Aetna Casualty and Surety Co. v. Lafayette National Bank of Brooklyn in New York

• Decision Date: 13 May 1971
• Citation: 271 N.E.2d 701,28 N.Y.2d 922,323 N.Y.S.2d 171
• Parties: , 271 N.E.2d 701 AETNA CASUALTY AND SURETY COMPANY, on Behalf of itself and all others, etc., Plaintiff-Respondent-Appellant, v. LAFAYETTE NATIONAL BANK OF BROOKLYN IN NEW YORK, Nathan Weiss, John D. Weiss and A. David Weiss, Defendants-Appellants, Franklin National Bank of Franklin Square, Defendant-Respondent, Maynard Merel, et al., Defendants.
• Court: New York Court of Appeals Court of Appeals

Page 171

323 N.Y.S.2d 171

28 N.Y.2d 922, 271 N.E.2d 701

AETNA CASUALTY AND SURETY COMPANY, on Behalf of itself and all others, etc., Plaintiff-Respondent-Appellant, v. LAFAYETTE NATIONAL BANK OF BROOKLYN IN NEW YORK, Nathan Weiss, John D. Weiss and A. David Weiss, Defendants-Appellants, Franklin National Bank of Franklin Square, Defendant-Respondent, Maynard Merel, et al., Defendants.

Court of Appeals of New York.

May 13, 1971.

Appeal from the Supreme Court, Appellate Division, First Department, 35 A.D.2d 137, 314 N.Y.S.2d 818.

To recover sums said to be trust funds diverted in violation of the Lien Law action was brought by the surety on performance bond for the defendant construction company which had been awarded contract for construction of a high school. The Supreme Court, New York County, Thomas C. Chimera, J., dismissed the amended complaint after trial and the surety appealed.

The Appellate Division modified the judgment and, as so modified, affirmed. It held that where lending bank knew of borrowing contractor's financial difficulties when they accepted from a director a certified check for the amount borrowed and knew that money had been received by contractor for high school construction and some of the beneficiaries of trust fund represented by check to contractor might not be paid for work rendered or material furnished, surety was entitled to recover from lending bank and directors who participated in paying it for diversion of trust funds in violation of Lien Law, but director who did not know of payment and bank which issued certified check but which did not know of loan or purpose of check were not liable. Appeals were taken by surety and certain of the defendants.

Motion to dismiss the appeals as against defendant-respondent Franklin National Bank granted, the said appeals dismissed, with costs, upon the ground they do not lie as of right, and the remaining appeals limited accordingly.