B. F. Sturtevant Co. v. Fidelity & Deposit Co.

EEARNED HAND, District Judge (after stating the facts as above). It may be accepted as the law of New York, Fosmire v. N. S. Co., 229 N. Y. 44, 127 N. E. 472, that an action at law will not lie by a subcontractor upon such a bond, while the obligee of the bond is unpaid. This decision I followed in my earlier ruling in the case at bar. It now appears that the city has been paid, and that there is a balance. If so, the reasons given in Fosmire v. N. S. Co., supra, no longer apply, because a recovery upon tlie bond would not now frustrate its purpose, or deprive the city of its protection. Moreover, that case expressly refuses to decide that a suit by the obligee (in that case the people), presumably for the use of the beneficiaries, might not lie. I regard that as a possibility open under the law of New York in a case like that at bar. The bond has been treated as though it contained a promise by the defendant to pay the subcontractors, but it does not. Indeed, not even the condition describes an act to be performed by the obligor. Therefore the difficulties arising from a promise to one person to pay a sum of money to another cannot arise. Those difficulties are that if the third person, who is damaged, sues, he is met by the fact that the promise was not made to him; while if the promisee sues, he is met by the fact that he can show no damage from the promisor’s failure [116] to pay money to another person. Therefore I decline to consider whether the rule of Hendrick v. Lindsay, 93 U. S. 143, 23 L. Ed. 855, and Gardiner v. Equitable Office Building Corporation (C. C. A., April 6, 1921, 273 Fed. 441) should take precedence over the rule in the state courts. On the other hand, the obligee, the city, could sue upon the bond, and at law could recover damages, except in so far as the recovery were prevented because it would énforce a penalty. In short, the right, though clear at law, would only be forbidden in equity, or at law upon .principles directly borrowed from equity. But if the recovery were to the use of the actual beneficiaries, such considerations would no longer obtain. The obligee’s right to recover would be as clear at law as before, but a recovery would not enforce a penalty! Therefore the plaintiff might well be able to sue at law in the name of the city to the use of all subcontractors. This has iti substance'been recognized in federal courts without the aid of the statute of 1894. Tyler v. Hand, 7 How. 573, 12 L. Ed. 824; Stephenson v. Monmouth, etc., Co., 84 Fed. 114, 28 C. C. A. 292. But the plaintiff may not sue, except in the name of the obligee, because the condition is not a promise, as I have said, and no action will lie, except upon the bond itself, under Farni v. Tesson, 1 Black, 309, 17 L. Ed. 67, a decision authoritative upon me, .whatever other courts have decided to-the contrary. Hence it follows that as an action at law the complaint must fail. It may be urged that it should succeed as a bill in equity. I will not say, if the city should refuse to allow its name to be used, and if the plaintiff were so to allege and to join the city and the defendant in a bill in equity, that the suit would fail. Again, I will not say that under equity rule 39 (198 Fed. xxix, 115 C. C. A. xxix) the plaintiff would fail, if, being refused consent by the city to the use of its name, it were to sue the defendant alone in equity in this district, alleging that it could not join the city because it could not serve it, and could not serve the defendant in the Western district, where alone it could serve the city. The difficulty with the present pleading, viewed as a bill in equity, is that it shows no reason for any recourse to equity at all, and, viewed as a complaint at law, it does not speak in the name of the only obligee. In no aspect therefore can it succeed. Finally, ft is unnecessary to say whether the plaintiff may sue on behalf of itself and all others similarly situated under equity rule 38 (198 Fed. xxix, 115 C. C. A. xxix). No doubt where, as-here, a person, e. g., the city, holds a right in trust for a class, it is usually enough that a single member of the class sue on behalf of himself and all his fellows. Whether, if the plaintiff filed such a bill, that doctrine would apply, I need not now decide. Demurrer sustained. In view of what was said at the bar, there will be no respondeat ouster.