Strong v. American Fence Construction Co.

126 Misc. 690, 214 N.Y.S. 433, 1926 N.Y. Misc. LEXIS 640

• Court: Appellate Terms of the Supreme Court of New York
• Decided: March 4, 1926
• Status: Published

Opinions

Bijur, J.

The defendant had made a contract with the United States government for certain work on one of the United States veterans’ hospitals. Plaintiff performed labor and furnished material in the prosecution of this work under a contract with one of defendant’s subcontractors.

The learned justice below was of opinion that there was no privity of contract between the plaintiff and the' United States and that he was not the “ sole beneficiary under the contract ” and that, therefore, the doctrine of Lawrence v. Fox (20 N. Y. 268) did not apply.

The act of Congress of August 13, 1894 (28 U. S. Stat. at Large, 278, chap. 280; as amd. by 33 id. 811, chap. 778) provides that any person entering into a formal contract with the United States for the construction of any public building shall execute “ the usual penal bond * * * with the additional obligation” that such contractor shall promptly make payments to persons supplying labor or materials. The act has been held to extend to persons supplying labor or materials to subcontractors. (Mankin v. U. S., 215 U. S. 533.) I think it a quite permissible construction of the statute that it imposes the “ obligation ” upon the contractor quite apart from the giving of the bond, but if that interpretation be. not acceptable, I am of opinion that the requirement that a bond be given imports a corresponding obligation on the part of the contractor. The very notion of guaranty or suretyship involves the correlative presumption that there is an original obligation to which it is collateral. (28 C. J. 886-890 and cases there cited.) This liability imposed, whether expressly or impliedly, by statute cannot, from its very nature, be waived or in any wise affected by failure, whether of the executive officers of the government or of the contractor, to make corresponding provision in the contract itself or to execute a bond as prescribed.

In passing, it may be remarked that the contract in the present case actually required the contractor to give a bond in the sum of $5,500.

The situation appears to me to be analogous to that where a bare contract of insurance is entered into, the court in such a case reading into the agreement all the terms provided by statute. (Hicks v. British America Assurance Co., 162 N. Y. 284. See, also, Steamship Co. v. Joliffe, 2 Wall. 450.) Nor does the obligation imposed by statute require for its support the application of the doctrine of Lawrence v. Fox (supra).

The provisions of the statute prescribing the method of enforcing the rights of contractors against the bond, and the requirement that the suit shall be in equity, joining all creditors, is to my mind intended solely to refer to the creditors’ resort to a fund represented by the bond. It has no application to a case like the one before us where the contractor undertakes to enforce merely the personal contractual obligation of the principal. It does not seem to me to be debatable that the defendant could not by failing to give a bond take advantage of his own default to destroy the obligation imposed by positive law.

Order and judgment reversed, with costs, and motion denied, with ten dollars costs.

Levy, J., concurs; Churchill, J., dissents in opinion.