Helman v. Dixon

• Decision Date: 13 November 1972
• Citation: 71 Misc.2d 1057,338 N.Y.S.2d 139
• Parties: Ira HELMAN, Plaintiff, v. Rudolph L. DIXON, Defendant.
• Court: New York City Court

Page 139

338 N.Y.S.2d 139

71 Misc.2d 1057

Ira HELMAN, Plaintiff, v. Rudolph L. DIXON, Defendant.

Civil Court of the City of New York, Queens County.

Nov. 13, 1972.

Irwin, H. Berson, Brooklyn, for plaintiff.

Chapian & Dilimetin, New York City, for defendant.

CHARLES H. COHEN, Judge.

This is an action on a check dated January 7, 1972 in the amount of $1450 delivered on that date by defendant as maker to plaintiff as payee. This check was not paid when presented for payment. On Manuary 13, 1972 payment was refused because defendant's account was short. When this check was redeposited payment was again refused on January 18, 1972 because payment was stopped. This check, signed by defendant as maker and held by plaintiff, who is its holder (Uniform Commercial Code, § 1--201(20)), and introduced in evidence, establishes a prima facie case for plaintiff. As stated in UCC 3--307(2), 'When signatures are admitted or established, production of the instrument entitles a holder to recover on it unless the defendant establishes a defense.'

As a first defense, defendant alleges that plaintiff is not the real party in interest in that he is acting as escrow agent for Caphelmac Construction Corp. Apparently in connection with this defense defendant also argues that plaintiff was merely to hold the check and not deposit it and therefore cannot sue on it. The escrow agreement of January 7, 1972, pursuant to which plaintiff was acting as escrow agent, clearly refutes this argument. It states that plaintiff acknowledges receipt 'of the sum of $1450.00 to be held in escrow to assure the purchasers of the above property that the following work will be completed within 7 days from this date. In the event said work is not completed undersigned will pay to purchaser (defendant) the reasonable cost of completing said repairs.' This means that plaintiff was to hold $1450 and not merely a check for that amount. The agreement does not even make reference to a check; plaintiff acknowledges receipt of 'the sum of $1450.' If the work was not completed, the escrow agent was to pay defendant the reasonable cost of completing the repairs. The escrow agent would presumably pay this from the escrow money which he could get only by depositing the check. Moreover, when one delivers a check bearing the date of delivery, the recipient has the right to expect that the maker has sufficient funds with the drawee bank at that time to cover the amount of that check (see Penal Law § 190.05), unless there is an agreement to the contrary (People v. Olans, 264 N.Y. 420, 191 N.E. 494 (1934)). As pointed out above, there was no such agreement to the contrary here. Accordingly, the Court finds that plaintiff properly sought to deposit the check.

The next question to be decided is whether plaintiff, an escrow agent, may sue. It is undisputed that plaintiff is acting as escrow agent. The check itself is payable to him as 'Escrowee,' and the agreement of January 7, 1972 states that he is holding the sum of $1450 'in escrow' and is signed by him as 'escrow agent.' As escrow agent he is bound to take whatever steps may be necessary to fulfill his duties properly. Falk v. Goodman, 7 N.Y.2d 87, 195 N.Y.S.2d 645, 163 N.E.2d 871 (1959). Aside from bringing interpleader actions, he may defend actions brought against him (Falk v. Goodman, supra), and there is no reason why he cannot bring such actions as may be necessary to fulfill his duties as escrow agent. Plaintiff is a trustee (Farago v. Burke, 262 N.Y. 229, 186 N.E. 683 (1933)); Bardach v. Chain Bakers, Inc., 265 App.Div. 24, 37 N.Y.S.2d 584 (1st Dept. 1942); Asher v. Herman, 49 Misc.2d 475, 267 N.Y.S.2d 932 (Sup.Ct.Queens Co. 1966)) and has a duty to act for any party who has a beneficial interest in the subject matter of his trust. Thus, as a matter of substantive law, plaintiff may bring this action. See Hauben v. Waxman, 281 App.Div. 1031, 121 N.Y.S.2d 7 (2d Dept. 1953). Parenthetically, it is noted that to the extent that plaintiff may be regarded as the promisee of a third party beneficiary contract, he may also bring this action. Croker v. New York Trust Co., 245 N.Y. 17, 156 N.E. 81 (1927).

