Gramatan-Sullivan, Inc. v. Nathan Koslow

pass upon al- need not the second We leged error, trial coun- a new since certainly proper pains not sel will take respective anything in their to introduce arguments inappropri- jury that is

ate or not based the evidence. the failure We conclude charge theory of

court to

joint enterprise prejudicial error judgment

which the set aside must be granted. and a new trial

Reversed and remanded.

CAMERON, Judge, Circuit dissents.

GRAMATAN-SULLIVAN, Inc.,

Appellant,

v. KOSLOW, Appellee.

Nathan 47, Docket 24140.

No. States Court of

United Second Circuit.

Argued 9, Oct. 1956.

Decided Jan. 1957. charge writing a failure to to consider court must be in we nevertheless there alleged circumstances notwithstand though tiie considered the error even request. ing request a written failure to make writing. the refused was not Hildenbrand, Moreover, always v. 81 U.S. plain Winstead we can notice App.D.C. necessary prevent 159 F.2d 25 and Swider error when a mis- Moodenbaugh, Cir., carriage justice. Dowell, 143 F.2d ski v. Inc., v. Railway Jowers, Cir., & Terminal In Dallas Co. 166 F.2d 2 A.L.R.2d Cir., Sullivan, 5 108 F.2d while request charge said that this Court

