[RPPTL-constructionlaw] Joint Check Overpayment Question

[Blaik Ross]

Ian,

 

Thank you very much for your response I appreciate it!  

 

The Release does indeed reference the particular project.  The Invoice
(both the "real" and the "fake" one) also references the particular
project.  The joint check on the check stub and the memo section states
the particular project.  The supplier admitted to me that he knew full
well there was an overpayment, but decided to just credit the
overpayment to the sub's house account (presumably because the supplier
was owed additional monies from this sub so he took the opportunity to
pay down more of the debt).  The Supplier never called the GC and asked
why there was an overpayment.  The supplier definitely knew the payment
was for a specific project, as the specific project was on his own
"real" Invoice he generated, it was on the Release he signed, and it was
on the check he endorsed and deposited.  Also, the check was for
materials only because the supplier at issue is strictly a materialman
and performs no labor - he is purely a distributor of goods.  I am not
sure though whether the supplier was aware that the Sub dummied up his
Invoice, but regardless of that knowledge, he certainly seized the
opportunity to grab more cash.  Hopefully the above facts change your
analysis?  

 

Thanks again though and thank you to all of my friends and colleagues
(both known and unknown) who replied.  The list-serve sometimes gets a
bum rap,  but when you need it its there for you, and you all have been
a huge help - so thank you!

 

Best Regards,

Blaik  

 

 

________________________________

From: constructionlaw-bounces at lists.flabarrpptl.org
[mailto:constructionlaw-bounces at lists.flabarrpptl.org] On Behalf Of
lan at lwwhiteattorney.com
Sent: Thursday, August 02, 2012 9:56 AM
To: 'RPPTL constructionlaw'
Subject: Re: [RPPTL-constructionlaw] Joint Check Overpayment Question

 

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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