CPLR 1004 states that 'Except where otherwise prescribed by order of the court . . . (a) person with whom or in whose name a contract has been made for the benefit of another, may sue or be sued without joining with him the person for or against whose interest the action is brought.' While the escrow agreement does not specifically state what the escrow agent is to do with the money deposited with him to the extent that it is not paid over to defendant, the Court finds it is implied in such event that this money be paid to Caphelmac. Apparently, since plaintiff was the attorney for Caphelmac it was not deemed necessary to spell this out, but it is clear that plaintiff, acting as escrow agent, was not to keep any such money for himself. Plaintiff is in effect a 'person with whom or in whose name a contract has been made for the benefit of another' and as such is authorized to bring this action by CPLR 1004. Any procedural difficulties which may have existed under the language of former CPA 210 providing that actions be brought by the 'real party in interest', have been eliminated by the repeal of that statute. See Advisory Committee Notes and Carvel Farms Corp. v. Bartomeo, 50 Misc.2d 1073, 1077, 272 N.Y.S.2d 507, 510 (Sup.Ct.West.Co.1965). See also Katsh v. Katsh, 23 A.D.2d 494, 255 N.Y.S.2d 916 (1st Dept. 1965) aff'd 17 N.Y.2d 453, 266 N.Y.S.2d 811, 213 N.E.2d 891 (1965). This first defense is insufficient.

As a second defense, defendant alleges that plaintiff's 'principal' (presumably Caphelmac) failed and refused to perform pursuant to the terms of the escrow agreement 'by the terms of which the subject check was not to be paid if said agreement was not performed.' As already indicated, the Court is of the opinion that the escrow agreement did not so provide. It stated that if the work as set forth in the agreement was not completed within seven days from January 7, 1972, the escrow agent would pay defendant 'the reasonable cost of completing said repairs'. In any event, the Court finds that the agreement was not performed by reason of certain actions of defendant.

The closing took place on Friday, January 7, 1972, at which time defenant presented to Caphelmac his list of defects in the house he was purchasing from Caphelmac. On the following Monday, the Court finds that Caphelmac started taking steps to correct the defects. However, later that day defendant picked up the keys to this house from Caphelmac's watchman and, the Court finds, did not permit the repairs to be made. Under these circumstances, where defendant prevented the performance of the agreement, he cannot successfully assert a defense to the effect that the agreement was not performed. In Re People, by Phillips, 250 N.Y. 410, 165 N.E. 829 (1929); Amies v. Wesnofske, 255 N.Y. 156, 174 N.E. 436 (1931).

Defendant also asserts a counterclaim for $1490 'as and for damages by reason of plaintiff's breach of escrow agreement dated 1/7/72.' At first blush, it might appear that this counterclaim should be dismissed for the same reason stated above with respect to defendant's second defense alleging a breach by Caphelmac. If this were done, the Court would make it clear that such dismissal be without prejudice to defendant's right to sue Caphelmac for damages based upon a claim that the house purchased by defendant from Caphelmac contained the defects set forth in the escrow agreement. Such a claim would be independent of the escrow agreement although that agreement would serve to show that the parties intended that the claims of defect with respect to the listed items should not be merged in the deed and extinguished. Disbrow v. Harris, 122 N.Y. 362, 25 N.E. 356 (1890); Senter v. Golden, Sup., 154 N.Y.S.2d 731 (not off. rep.) (App.Term 2nd Dept. 1956); Staff v. Lido Dunes, 47 Misc.2d 322, 262 N.Y.S.2d 544 (Sup.Ct. Nassau Co.1965). A problem is presented as to whether this counterclaim, although in terms directed against plaintiff for his alleged breach of the escrow agreement, may be amended to allege a claim against Caphelmac arising out of the defects in the house purchased by defendant from Caphelmac and which is apparently alluded to in the second defense.

Most of the testimony presented by both sides concerned the reasonable cost to repair these defects. This testimony by both sides was detailed and estensive. Defendant presented an expert witness who testified it would cost $1600 to repair the defects and also testified himself concerning this matter. Plaintiff, who was the attorney for Caphelmac did not testify concerning this matter since he was not familiar with it. However, he produced as a witness one Frank Capo, an officer of Caphelmac, who was its superintendent of buildings and most familiar with the construction of the house. He was the individual who inspected it, with defendant's list of defects, on the Monday following the closing. He testified that it would cost very little to repair the defects.

The main target at which evidence produced at the trial was directed was the cost of repairing the defects as set forth in the escrow agreement. If the defendant were to bring a new action against Caphelmac concerning...