leged diversion to the defendant of a York, corpo- “trust” fund which a New ration, Inc., Co., A. & Shaw should have payment plaintiff's held for the of the against alleged complaint claim it. The the “trust” arose under § 36-a York, the Lien Law New McK.Con- sol.Laws, following c. of the because Co., building Inc., facts. A. Shaw & is a contractor, and entered into a masonry tract needed construct “improvement” upon for an real estate Although Ferry, in Dobbs York. New plaintiff had no contract with contractor, upon contractor’s orders from sand and it time to furnished time job mortar it needed went on the along; that, so the contractor when performance contract abandoned August 1954, at the end of it owed the plaintiff $33,000. more than The con- provided payments tract interim each month the owner as the work progressed, two installments of which up dispute, make the fund in which the May received in and June 1954, and which it turned over to the defendant of loans him money job. used to finance the At payments the time of these two the con- tractor only $321.60, owed the and it Judge is to that amount plaintiff’s Palmieri recovery, limited the awarding instead of it the whole of the that, two He installments. held al- though imposed § 36-a upon “trust” payments contractor, made to a Duffy, only Prime J. & secured Francis Brothers subcontractors to the extent Y., Yonkers, plaintiff-ap- Duffy, N. their claims at time pay- when the made, pellant. ments were and that the contrac- obliged tor was not therefore Benjamin Jaffe, Stout, retain Ralph New payments interim intact as a defendant-appellee. “trust” City, for York completion job. until the It was CLARK, Judge, Chief Before from this recovery limitation of its SWAN, Judges. HAND and Circuit plaintiff appeals. Judge. HAND, Circuit question The first is whether “indispensable” an plaintiff, corpora- New York The party, jurisdiction judgment over which tion, appeals was a from in its validity awarding any judg condition favor, of its claim defendant, herein. against ment citizen of New made it a party original jurisdiction .depends upon Jersey: defendant com “diversity” citizenship. plaint struck it out amendment, because, plaintiff, arises because of an al- like the claim was a New presence de- fall due. If he uses the corporation York guilty purpose, “diversity” jurisdiction other feated larceny, anyone the contractor who receives them is clear It court. liable, civilly outcome at least to “subcontrac- personal interest no has knows, tors,” future, action, and if he if the because of this succeeded, charged notice, de- the he payments made or is that what the payment. its debt receives pro reduce is of an interim tanto would fendant re- interpretation most For at this the plaintiff and would to the it, against especially upon report relies a of the claim the vive Commission, for changing creditor New York merely one Law Revision thus “indispensable” legislature Ordinarily, Decem- submitted to the on another. nec- 11, 1941, is presence presumably ber which resulted parties whose those injustice from which essary protect them amendment of 36-a and § to judg- granted expressly the a out the arise first time will to them that press remedy not civil trust. does defendant breaches ment. argues here; report say he objection instead This did indeed twice that that contractor, he, “it would not the seem” and the that was for that it is prejudiced future, existing, a the benefit of have been as well who would as although claimants; and, although that recovery, guarded full because such a against categorical con- ruling, debt statement not revive his a would tractor, it, apparently tentative, collect he but to action assume in an we will estoppel arguendo of an benefit that is not have the it authoritative. The would payments not, however, upon issue bar does the issue whether turn payments interim whether or out of not the trust for the had been made by is bene- future, take impossible existing, to fit of It is as well as of the owner. claims; seriously depends argument upon as a basis for it whether the this ju- any holding privilege contractor court was without has to use the that the payments, pending completion at bar. decide the action risdiction to work, privi- collect In defendant to a an action existence of such contractor, lege against it is necessarily his debt is not consequence a recognizing burden have the contractor which would future claimants as bene- proving payments, were in privilege which pay ficiaries. The they mature, claims as endorsing defend- fact made itself shows that the trust Certainly, cheques kind, of the owner. is not may ant of the usual for its exercise appeared, giving as soon that evi- result as it became earlier claimants preference g. dent that the defendant could under a over later: e. if upon meeting handicap no a tractor defense fails payments. to earn later paid However, had debt out of privilege justi- would not funds derived from owner. We not fy privilege a payments to use the agree, therefore, ju- that the court purposes, the contractor’s own had not Civ.Proc., risdiction under Fed.Rules the section declared that a contractor 19(b), U.S.C.A., proceed Rule with- guilty larceny, if he not fails presence contractor, out apply payments to the “claims of we reach the merits. subcontractors” but that he also “fails pay short, the claims.” In position pays if he § resources, the claims from other payments he 36-a makes interim guilty larceny, though not building job fund, only for he not has used payments existing purposes. for other claims the benefit “sub It is necessary guilt condition contractors,” but of future claims that his may shall be in pro he default in as arise thereafter the work gresses. claims keep follows The contractor must in can- he guilty may as to tact all such save that he not be claims that have not certainly pay of other claims “subcontractors” as not as to claims matured — not ** tingencies. moneys doubt, yet Whether No in existence. subject-matter exposes risk of are or be the “subcontractors” exclusively upon solvency depends