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Collection of $165,000 Account From Uncreditworthy Contractor
Our office represented a material supplier who was faced with an unpaid balance in 2006 in excess of $165,000 on a contractor customer’s (Contractor A) account attributable to several commercial projects. Investigation by the client’s credit manager revealed that the customer (A) had always paid regularly (albeit on much smaller residential account balances) but had authorized another contractor (Contractor B) to buy on his account. It was determined that a de facto joint venture existed but the customer (Contractor A) had not monitored the joint venture closely and was unaware of the amount of materials utilized on the projects. Further investigation determined that Contractor B ordering the material had applied for credit and been denied by the supplier for, among other reasons, lack of enough valuable assets.
Our office was retained to file Mechanic’s Liens on the properties benefited by the materials installed by Contractor B and filed several liens. Payment of approximately $60,500 was received to release these Mechanic’s Liens at various times. A personal note for the remaining balance was entered into by the principal of Contractor B. After default, suit was filed later by our firm for the approximate $104,500 balance due against both contractors A & B jointly and severally. Additionally, a count for material misrepresentation was filed against Contractor B since it knew that it was denied credit and employed a subterfuge to obtain the materials.
Contractor A threatened bankruptcy and settled its liability under the suit for $50,000. Judgment was obtained previously against Contractor B and its principal for the full amount due, including the count for material misrepresentation. Garnishments against the principal of Contractor B resulted in the principal personally filing Chapter 13 Bankruptcy. Through bankruptcy counsel our firm pursued a complaint against discharge against the principal of Contractor B based on the state court judgment for material misrepresentation. At this point the remaining principal balance of $54,000 was settled for the nondischargeable amount of a $35,000 judgment to take effect at the end of the bankruptcy. In the interim our client received Chapter 13 dividends of slightly over $5,000. When the principal of B was discharged from bankruptcy in early 2013 state court garnishments were instituted on the nondischargeable $35,000 federal bankruptcy judgment. These garnishments netted approximately $1,000.
With the nondischargeable judgment at $34,000 the principal of B effected a lump sum settlement with our client for $25,000 immediate payment to release the judgment in mid 2014.
Thus, on a $165,000 indebtedness incurred by a non-credit worthy contractor (Contractor B) with virtually no assets our office ultimately collected approximately $141,500 over a seven year period:
Pursuant to Mechanic’s Liens 60,500
Pursuant to Suit against Joint Venturer 50,000
Chapter 13 Bankruptcy Dividends 5,000
State Garnishments 1,000
Lump Sum Settlement of Federal Judgment 25,000
TOTAL RECOVERY $141,500
© 2022 Eugene W. Shannon, PLC
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