Caristo Construction Corp. v. Diners Financial Corp.

The primary issue is whether a lender who, under an unfiled assignment of accounts, receives the payments made by a general contractor to a defaulting and now insolvent subcontractor, is liable for a diversion of trust funds under the Lien Law, although the lender, simultaneously with receipt of the payments, returned to the subcontractor “ advances ” in amounts equal to the payments. The lender, a factor, prevailed after a nonjury trial at Special Term. The Appellate Division reversed and granted judgment to plaintiff general contractor.

Plaintiff general contractor sued as subrogee of unpaid…