be- continued contractor’s * * * fact, mature, does fails that the fore claims their pay deny protection sec- as the claims mentioned not soon them Nothing Moreover, appear to does tion. bars in the section do. using moneys compromise between contractor from us an unreasonable fit any purpose possible ceived he see of the contrac- necessities provided tor, all such protection does not fail “subcontrac- he and the considering crimi- fact that out of other tors” being imposed. after- then which nal have or sanction was * * * receive, There is no evi- wards rate, any or a new not as At the that dence in indicate the case to proposition inter the correct is that any reasonable or had defendant knew language, Court pretation February grounds suspect prior to to Raymond Con Appeals adopted 23, 1939, plaintiff was that either Bank, 288 Federation crete Pile Co. * * * subcontractor any or that it 452, that N.E.2d When N.Y. 43 * * any *. claim at time With- Division, 261 Appellate case App.Div. 25, in the was evidence, out such was no there basis critical 23 N.Y.S.2d judgment requir- in the record for the “ inquiry issue that [Reasonable was ing defendant to return the mon- undoubtedly bank on of the ” * * * eys Finally, 288 N.Y. at L. P. disclosed the fact that would have page 462, page “In 43 N.E.2d 491: at pay O’Connor, Inc., would be unable to in- clear were not terms those sections if, 20th, February on its subcontractors re- tended to real trust fund to create a ease, as $78,000 in this sum of was done any main and all contin- such under deducted face from the was gencies from time the contractor cheek” from the amount of the owner, received or subcontractor first received page 28, App.Div. N.Y. at * * *» However, page S.2d at Thus Court of did not Appeals, plaintiff apparent Court put think the bank that was notice as ly argument, made an 288 N.Y. at added might outstanding to whether there be page 458, page 489: that claims; duty inquire. no it had is, “irrespective any that denial of position at bar case knowledge, actual since the bank bene stronger much is than the bank’s in that diversion, subject fited it is action, inquiry for an would have shown requirements law to restore to the existing what- there were no funds which received for except ever for which personal its benefit.” To this the court If has recovered. tois answered: “There is no evidence in the more, cover is it can be because it case any whether or not the bank made a breach of trust for the contractor inquiry to determine if there were progressing while any the work is to use any existence beneficiaries of the fund for his purposes own made,” when offset was and then job completed. might before the That follows, went page on as 288 N.Y. at meaning have been the but it was never page 43 N.E.2d at 489: “The most expressed. designed does or the statute * ** possibility do create the We have hitherto been dis cussing relationship fiduciary 36-a before arising § of a amendment be * * * that, and we understand tween the the de * * argues changed fendant possible subcontractor *. liability give scope of the fiduciary does not rise to im theretofore statute relationship * * * or, However, posed. if section once creat remained word, any before, except ed, it under and all con- as word continue one, grant- CLARK, Judge (dissenting). Chief addition ing two sentences: action” to enforce a “civil We have before us for construction regardless failure of a “subcontractor’s” important legisla- New York remedial lien; providing other and the to file protection tion for the of laborers and include funds shall building jobs. materialmen The evil obligation for right “upon an of action “pyramiding,” aimed at that of where- due to a become due parlays speculations, a contractor his in those no basis We find tractor.” can using undertaking one the basis in- changes more was supposing that expansion another, credit lend- civil sanction than attach tended to the same security pretty pro- ers and well holders crim- liability until, disaster, tected on ultimate those It would already attached. inal sanction contributing par- labor or materials to a an unwarranted job holding empty ticular are left an although that, suppose change to bag. remedy de- And the is the trust subject liability remained criminal vice first in 1929 now introduced contrac- condition the former legislation perfected by draft- claims,” civil “fails to tor liability ed, nurtured, supported with com- condition. of that relieved was plete by dis- documentation that most validity of a Finally, we submit that tinguished embodiment of law effective per- a third by to payment a contractor reform, the Law Revision of Commission as upon situation depend must son the State New York. of It is a matter received: is payment when the it exists regret profound my of brethren it sub- hold payee is, does denigrated precise have of that source subsequent that ject a condition legislative history persuasive and —so maturity their pay at shall contractor different from the usual confusion which as arise as future history engender such tends —which invalid, is it If progresses. work the Commission’s records afford. Rath- once; any construction other invalid at er, taking vague judicial some remarks trap for those a would make section legislation, they on earlier have reacted is It the contractor. who dealt against thought unduly is what to be remember in this connection fair (more accurately, harsh stern) measures part of rea- its as of Court the soning against contractors and have fashioned holding the unamended wholly original construction of the said, imposed sanction no civil section substantially guts statute which it in its page page 288 N.Y. at application that, immediate here. And “Though requires judges section federal should not 491: do to state provisions of of liberal law. ju- Law, not authorize does Lien The conclusion herein reached is based enlarge its so as to amendment dicial clearly statute, on a construction of the crucial purposes.” scope and defined 36-a,1 N.Y.Lien Law § denies Judgment supplier affirmed. plaintiff, a of materials