actual liabilities incurred as established by the reports required under the CBA.

 On January 29, 1990 a bond was executed and issued by New York Surety for the benefit of Delta as Principal and the Board as Obligee (the "Bond") on a form prepared by the Board.

 Prior to the execution of the Bond, Valerie Sanborn, an account executive at the Hal land Agency, the producing broker and agent of New York Surety, had discussions with Monika Scheutz, a bookkeeper for the Board, concerning the issuance of the Bond. During the course of those discussions, Ms. Scheutz never disclosed to Ms. Sanborn that: (a) there was a preexisting liability of Delta to the PIB in excess of $ 70,000.00 or (b) that the Board had commenced an action to recover those delinquencies. New York Surety was generally familiar with the practice of maintaining running balances between contractors and the Board. No credit investigation was conducted other than an inquiry to Delta's bank, which was answered satisfactorily. No litigation search was conducted by New York Surety.

 The Bond, in the penal sum of $ 80,000.00 was executed and issued on January 29, 1990.

 The Bond provides:

 

(1) an amount equal to all required fringe benefits under the Collective Bargaining Agreement on all classifications of employees covered thereunder who are employed by the Principal; . . . which amounts shall be due to the Obligee during the term of said Agreement, or written modification, renewal or extensions, or on such other dates or at such other times as may hereafter be agreed upon in writing between the Principal and the Obligee, . . . Provided, however, that this Bond is executed upon the following express conditions:

 

1. The Surety may cancel its liability as to future assessments under this Bond at any time by notice to Principal and Obligee at least forty-five (45) days in advance of the date of such cancellation.

 

. . . . .

 

4. The term of this Bond begins on July 1, 1989 and ends on June 30, 1990; however, the term of this Bond may be continued from year to year by the issuance of a continuation certificate executed by the Principal and Surety and delivered to the Obligee at least forty-five (45) days prior to June 30th of any year.

 and covers:

 

an amount equal to all required fringe benefits . . . which amounts shall be due to the obligee (Board) during the term of said Agreement (Collective Bargaining Agreement) . . . provided . . .

 

4. The term of this Bond begins on July 1, 1989 and ends on June 30, 1990 . . .

 As the result of a prior litigation between the Board and Delta in this Court (88 Civ. 7864 (PNL)) a General Release was executed March 4, 1990 by the Board releasing Delta from "any and all claims for the payment of fringe benefits for the period December 29, 1988 through October 31, 1989."

 On the following day, March 5, 1990, the Board first gave notice to New York Surety of the alleged delinquency of Delta in the payment of fringe benefits to plaintiffs. The letter estimated Delta's liability to plaintiffs for the period of November 1, 1989 through February 28, 1990 as $ 95,000.00.

 In May 1990 the Board filed an Amended Complaint in this action against Delta and refused to furnish further union labor to Delta.

 New York Surety cancelled the Bond by the cancellation notice issued by New York Surety on May 4, 1990 on its form identifying the effective date of the bond as "EFFECTIVE THE 1st DAY OF JULY 1989." Delta's payroll/benefits reports during the period of November 1, 1989 through May 1990, and moneys paid by Delta (or by third-parties on Delta's behalf) during the November 1989/May 1990 period, contained the following amounts: Report Amount n1 Amount Paid November 1989 $ 29,201.14 $ 10,000.00 n2 December 1989 20,081.74 34,724.29 n3 January 1990 18,981.19 26,104.04 n4 February 1990 n5 22,187.81 - 0 - March 1990 n6 15,571.64 23,600.00 April 1990 18,724.93 16,698.50 May 1990 6,186.83 43,513.81 TOTALS: $ 130,935.27 $ 154,640.64 n1 The amounts in this column are the combined amounts due to the Plumbing Industry Board, Plumbers Local 2 and Promotion Fund of Manhattan and Bronx. n2 Applied to amounts due for period August 1, to August 31, 1989. n3 Applied to amounts due for period August 1, 1989 to September 30, 1989. n4 Applied to amounts due for period October 1 to October 26, 1989. n5 Period ended 2/20/90. n6 Period of 2/21-3/27/90.

19930929

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