Davidson Pipe Supply Co., Inc. v. Wyoming County Indus. Development Agency

• Decision Date: 04 February 1993
• Citation: 156 Misc.2d 989,595 N.Y.S.2d 898
• Parties: DAVIDSON PIPE SUPPLY CO., INC., Plaintiff, v. WYOMING COUNTY INDUSTRIAL DEVELOPMENT AGENCY, "John Doe 1," "John Doe 2," "John Doe 3," and Indeck Energy Services of Silver Springs, Inc., Defendants.
• Court: New York Supreme Court

Page 898

595 N.Y.S.2d 898

156 Misc.2d 989

DAVIDSON PIPE SUPPLY CO., INC., Plaintiff, v. WYOMING COUNTY INDUSTRIAL DEVELOPMENT AGENCY, "John Doe 1,"

"John Doe 2," "John Doe 3," and Indeck Energy

Services of Silver Springs, Inc., Defendants.

Supreme Court, Wyoming County.

Feb. 4, 1993.

Jones, Hirsch, Connors & Bull, New York City, and Duke, Holzman, Yaeger & Radlin, Buffalo, for plaintiff.

Dadd and Dadd, P.C., Attica, for defendants Wyoming County Indus. Development Agency, "John Doe 1," "John Doe 2" and "John Doe 3".

Saperston and Day, P.C., Buffalo, for defendant Indeck Energy Services of Silver Springs, Inc.

VINCENT E. DOYLE, Justice.

Motion is brought by plaintiff, Davidson Pipe Supply Co., Inc. [Davidson] for an order for partial summary judgment pursuant to CPLR 3212 and for a declaration pursuant to CPLR 3001 that:

Davidson has a private right of action for damages against defendants Wyoming County Industrial Development Agency [WCIDA], "John Doe 1, 2 and 3" [officials of WCIDA] and Indeck Energy Services of Silver Springs, Inc. [Indeck], as agent for WCIDA, for their failure, pursuant to New York State Finance Law Section 137(1) [the Bond Statute], to furnish a bond guaranteeing payment of monies due to all persons, including Davidson, furnishing labor or materials to WCIDA's contractor or subcontractor.

Cross-motion is brought by Indeck for an order dismissing the complaint on grounds that a labor and material payment bond was not required for this construction project or, alternatively, if such a bond was required, Davidson lacks standing, failed to timely file a claim and commence a lawsuit and is too remote under the Bond Statute to file a claim against a labor and material bond.

The uncontested facts in this case reveal the following:

Defendant WCIDA is a public benefit corporation organized under the New York General Municipal Law Section 856(2) and Section 901-b. A function of WCIDA is to make private financing available to private developers at tax exempt interest rates through the sale of industrial development revenue bonds. Defendant Indeck, a developer of an energy cogeneration plant in Silver Springs, New York that produces steam and electrical energy which is then sold to manufacturers and utilities [the Project], entered into a Credit Agreement with the Bank of New York [Bank] by which Indeck obtained a loan from the Bank for construction of the aforesaid Project. Simultaneously, Indeck and the IDA executed an Installment Sale Agreement which provides for the transfer of title from Indeck to IDA at the beginning of construction of the Project and the transfer of title from the IDA back to Indeck at the termination of the Installment Sale Agreement, which occurs when Indeck pays its indebtedness in full to the Bank and the payment by Indeck of annual installments of $1.00 to the IDA.

Indeck engaged National Energy Production Corporation [NEPCO] as its general contractor to construct the Project which then engaged Fels Co., Inc. [Fels] to perform certain steel-related work in connection with the construction of the Project. Fels then contracted with Davidson which, between October 4th and November 13th, 1990, delivered steel pipe and related materials to Fels for incorporation into the plant for an agreed price of $136,639.32, which funds have not been paid to Davidson.

Davidson filed both "private" and "public" improvement liens. Subsequently, NEPCO executed bonds in connection with the private lien and the public improvement lien.

On September 23rd, 1991, Davidson commenced the instant action claiming, inter alia, that Indeck failed to provide a payment and material bond pursuant to the Bond Statute requirement for payment and material bonds on public improvements.

In the typical transaction, such as that presented in the instant case, the developer, Indeck, conveys its fee interest in realty to the industrial development agency, WCIDA, which then leases the premises back to the developer. The rent paid by the developer to the IDA pursuant to the lease back agreement is more or less equal to the principal and interest due on the monies raised by the sale of the industrial development revenue bonds, the proceeds of which were expended to both acquire and improve the property. Upon satisfaction of the rental obligation, the fee interest in the premises is conveyed back to the developer.

