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Administrative History

Chapter 5 of the Laws of 1926 created the State Office Site and Building Commission for the purpose of procuring a site in the city of Albany for a new state office building. Chapter 4 of the Laws of 1927 authorized the commission to construct such a building upon the selected site. In February of 1927, the commission entered into a contract with the Seglin Construction Company for the construction of the foundation, steel frame work, and exterior of the office building. Thereafter, with state approval, Seglin Construction Company entered into contracts with a number of subcontractors for the performance of various portions of the work to be done under the main contract.

After work of excavating had proceeded for a short time, state authorities concluded that existing plans for the foundation were inadequate. State authorities ordered the suspension of further work pending the preparation of further plans and designs for the foundation. Revised plans included a radical change in the design of the foundation that would necessitate significant additional work. Subsequently, Seglin Construction Company and its subcontractors initiated claims against the state for damages caused by the delay and compensation for the extra work and materials necessitated by the change in design. Certain subcontractors also filed claims directly against Seglin.

A special act was passed by the legislature in 1931 (Chapter 692) conferring on the State Court of Claims jurisdiction to hear and render judgment on the claims of Seglin and its subcontractors. The Court of Claims rendered final judgment against the state with regard to some of the claims and in the state's favor with regard to others. Since neither side was satisfied, Seglin and some of its subcontractors and the State of New York cross-appealed the judgment to the Supreme Court, Appellate Division, Third Department.

Counsel for the state argued that the 1931 act was unconstitutional in that it permitted subcontractors to make claims against the state when there was in fact no contractual relationship between them and the state. Honoring such claims, the state's counsel alleged, was tantamount to the state freely donating money to private corporations in direct violation of Article 8, Section 9 of the State Constitution. Counsel for the state also argued that the 1931 act, by permitting subcontractors to litigate claims directly against Seglin in the Court of Claims, withdrew such claims from the proper jurisdiction of the Supreme Court.

The Appellate Division ruled that, regardless of the lack of a contractual relationship between the state and the subcontractors, it was clear that damage to these claimants had resulted solely by act of the state in interfering with their ability to fulfill their contractual obligations to Seglin. The Appellate Division also found that the while the 1931 act permitted litigation of subcontractors' claims against Seglin in the Court of Claims, it did not prevent such claims being taken up in Supreme Court if the claimants so desired. On these grounds, dismissal of a number of subcontractors' claims by the Court of Claims was reversed in January of 1937 and new trials were granted. Other claims that had been honored by the Court of Claims were affirmed, yet modified in terms of amount of damages to be paid to claimants.