Case ID: ad_173/html/0094-01.html
Source: Caselaw Access Project
Author: {"author": "\n      McLaughlin, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Windsor Construction Company, Respondent, v. Irving Ruland and Others, Appellants.
    First Department,
    June 2, 1916.
    Contract — alleged oral agreement of stockholders and directors of corporation to pay for improvement of realty owned by corporation — evidence not establishing personal liability — Statute of Frauds — oral promise of directors and stockholders to pay debt of corporation.
    Action to recover on an oral contract alleged to have been made by the directors and stockholders of a corporation to pay personally for alterations and additions made to a building owned by the corporation by the plaintiff under a contract with the corporation. Evidence examined, and held, insufficient to justify a finding that the defendants had assumed any personal liability for the debt of the corporation.
    
      It seems, that if the contractor refused to continue work upon the ground that the corporation was remiss in making payment, but continued and completed the building in reliance upon an oral contract by directors and stockholders to make payment personally, there was an enforeible obligation not within the Statute of Frauds. The interest of the stockholders in the completion of the building owned by their corporation would be a sufficient consideration for their promise.
    Appeal by the defendants, Irving Ruland and-others, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 1st day of June, 1915, upon the verdict of a jury, and also from an order entered in said clerk’s office on the 14th day of June, 1915, denying defendants’ motion for a new trial made upon the minutes.
    ■ Noáh A. Stancliffe, for the appellants.
    
      Warren-Mg Conihe, for the respondent.
   McLaughlin, J.:

On and for some time prior to November 8, 1912, the Forty-first Street Bealty Company, a domestic corporation, was the owner of a building at the southeast corner of Broadway and Forty-first street, in the city of New York. The defendants were directors and stockholders of the corporation, Buland owning 117, Griswold 697, and Brush 337 shares of its capital stock. Their aggregate holdings were considerably in excess of one-third of the stock issued and outstanding, which amounted to 2,964 shares out of an authorized 3,500 shares. Brush was president and Buland vice-president of the corporation. On the date named the realty company entered into a contract with the plaintiff, also a domestic corporation, by which the latter agreed, for $90,000 and a commission of $12,000,.to make alterations and additions to the building according to certain plans and specifications. Subsequently other plans and specifications requiring work not embraced within the contract were adopted and extra orders given, so that the cost of the work was largely increased.

The contract provided that every second week plaintiff should submit to the architect written requisitions for the amount advanced by it for labor and materials, and also the amounts due subcontractors. On these requisitions certificates were to be issued by the architect, and payments made by the realty company in accordance therewith. Immediately following the execution of the contract the plaintiff commenced the work and continued with the same until the repairs were completed, with the exception of a short intermission in August, 1913. The work was completed in January or February, 1914, and the final certificate of the architect issued on February twenty-sixth. Prior to this, and on February 20, 1914, the realty company went into bankruptcy, leaving unpaid to the plaintiff the amount due on the final certificate, and also a balance on two prior certificates, amounting in all to $16,823.74, to recover which, with interest, this action was brought. The plaintiff had a verdict for the amount claimed, upon which judgment was entered, from which, and an order denying a motion for a new trial, defendants appeal.

The recovery against the defendants is predicated upon defendants’ alleged oral promises made prior to the completion of the work, that they would be personally responsible for the payment of all moneys thereafter earned by plaintiff under its contract with the realty company.

According to the testimony of Morris Levin, plaintiff’s treasurer, the realty company had failed almost from the commencement of the work to make prompt payments as called for by the contract, and on the lYth of May, 1913, in a conversation with defendant Ruland, he threatened that the plaintiff would withdraw its men from the job and file a mechanic’s lien for the amount then due if payments were not made promptly on presentation of the architect’s certificates. Other witnesses were produced by the plaintiff — all more or less interested—who testified that thereafter, and especially on May 20, 1913, the defendants Ruland and Brush promised orally if plaintiff would proceed with the work and refrain from filing a lien they would personally pay for the work, and on May 26, 1913, defendant Griswold made a similar promise and assumed a like personal responsibility. Morris Levin further testified that plaintiff, in reliance on these promises, refrained from fifing a lien and continued with the work to completion.

Although it is not entirely clear from the record, it is fairly to be inferred from what appears therein that the recovery here represents only work done and materials furnished after the alleged promises were made. If the promises were, in fact, made, as testified to by plaintiff’s witnesses, and the plaintiff thereafter proceeded with and completed the work solely in reliance thereon, they created a valid, original and enforcible obligation and were not within the Statute of Frauds. The interest of the defendants as stockholders in the realty company in the completion of the work furnished a sufficient consideration. (Voska, Foelsch & Sidlo, Inc., v. Ruland, 172 App. Div. 616.) But the promises, even though made, would not justify a recovery unless thereafter the work performed and material furnished were in reliance upon them.

The defendants denied that they, or either of them, ever made the promises alleged, or any promise that could be construed into a personal obligation.

