Contractor took deposit and then went out of business

[soupcxan]

My retired dad ordered $20k of hurricane windows and gave this company (that has supposedly been in business since 1979) a $7k deposit. Last week, the company confirmed that they would install tomorrow. Today my dad tried to call the company to confirm they were still coming tomorrow and got nothing but voicemail. So he drove over to their shop and finds everything locked and a note that says they are no longer in business.

The deposit check was cashed in August. What does he need to do to try to recover whatever cash he can?

Here's a story about the assholes:

Shutter company shuttered - wptv.com

 

[2B]

If they can prove that this was a scheme to rip people off then the owners can be sued to make restitution. They can only make restitution if the money is available to the courts either voluntarily or not. Usually, this isn't the case where any money is available.

The more likely case is that your father is now an unsecured creditor of the company as it goes into bankruptcy. The money is probably lost.

A similar situation once happened to me when we ordered indoor shutters. The company went under and I was out a few hundred dollars for the shutters. I had only paid the deposit for them to order the shutters. I happened to see the shop open and I went in. It turned out that it was someone from the lawyers doing an inventory. I told them I had ordered shutters that were supposedly delivered. They actually were there and clearly marked for me. I was told to take them which I did. Installing them was a pain in the butt but I got my shutters. It's possible your father's windows are in and he may be able to claim them. If the windows aren't there it's obvious they were making sales, taking money and not intending to install anything.

It's possible they meant well and just mismanaged their business. Honest people do screw other people somethimes without intending to.

If your father paid by credit card, he may be able to get a refund from the credit card company but there is a time limit. Check right away if he did.

 

[zinger1457]

Assuming the contractor was/is licensed check with your states Registrar of Contractors (RoC), they will try and mediate a solution and should have an insurance fund setup to cover loses if you're unable to collect from the contractor. I had a similar problem when I was looking to build an addition to my house. The contractor (licensed) took my deposit and decided to skip out. I filed a claim with the Registrar of Contractors, the process took a long time (almost 1 year) but I did get my money back from the RoC, plus the difference in the amount between what the new contractor and old quoted for the job.

 

[soupcxan]

He paid by check so credit card dispute is not an option.

He called the window manufacturer to see if they had already produced the windows and just not delivered them to the installer. They confirmed they had an order but had not produced anything because they had not received any cash from the installer. So...looks like fraud.

I'll have him see if there is a Registrar of Contractors, thanks.

 

[Lakewood90712]

Chances of recovery are slim. The down payment likely exceeded the state laws , but at this point with a failed business , that issue will go nowhere. They likely owe everyone money.

File a small claims suit against the business. You will win , likely by default , then see if a debt collector will buy the judgement.

Ask your tax adviser if this could be claimed as a tax loss ( loss by theft/fraud)

Sorry.

 

[Walt34]

The deposit check was cashed in August. What does he need to do to try to recover whatever cash he can?

It's long shot but also call the police or sheriff's department there. To make it a criminal case they'd have to be able to prove the company owner knew, at the time the check was cashed, that the company was going to go bankrupt. A lot depends on state law too.

When I was doing fraud investigations I had a couple of those and was happy to work them. When the guy is looking at jail time that's a powerful incentive come up with restitution funds so at sentencing he can say he made everyone whole. But that was in MD and our agency did have the resources to put the time into it. Not every agency does.

 

[Live And Learn]

Wow. This is scary ! Makes me never want to give a large deposit again. And I just did - for hurricane windows and shutters no less !

Fingers crossed for your dad. What a terrible situation.

 

[Walt34]

Wow. This is scary ! Makes me never want to give a large deposit again.

When you do, use a credit card so at least you have that 60-day window to get refunded even if you pay the cc bill in full every month.

 

[heeyy_joe]

Wisdom comes from bad judgment. Thanks for sharing.

 

[Texas Proud]

It's long shot but also call the police or sheriff's department there. To make it a criminal case they'd have to be able to prove the company owner knew, at the time the check was cashed, that the company was going to go bankrupt. A lot depends on state law too.

