New York Court Holds That Parent of Dissolved Subcontractor May Not Sue Prime Contractor or Surety Absent Formal Merger or Prime Contractor’s Assent to Substitution

A. Servidone, Inc. v. Bridge Technologies, LLC,
2001 N.Y. App. Div. LEXIS 1407 (N.Y. App. Div. Feb. 8, 2001)

Servidone contracted with the State Department of Transportation to build three bridges. Pursuant to that contract, Servidone subcontracted with Bridge Technologies, Inc., for installation of the superstructures of two of the bridges. During the performance of the subcontract work, Bridge Technologies, Inc. was dissolved, and its parent corporation, Bridge Technologies Ltd. continued the performance of the subcontract. Servidone, however, was not notified of the dissolution.

A dispute arose concerning the performance of the subcontract, and Servidone withheld final payment. In two separate actions, the parent corporation sought to bring claims for breach of contract and quantum meruit against Servidone and upon a statutory payment bond issued by Reliance Insurance Company, as surety to Servidone.

The Supreme Court, Appellate Division upheld the dismissal of all three claims. It held that Bridge Technologies, Inc., as a corporation, had a legally distinct and independent existence from its parent prior to its dissolution, and that the record afforded no basis for disregarding that corporate form. Since the parent failed to establish that it was a party to the written subcontract, its claim for breach of contract did not state a cause of action. Similarly, in the absence of the proof of a merger, the court rejected the contention that Bridge Technologies, Inc., by its dissolution, merged into the parent. Similarly, Bridge Technologies, Ltd.’s status as parent did not confer upon it the authority to enforce the subcontract. Moreover, the existence of a written contract between Servidone and Bridge Technologies, Inc., precluded an action in quantum meruit by the parent. Finally, because the parent did not furnish labor or materials pursuant to a subcontract made directly with Servidone, or even with Bridge Technologies, Inc., it had no right to sue under the statutory payment bond.

 

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