Northeastern Subcontractors Association
Vol 18, No. 8 (518) 869-9800 February 2000
Inside this edition: 2000-2001 State Budget * President's Message * Thinly Disguised Pay When Paid Clause * New Members * Commercial Claims Court * NYS Permit Database now on the Web
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GOVERNOR PATAKI INTRODUCES 2000-2001 STATE BUDGET Wicks Law on the Chopping Block (Go Top)
Governor George Pataki has proposed a 2000-2001 Executive Budget, totaling $76.8 billion, that would cut taxes while increasing funding for a variety of initiatives in such areas as education, the environment and roads and bridges. The Governor's spending plan also includes a statutory and constitutional debt reform package which would improve the state's borrowing practices, and a variety of economic development initiatives to expand job creation and economic development in upstate New York. The Governor has proposed a spending increase in the General Fund (the portion of the budget supported by state taxpayers) of 2.3 percent, but the total budget (All Funds) will see spending growth of 5.5 percent. The Executive Budget's financial plan also projects a year-end State surplus of $625 million for the fiscal year ending March 31, 2000. Under the 2000-2001 budget, Governor Pataki has proposed a $700 million package of new tax cuts and economic development initiatives to include: Phasing in the complete elimination of all gross receipts taxes on energy for both business and residential consumers, targeting industrial and manufacturing businesses first to create jobs. A low and moderate income housing tax credit to encourage the construction and development of affordable housing for low and moderate income families. This would "piggyback" on the Federal housing credits. A "Green Buildings" tax credit to encourage the construction and rehabilitation of environmentally-sound buildings. This measure would promote improved environmental standards, increased energy efficiency and create an awareness of new environment-friendly technologies. A transportation infrastructure tax credit to encourage businesses to make investments in transportation infrastructure projects leading to the creation of new jobs. A reduction in the corporate franchise tax rate imposed on small business from 7.5 percent to 6.85 percent. The Governor has once again taken aim at New York's multiple contract statutes (the Wicks Law) by proposing a blanket exemption from Wicks Law requirements for all school districts. The Wicks Law requires separate prime contracts for plumbing, HVAC and electrical work on public works projects valued at $50,000 or more. The Governor claims a Wicks Law exemption would reduce the annual cost of new school construction by more than 10 percent. Other noteworthy proposals of interest to the construction industry included in the 2000-2001 budget are: Capital funds of $180 million for the construction of a new, 750-cell, 1,500-bed maximum security prison at a site to be determined. A new five-year transportation plan that includes $8 billion ($1.6 billion per year) for highway and bridge construction contracts. The next phase of the "Albany Plan" to include renovation of the Alfred E. Smith State Office Building. Design work is planned in 2000-01, with construction work scheduled for the 2001-02 fiscal year.
One of the primary reasons we all belong to an association like NESCA, is to utilize the educational and training resources offered for our benefit. While many subcontractors and suppliers understand the need for continued education and training and the positive impact it has on our businesses, most of us have neither the time nor the means to engage in putting together comprehensive educational programs for our employees. And that's where your membership in NESCA provides you with a significant advantage. NESCA is able to pool the resources of all our members to provide the ongoing, comprehensive education and training our managers and supervisors need to stay current and perform their jobs better. In fact, during the last three years, NESCA has been able to expand our educational offerings to members by combining our efforts with the General Building Contractors of New York State and Eastern Contractors Association. The result of this "educational partnership" has been an improved, expanded and more varied educational product. Consider the fact that just since September 1999, members have had the opportunity to take advantage of the following educational programs: A seminar on the new OSHA Forklift Operator Training Standard. A 10-week course on Basic Blueprint Reading. A 5-week superintendent training program on Planning & Scheduling. A seminar on Employee Handbooks. A 5-week superintendent training program on Cost Awareness & Production Control. A seminar on Hiring & Firing. A seminar on DOT Roadside Safety Inspections & Hazardous Materials Compliance. A seminar on Sexual Harassment & Discrimination. A 5-week superintendent training program on Accident Prevention & Loss Control. A seminar on the qualifications for becoming a Notary Public. A 12-week course on Basic Estimating just got started at the end of January and a 5-week superintendent training program on Project Management is set to begin in February. In addition, seminars on Sales Tax Compliance, Insurance Certificates and a variety of OSHA/Safety-related programs are on tap for the coming months. The point is, I urge you to take full advantage of these outstanding educational opportunities. Why not make it a habit of sending the person or persons who handle particular functions within your business to the educational programs which are related to those functions? Finally, I encourage you to purchase a ticket for NESCA's 15th Annual Frank Campito Memorial Car/Cash Giveaway to be held February 24, 2000 at the Century House. This event is NESCA's primary fund raiser for the year, and it offers all ticket holders a great evening out as well as the chance to win a grand prize worth $25,000! Please support NESCA through your purchase of a ticket. One final note. Due to the Car/ Cash Giveaway, there will be no regular membership meeting in February.
