Home Building, Inc. v. . Nash

Bbogden, J. 1. Was tbe waiver of lien executed by tbe plaintiff procured by tbe fraud of tbe contractor or as a result of a conspiracy between tbe defendants? 2. What was tbe legal effect of such waiver ? At tbe outset it is to be observed that this suit is not instituted for tbe purpose of enforcing a lien or to establish tbe right of participation *433 in any funds that may be left in the hands of the owner due'the contractor. It is a typical action for damages based upon allegations of fraud and conspiracy in procuring from the plaintiff a waiver of lien. Therefore, it is obvious that many of the issues submitted to the jury had no bearing upon the vital questions in controversy. If the contractor secured the waiver of lien by fraud and the other defendants participated therein or conspired with the contractor to defraud the plaintiff of the protection and security of a lien, and such facts be found by a jury, the plaintiff would be entitled to recover upon the causes of action as laid in the pleadings, provided of course that competent evidence was offered upon the issues submitted. The agreement by the contractor to pay a preexisting debt to a creditor out of the proceeds of the contract price was not unlawful, and in itself, constituted no evidence of fraud. Rose v. Davis, 188 N. C., 355. Such contract price is not deemed by the law to be a trust fund until notice has been given to the owner. Foundry Co. v. Aluminum, Co 172 N. C., 704. Moreover, the legal fiction of a trust fund after notice, is designed exclusively for the purpose of enabling the claimant to share in the fund or proceeds undistributed and then remaining in the hands of the owner and due upon the contract price. Hence the issues submitted by the defendants were the proper issues arising upon the pleadings and should have been submitted to the jury. The defendant Nash filed an answer in which he failed to deny the allegations of fraud, contained in the complaint, but set up the defense that he had been adjudicated bankrupt on 3 June, 1929, and pleaded the bankruptcy act as a bar to recovery. Thus the allegations of fraud are not denied by the defendant Nash. The plaintiff, however, cannot recover against the other defendants unless there is competent evidence tending to show that said defendants participated in any fraud committed by Nash or ratified the same. A careful analysis of the record fails to produce the conclusion, upon the record now before the court, that any evidence of such participation or ratification was offered. It is true that on 9 May, long after the contract had been made, the defendant Dixson did not make a full disclosure to the plaintiff and his attorney with respect to various payments made to the contractor, but this conversation produces no evidence of fraud in the procurement of a release of a lien secured many months prior thereto. And if not sufficient to fix liability upon the defendant Dixson, it necessarily follows that it was not sufficient to fix liability upon the Brown-Rogers-Dixson Company upon the evidence offered at the trial. The legal effect of a valid waiver of lien, under the circumstances disclosed by the record, is to remit the plaintiff to his right to participate in any fund in the hands of the owner. New trial.