After a careful consideration of the evidence set out in the record I am of the opinion that the finding of the jury that the defendants made such promises, upon which the plaintiff relied, is against the evidence. The conduct of the parties, and especially the documentary evidence, clearly indicates to the contrary. It appears that the plaintiff pursued precisely the same course after the alleged conversations as it had theretofore. It furnished requisitions to the architect in the same manner, same form, and obtained from him nineteen certificates, all addressed to the realty company, which were presented to it by plaintiff, and sixteen of which were thereafter paid by it. The amount thus paid by these certificates exceeded $50,000. As had been the case before the alleged promises were made, the realty company was dilatory in making payments on the certificates, and plaintiff from time to time insisted that such payments should be made and on several occasions threatened to withdraw its men from the work and file a mechanic’s lien if not paid promptly. Indeed, on May 31,1913, less than a week after Griswold’s alleged promise, and only eleven days after the alleged conversations with Ruland and Brush, plaintiff wrote the realty company calling attention to the fact that a balance of $3,251.35 still remained unpaid on the very certificate, non-payment of which plaintiff claims caused it to exact the alleged promises from defendants, and also that a certificate for $8,552.39, issued on May twenty-ninth, was due and unpaid. The letter contained this statement: “Unless we receive check for the amount of both certificates by Monday, June 2d, we will withdraw all our mechanics from the above mentioned building until your indebtedness to us is made good, as we are hard pressed by our material men, who threaten to file mechanic’s liens against said building unless they receive immediate payment. ” N either at the time this letter was written, nor for many months thereafter, did plaintiff make any claim or demand that the defendants, or either of them, personally pay any sum whatever, but, on the contrary, frequently sought their assistance in getting payments from the realty company.

It is true plaintiff’s witness Levin testified that he had written the defendant Brush demanding personal payments but no evidence was produced in support of such testimony and Brush denies that he ever received such letter, or that any demand was made. The only evidence as to personal demands on Griswold consists of a telegram dated December 30, 1913, and three letters dated respectively January 10, 21 and 28, 1914. One of these letters and the telegram are not personal demands, while a fair construction of the other two letters would seem to indicate a request that G-riswold use his influence to induce the corporation to pay. The same is equally true of the only evidence claimed to show a personal demand on Ruland, viz., a letter dated February 14, 1914. Little or no weight, as it seems to me, can be attached to these communications, when read in the light of the prior conduct of the parties, and especially of the written demands made on the realty company on January 15 and 28, 1914. It is highly significant that out of the many letters claimed to have been written to the defendants plaintiff did not produce a single one that referred to the alleged promise or substantiated in any way its present claim. It is incredible if defendant had, in fact, made the promises alleged and plaintiff had gone on with the work in reliance upon them, that.when subsequent payments were not promptly made, its complaints and threats to quit and file mechanics’ liens should be addressed solely to the realty company and no effort made to obtain payment from the defendants- personally until January, 1914.

This view is supported by another very significant fact. On January 16, 1914, when the work was substantially completed, Ruland gave to plaintiff a check for $300. On January nineteenth following he gave plaintiff another check for $200. On January 20, 1914, plaintiff received from the realty company $1,000 on account of the balance then due and out of this payment plaintiff immediately returned to Ruland the amount of -the two checks, notwithstanding the fact that at that time there was still due to the plaintiff from the realty company, after deducting the $1,000 payment, a sum largely in excess of both checks. In making this repayment the plaintiff pursued the same course it had theretofore pursued in repaying a $3,000 advance made by Ruland early in May, 1913, and several other advances made prior to that time. The plaintiff, at the time these advances were made, was hard pressed for money and it is inconceivable if Ruland had been under a personal obligation to pay plaintiff for this work, it would have returned to him the amount of the $300 and $200 checks. Such amounts would have been retained and applied on the amount then due from Ruland and the other defendants.

But it is suggested in support of the plaintiff’s claim that after the promises were made the work was resumed “with renewed vigor and activity.” The suggestion is not sustained by the proof; on the contrary, the opposite appears. The work slackened rather than increased. In August, 1913, plaintiff practically ceased all work on the building because it had been advised by the architect that a readjustment of the affairs of the realty company was necessary in order to enable it to pro-, ceed with its project. Not even at this time did plaintiff indicate that.it regarded defendants as its debtors, but started the work some days later upon the assurance of the architect that the realty company would promptly pay its then outstanding-indebtedness. Indeed, as late as December 5, 1913, it seems plaintiff did not consider that the defendants were personally liable, for on that day it wrote to the realty company, “The work specified in our contract was performed long ago; we have been doing extra work all along. We find it impossible to wait any longer for the long deferred money due us; and regret to say that unless we get a payment on account of said commissions, including the amount of insurance hill rendered, by Tuesday, December 9th, 1913, we will be compelled to file a mechanic’s lien against the above mentioned building for the full amount of our claim, and also commence proceedings to recover what is due us.”

When all of the evidence is considered, much of which as indicated is documentary, it seems to me it fairly shows that the plaintiff at all times down to the time the work was completed did not consider the defendants personally responsible, but looked solely to the realty company for compensation. It is certainly too vague, indefinite and unsatisfactory to justify a verdict that the defendants became legally obligated to pay the plaintiff’s claim. The finding that they did so is against the evidence.

Other errors are alleged as to the admission of evidence, hut the conclusion reached renders it unnecessary to pass upon them.

The judgment and order appealed from are, therefore, reversed and a new trial ordered, with costs to appellants to abide event.

Clarke, P. J., Laughlin, Scott and Dowling, JJ., concurred.

Judgment and order reversed and new trial ordered, with costs to appellants to abide event.