Rure Associates, Inc. v. DiNardi Const. Corp.

• Decision Date: 05 November 1990
• Docket Number: No. 227,D,227
• Parties: 63 Ed. Law Rep. 770 RURE ASSOCIATES, INC., Plaintiff-Appellant, v. DiNARDI CONSTRUCTION CORP., Hartford Accident and Indemnity Company, and the Board of Education of Bay Shore Union Free School District, Defendants, Hartford Accident and Indemnity Company, and the Board of Education of Bay Shore Union Free School District, Defendants-Appellees. ocket 90-7399.
• Court: U.S. Court of Appeals — Second Circuit

Page 1332

917 F.2d 1332

63 Ed. Law Rep. 770

RURE ASSOCIATES, INC., Plaintiff-Appellant, v. DiNARDI CONSTRUCTION CORP., Hartford Accident and Indemnity Company, and the Board of Education of Bay Shore Union Free School District, Defendants Hartford Accident and Indemnity Company, and the Board of Education of Bay Shore Union Free School District Defendants-Appellees.

No. 227, Docket 90-7399.

United States Court of Appeals Second Circuit.

Argued Oct. 3, 1990.

Decided Nov. 5, 1990.

Gordon P.R. Posner, Mineola, N.Y. (Steven G. Rubin, Mineola, N.Y., of counsel) for plaintiff-appellant Rure Associates, Inc.

Daniel Greenberg, Northport, N.Y. (Mark S. Kosak, Ingerman, Smith, Greenberg, Gross, Richmond, Heidelberger & Reich, Northport, N.Y., of counsel) for defendant-appellee the Board of Educ. of Bay Shore Union Free School Dist.

Joseph D. Stim, Huntington, N.Y. (Stim & Warmuth, Huntington, N.Y.) for defendant-appellee Hartford Accident and Indem. Co.

Before CARDAMONE, Circuit Judge, and POLLACK, Senior District Judge. ^{* **}

MILTON POLLACK, Senior District Judge.

In this diversity case, Plaintiff Rure Associates, Inc. ("Rure"), a subcontractor, appeals from two partial summary judgments against it rendered in the Eastern District of New York, which (1) dismissed as untimely its complaints asserting a mechanic's lien and a claim of an assumption of liability made against Defendant Board of Education of Bay Shore Union Free School District ("School District"), and (2) dismissed as untimely its claims under a payment bond issued to the contractor by Defendant Hartford Accident and Indemnity Company ("Hartford").

For the reasons appearing hereinafter, the judgments below exonerating defendants from direct personal liability are affirmed and the judgment dismissing the mechanic's lien against the property of the School District is reversed and that claim is remanded.

Background

Defendant DiNardi Construction Corp. ("DiNardi") entered into a primary contract with the School District for alterations to Bay Shore High School. Hartford supplied a labor and material payment bond for the project under which DiNardi, the contractor, was principal. In July 1984 Rure entered into a subcontract with DiNardi to provide aluminum doors and windows under DiNardi's primary contract with the School District. The subcontract was fixed in the amount of $853,271.00. In March 1986, the School District discharged DiNardi because of alleged poor workmanship. Rure allegedly performed $681,641.00 worth of its work until DiNardi was terminated. As a result of the termination, DiNardi allegedly breached the subcontract with Rure; Rure claims it is owed $182,141.27. Subsequent to DiNardi's discharge, the School District undertook to have the project completed by another contractor. Before thirty days had elapsed after the completion and acceptance of the project, Rure asserted its direct claims and mechanic's lien for work performed.

Rure's first claim is against DiNardi for breach of the subcontract (this is not in controversy on this appeal). Rure's second claim is against Hartford under the payment bond issued to the contractor. Rure's third claim is on a mechanic's lien on the public improvement project of the School District. Rure's fourth claim asserts that the payment bond of Hartford covers the mechanic's lien filed against the School District. Rure's fifth claim asserts a direct claim for nonpayment against the School District under the theory that the School District assumed DiNardi's liabilities and obligations, including liability for the work Rure had completed.

The School District moved to dismiss Rure's third and fifth claims against it and Hartford moved to dismiss the second and fourth claims against it.

By order dated April 4, 1989, the district court converted all motions to motions for summary judgment.

The District Court's Decision

Fifth Claim

The district court dismissed the subcontractor's direct claim against the School District for untimeliness in the filing of the notice of its claim. N.Y. Education Law Sec. 3813 (McKinney 1981) requires that a notice of claim be filed with the School District "within three months after the accrual of such claim." The district court held that Rure's claim accrued when DiNardi was discharged on March 24, 1986, rather than when the project was completed by the subsequent contractor. The notice of the subcontractor's direct claim, filed more than two years after termination of the original contractor on June 22, 1988, was therefore held to be untimely.