When I was doing fraud investigations I had a couple of those and was happy to work them. When the guy is looking at jail time that's a powerful incentive come up with restitution funds so at sentencing he can say he made everyone whole. But that was in MD and our agency did have the resources to put the time into it. Not every agency does.

I know that when that happened to my sister and some of her neighbors the police said it was a civil matter... I think enough people pushed and there were a few who paid deposits and got nothing (my sis did get a lot of work done).... so they finally did file a case against him...

He skipped out to Florida, never to be heard from again.... nobody got any money either....

 

[Lakewood90712]

The company website is still up , proudly showing an award from Angie's list and The BBB logo. BBB currently says they are "re-evaluating the business" so no rating is currently available.

 

[growing_older]

I was caught in a mess with a contractor. I did my research and found a guy who had been in business 15 years in my town with a good reputation. What I didn't know was he had sold the business to some fly by night (deliberate fraudsters - in my opinion) outfit and the deal was he would keep selling and not mention the change in ownership. They did a terrible job that I had to hire another company to fix, but all the money paid was long gone.

Despite good research and vendor's good reputation, all was not as it seemed. I only put deposits by credit card now. I want some better protection in case a deal isn't what I'm told or the company isn't what they represent.

 

[soupcxan]

Wisdom comes from bad judgment.

I don't see the bad judgment here. This was a supposedly reputable contractor who had done other work for my dad in the past and had been in business for a long time. No contractor I've dealt with will order expensive custom items without a deposit.

Also, the owner of the closed company was president of the local chamber of commerce last year!

http://www.wptv.com/news/region-martin-county/more-fallout-from-shutter-company-shutdown

 

[MichaelB]

I don't see the bad judgment here. This was a supposedly reputable contractor who had done other work for my dad in the past and had been in business for a long time. No contractor I've dealt with will order expensive custom items without a deposit.

Also, the owner of the closed company was president of the local chamber of commerce last year!

More fallout from shutter company shutdown - wptv.com

This looks more like bad luck than anything else. It's a real shame, hopefully your father will withstand the financial impact.

 

[phil1ben]

I have two thoughts assuming your Dad is really pissed off and wants to spend the time to try and recoup his money:

1. The amount is too small to hire a lawyer. Go to your county courthouse and have your Dad fill out a complaint suing BOTH the company and the salesman he gave his money to. He must locate the salesman and his home address before filing the complain because it must be served. The basis of the personal suit is that the salesman defrauded him in July and had no intention of ever installing the windows. The important aspect of the complaint is that the salesman intended to deceive your Dad and that your Dad relied on his statements losing $7,000.00. If the salesman committed fraud he is personally liable for his actions and the corporate veil can be pierced. Your Dad may also be able to collect triple damages under the laws of some states. Normally the court attendants are very helpful to people representing themselves.

2. Again if these people never intended to install the windows their actions are criminal. Also file a complaint with the police department. You may also be able to file a private criminal complaint in local municipal court. I suspect your Dad was not the only one hoodwinked. The police may have received other complaints and together with your father's may decide to spend time on the case.

The laws and procedure of every state vary. Particularly the laws in Texas but the general concepts normally apply everywhere. Good Luck.

 

[rodi]

I agree that if your dad wants to spend time and aggravation on this he should
- report to whatever contractors licensing board.
- pursue the lawsuit as described by philben1.

We had a horrible experience with a contractor when we built our casita. Unfortunately there was an arbitration clause in the contract - and when the contractor refused to pay his portion of the arbitration fees - they expected US to pay them. We were pursuing his licence through the CSLB. That was a painful process - but we had overwhelming proof of damages so it was finally referred to the state attorney general 2 years after the fact. A negotiation was settled and we received a few payments before he decided that losing his license was ok. That's the only threat the contractors boards have over unscrupulous contractors... their licenses.

