Krellberg v. Gregory

• Decision Date: 17 February 1960
• Citation: 23 Misc.2d 871,199 N.Y.S.2d 148
• Parties: Sherman S. KRELLBERG and Theatre Securities Syndicate, Inc., Plaintiffs, v. Paul GREGORY and Gregory Enterprises, Inc., Defendants.
• Court: New York Supreme Court

Page 148

199 N.Y.S.2d 148

23 Misc.2d 871

Sherman S. KRELLBERG and Theatre Securities Syndicate, Inc. Plaintiffs, v. Paul GREGORY and Gregory Enterprises, Inc., Defendants.

Supreme Court, Special Term, New York County, Part I.

Feb. 17, 1960.

Paul, Weiss, Rifkind, Wharton & Garrison, New York City, for applicant Leslie Stevens.

Lazarus Joseph, New York City (Emanuel Tacher, New York City, on the brief), for plaintiffs.

Robert Markewich, and Markewich, Rosenhaus & Beck & Arthur F. Garfinkle, New York City, appearing specially for defendant John J. McClosky, Sheriff of New York County.

JOSEPH A. GAVAGAN, Justice.

The movant, Leslie Stevens, is not a party to this action, but moves as a third party claimant for the relief stated in his notice of motion. He is the author of the play involved in this lawsuit, entitled 'Marriage-Go-Round' now being presented at the Plymouth Theatre. The play is produced by a limited partnership doing business under the name and style of 'The-Marriage-Go-Round Co.' (hereinafter referred to as Producing Partnership), the successor in interest to a production contract originally made between the said Leslie Stevens and the defendant, Paul Gregory. This production contract was executed on or about November 1, 1957. This contract thereafter was transferred by Gregory to the Producing Partnership as aforestated. It assumed all the obligations under the production contract with Stevens. Under said production contract in effect between Stevens and the Producing Partnership, Stevens is to receive certain specified percentages of the gross weekly box office receipts for the performances of his play. The moneys due him under the agreement are stated to be trust funds. Paragraph Fifth (a) therein provides as follows: 'The portion of any gross receipts or net profits due to the Author shall belong to the Author and shall be held in trust by the Producer as the Author's property until payment. The trust nature of such fund shall not be questioned, whether the moneys are physically segregated or not * * *.' Thus, Stevens claims that a fixed and ascertainable portion of the box office receipts are trust funds belonging to and held for his benefit and that such amounts, as are held or subject to the levy of attachment heretofore granted herein, are trust funds to the amount of his fixed and ascertainable portion.

In the pending action plaintiffs obtained a warrant of attachment which was levied by the Sheriff of New York County upon the box office receipts of the play. The Sheriff, however, has not taken physical possession of the receipts. The motion by the defendants to vacate the warrant has been denied by me in a companion motion decided simultaneously herewith.

As to the instant application, the court is satisfied that the trust fund provision in the Stevens contract is valid and that a fixed and ascertainable portion of the box office receipts become trust funds upon coming into existence. Paragraph Fifth (c) of Stevens' agreement provides that 'The portion of any gross receipts or net profits due to the Author shall belong to the Author and shall be held in trust by the Producer as the Author's property until payment. The trust nature of such funds shall not be questioned, whether the moneys are physically segregated or not * * *.' While plaintiffs oppose the instant motion upon the assertion that the trust fund provision is actually ineffectual as such, their position is not fortified in law. In Colton on 'Contracts in the Entertainment and Literary Fields' (1953 Copyright Problems Analyzed, p. 154) it is stated that

'Where deals are made on a royalty basis, a provision is frequently included in the contract to the effect that, as moneys are received of which the grantor is to receive a share, that portion thereof agreed to be paid to the grantor will be held in trust for the grantor until turned over to him with the proviso that said moneys can be commingled with the other funds...