on the several arising that one laborers and This materialmen of out by improvement, recommended Law sections the premiums and to the of surety which is immediate Commission Revision on premiums bond or bonds filed pertinent ly It reads as follows: accruing here. and insurance dur- ing making improvement who diverts Contractor funds 36-a. “§ and larceny; remedy any guilty any officer, civil en- and contractor director or by agent any received applies The funds trust. contractor who or force application an owner the im- from consents to of such funds property hereby purpose provement of real other and fails to funds to constitute the guilty claims hereinbefore declared mentioned applied larceny punishable pro- such to be hands and as payment of claims of to the subcon- vided in section thirteen and hundred two engineers, tractors, architects, surveyors, penal mwy law. Such trust he en- particular involved, improvement just here appointment now been honored Quite defined intended benefit of the trust proper- Commission itself. ly incorporate I am I statute. But should convinced all this material claiming such correct with its voluminous this annotations benefit; opinion, give and for demonstration thereof be sufficient rely I shall scholar- quota- Commission’s flavor briefer and citation ly Study “Act, tion. Recommendation and The Commission summarized the lating existing to the Trust Fund Provisions (1941) law thus: (1942). Law,” I note the Lien 271-336 “Legislation has been in New enacted Study, supporting 295- the detailed prevent York and several other states prepared the direction under frequently abuses which arise scholar, John of that Professor pyramiding eminent building operations long MacDonald, Ex- who served as W. adequate protection to afford to those Secretary Re- and Director up ecutive or contribute services materials who has search of the Commission and improvement property.2 on an of real maintained, civil action mortgages, these who con- forced while the men provided chap three-a labor, in article tributed their material by any person to share in possible security entitled very ter made for such fund, have or not he shall mortgages, holding would be left right to-file, filed, legiti- notice proverbial ‘empty bag.’ fact, In da shall have recovere unwittingly lien or of judgment mate financial institutions arising unscrupulous a claim out aided and abetted improvement. purpose For by permitting builder him to divert only, shall again, civil action building money. funds loan Time and right upon an ob include action sorrow, of such institutions learned to their moneys ligation due to become opera- or completing an for the cost of moneys contractor, a as well by builder, due to actually .as a was tion abandoned greater such by (The received him.” itali than the amount named in the 1942.) in building mortgage. cized words were added loan ' 3-A, “Enforcement of Art. entitled builder, likewise, suf- “a —The honest [New],” Trusts contains seven sec by foregoing tactics, fered reason of the Law, appearing, Y. Lien tions now as N. he in that the honest builder found that re evading 70-76. “Note of Commission” compete §§ could not with one ferred to in infra. payment note labor in the of material and con- following description 2: vivid building. The of t struction of a The honest build- quoted Study, er, paying operation, not, current abuses was could for an in Rep.N.Y.Law compete selling operation, Revision Commission with one paid only from Levitt’s Guide to the Me about who at times 25% Law and Conditional Sales chanic’s Lien cost. n published (writte and at in Law analysis, “b—In the last dis- for of The Association the Revi builder, say stance and honest we Law, York State Lien time, sion of the. New that a of such builders number pp. 1930) ¶ 279, merely improvident, 149-150: have been grief. came to years larger pop- opportunity diverting of “For our centers for n fact, harbored, large money impunity, in nurtured- ulation a sums of with en- - type gendered pyramiding and contractor who of builder a of mush- habit or operations by operations. By ‘pyramiding’ rooming thrived on commenced them or completed by ‘mushrooming’ never them. builder A we mean the use of mort- commencing opera- type, gage operation after an of that monies from one practice mortgaging tion, adopted purchase of of additional land and the erec- beyond operation buildings far the value operations, such of tion of in other , equity, contractor, thereby adding upon before the his ma- link link to this (intent only subcontractor or chain. terialman vicious The concomitant result of performing contract, upon practice history. his with no is now a matter of deplorable for continuous search- time or facilities condition in which the superhuman ing vigilance), building or realized now trade finds itself is direct- position. ly pyramiding— It must be noted that even his traceable to source — nature, mushrooming. improvi- an inconceivable never The dishonest care or overnight mortgage. possessed prevented an Such dent' builder found himself proceeds pocket a host of buildings, time, would but at the builder same principle legislation The critical Commission’s on the is based Such purposes improvement con- work of this case for an received that funds scope applied of that fund. Thus cost cerned should be improvement. urged approved older supplements it fully by the view unsuccess- It present plaintiff by upon property im- all remedy lien —that owing money paid or to the contractor proved, after which is available improvement one contract work on constituted on his the owner single res for of all improvement made.3 the benefit have been for the improvement. who those worked legislation in enacted was first “The single single This idea of a trust for a gen- in at the time this state improvement permeates every page of It re- Lien Law. revision eral study report. official Nowhere mortgages building quired loan suggest do the authors construction to hold owner covenant tain a adopted by my in- brethren —that each moneys as received thereunder separate stallment constitutes