Brian B. Carmer President
THINLY DISGUISED PAY WHEN PAID CLAUSE FAILS TO CIRCUMVENT THE WEST-FAIR CASE (Go Top)
A New York State Appellate Court recently upheld a subcontractor's claim against a surety and dismissed the surety and the general contractor's thinly disguised pay when paid defense. In Blandford Land Cleaning Corp. v. National Union Fire Insurance Company of Pittsburgh, PA, 1999 WL 1081310 (N.Y.A.D. 1 Dept.), the First Department reversed the lower court's decision granting summary judgment to National Union Fire Insurance Company of Pittsburgh, PA (the "Surety"). In September 1995, F.C. Bruckner Associates, L.P. (the "Owner") entered into a contract with York Hunter of New York, Inc. (the "General Contractor") for the construction of a shopping center in Bronx, New York. The Plaintiffs in the action, Blandford Land Clearing Corp., Dayton Metal Products, Inc., and United Air-conditioning, Inc. (the "Subcontractors"), each separately subcontracted with York to perform various aspects of the work on the shopping center. The prime contract's general conditions stated in part that "for purposes of payment only, Contractor is acting as agent of Owner." The subcontractors sued the Surety for payment under the Payment Bond. The Surety moved for summary judgment claiming its obligation under the payment bond was only as broad as that of the General Contractor, and the General Contractor as agent for payment had no liability for such payment as such liability was that of the Owner. Citing the West-Fair Elec. v. Aetna Cas. & Sur. Co. case (87 N.Y.2d 148), the Appellate Court held that there were two grounds under which a subcontractor could require a surety to honor its bond. The first was that the bond obligation of the surety is an independent obligation of the surety where the bond does not make the obligation co-extensive with that of the General Contractor subject to defeasance only upon payment by the General Contractor. The second ground is that the subcontracts here lacked mutual obligation as the contractor had no obligation to make payment to the subcontractor making his promise illusory. Even if the payment bond were not an independent promise to pay on the part of the Surety, under basic contract law, subcontractors can seek payment from the contractor under the contract or against the contractor or Owner on the basis of unjust enrichment. Finally, the court stated that even if the designation of the contractor as the Owner's "agent for payment" did not impair the subcontracts, the court would find that the designation still offended public policy. The description of the General Contractor as agent for payment violated public policy as a provision which forces the subcontractor to assume the risk that the Owner would fail to pay the General Contractor and is void and unenforceable under the West Fair case. For the above reasons, the court allowed the subcontractors to collect their claims from the Surety under the payment bond.
Terence J. Burke NESCA Legal Counsel
David Frueh Contracting P.O. Box 183 Glenmont, NY 12077-0183 (518) 439-1573; FAX (518) 439-1573 Contact: David Frueh
McKnight Building & Masonry, Inc. Box 433, Dunbar Road Windsor, NY 13865 (607) 655-1994; FAX (607) 655-1994 Contact: Timothy McKnight
NESCA MEMBERS SHOULD UTILIZE COMMERCIAL CLAIMS COURT (Go Top)
If you're like many construction industry subcontractors and suppliers, you may have plenty of experience trying to collect all those nagging "small" receivables -- payments owed in amounts small enough that some general contractors and owners figure you simply won't bother spending a lot of time and effort to collect. The amount owed may be so small that filing a lien or a claim against a payment bond just doesn't make sense. And engaging an attorney to sue, or in any other capacity for that matter, may plainly not be an option given the amount owned. When faced with this situation, the Commercial Claims Court may be your best option. The Commercial Claims Court was modeled after the small claims court and provides an inexpensive way for corporations to settle disputes in a court of law without hiring an attorney. Corporations faced with common headaches, like bounced checks and small receivables, have a weapon with which they can fight back. Under the law, corporations can file claims of up to $3,000 in the Commercial Claims part of the City Court, or in the regular part of Town and Village Courts. For a $20 filing fee, any corporation can resolve a monetary claim in Commercial Claims Court. Any authorized officer or employee can appear on behalf of the corporation, without legal counsel, to present a claim and provide documentation. A business can file up to five commercial claims each month. In a Town or Village Court, corporations filing a claim must prepare a simple "civil summons and complaint" form (available at any legal forms store). After completing this form, the corporation must take it to the court for the judge's signature, and at that time a court date will be assigned. The corporation must then have the completed form served personally on the defendant. Whoever serves this form must sign a simple "affidavit of service" form (also available at legal forms stores) swearing that the service was made. The corporation must then submit to the court clerk a copy of these two forms. In the Commercial Claims part of the City Court, a corporation must file a statement of the claim (a brief written statement of the facts that form the basis of your claim). When the claim is filed, the clerk will then send the notice of claim to the defendant by both certified and ordinary first class mail. A commercial claim will not go to trial until the defendant has been served with a notice of claim. In any case, most Commercial Claims Courts have a clerk who can assist you with the procedures for bringing your lawsuit. You may file your claim in a City Court having a commercial claims section in a county where the defendant lives, works or has a place of business, or, you may choose to sue in the regular part of Town or Village Courts if the defendant is a county resident and either you or the defendant lives, works or has a place of business in the particular town or village. Before your trial, you should gather all the evidence necessary to prove your claim (i.e. canceled checks, written contracts, bills or invoices, etc). Testimony, including your own, is evidence. Any witness whose testimony is important to your case may testify. The claimant's case is presented first followed by the defendant's side of the story. If the claimant wins, the court will enter a judgment for a sum of money. The court may also require the claimant to take certain action (for example, return damaged merchandise to the defendant) before entering the judgment. After winning a judgment in your favor, you should try to contact the losing party to collect your judgment. If the defendant does not pay you, you may need the services of an enforcement officer (a sheriff for instance). You must provide that officer with the information needed to locate assets (money or property) of the defendant, and the enforcement officer then can seize those assets to satisfy your judgment. NESCA members who would like more information on the Commercial Claims Court should call the NESCA office.
NYS PERMIT DATABASE NOW ON THE WEB (Go Top)
Governor George Pataki has announced the launching of New York's online permit database, www.nys-permits.org, a new website designed to provide New York's business community with a "one-stop" information resource addressing permitting needs and questions. The site not only allows users to access over a thousand permit types, it allows them to develop their own customized permit packages. It provides information on 167 different business types, and the different permits issued by various state agencies, including the construction contracting agencies such as OGS and DOT. The site also deals with such commonly asked questions as: Do I need a permit?; How do I register my business name?; What is a Permit Assistance Kit?; What are my tax obligations?; and How do I obtain my professional license?