Scarsdale Nat. Bank & Trust Co. v. United States Fid. & Guar. Co.
| Decision Date | 17 April 1934 |
| Citation | 190 N.E. 330,264 N.Y. 159 |
| Parties | SCARSDALE NAT. BANK & TRUST CO. v. UNITED STATES FIDELITY & GUARANTY CO. |
| Court | New York Court of Appeals Court of Appeals |
OPINION TEXT STARTS HERE
Action by Scarsdale National Bank & Trust Company, as assignee of moneys due under a contract with the state for a public improvement, against the United States Fidelity & Guaranty Company, as surety on the completion bond, involving the right to the balance in the hands of the state comptroller applicable to the contract. Judgment for defendant (146 Misc. 819, 263 N. Y. S. 854) was modified and affirmed (239 App. Div. 100, 266 N. Y. S. 753), and both parties appeal.
Judgment of Appellate Division reversed, and that of Special Term affirmed.Appeal from Supreme Court, Appellate Division, Second Department.
Alexander M. Crane and James H. Hoffnagle, both of New York City, for plaintiff.
Walter W. Westall and Henry E. Stohldreier, both of White Plains, for defendant.
On December 2, 1930, the Cook Contracting Company, a partnership, entered into a contract with the parkway commission, as a representative of the state, for the construction of a portion of a road in Westchester county. On December 8, 1930, the defendant executed a bond, as surety, to the state, in the sum of $179,000, guaranteeing the completion of the contract by the Cook Contracting Company. Four months later, and on April 8, 1931, the Cook Contracting Company executed an assignment of all moneys due and to become due, under the contract, to the plaintiff. On July 10, 1931, the Cook Contracting Company defaulted on its contract, and on July 28, 1931, the state called upon the defendant, as surety, to complete the contract. At the time of the default the contractor had earned, in addition to the moneys theretofore paid to the assignee, the sum of $10,746.29. The state, through the comptroller, also had in its possession retained percentages amounting to $3,092.86.
The defendant, pursuant to the demand of the state, completed the contract at a loss of $55,783.59. Is the assignee, the plaintiff, or the bonding company, the defendant, entitled to this sum of $10,746.29, the money earned at the time of the default? The courts below have awarded to the defendant the retained percentages, but the Appellate Division, reversing the Special Term, has given the earned moneys to the plaintiff.
The plaintiff, as assignee, could not receive any more money than the contractor was entitled to. In other words, the assignment carried with it all his rights, but nothing more. The contractor and the assignee were both bound by the terms of the contract. The contract entered into between the state and the contractor specifically sets forth by its terms the rights of the parties in the event of a default. It states as follows:
After July 10, 1931, when the Cook Contracting Company defaulted, the state could have completed the work and retained all money due to the contractor at the time of the default and apply it to the cost of completion. The deficiency, or loss sustained by the state, would have been an obligation of the bonding company and could have been collected from it by the state. Under these circumstances the assignee would not have been entitled to this sum of $10,746.29. It had no better rights under the contract than the contractor, and, if the state, as against the contractor, could apply these earned moneys to the cost of completion, it could do the same thing as against the assignee. In other words, the moneys due at the time of the default, called the earned moneys, could and would be applied by the state in reducing the amount due on the defendant's bond.
Does it make any difference in the application of these earned moneys that the surety company complied with the demand of the state and completed the job at its own expense? Upon what principle, or, according to what reasoning, would the earned moneys in one instance inure to the benefit of the defendant and not in the other? The answer attempted to be made is that the assignee bank's money went into the work and left just so much less to be completed.
The same answer could be made to the state's claim to the money, had it finished the work. The...
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