a applied cost to the trust improvement. those trust fund the benefit of Moneys were received so improvement prior worked on funds, a to constitute trust declared payment of Nowhere that installment. punishable made was diversion which comprehensive report is there trust con- Later a misdemeanor. as problems of discussion of the intricate statutory moneys re- cept to include extended judicial en- by a contractor or subcontractor ceived gloss upon forcement raised the novel improvement, or of an on account the statute here advánced. moneys assignment to be- or due an improvement, as public explanation Study of the So the due on come owner received an time when the trust is couched arises well mortgage conveyance, proceeds squared terms which cannot be improved property present opinion: on the our of insurance owner, payable to contrac- an “Closely problem allied to the subcontractor. Some of these tor or who are beneficiaries of the trust provide for the creation statutes question is the as to when the trust covenant; by expressly de- trust others elementary arises. While it is of Diversion clare existence a trust. can be no there eficiary, trust without a ben any punish- of such trust funds is now beneficiary may be des larceny.” Rep.N.Y.Law 1942 Re- able as ignated by by class rather than Commission 283.4 vision naming' specific individuals. Fu Commission, widespread designated to end The ture members of the concerning uncertainty interpretation may enjoy of class the benefits of a existing, provisions, recommended the legislation trust. It would seem that the trust clearing up doubt. items of desig arises as soon as the trustee tottering brink of The writ- on the ruin. funds intention borrowed on the many builders, strength improvement interviewed er has of an should who, eyes, in with tears their confessed “reach its ultimate destination —material law, force, if the now in had been and labor —before such funds are taken year ago, way profits by books or two by on our statute a owner, of either they substance, now bo would men of or contractor subcontractor.” soundly owning buildings, which financed 3. This is still Friedman, true. Pro during falling could carried even Equitable tecting the Lien of the Sub market.” Materialman, J., N. Y. L. penalizing The author then stresses p. 31, 1956, Oct. and Oct. legitimate of contractors unable to “meet p. 4. competition fly-by-nights, these 4. For description whose estimates did not include fuller the various labor,” legislative steps in full for material and refining the burden after 1929 in renting public, overproduction concept, Study, fund the trust see buildings, express legislative Rep.N.Y.Law Revision Commission 300. Y.Law provision Revision Commission receives in nated fund, is such trustee and that resulting beneficiary, who entitled study group The thus concluded any after fund remainder interpretation urged by plain- to claimants has been distributed tiff here was correct unless claimants in trust it. The entitled share required were lien to to file notice of all until continue would qualify had as beneficiaries. idea This im on the material services and appeared Appellate Division in one designat (by provement the classes by case5 and our was followed us in statutory provision) have ed opinion first in Wickes Boiler Co. paid. seem that would been It Godfrey-Keeler Co., Cir., 116 F.2d 842. existed no such claimant if great pains to The Commission took by receipt of the moment of wipe out had these two decisions which (or other trustee the contractor cast doubt on it considered what provi designated fund proper It of the statute. sions) favor in arise would Report criticized them name in the (i.e., members of future claimants amendments,6 explaining proposed whose benefit classes various and it recommended that enacted). con provisions were fund Lien Law be sections owner, tractor, or subcontractor amended words: the addition trustee, position to in a “Such trust be enforced civil to determine know or provided action maintained as in article paid, if claims are chapter person three-a paid, position in a he is also fund, entitled to share whether or it, re know even absence of the filed, right not he shall have or had the quirement that must file claimants file, notice lien or shall have fund, a lien to share judgment arising covered a for a claim in the case of non-lienable claim improvement.” Legis- out being ants, in of the claim absence passed lature quested, the amendments as re- however, judgment. If, reduced to ratifying thus the Commission’s filing req of a notice lien is rejecting construction of the statute and uisite to establish claimant as a contrary interpretation beneficiary, would seem no trust Wickes Boiler Co. case. It be not- arise, were would unless such notice already we ed that felt constrained passed out filed before change our view there announced in (or possession of the opinion rehearing, our Wickes Boiler designated by stat other trustee Godfrey-Keeler Co., Cir., Co. v. 2 121 F. ute). Moneys by the transferred 415, Godfrey-Keeler 2d certiorari denied filing the of a no before contractor Co., 686, Co. v. Boiler 314 Wickes U.S. free of a of would be taken tice trust, lien 297, 62 S.Ct. 86 L.Ed. 549. having for failed the trust My beneficiary, i.e., adopt lienor brethren nevertheless lack of a con- designated filed who no struction the amended which the classes statute language, legislative the left the fund wars its tice of lien before its Rep.N. history, law,8 1942 and New York hands.” contractor’s case Trap Corp. Significantly, National Rock v. the two York York 8. New cases New 5. Rockaway, App.Div. People majority, Far 260 cited v. Kew Gar- Bank 426, Terrace, Inc., Co.Ct., 1035, N.Y. affirmed 285 dens 38 24 N.Y.S.2d N.Y.S.2d 246, Raymond 825, Concrete Pile 498. Co. v. N.E.2d 35 Co., Bank & Federation Trust 288 N.Y. Rep.N.Y.Law Revision Commission 1942 6. 452, 486, 43 both involved the con- 283, 284. struction of the trust fund sections as they appeared Rep.N.Y.Law Revision before the Commission 1942 amend- 1942 7. Metropolitan Casualty ments. In Ins. 287.

