In re J.F. Growe Const. Co.

• Decision Date: 31 March 1919
• Citation: 256 F. 907
• Parties: In re J. F. GROWE CONST. CO.
• Court: U.S. District Court — Northern District of New York

256 F. 907

In re J. F. GROWE CONST. CO.

United States District Court, N.D. New York.

March 31, 1919

Geo. J Hatt, 2d, of Albany, N.Y., for trustee.

Thos R. Tillott, of Schenectady, N.Y. (Chas. A. Riegelman, of New York City, of counsel), for claimant Truscon Steel Co.

Miller & Golden, of Schenectady, N.Y., for claimant Vrooman.

RAY District Judge.

The J F. Growe Construction Company, here called Construction Company for brevity, entered into a written contract with William C. Vrooman, owner of certain real estate in the city of Schenectady, on the 17th day of February, 1917, to 'provide all the materials and perform all the work for the erection and completion of a two and one story commercial building to be located at 247 Dock street, Schenectady N.Y.' The said contract contained the following provisions, viz.:

'Should the contractor at any time refuse or neglect to supply a sufficiency of properly skilled workmen, or of materials of the proper quality, or fail in any respect to prosecute the work with promptness and diligence, or fail in the performance of any of the agreements herein contained, such refusal, neglect, or failure being certified by the architects, the owner shall be at liberty, after three days' written notice to the contractor, to provide any such labor or materials, and to deduct the cost thereof from any money then due or thereafter to become due to the contractor under this contract; and if the architects shall certify that such refusal, neglect, or failure is sufficient ground for such action, the owner shall also be at liberty to terminate the employment of the contractor for the said work and to enter upon the premises and take possession, for the purpose of completing the work included under this contract, of all materials, tools, and appliances thereon, and to employ any other person or persons to finish the work, and to provide the materials therefor, and in case of such discontinuance of the employment of the contractor . . . shall not be entitled to receive any further payment under this contract until the said work shall be wholly finished, at which time, if the unpaid balance of the amount to be paid under this contract shall exceed the expense incurred by the owner in finishing the work, such excess shall be paid by the owner to the contractor; but if such expense shall exceed such unpaid balance, the contractor shall pay the difference to the owner. The expense incurred by the owner as herein provided, either for furnishing materials or for finishing the work, and any damage incurred through such default shall be audited and certified by the architects, whose certificate thereof shall be conclusive upon the parties.' Also the following:

'Under this contract the owner has the privilege to occupy part or parts of the building as soon as such is or are ready for occupancy.'

The said Construction Company entered on the performance of such contract, taking possession of the premises for the purpose, and February 17, 1917, entered into a contract with Trussed Concrete Steel Company, of Youngstown, Ohio, now Truscon Steel Company, and hereafter called Steel Company for brevity, by which said Steel Company was to furnish for use in the construction of such buildings certain steel Kahn bars, rib bars, Floretyle, Hy-rib and round rods, f.o.b. cars at its works, Youngstown, Ohio, freight allowed to Schenectady, N.Y., at the agreed price of $2,025, 'net cash 30 days from date of such invoice or 1 per cent. for cash 15 days after deducting freight.'

The Steel Company shipped the steel to the Construction Company in two lots, one March 21, 1917, and the other March 23, 1917, over the New York Central Railroad lines, consigned to J. F. Growe Construction Company, at Schenectady, N.Y., as per agreement.

One shipment, that of March 23d, reached Schenectady April 2d, and was unloaded and placed on the premises where such buildings were being erected April 3 or 4, 1917; the other shipment, that of March 21st, reached Schenectady April 9th, but was not placed on such premises, but was unloaded by the railroad and placed in its freight house, under its rule that part of a carload of freight shall be unloaded at the freight house, regardless of shipping directions to the contrary.

The carload last shipped, but first to arrive at Schenectady, was invoiced at $1,445.34, and the part of a carload first shipped, and received at Schenectady April 9th, invoiced at $579.66. When this contract was made between the Steel Company and the Construction Company, the latter was actually insolvent and knew the fact, but the Steel Company was ignorant of such fact, as was Vrooman.

