American Blower Corp. v. James Talcott, Inc.

• Decision Date: 07 July 1961
• Citation: 176 N.E.2d 833,219 N.Y.S.2d 263,10 N.Y.2d 282
• Parties: , 176 N.E.2d 833 AMERICAN BLOWER CORPORATION, on Behalf of Itself and on Behalf of All Other Persons Entitled to Share in the Funds Received by Baker Smith & Co., Inc., as Subcontractor from Paul Tishman Co., Inc., Respondent, v. JAMES TALCOTT, INC., Appellant, et al. Defendant.
• Court: New York Court of Appeals Court of Appeals

Page 263

219 N.Y.S.2d 263

10 N.Y.2d 282, 176 N.E.2d 833

AMERICAN BLOWER CORPORATION, on Behalf of Itself and on Behalf of All Other Persons Entitled to Share in the Funds Received by Baker Smith & Co., Inc., as Subcontractor from Paul Tishman Co., Inc., Respondent, v. JAMES TALCOTT, INC., Appellant, et al. Defendant.

Court of Appeals of New York.

July 7, 1961.

Julius J. Abeson, J. Jacob Hahn and Francis J. Ryan, Jr., New York City, for appellant.

Herman N. Schwartz, M. M. Leichter and Jay Kushner, New York City, for respondent.

FULD, Judge.

This case, like Aquilino v. United States, 10 N.Y.2d 271, 219 N.Y.S.2d 254, also decided this day, involves an interpretation of the trust provisions of the Lien Law, Consol.Law, c. 33. Since we have expressed our views of these provisions at length in the Aquilino case, we do not repeat them; instead, we apply the conclusions, which have already been stated, to the problems presented here.

This is a contest between an assignee (Talcott, Inc.) of moneys due under a construction contract and a sub-subcontractor (American Blower Corporation). The sub-subcontractor seeks to impress a trust under article 3-A of the Lien Law on four checks paid to the subcontractor (Baker Smith & Co.) and indorsed over to the assignee on the assignment.

The Lien Law trust fund provisions, as they existed at the time the facts giving rise to this case occurred, afforded protection for both matured and unmatured claims (Aquilino v. United States, supra, 10 N.Y.2d at pages 279-280, 219 N.Y.S.2d at page 260). However, a statutory trustee under those provisions is empowered by statute to make assignments of payments due him (Lien Law, § 13, subd. (1-a); § 15) and, therefore, such an assignment, if properly perfected and without regard to notice, is not such a diversion of the trust res as can give rise to an action to impress a trust by a beneficiary. Therefore, had the assignment been perfected here, the assignee Talcott would be entitled to the contested funds.

The fact is, however, that the assignee did not record his assignment as required by statute. (See Lien Law, § 15; see, also, Lien Law, § 13, subd. (1-a).) Section 15 of the Lien Law declares that no assignment of moneys due under a building contract 'shall * * * be valid for any purpose, unless the contract * * * or a statement containing the substance thereof and such assignment * * * be filed within ten days after the date of such assignment of contract'. The assignee Talcott not having filed as required, his claim must be considered defective as against American Blower, one of the statutory beneficiaries of the trust fund provisions.

This result comports with both the spirit and the letter of the statutes we are considering. It is true, of course, that the assignee Talcott contributed his money to the improvement, just as the sub-subcontractor American Blower contributed heating and ventilating work to it. This, together with the fact that the form of interim financing which Talcott provided is evidently a basic requirement of the contracting business, is strong argument in Talcott's favor. These considerations are outweighed, however, by the fact that Talcott had available a means of protecting its interest and that it failed to take advantage of it.

Amiesite Const. Corporation v. Luciano Contracting & Building Co., 284 N.Y. 223, 30 N.E.2d 483 and Foreman v. Louis Jacques Const. Co., 261 N.Y. 429, 185 N.E. 690, are relied upon to establish that a materialman who is not a lien creditor cannot successfully assail an unfiled assignment. Without entering into a discussion of these very complicated cases, we would merely point out that, in a case later than either of those cited, we left that precise question open. See New York Trap Rock Corporation v. National Bank of Far Rockaway, 285 N.Y. 825, 35 N.E.2d 498; see, also, 1942 Report of N.Y.Law Rev.Comm., p. 284; N.Y. Legis.Doc. (1942)...