531 parts paid by owner with other the contractor.9 which clashes ignore My brethren the result of their statutory view each In their scheme. preferring payment by the owner construction: laborers who installment stages separate construction, do the constitutes contractor digging foundation, who the men over the res the benefit of men job, improvement prior parts who last do the such as worked on the present painting payment. group In the the interior. The former moment of they presumably owner’s can look decided workmen to all case general subsequent payments contractor se checks which installment curity, group worked one while last has but ceived after against job may payment they proc into the which be traced can hands, necessary received eed.10 checks effect of this de but improve- ordinarily early same cision for this is that install help on which ment ment the date will never the stat before though utory beneficiaries, are held those started not work adequate a contractor at which beneficiaries do have satis benefit. The time payment from faction from later installments.11 installment receives an in deter- fact complexity my now a critical owner is The administrative mining rights enough plan different claimants brothers’ condemn it. although fund, liability the trust To avoid criminal a contrac- money never fund include tor not divert an installment check must Corp., Wrecking lightly Barr York Co. of New Sup., v. is so taxed that nonbeneficiaries 607, Eroessel enjoy Justice N.Y.S.2d 40 can An un- diverted trust funds. explained the stat between scrupulous difference tlie owner and contractor can help payment construed amendment ute before time of installments ease, supra, Raymond un expense statute lender cestuis. Subsequent wording. present If, dig hand, der men who on the other recognized that the subsequent have New York eases the foundation can look to all payments strengthened pref- security, amendments 1942 have a provisions de painters, earlier and overruled Ridgefield Supply erence over who could look g., v. Co. Making E. cisions. Rosen, to the last installment. each 337; 675, separate payment 147 N.Y.S.2d Misc.2d 1 cannot fail Estate, 1 Misc.2d anomalies, re Einach’s In breed since makes cases 240; D. & happenstance Waldman v. 146 N.Y.S.2d on the of whether turn Heating Contractors, Plumbing & arrived after V. Sup., owner’s check materialman before or 787; performed. v. Nassau Wade N.Y.S.2d 102 App. Supply Corp., & Lumber Suffolk 11. This is most obvious whore owner Application 294; 89 N.Y.S.2d Div. Rafuse, pays an installment advance and there Sup., affirmed 82 N.Y.S.2d who no materialmen have worked 654; App.Div. 944, Rosicato 83 N.Y.S.2d prior to the of that installment. Manera, 81 N.Y.S.2d Misc. It is also true in the case where money borrowed 36-a § the amended sentence The last early stages did men of work unpaid by an in- owed makes improvement. on the These men were res. of the trust owner surer paid money, from borrowed and the first supra. 13(7) See. note installment check diverted to the from the advances makes Law N.Y.Lien But from the next lender. installment assigned the contractor whom to lender obliged pay check contractor was the to the trust fund. contract his group lender both the and the second opinion majority does not make of materialmen which led to The his default. 10. early Upon only group who do men the the the default whether second clear only stages recourse to the have materialmen needed of work recourse to the immediately funds, group having follows the first al- installment they paid. ready rule, my to or whether can look But under been work brothers’ their subsequent installments. If the for- first the installment for the exclu- all case, enjoyment group; installment the one of the earlier the sive since mer is and it, may with creditors’ claims that do not claim so burdened be di- be statutory get than loss 100 cents verted to nonbeneficiaries cestuis such as the dollar, next installment while the lender. the nonbeneficiary timing he is sure to the manner unless and install- the during persons performed ment quite that all who to the contractor are period check that time covered My the irrelevant. brethren mention agreed whether that will be satisfied. To know here the owner had to nonbeneficiary paid- job check be the contractor installments as the general completed, ascer- was now contractor must But not all contractors paid hardly peril precise fashion'; claims tain at his subcontractors, that it is (cid:127) laborers, materialmen, proper to construe lead- the statute as ing insurers, consequences arose sureties which to variable and own- as the period installment and that er covered alter their scheme two, payments. more free parties feel check. I doubt if he will These are both strangers persons he would the check than to use class designed statute protect, statute and noth- ing background adopted. suggests been arrangements their chance should So, too, means decision scope trol the trust fund. proceedings the in enforcement My Raymond brethren cite Concrete timing prove of each must Co., Pile Co. v. Bank & Trust Federation 452, the claims and installment 288 N.Y. re- as. per- properly allocated which are haps it— quiring this result. if that case Even only - years Not after event. supported view, it would prove of each total claims must he here, help us not as the case inasmuch now statutory beneficiary, must but original provi- involved the and allocate also break down the sions before the 1942 amend- critical pay- installment the correct them to opinion ments. Since the of the Court unnecessary addition ments—an length Appeals was filed Law Re- after the proceed- complexity of the work,12 completed view Commission ings. seen be It remains to opportunity the Commission had no attempt- litigation expensive will say opinion how much of Legislature remained persons whom ed good passage law after of the amend- un- help small tried to —workmen approve ments. The Commission did claims. secured Appellate result,13 however, Division careful These amendments were which the Court of reversed. ana- who had skilled draftsmen work of lyzed ground opinion— The the final They prior and cases. statute fund sections are change by adopted without were Legislature clearly criminal and not over- civil—was Commission’s so that ruled ground the amendments. second In- marred. scheme was consistent funds cannot be traced in- —that troducing date this late new wrinkles at persons hands of third nothing mischief. causes ceived them without notice of their trust reading approved by The statute’s natural character —was the Com- owing moneys paid the contrac- good mission14 and is still law. But it improvement constitute recovery by for one tor single does not bar of men fund for benefit in this case where the trial care- court improvement, fully finding on that who worked documented its July 29, defining origin purpose case decided note 12. The May 11, passed legislation appears were amendments which now Casualty Metropolitan Ins. preceding “Note of Commission” N.Y. Wrecking Corp., York v. Barr New Law 70. Lien § Co. history 607, Sup., and the N.Y.S.2d 40 Rep.N.Y.Law 13. Revision Commis- Assembly given in the amendments sion 316. Kep.N.Y.Law Revision Commis- setting 789, Rep.N.Y.Law 773, 790, forth id. 14. 1942 also Revision sion Commis- sion 315-317. prevents “pyr- other words the statute he had notice that defendant amiding.” diverted received were funds.15 sug- appeal The record in Ap- Court of remarks of the The full gests pyramiding approved still occurs peals it never show York, persons New opinion like the today. was Its we reach result carefully sprinkled protection. still need words as with such through cases, earlier proof pre- state down pleadings as and the "on the Raymond decision, did sented,” evince sufficient “There no evidence ** hostility require the careful correc- “With- indicate that case to provisions ably developed tive evidence, so no basis out such there * suggest judgment Law Revision Commission. I for the in the record say that it is to the least anomalous up "In the circumstances disclosed * * * ” n —which cudgels us now to take for the record show pyramider proof en- and raise obstacles to the insufficient no- result turned lightened legislative tice, Commission and on this novel construction program which have never occurred of the statute. the state courts. judicial hostility to the trust I think and remand we should reverse evincing, provisions, which we are proceedings, for further in- as herein conspicuously absent which have been dicated. amend- decisions under state seemingly from fear ed stems statute,16 concept prove will trust fund persons are too restrictive. Where third funds, being diverted to recover sued potential hardship of is con- the statute requirement trolled de- that the