Defendants contend that WCIDA's acquisition as record owner of the parcel of land located in Silver Springs, Wyoming County, New York, the construction of the cogeneration plant, and WCIDA's financing of part of the costs of the plant were entirely for private purposes and did not constitute a "public improvement" for purposes of the Bond Statute. Further, defendants contend that because the Project was not then a public improvement, neither WCIDA nor Indeck were responsible for providing a bond guaranteeing the payment of materialmen and laborers pursuant to Section 137 of the New York Finance Law.

Plaintiff Davidson argues that:

1. Summary judgment is appropriate where the sole question is one of statutory construction and no material and triable issue of fact is presented;

2. The Bond Statute was enacted for the benefit of materialmen and laborers who provide goods and services in the execution of a public project;

3. "Public work" must be distinguished from "public improvement;"

4. Davidson has standing to seek relief under Section 137 of the New York State Finance Law; and

5. Davidson has a private remedy under the Bond Statute for failure to provide a payment bond.

Section 137 of the New York State Finance Law provides in relevant part as follows "In addition to other bond or bonds, if any, required by law for the completion of a work specified in a contract for the prosecution of a public improvement for the State of New York, a municipal corporation, a public benefit corporation or a commission appointed pursuant to law, or in the absence of any such requirement, the comptroller may, or the other appropriate official, respectively, shall nevertheless require prior to the approval of any such contract a bond guaranteeing prompt payment of monies due all persons furnishing labor or materials to the contractor or his subcontractor in the prosecution of the work provided for in such contract" [Emphasis added].

This Court finds that WCIDA is a public benefit corporation [see New York General Municipal Law Section 2] and is a public corporation under Lien Law Section 2(6). The legislative purpose of such agencies is expressly declared to be to advance the general prosperity and economic welfare of the People of New York through the improvement of industrial facilities [see General Municipal Law Section 858]. WCIDA is expressly granted the power to acquire realty [General Municipal Law Section 858] which in fact WCIDA has done in this case. A "public improvement" means an improvement of any real property "belonging to the state or a public corporation" [New York Lien Law Section 2(7) ]. The Courts of this State have consistently held that property owned and developed by an agency is a public improvement, notwithstanding that the property may be the subject of a sale/lease back agreement or, as here, where the agency owned property is the subject of a executory sale agreement [see Lincoln Bank v. Spaulding Bakeries, Inc., 117 Misc.2d 892, 459 N.Y.S.2d 696; Albany County Industrial Development Agency v. Gastinger Ries Walker Architects, Inc., 144 A.D.2d 891, 534 N.Y.S.2d 823, appeal dismissed,73 N.Y.2d 1010, 541 N.Y.S.2d 764, 539 N.E.2d 592, appeal denied, 74 N.Y.2d 605, 543 N.Y.S.2d 398, 541 N.E.2d 427 (1989) ].

Section 137 of the New York Finance Law requires WCIDA, the members of Indeck as WCIDA's agent, to require a payment bond before entering into any contract for a public improvement. The purpose of Section 137 of the New York Finance Law is to protect laborers and materialmen who, as here, provide goods and services in connection with the prosecution of a public improvement [see Chittenden Lumber Co., Inc. v. Silberblatt & Lasker, Inc., 288 N.Y. 396, 43 N.E.2d 459].

As set forth in the Bond Statute, the public policy of the State is "to protect the persons for whose benefit it was enacted, against non-payment for labor and material furnished in the execution of a public project ... In other words, the State has declared its policy to be that persons furnishing labor and materials ... shall be paid" [see State Bank of Albany v. Dan-Bar Contracting Co., Inc., 23 Misc.2d 487, 199 N.Y.S.2d 309, aff'd, 12 N.Y.2d 804, 235 N.Y.S.2d 835, 187 N.E.2d 19].

However, a review of the Bond Statute reveals that there is no express private remedy when its requirements to provide a bond are ignored. Absent explicit legislative direction, it is for the Courts to determine whether a private cause of action is implied in the statute [Merrill Lynch, Pierce, Fenner & Smith v. Curran, 456 U.S. 353, 102 S.Ct. 1825, 72 L.Ed.2d 182]. The first two inquiries in determining legislative intent to create a private right of action are whether the statute was enacted to benefit a certain class and whether plaintiff is "one of the class for whose especial benefit the statute was enacted" [Motyka v. City of Amsterdam, 15 N.Y.2d 134, 256 N.Y.S.2d 595, 204 N.E.2d 635]. The Court will then examine indications in the legislative history of an intent to create or deny such a remedy and the consistency of doing so with the purposes underlying the legislative scheme [Burns Jackson Miller Summit & Spitzer v. Lindner, 59 N.Y.2d 314, 464 N.Y.S.2d 712, 451 N.E.2d 459].

The Bond Statute was enacted after the filing of the report of the Joint Legislative Committee on State Fiscal Policies (1938) which found a lack of protection for those who furnish labor and materials to contractors performing work on public improvements. The enactment of the Bond Statute was intended "to afford additional assurance of payment to...