Hall & Co. v. Continental Cas. Co.

• Decision Date: 02 June 1970
• Citation: 34 A.D.2d 1028,310 N.Y.S.2d 950
• Parties: HALL & COMPANY, Inc., Plaintiff-Respondent-Appellant, v. CONTINENTAL CASUALTY COMPANY, Defendant-Appellant-Respondent. CONTINENTAL CASUALTY COMPANY, Defendant and Third-Party Plaintiff, v. Moses MOSES, Martin Rausman, and Emil Rausman, Third-Party Defendants-Appellants, and Bash Apartments Corp., Bash Enterprises, Inc., Royal ViewApartments, Inc. and Michael E. Bash, Third-Party Defendants.
• Court: New York Supreme Court — Appellate Division

Page 950

310 N.Y.S.2d 950

34 A.D.2d 1028

HALL & COMPANY, Inc., Plaintiff-Respondent-Appellant, v. CONTINENTAL CASUALTY COMPANY, Defendant-Appellant-Respondent.

CONTINENTAL CASUALTY COMPANY, Defendant and Third-Party Plaintiff, v. Moses MOSES, Martin Rausman, and Emil Rausman, Third-Party

Defendants-Appellants, and Bash Apartments Corp., Bash

Enterprises, Inc., Royal ViewApartments, Inc. and Michael E.

Bash, Third-Party Defendants.

Supreme Court, Appellate Division, Third Department.

June 2, 1970.

Hart & Hume, Henry J. Wallach, New York City, for defendant-appellant-respondent.

Hyman Sturmak, New York City, for third-party defendant-appellant Moses Moses.

Kohn, Bookstein & Karp, Edward L. Bookstein, Albany, for plaintiff-respondent-appellant.

Ellis Levy, Stanley Rothschild, New York City, for third-party defendants-appellants Martin Rausman and Emil Rausman.

Before HERLIHY, P.J., and REYNOLDS, GREENBLOTT, COOKE and SWEENEY, JJ.

COOKE, Justice.

Cross appeals from an order of the Supreme Court at Special Term, entered in Albany County on July 15, 1969, which denied motions for summary judgment.

On February 22, 1966, Hall & Company, Inc. sent a proposal to Bash Apartments Corp. which, if accepted and executed, would have constituted a contract between them whereby the former would construct a sewage treatment plant for the latter in consideration of $59,000. The proposal, calling for semi-monthly progress payments based on the value of labor and materials stored at the site or incorporated in the work, was never accepted by Bash. An insurance broker, not the agent of Continental Casualty Company, forwarded the proposal and other documents to Continental with a request for a payment bond. Continental, as surety, issued a payment bond on April 4, 1966, in favor of Hall as obligee and Bash as principal, guaranteeing payment on a contract described as the 'written agreement dated February, 1966.'

Because Bash stated that the proposal documents could not be located, Hall forwarded another set on May 18, 1966. Work on the project began on May 23, 1966. On September 8, 1966 Bash returned the proposals, signed, but with the terms of payment modified so as to provide for a lump sum payment of all amounts presently owing 10 days after completion of the work. No progress payments had been made but 80% Of the work had been completed. Hall accepted and signed the contract on September 12, 1966.

Without dispute, Hall has duly completed its work under the contract and, except for payment of $6,000, Bash has defaulted. The parties proceeded to arbitration resulting in an award to Hall of $54,976.60 and a judgment was entered thereon.

In the first place, there was no contract of February, 1966. Indeed, an affidavit of Hall's president so states and the arbitration testimony establishes that the terms of the contract were not agreed upon until September 12, 1966. The proposal submitted by Hall on February 22, 1966 was an offer to enter into a contract and its return by Bash, with changes in the method of payment, was a counteroffer which did not ripen into a contract until accepted by Hall on September 12, 1966.

A surety bond attaches to the principal contract and must be construed in conjunction therewith (Madawick Contr. Co. v. Travelers Ins. Co., 307 N.Y. 111, 118, 120 N.E.2d 520, 523), so that, if no underlying agreement ever came into existence, there is nothing to which the surety's obligation can attach and it is, therefore, a nullity (cf. Walcutt v. Clevite Corp., 13 N.Y.2d 48, 56, 241 N.Y.S.2d 834, 838, 191 N.E.2d 894, 897; 10 Williston on Contracts (3d ed.), § 1214). Thus, a bond upon a proposal, which was not accepted and which did not ripen into a contract, is not binding upon the surety (Matter of P. J. Panzeca, Inc. v. County of Nassau, 56 Misc.2d 460, 288 N.Y.S.2d 813, affd. 30 A.D.2d 640, 292 N.Y.S.2d 1007). Where a party, intending to enter into a contract with another and prior to its execution, secures from the other a guaranty of the performance of the contemplated contract,...