Sounds like these people are already willing to forfeit any license - so that might not work. But file a complaint anyway out of principal.

 

[RunningBum]

Sometimes the local TV station will help out here. The threat of a story may make the owner do something. It's worth a shot if one of them does any kind of consumer advocacy help work.

 

[zinger1457]

We were pursuing his licence through the CSLB. That was a painful process - but we had overwhelming proof of damages so it was finally referred to the state attorney general 2 years after the fact. A negotiation was settled and we received a few payments before he decided that losing his license was ok. That's the only threat the contractors boards have over unscrupulous contractors... their licenses.

Sounds like these people are already willing to forfeit any license - so that might not work. But file a complaint anyway out of principal.

I'm sure the group that regulates contractors differs from state to state but in Arizona if you file a claim with the contractors board and win you get paid directly from the contractors board fund, it's then up to the agency to pursue the contractor to collect the money they paid out. The fund is setup from the fees contractors pay to be licensed, it's suppose to be an added incentive for people to use licensed contractors.

 

[ERhoosier]

The company website is still up , proudly showing an award from Angie's list and The BBB logo. BBB currently says they are "re-evaluating the business" so no rating is currently available.

I've come to view AL and BBB ratings are almost worthless. Certainly not an excuse for doing your own homework on any potential contractor.

 

[Totoro]

No contractor I've dealt with will order expensive custom items without a deposit.http://www.wptv.com/news/region-martin-county/more-fallout-from-shutter-company-shutdown

Several ways to handle this in future, some options:

• Order and pay the item with manufacturer yourself, directly. Have it delivered to contractor.
• Put the money in escrow with a bank.
• Require proof of invoice and confirm with manufacturer before .transferring deposit. Establish written claim of ownership of item.

Its a frequent mishap in business unfortunately. Remember that the inverse also happens: contractor pays for his materials, customer goes bankrupt. Guy I know lost 5 years of profit in one such case just this week.

Once it happens cash is likely gone, especially if the manufacturer didn't get the order and payment yet. The suggestions by other posters on how to handle this are good: get yourself established as creditor, try to invoke fraud.

 

[Cobra9777]

...Remember that the inverse also happens: contractor pays for his materials, customer goes bankrupt...

IMO, that's a risk of being in business. As a customer, it's not my role to mitigate the contractor's business risk. At least he has possession of the material, which can be liquidated. Much different than the inverse when a consumer writes a check and gets nothing.

I won't do business with any contractor that requires a deposit. I learned my lesson with a fence contractor when I was about 28-29 years old, who no-showed after I gave him a check for $400. I'm OK with progress payments for a large job that takes several weeks or months. But for most smaller jobs, if they don't have the basic wherewithal to buy materials and pay their workers for the week or so it takes to complete the job, then that's a red flag that there are bigger issues.

I take it even further... We had a bathroom remodel recently and I negotiated a 10% holdback to be paid 45 days after completion, just in case any issues came up after the job. The contractor had no issue with this. We did have two problems with a slow leak under the sink and an exhaust fan that quit working. Both problems got resolved within an hour after we called.

Just last week, I had a contractor come out to measure a very large, and oddly-shaped double-pane window that lost its seal. He gave me the quote, and I said OK. He then said, we'll need a 40% deposit for the material cost since it will have to be custom made. I said, is that really necessary? I'd prefer to pay when the job is done. He said, no problem, we can work with that.

 

[Milton]

I know that when that happened to my sister and some of her neighbors the police said it was a civil matter.

That response will be received 99% of the time. Rightly or wrongly, the police have neither resources nor inclination to pursue such disputes.

Sometimes the local TV station will help out here. The threat of a story may make the owner do something. It's worth a shot if one of them does any kind of consumer advocacy help work.

As the business is apparently now closed, potential loss of goodwill seems like a hollow threat.

In any case, the story of the company's recent failure has already been published (see WPTV link provided by OP).

