Trowell Trades Supply, Inc. v. Fineline Drywall, In c., No. S1528-04 CnC

(Norton, J., Aug. 19, 2005)

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STATE OF VERMONT SUPERIOR COURT Chittenden County, ss.: Docket No. S1528-04 CnC

TROWELL TRADES SUPPLY, INC.

v.

FINELINE DRYWALL, INC.

ENTRY

Following a default judgment and an elapsed appeal s period, Plaintiff Creditor moves for a writ of execution ag ainst Defendant Debtor and moves for a judgment against Trustee, MacMillin Company. As there is no opposition to Creditor’s first motion and the appeals period has lapsed, the court grants the motion and shall issue a writ of execution against Fineline Drywall, Inc. As to the second qu estion of whetherCreditor has a right to obtain a judgment from Trus tee, a brief review of the

facts and law is necessary.

From an April 15, 2005 default judgment, Creditor has a judgment lien of $46,000 on Debtor’s assets. As part of an attempt to secure this judgment, Creditor served Trustee with process to s ecure money that it owed to Debtor. 12 V.S.A. § 3013. Prior to this a ction, Trustee had subcontracted with Debtor for drywall work on a num ber of jobs. Debtor did about $15,000 worth of work on the projects but did not finish. At the time Creditor served process, Trustee admitted that it owed Debtor $15,000 for work performed but stated that the sum was not certain as required under 12 V.S.A. § 3018 because Trustee had a contra ctual right to deduct completion costs from the amount owed. Subsequentl y, Trustee made one payment directly to an employee of Debtor for $6,00 0. Trustee now offers affidavits and contracts showing that in fact it in curred completion costs of $52,000, which exceeded the amount owed and should cancel its balance as

a trustee.

Under the relevant statute, a trustee is liable on ly for “[a]ny money or other thing due the [debtor] . . . provided it i s due absolutely and without contingency.” 12 V.S.A. § 3018; see also § 3019 (t he contingency must date from the time of service). Courts interpretin g these sections have emphasized that a contingency means that the existe nce and the amount is in question and not merely the liability. Ricker v . Lajoie , 314 F. Supp. 401, 402–03 (D.Vt. 1970).

As specific application of this principle, a trust ee may deduct from its obligation to debtor any demands the trustee ha s under a contract with the debtor. § 3076. This limitation prevents Credi tors from selectively looking at the debtor–trustee contractual relations hip, but it also limits aTrustee to contractual relationships when seeking t o apply the exception.

See Johnson v. Howard , 41 Vt. 122, 125–27 (1868) (Town unable to deduct taxes owed to cancel trustee process on contractual amounts owed to debtor).

Here Trustee and Debtor had a contract for a serie s of projects.

Trustee’s credit toward debtor was at all relevant times contingent on the Debtor either completing the project or for any pen alties incurred for breach. Trustee has submitted evidence that such p enalties, in the form of closing costs, were, in fact, incurred because Debt or stopped performance and never resumed. None of these obligations were formed after Creditor served Trustee with process. What has changed is m erely the subsequent

calculations that Trustee warned in its answer to C reditor’s disclosure. Therefore, since the $14,000 was not an amount abso lutely due and was subject to contractual contingencies allowable unde r § 3076, Creditor’s motion for judgment against Trustee must be denied.

Finally, Trustee’s payment of $6,000 to an employe e of Debtor falls squarely into another exception allowed under 12 V. S.A. § 3021. Merrimack Sheet Metal v. Liv-Mar, Inc. , 147 Vt. 85, 89–90 (1986). This exception protects wage payments from the trustee p rocess. While this does not apply to profits, it does allow direct pay ments of wages to employees. In this case, Trustee’s payments went d irectly to an employee as payment for work that he performed. By virtue o f § 3021, it is protected from the trustee process.

Based on the foregoing, Plaintiff’s motion is Gran ted in part and

Denied in Part.

Dated at Burlington, Vermont________________, 2005

.________________________________ Richard W. Norton, Judge