Merrimack Sheet Metal, Inc. v. Liv-Mar, Inc.

Citations: 147 Vt. 85; 511 A.2d 992; 1986 Vt. LEXIS 369Docket: No. 85-060

Court: Supreme Court of Vermont; April 17, 1986; Vermont; State Supreme Court

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Hill, J. Trustee, D. D. Snyder. Son, Inc. Snyder appeals a superior court ruling that found it liable to Merrimack Sheet Metal, Inc. for $19,000 due to payments made in violation of its trustee obligations. The court's decision is reversed and remanded for further proceedings. Merrimack is pursuing a collection action against Liv-Mar, Inc. for unpaid plumbing supplies, having secured a default judgment of $18,542.16 against Liv-Mar, which remains unsatisfied. Liv-Mar, a plumbing subcontractor, breached its original subcontract with Snyder for the Trail Creek Condominium Project in September 1983, leading to an oral labor-only contract where Snyder would pay Liv-Mar's employee wages instead. At the time of this contract change, Liv-Mar owed Central Supply $25,000 for plumbing fixtures. The trial court found Snyder had guaranteed Liv-Mar’s debt to Central Supply, though Snyder contests this. Snyder did pay Central Supply for materials ordered by Liv-Mar. Following Merrimack's petition for trustee process against Liv-Mar’s assets held by Snyder, the court found it likely Merrimack would succeed in its claim, and attached $19,000 from Snyder. Snyder subsequently paid Central Supply $25,077.44 and made $27,092.90 in wage payments to Liv-Mar’s employees. Merrimack argues these payments were subject to trustee process, while Snyder claims the wage payments were exempt as they compensated employees for work done on the project. The trial court determined these payments benefited Liv-Mar and that Central Supply did not release Liv-Mar from its debts, concluding Snyder violated its trustee duties. Snyder's appeal cites that only debts actually owed to the judgment debtor at the time of attachment are subject to trustee process.

Snyder asserts that his payments to Central Supply were made to fulfill a contractual obligation to Central Supply, not to satisfy a debt owed to Liv-Mar. The existing contract between Snyder and Liv-Mar was solely for labor, and thus Liv-Mar had no enforceable right against Snyder to collect payment for Central Supply's debt. The trial court's finding that Snyder guaranteed Liv-Mar’s obligation to Central Supply is contested, as a guaranty does not create a direct duty to the primary creditor. Consequently, Snyder's obligation to Central Supply is not subject to trustee process. The court's assertion that Snyder's payments benefited Liv-Mar is irrelevant to this determination. 

Snyder also claims that payments made to Liv-Mar are exempt from trustee process under 12 V.S.A. 3021, which protects wages owed to employees when a contract is involved. The statute mandates that sums owed for work performed under such contracts are exempt from trustee process, aiming to protect employees' wages from creditors. The trial court's reasoning that these payments benefitted Liv-Mar and were thus subject to trustee process is unconvincing, as wage payments inherently benefit the employer. 

Merrimack argues that Snyder waived this exemption by not summoning other creditors, but the statute places this responsibility on the principal defendant, not the trustee. While the trustee must prove the exemption, Snyder has met this burden, as the court confirmed he made payments to Liv-Mar to cover wage obligations for employees on the Trail Creek Project. The trial court erred in denying the exemption mandated by the statute.

The exemption under 12 V.S.A. 3021 pertains specifically to debts owed for labor performed under plumbing contracts, excluding any profit. Although testimony indicates that payments to Liv-Mar's principals were for work performed under the contract, the trial court did not make a definitive finding on this matter. Therefore, the case is remanded for the trial court to determine whether all payments to Liv-Mar's principals were indeed wages for work completed on the project. The trial court's previous rulings regarding payments to Central Supply and Liv-Mar are reversed, and Snyder's other claims of error are not addressed as they do not impact the decision. Snyder has acknowledged a liability of $2,988.13 for travel expenses paid to Liv-Mar after the initiation of the trustee process, which results in Merrimack being awarded judgment for that amount. The case is reversed and remanded for further proceedings consistent with this opinion, with the trial court noting that payments made after January 27, 1984, were to "Clifford G. Martin Plumbing" but served the same purpose.