Buffalo Glass Co. v. Assets Realization Co. — 133 A.D. 775

Majority

p. 775

Buffalo Glass Company, Respondent, v. Assets Realization Company, Appellant.

Fourth Department,

July 6, 1909.

Headnote

Contract — agreement "of contractor to collect and pay sub-contractor — assignment — liability of assignee on promise of assignor.

Where a general contractor induced a sub-contractor to refrain from filing a mechanic’s lien by a promise to collect the amount for the sub-contractor on its own lien and thereafter assigned the contract and the action of foreclosure to a bank which agreed to see the sub-contractor paid, one who bought the rights of the bank from its receiver subsequently appointed, with knowledge of the sub-contractor’s claim, for the consideration of one dollar, although the claim was actually worth $7,000, is liable to the sub-contractor for the balance due where the suit of foreclosure was settled for a sum sufficient to pay all subcontractors, and there was an understanding that the settlement should be distributed among them.

Appeal by the defendant, the Assets Realization Company, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Erie on the 16th day of January, 1909, upon the verdict of a jury rendered by direction of the court, and also from an order entered in said clerk’s office on the 10th day of February, 1909, denying the defendant’s motion for a new trial made upon the minutes.

The action was commenced on the 24th day of July, 1907, to

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recover the sum of $249.05, with interest, the amount which it is" alleged was due and owing to the plaintiff for materials furnished by it: in the erection of a certain building in the city of Buffalo owned by the firm or corporation known as 0. A. Weed & Co. arid which sum it is claimed the defendant became obligated to pay to the plaintiff by reason of facts hereinafter stated.

James O. Moore, Warren Tubbs and Adon W. Crosby, for the appellant.

George H. Frost and Henry A. Dann, for the respondent.

-The material facts are nbt in dispute, and were established principally by documentary evidence. Both parties having moved for a direction of a verdict, and neither having asked that any issue of fact be submitted to the jury, it is practically a concession that none of the essential facts are controverted. .

In April, 1902, Rumrill & Carter, a firm of building contractors of the city of Buffalo, PT. Y., entered into a contract with the firm of C. A. Weed & Co., of the same place, for the building and erection of a store building in said city at the agreed price. of $49,300, subject to additions and deductions, the Work to be done under the direction and to the satisfaction of Green & Wicks, architects, and to be paid for upon their certificate and recommendation.

In June following,. Rumrill & Carter entered into a contract with the plaintiff, the Buffalo Glass Company, to provide all of the glass and glazing for the said building for the sum of $849. About the same time other parties niade sub-contracts with Rumrill & 'Carter for the doing of other parts, of the work. In fact,, Rumrill & Carter sublet all the work except the mason work, which they did- themselves. The plaintiff performed its contract and received its pay therefor excepting the sum -of $249.05, to recover which, with interest thereon from June 13,. 1903, this action is brought.

Shortly after securing the contract of C-A. Weed & Co., and after all the sub-contracts were made, including the plaintiff’s, the firm of Rumrill & Carter assigned its contract to the German Bank of Buffalo. When such assignment was made Mr. Rtimrill had a talk with Mr. Georger, president of the German Bank of Buffalo,

p. 777

regarding the sub-contracts of Rumrill & Carter. He told Mr. G'eorger of the amount of their contract and explained what the sub-contracts were, and said that he would like money advanced from time to time to run the work, and that as the money was paid to him it should be turned over to the bank, and asked in substance that the bank, the assignee of such contract, pay the bills due on the contract and the amounts due and owing to the sub-contractors. On December 10, 1902, Mr. Georger, as president of the German Bank of Buffalo, wrote Messrs. Green & Wicks, the architects, informing them in substance that the bank had an assignment of the contract and stated that it had undertaken to see that all subcontractors would be paid out of the moneys .which might become due from said work, and stated that the bank pledged itself to pay all the sub-contractors out of the funds just as fast as payments were made to it. The president asked that the payment then due be sent to him. Oh January 17, 1903, the president of the German Bank acknowledged the receipt from Green & Wicks of a check for $5,000 to apply on the contract of Rumrill & Carter and stated: “ This check, we understand, is to be applied in part payment of the sub-contractors as they are entitled to their proportion of the same.” Another letter, under date of May 1, 1903, was' written to Messrs. Green & Wicks, the architects, by the president of the German Bank, in which it was said that “ I (the president understand from Rumrill & Carter there is over $8,000 due on their contract, and that they are entitled to their money. Will you kindly inform me if such is the case, and why the money should not be paid at once, as it is very annoying to have these sub-contractors running after us and not to be able to give them a, good reason why their money is not forthcoming. Please let me hear from you at once and oblige