fendant have received funds with

notice of their trust character.17 toAs liability, contractors’ the stern effect HAERR, Spencer Appellant, Charles

may greatly exaggerated: My be breth- suggest reading ren that the America, UNITED STATES require of the statute would contractors Appellee. to husband all until the end No. 16047. job. But the Commission noted use the fund Court United States impunity pay person . Fifth Circuit. statutory falls one of the classes.18 Jan. 1957. safely And the funds diverted nonbeneficiaries, Ap- to peals the Court as just long as observed,19 eventually paid statutory tractor moneys. classes out of other The con- danger tractor will face the of criminal liability only if he diverts trust funds knowing going

without how is

his materialmen and subcontractors. In Palmieri, J., Rep.N.Y.Law D.C.S.D.N.Y.,

15. 18. 1942 Revision 143 F. Commis- Supp. 641, 646, 329. sion 647. Raymond Concrete Pile Co. v. Federa- supra 16. Cases cited note 8. Co., tion Bank & Trust 288 N.Y. Rep.N.Y.Law 17. 1942 Revision Commis- sion 315.

Case Details

Case Name: Gramatan-Sullivan, Inc. v. Nathan Koslow

Court Name: Court of Appeals for the Second Circuit

Date Published: Jan 7, 1957

Citation: 240 F.2d 523

Docket Number: 24140_1

Court Abbreviation: 2d Cir.