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WEST-FAIR ELEC. CONTRS. v. AETNA CAS. & SUR. CO.

May 20, 1994

West-Fair Electric Contractors, Plaintiff,
v.
The Aetna Casualty & Surety Company and Gilbane Building Company, Defendant. L.J. Coppola, Inc., Plaintiff, v. The Aetna Casualty & Surety Company and Gilbane Building Company, Defendants.


Brieant


The opinion of the court was delivered by: CHARLES L. BRIEANT

Brieant, J.

 Defendants in each of these consolidated diversity actions have moved for summary judgment pursuant to Rule 56, Fed. R. Civ. P. Plaintiffs also have moved for summary judgment. Summary judgment is granted to plaintiffs.

 Defendants are the Gilbane Building Company ("Gilbane") and the Aetna Casualty & Surety Company ("Aetna"). Gilbane is a Rhode Island corporation with its principal place of business in Providence, Rhode Island. Aetna, a company duly authorized to act as a surety in the State of New York, is a Connecticut corporation with its principal place of business in Hartford, Connecticut.

 Aetna, as surety for Gilbane, signed and executed a performance bond and a labor and materials bond on May 28, 1992, in the sum of $ 13,845.73, guaranteeing prompt payment of moneys due to all persons furnishing the principal with labor and material for the construction of the Westchester Pavilion Project at White Plains, New York ("The Project"). This bond was paid for by Gilbane.

 On December 28, 1992, West-Fair and Gilbane entered into a contract for $ [ILLEGIBLE NUMBERS] for West-Fair, as a subcontractor to furnish and install electrical work at the Project. On or about January 5, 1993, Coppola and Gilbane entered into a contract for $ 205,705 for Coppola, as a subcontractor to furnish and install mechanical and plumbing work at the Project. Thereafter, these subcontractors were authorized to perform extra work amounting to $ 1,247,548 and $ 378,204 respectively.

 Gilbane paid West-Fair $ 1,212,250 and Coppola $ 401,713. These payments represented all sums received by Gilbane from the Project Owner, Fischer-Reese White Plains Associates, L.P. ("Fischer-Reese") on account of the work done through October, 1993 when Gilbane received its last payment from Fischer-Reese. The subcontracts each contain the following clause (hereinafter, "the clause in § 3.2):

 
It is specifically understood and agreed that the payment to the trade contractor is dependent, as a condition precedent, upon the construction manager receiving contract payments, including retainer from the owner . . .

 (See Defendants' Notice of Motion Ex. 2 § 3.2).

 Fischer-Reese is now said to be insolvent. The sub-contracts are silent as to the consequences of the Project Owner's insolvency. Fischer-Reese provided no payment or performance bond for the benefit of Gilbane. However, defendant Gilbane, through Aetna, did provide a payment bond for the benefit of plaintiffs.

 Defendants argue that the payment clause in the agreements between Gilbane and its subcontractors, quoted above, limits the prime contractor's liability to the subcontractors and hence Aetna's responsibility, to amounts actually paid to the prime contractor by the owner. The issue is controlled by New York law. Defendants rely on the decision in David Faranoff, Inc. v. Dember Construction Corp., 195 A.D.2d 346, 600 N.Y.S.2d 226 (1st Dept 1993). To the same effect, but applying Maryland law, are Gilbane Building Company v. Brisk Waterproofing Company, Inc., 86 Md. App. 21, 585 A.2d 248 (Ct. of Ap. Appls. Md. 1991) and Architectural Systems, Inc. v. Gilbane Building Company, 760 F. Supp. 79 (D.Md. 1991).

 The Faranoff decision may be distinguished with respect to the defendant Aetna because Aetna assumed a direct obligation to plaintiffs by the plain language of its bond:

 
"The above named Principal and Surety [Aetna] hereby jointly and severally agree with the owner that every claimant that has not been paid in full . . . may sue on this bond for the use of such claimant . . ." ...

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