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September 29, 1967

The INGALLS IRON WORKS COMPANY, a corporation, Plaintiff,
FEHLHABER CORPORATION, a corporation, and Terry Contracting, Inc., a corporation, as individual corporations, as members of a joint adventure known as Fehlhaber-Terry, as cotrustees under an express trust, and as statutory cotrustees under Article 3-A of the New York Lien Law; Fehlhaber-Terry, a joint adventure consisting of Fehlhaber Corporation, a corporation, and Terry Contracting, Inc., a corporation, Aetna Casualty and Surety Company, a corporation, American Employers Insurance Company, a corporation, and X, Y, and Z, whose names are otherwise unknown to plaintiff, but who are persons, firms or corporations who are transferees of trust assets liable to plaintiff, or persons aiding and abetting said named defendants, whose names will be added by amendment when ascertained, Defendants

James T. Foley, Chief Judge.

The opinion of the court was delivered by: FOLEY

Memorandum-Decision and Order

JAMES T. FOLEY, Chief Judge.

 As the title might warn, claims that create complexity are set forth in this action. The motion at hand has resulted in a massive submission. The briefing by plaintiff was withheld for several months and then when filed was most extensive in its coverage followed by a tit-for-tat prolonging of the final submission by letters and supplemental affidavits by both sides for a substantial time period.

 Generally, the motion by the named defendants can be described as one for summary relief of dismissal of each of the three claims, or in the alternative for summary judgment grant for a substantial portion in the amount of $1,500,000 of the $1,601,377.27 sought in the dollar-and-cents overall demand. There is also detailed equitable relief sought such as accounting, identification and proper distribution of the $1,601,377.27, as alleged trust assets. The extensive briefing referred to, of almost two hundred pages, covers many legal propositions ramified to an extent that it seems inconceivable so much case law and text discussion could arise from a simple factual base, namely, the supply of steel by the plaintiff manufacturer-supplier to a highway improvement and construction job in the Borough of Brooklyn, Kings County, New York. The language in the briefing and substantial affidavits submitted is filled with charges and counter-charges of the most serious kind, with criminal violations regarding some conduct of both sides at least inferred. My experience has been that bitterness of this kind seems often to be found in construction disputes, but after the smoke has cleared and the battle is over, participants contract and do business freely again in new projects.

 There is an odd, unusual and even bizarre background to be discussed herein that may supply justification for the present attitudes and need for the elaborate briefing and submission for summary relief. The contentions are a twisting, tumbling kind in many respects, always hard to diagnose in a paper submission. The caution that is a wise one, as Judge Medina remarked recently, is that an avalanche of verbiage and mutual recriminations of one sort or another may bury simple facts and lead a District Judge to erroneous summary grant that results only in the waste of more time. (See Sherman v. Kirshman, 2 Cir., 369 F.2d 886).

 The background facts are adequately covered in the complaint, affidavits and counter-affidavits, and particularly set forth with detail in the affidavit of Frederick R. Fehlhaber attached to the motion papers. Summarization only is necessary for the purpose of this decision. The exhibits noted throughout are attached to the motion papers.

 On or about April 18, 1960, Fehlhaber Corporation (Fehlhaber), with co-defendant Terry Contracting, Inc., (Terry), bidding as joint venturers, entered into a contract with the State of New York for the construction of a highway improvement in Kings County, described as Interstate Route Connection 512-Gowanus Expressway. The construction contract is officially termed for ready reference Contract FIGE 60-2.

 Thereafter, on May 10, 1960, Fehlhaber and Terry entered into a Joint Venture Agreement, a substantial and detailed writing. (Ex. B). This agreement between the joint venturers, at times referred to in the law as joint adventurers, which may be a more apt description in this litigation, apportioned specifically certain portions of the work to be done by Fehlhaber and Terry for the State under the contract. It sets forth the obligations, liabilities, responsibilities and other details not only concerning the work but also concerning the moneys received from the contract, the sharing of losses and division of profit or loss, all unnecessary to delve into now.

 Then the transaction occurred that caused this litigation. In July and October, 1960, Terry, in furtherance of work set forth in Schedule B of the Joint Venture Agreement, entered into an agreement with Plaintiff for the furnishing of a substantial amount of steel for installation in the road improvement. (Exs. D, D-1). There is much dispute as to the manner in which the following events are to be described, and the inferences to be drawn therefrom. However, it is clear Plaintiff Ingalls during 1960 and 1961 delivered steel to the project, payments for such deliveries were made to the Joint Venture, came into Terry's hands but were never paid to Ingalls, and it seems undisputed Ingalls gave receipted invoices that were to be forwarded and processed to the State that would induce payment of the moneys for the steel deliveries by the State of New York. The major factor, of course, underlying the claims was that such moneys never had been or were ever paid by Terry to Ingalls. Fehlhaber vigorously contends that in good faith observance of the receipted invoices of Ingalls it was led to the belief that Ingalls received and was receiving the actual payments from its joint venturer, Terry.

 There is a lengthy letter of April 24, 1961 that plays an important role in a series of unusual happenings. (Ex. G-1). This letter is signed by Richard G. Terker, President of Terry Contracting, Inc., not only in behalf of that firm but underneath the Joint Venture listing of Fehlhaber and Terry. This letter defendants' counsel persistently call a "secret agreement", contending Fehlhaber was completely unaware of it, and that it was prepared by the Plaintiff Ingalls' New York attorney for Ingalls and Terry. The terms of this letter do defer payment by Terry to Ingalls of $1,500,000.00 in consideration of an additional $100,000.00 to be paid by Terry.

 Later, in other important incidents, meetings were then held among representatives of Ingalls, Terry and Fehlhaber. These meetings resulted in a writing (Ex. H), a letter-agreement with formal acceptances which not unexpectedly or unusually in a legal contest is interpreted differently by the attorneys. The writing, of course, will ultimately speak for itself to judicial analysis and wisdom, but it does at least import that the steel orders from Terry to Ingalls were solely a contract between such companies and Fehlhaber was never a party thereto or incurred any obligation under the letter-agreement of April 24, 1961.

 The next development with the same fascination is that on April 2, 1962 a release and waiver of lien with respect to $1,500,000 worth of the steel materials delivered and used in the highway improvement were executed by the President of Ingalls, J. B. Kopp. Again, there is intense argument as to the legal effect of these writings particularly in regard to the authorization for their execution together with claimed circumstances of duress to compel an execution, making the documents legally invalid and unmaintainable against the three claims for the amount stated.

 My survey is much lengthier than intended, but the difficulty to compress should be obvious and my only purpose to recite so much is to help others find their way. The three claims are set forth in good form and I am sure as succinctly as can be in this bewildering set of circumstances where they provide a springboard for at least the arguable application of diverse and ponderous legal principles.

 The three claims can be essentially described briefly: The first claim is an action to enforce a trust under Section 77 of Art. 3-A, New York Lien Law, McKinney's Consol.Laws, c. 33. As provided therein, Ingalls sues as representative of the class of trust beneficiaries and in accord with F.R.Civ.Proc. 23(a) pertaining to class actions. The second claim charges the trust funds in the amount of $1,601,377.62 were wrongfully withheld in violation of the express trust referred to in Paragraph 13 of the Joint Venture Agreement between Fehlhaber and Terry. The third claim asserts defendants Fehlhaber-Terry, (joint venturers), Terry, Fehlhaber, Aetna and American Employers ...

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