Naiztat Iron Works, Inc. v. Tri-Neck Const. Corp.
| Decision Date | 04 March 1970 |
| Docket Number | TRI-NECK |
| Court | New York Supreme Court |
| Parties | NIAZTAT IRON WORKS, INC., Plaintiff, v.CONSTRUCTION CORP., Arnold Neckman, Jack Weisburst, Forrest T. Weisburst, J. B. Eurell Co., Inc., Alltest Foundation Corp. and Fidelity and Deposit Company of Maryland, Defendants. |
Plaintiff Naiztat Iron Works, Inc. (hereinafter Naiztat), a subcontractor, brings this action on behalf of itself and as representative of all other similarly situated unpaid subcontractors against Tri-Neck Construction Corp. (hereinafter Tri-Neck) and Arnold Neckman under Article 3--A of the Lien Law to establish:
1. The existence of a trust fund;
2. That Tri-Neck Construction Corp. and Arnold Neckman are trustees thereof;
3. That Naiztat and other similarly situated parties are beneficiaries of such trust fund; and
4. That both defendants diverted such trust fund.
At the outset, defendants' affirmative defense of the Statute of Limitations is dismissed. The proof at the trial established that Tri- Neck did not abandon the job nor were they discharged until February 8, 1968. This action was instituted on January 31, 1969.
The claims against the defendant Tri-Neck, as general contractor, and Arnold Neckman by virtue of his office as president and sole stockholder of Tri-Neck, are based on the following allegations:
A. That Tri-Neck received from the owners of the property the sum of $43,318.00 and failed to pay to plaintiff and the other subcontractors and materialmen the sums due to them for the work, labor and services that they performed and the material that they furnished for the job. Plaintiffs claim that Tri-Neck, together with Arnold Neckman, are responsible to plaintiffs for diverting trust funds.
B. That Tri-Neck did not maintain books and records in accordance with the provisions of section 75 of the Lien Law and such failure was 'presumptive evidence that the trustee has applied or consented to the application of trust funds actually received by him as money or an instrument for the payment of money for purposes other than a purpose of the trust as specified in section seventy-one of this chapter.'
Defendants contend as to 'A', that although it (and he) received $43,318.00 from the owner, Tri-Neck spent and disbursed in connection with the job a sum in excess of $42,536.00 and consequently, it claims, there was no diversion by the general contractor of trust funds.
As to 'B', defendants testified that on May 14, 1969, at the termination of examinations before trial and supplementary proceedings at which defendant Arnold Neckman appeared with Tri-Neck's books and records, defendants' automobile with the books and records was stolen and when the automobile was recovered five days later, the books and records contained therein were missing. I may add that I reluctantly resisted an overwhelming impulsion to interpolate the word 'conveniently' before the word 'missing' in the previous sentence.
The payment of $43,318.00 concededly received by Tri-Neck from the owners of the real property, Jack and Forrest Weisburst, was for work done pursuant to a written construction contract dated June 21, 1967, made between the Weisbursts and Tri-Neck, and for certain extras authorized by the owners. The concession as to the payment and the amount paid establishes the existence of a trust fund under Section 70(1), (2) and (6) of the Lien Law.
Of the amounts claimed by the defendants to have been disbursed by them in discharge of their obligations as trustees, the administrative expenses of $5,515 and the drawings and expenses of the defendant Arnold Neckman totaling $7,700 may not be applied under section 71(2) of the Lien Law in discharge of the trustee's obligations. The statute provides as follows:
'2. The trust assets of which a contractor or subcontractor is trustee shall be held and applied for the following expenditures arising out of the improvement of real property or public improvement and incurred in the performance of his contract or subcontract, as the case may be:
(a) payment of claims of subcontractors, architects, engineers, surveyors, laborers and materialmen;
(b) payment of the amount of taxes based on payrolls including such persons and withheld or required to be withheld and taxes based on the purchase price or value of materials or equipment required to be installed or furnished in connection with the performance of the improvement;
(c) payment of taxes and unemployment insurance and other contributions due by reason of the employment out of which such claims arose;
(d) payment of any benefits or wage supplements, or the amounts necessary to provide such benefits or furnish such supplements, to the extent that the trustee, as employer, is obligated to pay or provide such benefits or furnish such supplements by any agreement to which he is a party;
(e) payment of premiums on a surety bond or bonds filed and premiums or insurance accrued during the making of the improvement or public improvement.'
Defendants included in the administrative expenses totaling $5,515 the following amounts:
Rent $303 per month
Accountant (Stanley Neckman, cousin of Arnold
Neckman 150 per month
Telephone 150 per month
Bookkeeper
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...Court showing the nature or extent of a non-trust application of statutory trust funds. Contrast, Naiztat Iron Works, Inc. v. Tri-Neck Construction Corp., 62 Misc.2d 228, 308 N.Y.S.2d 427 (Sup.Ct.Sp.T. Kings Co. 1970); In the Matter of Kawczynski, supra. At trial, the Plaintiff sought to in......
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