Third Claim

The district court dismissed the mechanic's lien against the School District on the ground that Rure could not maintain a mechanic's lien action against the School District unless it had a direct claim against the School District or alternatively on the ground that the mechanic's lien was untimely filed under N.Y. Lien Law. ¹

Second and Fourth Claims

The district court dismissed the direct claims against Hartford under the payment bond on the ground that the action was untimely commenced. Under Paragraph 3(b) of the payment bond furnished to the contractor, Rure was obliged to commence his action against Hartford within one year "following the date on which the Principal ceased work on said CONTRACT,...." (emphasis in original), and Rure failed to meet this time limitation.

Discussion

Fifth Claim--Direct Claim Against the School District

N.Y. Education Law Sec. 3813 requires a claimant to file a notice of claim so as to afford a school district an opportunity to investigate a claim against it. Board of Education of Enlarged Ogdensburg City School District v. Wager Construction Corp., 37 N.Y.2d 283, 290, 372 N.Y.S.2d 45, 49, 333 N.E.2d 353 (1975). Section 3813 requires that such notice be filed by a claimant with the School District, "within three months after the accrual of such claim." The district court ruled that "any claim subcontractor-Rure possessed against the School District accrued at latest on March 24, 1986 [when the subcontractor left the jobsite subsequent to DiNardi's termination on March 14, 1986]." Rure contends that his claim against the School District accrued when the project was fully completed by the second primary contractor.

In order for Rure to pursue a direct action against the School District, Rure posed two mutually exclusive alternatives: (1) that the School District stands in the shoes of DiNardi under a theory that the School District assumed the liabilities and obligations of DiNardi; or (2) that Rure stands in the shoes of DiNardi through a derivative claim. ² The validity of the chosen alternative depends upon the establishment of both (a) timeliness and (b) assumption of status.

Under the first alternative, Rure's claim is time-barred. A claim accrues when damages are ascertainable. Acme Skillman Construction Corp. v. Board of Education of New York, 106 A.D.2d 533, 533, 483 N.Y.S.2d 357, 358 (N.Y.App.Div.1984), appeal denied, 65 N.Y.2d 609, 494 N.Y.S.2d 1029, 484 N.E.2d 672 (1985). Rure's damages against DiNardi became ascertainable when Rure left the jobsite on March 24, 1986; consequently, its notice of claim filed on June 22, 1988 was untimely. Since timeliness was not established, we need not reach the issue whether there was an assumption of DiNardi's contractual obligations by the School District.

With respect to the derivative claim, Rure does not cite any authority supporting such an argument; it failed to support this alternative as a theory on which a direct claim may be pursued.

For the above stated reasons, we affirm the district court's decision dismissing Rure's fifth claim against the School District.

Third Claim--the Mechanic's Lien Claim

Under New York law, a subcontractor must establish that there is money due to a general contractor from an owner based on a primary contract, for the subcontractor to recover under a mechanic's lien against the owner. Brainard v. County of Kings, 155 N.Y. 538, 544-45, 50 N.E. 263, 264-65 (1898); Van Clief v. Van Vechten, 130 N.Y. 571, 577, 29 N.E. 1017, 1018 (1892); Falco Construction Corp. v. P & F Trucking, Inc., 158 A.D.2d 510, 551 N.Y.S.2d 273, 274 (N.Y.App.Div.1990); Bunce v. Fahey, 73 A.D.2d 632, 632, 423 N.Y.S.2d 58, 59 (N.Y.App.Div.1979); Lorber v. Eskof Real Estate, Inc., 21 Misc.2d 308, 311, 194 N.Y.S.2d 766, 769 (N.Y.Sup.Ct.1959). Although there is a contrary allegation in the brief of the School District, for the purpose of an appeal of a summary judgment against Rure, we must assume the facts Rure alleged in its complaint, i.e., that the School District owed DiNardi at least $182,141.27.

The district court held that the existence of a direct claim against the School District is a prerequisite to foreclosure of a valid mechanic's lien. This is not a correct statement of New York law. Under New York law, a subcontractor can proceed on a mechanic's lien if there is money due and owing to the general contractor under the primary contract regardless of the existence of contractual privity between subcontractor and the owner. Rainbow Electric Co. v. Bloom, 132 A.D.2d 539, 517 N.Y.S.2d 273 (N.Y.App.Div.1987) (Electrical subcontractor was entitled to recover on its mechanic's lien against owners despite absence of contractual privity.); Hartman v. Travis, 81 A.D.2d 692, 693, 438 N.Y.S.2d 633, 634 (N.Y.App.Div.1981) (Under Lien Law Sec. 3, governing mechanics' liens on real property, resort to a mechanic's lien is permitted absent any contractual privity.). However, consent of the owner for the performance of the labor or the furnishing of materials by the subcontractor is necessary to proceed on a mechanic's lien. N.Y. Lien Law Sec. 3 (McKinney Supp.1990). Consent can be implied. Where the circumstances are such that an owner may be said to have consented so far as the contractor is concerned, the owner is deemed also to have consented to the furnishing of labor and materials to the contractor with the latter's...