It is practically conceded that the plaintiff knew that the German Bank was receiving the funds from Weed & Co. upon the Rumrill & Carter contract. The payments by Weed & Co. to Rumrill & Carter were made to the German Bank. The money was deposited in the name of Rumrill & Carter. From time to time the sub-contractors were paid out of the German Bank funds. The moneys so paid to the sub-contractors, including the plaintiff, were paid by checks of the firm, Rumrill & Carter. Finally, trouble arose

p. 778

between Rumrill & Carter ánd C. A. Weed & C’o. and resulted in the filing of a lien by Rumrill & Carter upon the building. The plaintiff became concerned about the balance of its bill and it was finally agreed■ between it and Rumrill & Carter that plaintiff need not file a lien; that Rumrill & Carter would file a lien including therein the; amount due plaintiff, which amount should belong to and be paid to plaintiff when the lien was settled, and because of that understanding and agreement with Rumrill & Carter the plaintiff did not file a lien. Matters ran along until June 12,1903, when the German Bank reassigned to'E. Curtis Rumrill, as surviving member o'f the firm of Rumrill & Carter, the building contract, and then Mr. Rumrill prepared and filed- .a-mechanic’s- lien for." $8,211.40, and subsequently he commenced an action to foreclose such lien as surviving partner. . Weed.A Co. removed the lien by substituting a bond and subsequent to the commencement of tlie action and on June 15, 1903;■ Rumrill assigned the mechanic’s lien, the right of action and the original contract, to the German Bank. That assignment was made on the third day after the bank made the reassignment of the contract to Rumrill as surviving member of.'the firm of Rumrill & Carter, , So that up to this point the ' German Bank was the equitable owner of the contract entered into between Rumrill & Carter and C. A. Weed & Co. ' It was also the owner of the lien filed by Rumrill, as surviving partner, and of any. ..right which accrued because of the commencement of the foreclosure of such lien, and under the bond given by C. A. Weed & Co. to relieve the property from such lien. After such .reassignment of the rights under the foreclosure action and under the bond given in substitution of the lien, the German Bank failed and Mr. Albert J. Wheeler was appointed its receiver. At tile time of such failure . the bank held the Rumrill & Cárter contract and the mechanic’s lien of $8,211.40, which passed into the hands of the receiver, Mr. Wheeler. The receiver duly sold or transferred the entire.claim to the defendant “ subject to all -payments, counterclaims, off-sets and equities.” The defendant knew of the plaintiff’s claim before it paid the receiver for the assets and before the receiver was author- ■ ized to make the transfer. The assignment was made, to defendant N O * without, recourse to" the receiver and was all' of the right, title and interest of the insolvent German Bank and of the.receiver, subject-

p. 779

to outstanding interests. The defendant received in settlement of the suit and lien $5,500, and it admits that in May, 1906, it settled said claim, mechanic’s lien, bond and foreclosure suit against Weed & Co. and released and discharged said Weed & Co. from all liability therein. The defendant gave the receiver $1 for said claim, yet it is conceded that it was worth $7,000. It is practically conceded that the defendant knew of the plaintiff’s claim and of the claims of the other sub-contractors and of said lien and action at the time it purchased said asset, and that it amounted to about $3,000 or $4,000.

Under these circumstances it seems to me clear that the defendant, having purchased from the receiver this contract, this lien and any and all obligations which arose under the bond and knowing all the conditions and circumstances, is liable for the amount owing to the plaintiff. It seems to me that the plain principles of equity require that the judgment in this case should be affirmed.

The defendant purchased from the receiver of the German Bank the contract between Rumrill & Carter and C. A. Weed & Co. It purchased also all right, title and interest acquired by the lien filed by Rumrill as surviving partner, and in and to the bond which was given by C. A. Weed & Co. to relieve its property from the incumbrance of such lien. The defendant knew all the conditions and circumstances attending the transfer of such' lien and the rights acquired under the action of foreclosure and under the bond, and it is apparent that one of the conditions which were understood by the defendant was that it took such asset or claim subject to the lien or claim of the plaintiff and the other sub-contractors. The evidence very conclusively shows that the defendant received as a result of the work done by the firm of Rumrill & Carter or by Rumrill, as surviving partner, the sum of $5,500, and that it was understood by all parties that such sum should be distributed to pay the claims of the sub-contractors. This the defendant refused to do and this action was brought.

There is no new or novel proposition of law involved in this case. The plaintiff contracted to do certain work for Rumrill & Carter in the carrying out of their contract with C. A. Weed & Co. Rum-rill & Carter assigned such contract to the German Bank, informing it of its obligation to the plaintiff and the other sub-contractors.

p. 780

The German Bank having failed its receiver'sold such contract and all the rights and obligations which accrued thereby under order of the court to the defendant. It purchased the same fully knowing the obligation which it assumed in favor of the sub-contractors,, by reason of the assignment of Rumrill & Carter to the bank. It purchased those assets for a nominal - consideration and now refuses to pay the obligation which' it assumed or which came to it by reason of such purchase.

I think it clear that when the defendant purchased from the ' receiver of the German Bank the claims and obligations involved in the contract between Rumrill & Carter and, C. A. Weed & Co. it became obligated to devote whatever it might receive under such contract to the payment of the claims of the sub-contractors, and it having received from Weed & Co. sufficient for that purpose this plaintiff, as a sub-contractor, is entitled to -receive the balance of its claim. . •

Rone of the exceptions which are called to our attention by appellant constitute reversible error. As before said, the facts are undisputed. By the uncontradicted evidence the defendant obtained money from C. A. Weed & Co. for which it paid no other consideration than one dollar, and which, as I think,' ought to be applied under the circumstances in payment of the claims of plaintiff and the other sub-contractors of . Rumrill & Carter, the amount so received by the defendant being amply sufficient for that purpose.

The judgment and order appealed from should be affirmed, with costs.

All concurred.

Judgment and order affirmed, with costs.