IMO, that's a risk of being in business. As a customer, it's not my role to mitigate the contractor's business risk. At least he has possession of the material, which can be liquidated. Much different than the inverse when a consumer writes a check and gets nothing.

I won't do business with any contractor that requires a deposit.

+1.

 

[Walt34]

I know that when that happened to my sister and some of her neighbors the police said it was a civil matter...

It's a subtle distinction that most with no legal experience often find hard to understand. The underlying issue is one of intent, and the state's ability to prove beyond a reasonable doubt that intent. That's a high bar to clear as it should be.

In a case like this that's why proving that the owner knew the business was going to go bankrupt at the time he cashed the deposit check is crucial. In MD that's theft by scheme and design and it is a criminal matter. But proving that intent is often impossible. That, and being a poor businessman and making bad judgments/decisions is not a crime either.

And indeed almost all of the time it is a civil matter.

For example, in one case we received a lot of complaints about an eBay seller accepting money for custom-made computers but not shipping them, this back about 1995 or so. I applied for and obtained a search warrant for the address, an apartment. The guy was cooperative and almost as soon as I walked in I could see it was going to be a civil case, not criminal.

There were boxes of computer parts stacked waist-high in the living room, den, and bedroom. What happened is that his prices were so low that he grossly underestimated demand, he had a full time job elsewhere, and simply didn't have the time to build them fast enough to fulfill the orders in a timely manner. This was clearly not a case of someone intending to abscond with the money and who was guilty of at most bad judgment.

We referred the case to the consumer protection department, where they would most likely contact the people and ask if they wanted a refund or wait for what they ordered.

 

[Texas Proud]

It's a subtle distinction that most with no legal experience often find hard to understand. The underlying issue is one of intent, and the state's ability to prove beyond a reasonable doubt that intent. That's a high bar to clear as it should be.

In a case like this that's why proving that the owner knew the business was going to go bankrupt at the time he cashed the deposit check is crucial. In MD that's theft by scheme and design and it is a criminal matter. But proving that intent is often impossible. That, and being a poor businessman and making bad judgments/decisions is not a crime either.

And indeed almost all of the time it is a civil matter.

For example, in one case we received a lot of complaints about an eBay seller accepting money for custom-made computers but not shipping them, this back about 1995 or so. I applied for and obtained a search warrant for the address, an apartment. The guy was cooperative and almost as soon as I walked in I could see it was going to be a civil case, not criminal.

There were boxes of computer parts stacked waist-high in the living room, den, and bedroom. What happened is that his prices were so low that he grossly underestimated demand, he had a full time job elsewhere, and simply didn't have the time to build them fast enough to fulfill the orders in a timely manner. This was clearly not a case of someone intending to abscond with the money and who was guilty of at most bad judgment.

We referred the case to the consumer protection department, where they would most likely contact the people and ask if they wanted a refund or wait for what they ordered.

I agree... when the police first came they talked to my sister and her neighbor... he had done a lot of work at my sister's house and had tore out parts of the kitchen at the neighbor.... it wasn't until other neighbors said they had paid a deposit and the guy never did anything to their house that the police did anything...

In reality, nothing really was done... I think there was a charge for a crime, but he had left the state and nothing else happened... but I think it made some of the neighbors feel a little better...

 

[Walt34]

In reality, nothing really was done... I think there was a charge for a crime, but he had left the state and nothing else happened... but I think it made some of the neighbors feel a little better...

If there is an outstanding warrant, even if it is for a misdemeanor (and states rarely if ever extradite from another state for misdemeanors) those things have a way of popping up at the most inconvenient times.

Returning from a foreign country, Customs will hold the person until it is determined whether the issuing jurisdiction will come and get him. They probably won't but the guy is sitting in a cell for several hours until that is ascertained.

Maybe he forgets about it and 15 years later goes back to visit a friend, gets stopped for speeding and then it is discovered.

If that happens he's gonna have a hard time convincing a judge he should be released on a low bond. Not a good thing to have hanging over one's head. I had a couple of ten-year-old cases pop up that way.