Opinion ID: 782085
Heading Depth: 3
Heading Rank: 2

Heading: dwf

Text: 36 BDC contended that DWF's claim was subject to a bona fide dispute because contractual prerequisites to payment had not been satisfied. BDC relied on section 10.1(f) of the contract between DWF and HRH, which BDC subsequently assumed. That section required that DWF first fully pursue a lien action against the hotel before it could seek to recover directly from BDC: 37 Except to the extent that the Construction Manager [HRH] has received funds for payment to Contractor [DWF], which it has improperly not paid to Contractor, Contractor understands that it shall have claim against Construction Manager for payment on account of the Contract Price for the Project, or any other sums that may be due and payable hereunder, only to the extent that this Contractor has fully pursued its lien rights against the Project for which a claim of non-payment is made under the lien law of the State of New York, including a foreclosure action against same (the  Lien Action ), and then only to the extent that, and for the amount that, Contractor's ultimate recovery from the Owner [BDC], by virtue of the Lien Action, is less than the proper unpaid amount due this Contractor. The Contractor hereby expressly waives any and all claims with respect to any unpaid sums against Construction Manager under this Contract, unless and until the Lien Action is fully completed. 38 (Contract between HRH and DWF, section 10.1(f) (emphases in original).) 39 The Bankruptcy Court, relying on this provision, concluded that DWF's right to payment from BDC had not yet arisen and, therefore, that its claim was subject to a bona fide dispute. The petitioning creditors argued that BDC could not invoke § 10.1(f) because the contract had been drafted with only DWF and HRH in mind. The section, the creditors claimed, was intended to protect the construction manager, HRH, against a claim for payment by DWF in the event BDC failed to pay HRH for work done by DWF. If that occurred, DWF would be required first to proceed directly against the property rather than against HRH. The petitioning creditors claimed that even though BDC assumed the contract, it should not be permitted to wear two hats — that of property owner and that of construction manager — and that it would pervert the very meaning of paragraph 10.1(f) to require DWF to pursue a lien action before pursuing any other action against BDC. (Appellants' Br., Appeal of Order of the Bankruptcy Court dated July 2, 2001, at 18.) The District Court rejected this contention: Appellants cite no authority for the proposition that a party who assumes the rights and obligations under a contract can be barred from enjoying some of those rights because of the original intention of the drafters without any direct contractual language to that effect. Key I, 2002 WL 449856, at . 40 We agree with the District Court. When BDC assumed the DWF-HRH contract, it succeeded to HRH's rights under the contract and was entitled to require DWF to pursue a lien action against the hotel before seeking payment directly from BDC. That BDC is both the construction manager under the contract and the property owner does not change this result. See, e.g., Tanbro Fabrics Corp. v. Deering Milliken, Inc., 35 A.D.2d 469, 471, 318 N.Y.S.2d 764, 767, aff'd 29 N.Y.2d 690, 325 N.Y.S.2d 419, 274 N.E.2d 751 (1971). Since DWF failed fully to pursue a lien action, its right to payment had not matured and, as the District Court correctly found, its claim was subject to a bona fide dispute.