[RPPTL-constructionlaw] Joint Check Overpayment Question

[lan at lwwhiteattorney.com]

Let's start with the usual quibble, "It depends on the facts."  The supplier
signed  a release, but exactly what did it say.  Specifically did it
reference the particular job, or a particular invoice, or something else
that would put the supplier on notice of the overpayment.  The facts assume
the supplier didn't know what was going on, and you may never be able to
prove otherwise, but is that a rabbit worth chasing down the hole?  Was
there any kind of communication from the GC (or from anyone else) to the
supplier directing application of the funds to a particular job?

 

With all that, however, my guess is the answer to your question is no.  From
the supplier's perspective, how would he know what the payment represented?
I agree that a joint check from a GC affords some notice the payment is for
a particular project, but is there any reason for the supplier to think the
payment was for materials only?  If the check represented payment for both
labor and materials, the sub-contractor would have every right to direct the
labor portion toward it s house account.  How would the supplier know?  In
addition, it isn't a case where the supplier is getting a windfall.  They
are simply being paid what they are owed.  My gut call is that unless you
can assign some knowledge to the supplier, there would not be a right of
action.

 

Regards,

Lan White

(727) 797-5599

 

From: constructionlaw-bounces at lists.flabarrpptl.org
[mailto:constructionlaw-bounces at lists.flabarrpptl.org] On Behalf Of Blaik
Ross
Sent: Wednesday, August 01, 2012 5:42 PM
To: RPPTL constructionlaw
Subject: [RPPTL-constructionlaw] Joint Check Overpayment Question

 

Hello Everyone,

 

I hope I am sending this to the right list-serve address as I know there are
two now.  

 

Factual Background:

 

I represent a General Contractor ("GC").  GC has hired a subcontractor to
perform a certain scope of work.  The subcontractor buys his materials from
a supplier.  Due to problems with the subcontractor's line of credit with
the supplier, GC must pay for subs materials via joint check. GC receives an
Invoice, purportedly from the supplier.  It is on the supplier's letterhead.
GC pays it via joint check and the check is deposited by the supplier and a
release signed by both the sub and supplier.  GC later finds out that the
invoice it paid was "dummied up" by the subcontractor, who added $30,000 to
it fraudulently in order to try and get ahead of GC on the subcontract and
get more cash flow.  Subcontractor has already failed before GC discovers
that it was a "dummied up" invoice and sub has been terminated from the
project.  

 

I wonder why the supplier, when they received a joint check for an amount in
excess of the true invoice amount, did not call the general contractor or
refund the general contractor back the $30,000?  GC calls the supplier and
asks what happened - i.e. why it is that GC paid them $130,000 in a joint
check, but that the real invoice was only for $100,000, and why didn't GC
get a refund.  Supplier says this is not uncommon and they just credited the
subcontractor's house account - so in effect GC has paid for this failed
subcontractor to have an additional $30,000 of credit, or it went to other
debts sub held with the supplier.  GC asks the supplier to send it a refund
and supplier refuses saying GC's only recourse is to backcharge it against
the subcontractor's lump sum contract.  Supplier claims no knowledge of the
"dummied up" invoice and claims that there is nothing wrong with his
crediting the overpayment by the general contractor to the subcontractor's
house account.    

 

Question:

 

Does GC have a direct cause of action against the supplier who it overpaid
and who signed a release stating it was paid $130,000 for materials
delivered to Project XYZ, but the materials delivered were only really worth
$100,000 per the "true" invoice?  Is there not something fundamentally wrong
with the supplier taking the $30,000 overpayment and using it to satisfy the
subcontractor's other debts with him.regardless of supplier's intent or
knowledge of the "dummied up" invoice and subcontractor's fraudulent
motives?        

 

Thank you,

Blaik P. Ross, Esq. 

bross at beauchampco.com

305-445-0819

          

 

 




Capability Integrity and Value.
We look forward to providing our clients with many more years of delivering
the highest quality buildings in our community.
http://www.beauchampco.com

 

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