In 1915 the Construction Company, through the Bradstreet and Dun commercial agencies, had communicated to the trade generally, or put in the way of being communicated to the trade, or all who should inquire, materially false and untrue statements and representations as to its financial condition and ability, representing its total assets as $36,671.74 and its total liabilities as $7,846.35. Before entering into the contract the Steel Company procured from the said commercial agencies reports as to the financial condition of the Construction Company, which, based on such financial statements made by the Construction Company and subsequent information, showed its assets as $38,671.74 and its liabilities as $30,825.39.

The agent of the Steel Company testified that in originally making the contract of sale of this steel he relied wholly on these reports. It is undoubtedly true that he did. In fact, the Construction Company was insolvent then and at all subsequent dates, and knew it.

Shortly before April 2, 1917, Smith, the duly authorized agent of the Steel Company, learned that a lien had been placed on some of the property of the Construction Company. He made an unsuccessful search for Growe, of the Construction Company, and, being unable to find him, he went to Mr. Shaffer, who was the treasurer of the Construction Company, for information as to its financial condition, when the following conversation took place:

'A. I went to the office of the Growe Construction Company in Albany. I asked for Mr. Growe, and I was told that he was not there, but that the treasurer, Mr. Shaffer, was there. I had a talk with Mr. Shaffer. I asked him what there was to the lien that had been filed against the property in Albany on which the Growe Construction Company were doing the work. He said that that lien meant absolutely nothing; that it was merely a petty misunderstanding between Mr. Crannell and Mr. Growe; that Mr. Crannell and Mr. Growe had between themselves, verbally agreed upon the settlement of it, which Mr. Crannell afterwards put into a letter and sent to Mr. Growe, asking Mr. Growe to verify their understanding by signing it; that Mr. Growe had been too busy to take it up, or overlooked sending it back to Mr. Crannell; and that Mr. Crannell had filed this lien, or caused this lien to be filed. I said: 'I want to know what effect that has on the company.' ' Why,' he said, 'that has no effect on the company.' I said: 'I am here as the Credit Department, because we have got some goods on the way here to you, and I want to know about that lien.' He said: 'I know; the goods are there in the freight sheds.'

'Q. Had the goods been delivered at that time?

'Mr. Hatt: I object to that as calling for a conclusion.'

(Sustained. Exception.)

'Q. Did Mr. Shaffer say whether or not they had received the goods which you had shipped to them?

'Mr. Hatt: I object to that as improper. He has testified that Shaffer told him that the goods were at the freight house.'

(Overruled. Exception.)

'A. He specifically said the goods were still at the freight house, and I called his attention to the part of our contract, as a reason for my being there--

'Mr. Hatt: I object to that as improper and move to strike it out.'

(Overruled. Denied.)

'Q. State anything you said, Mr. Smith, or he to you, on the subject of this shipment or their credit. A. When he said that the lien had no effect upon the company, I said that I wanted to know its bearing upon the company, because we had some goods on the way that if there was trouble, I could stop in the delivery, and he answered not to do that; that they had had trouble enough with the strike, and their goods were a couple of weeks late in getting here anyway. Then he went on to tell about the strike; that the workmen had asked for more money, and he had refused to grant it, but that he was going over the next day, and he was quite confident he could compromise with them and get them back on the job at once. But I kept at him on the effect on the company of the lien.

'Mr. Hatt: I move to strike that out as improper.'

(Granted.)

'Mr. Riegelman: I consent to it.

'Q. State what you said and he said about anything that took place, but not the effect. A. I asked him, 'How about the payment of our account?' and he said, 'Don't you worry about the account. The company is financially responsible. We have property. We have money to take care of your bill when it is due, or within a very few days, and the strike is the reason, if there is any delay.'

'Q. Did you do anything at that time to stop the delivery of the goods? A. No, sir.'

This conversation and the statements then made must be considered in connection with the information before received by Smith from the commercial agencies and which had been communicated to them by the Construction Company. The Construction Company was then insolvent, and it and its officers, including the treasurer, knew that fact. The Steel Company, represented by Mr. Smith, relied on the statements made by its treasurer, sustained, as he believed they were, by the...