Schrieber, Sons & Co. v. Citizens Bank

Harrison, J., delivered the opinion of the court. In July, 1897, The Citizens Bank of Norfolk entered into an agreement in writing with Trank B. May, a general contractor, for the erection by him of a bank building to cost $95,750.00. In April, 1899, the bank filed its bill in this case alleging that it and numerous tenants had been using and occupying the building since January 19, 1899, though it was not fully completed, there being several matters involving small cost to be attended to. It further alleged that the entire cost of the building had been paid except a balance then in its hands of [259] ■$4,444.4:0, out of which was to be first paid the sums mentioned as necessary to complete the building. It further alleged that a number of sub-contractors had recently filed claims of lien against •the building, amounting in the aggregate to $12,043.68, but insisted that such sub-contractors had no claim under the mechanic’s lien law either against the land and building, or •against the bank, except to the extent of the balance then in its hands. The prayer of the bill was for an account ascertaining and determining the proper amounts due to the several subcontractors, and a proper application and distribution of the balance in hand among the several parties entitled thereto •according to their respective rights. An answer, to be treated as a cross-bill, was filed by the appellant, setting up a lien for the sum of $5,595.00 under its contract with the general contractor; and also for the further sum of '$339.23 for extras claimed to have been furnished directly to the bank upon the order of the architect; and alleging that the bank had improperly disbursed part of the building fund, and should be held to account for a much larger sum than that •admitted to be in its hands. An elaborate report, together with the evidence upon which it was based, was returned, finding that at the time of the institution of this suit there was in the hands of the bank unpaid on the building a balance of $4,444.40, and that, after the completion •of the building according to the contract, the bank had in its hands applicable to unpaid claims the sum of $3,636.2Y, out of which had to be first paid two claims of superior dignity amounting to $1,865.03, and the residue disbursed pro raía among nine remaining claimants including the appellant. A decree was entered overruling all exceptions to this report, and confirming the same, which we are now asked to review. Adverting to the alleged errors in the order of their assignment, the court is of opinion that it was not error to allow the bank credit for the sum of $808.13 paid by it for work done and [260] materials furnished by Julian C. Smith, a sub-contractor. Smith had been employed by the general contractor to do certain asphalt paving around the building. Being in doubt whether the general contractor would pay him, he declined to undertake the work unless the bank would guarantee the payment of his claim. This the bank was obliged to do in order to have the pavement completed in accordance with the plans and specifications. The contract provided that in case the general contractor .failed in the performance of any of his agreements, the owner should be at liberty to supply the deficiency and deduct the cost from any money due or to become dire under the contract. This item for the paving done by Smith was clearly covered by that provision. The court is further of opinion that the hank was not properly chargeable with the sum of $1,069.32 in addition to the oirginal contract price of the buildings. That sum represented the price of work not covered or contemplated by the contract which was paid for by the hank as soon as it was done. It would hardly be claimed, if the work in question had been done by a stranger to the original contract, that the hank should he charged with its cost as if done under the original contract. The case is not different because such work was done by the same person who had the larger contract. It was a separate and distinct transaction, outside of and apart from the original building contract, and therefore not to he considered in connection therewith. The court is further of opinion that there was no error in allowing the hank credit for the notes held by it which had been executed by the general contractor, and endorsed by the several sub-contractors to whom they were payable,- and discounted by the bank for the benefit of the latter. Hor was it error to allow the hank credit for other similar notes taken up by it which were due and payable at other hanks. Hor was it error to allow the hank credit for orders drawn upon it by the general contractor in favor of sub-contractors. So far as can he discovered from [261] tlie record, every credit here complained of represents money paid by the bank for work done or materials furnished under the contract for the erection of the building in question. These are not, as contended, assignments or transfers of any part of the debt due or to become due the general contractor by the owner for the construction of the building, such as are prohibited by act of Assembly 1895-’6, p. 379. On the contrary, it is the contract price of the building going directly to those who have done the work and furnished the materials, which is what the act cited intended to accomplish. The chief contention in this connection is that these payments were made out of the remaining fifteen per cent, of the cost of the building after eighty-five per cent, of such cost had been expended, while under the contract between the bank and the general contractor, it is insisted that this last fifteen per cent, was not due or payable until the building was completed, and that appellant had the right to rely, for its protection, upon the bank withholding the same until it was due. The clause of the contract relied on in support of this contention is in these words: “And that such price shall be paid by the owner to the contractor upon the certificate of the architect, as follows, viz.: At intervals of thirty days measurements shall be made by the architect of the amount of materials and labor embodied in the building, and payments made to within fifteen per cent, of the value of the same.” This provision was intended alone for the protection of the owner of the building, and had no reference to sub-contractors who might thereafter be employed. The contract further provided that in case the general contractor failed in the jierformance of any of his agreements the owner should be at liberty to supply the deficiency and deduct the cost from any money due or to become due under the contract. If the owner had to reserve in his hands fifteen per cent, of the entire cost of the building, until the same was fully completed, for the ultimate protection of sub-contractors who had not protected themselves, it would make this last [262] mentioned provision of the contract nugatory, and leave the-owner without the means, in many cases, of finishing’ the work contracted for. The owner is under no obligation to protect the-interest of the sub-contractor except where the latter has complied with the law, and thus put himself in a position to demand protection from the owner. The law has generously thrown around the sub-contractor every safeguard, and provided adequate means for his protection. To secure its benefits, however, the sub-contractor must act. Section 2479 of the Code,, as amended by Acts 1893-H, p. 523, afforded appellant complete-protection against loss, but of this no- advantage was taken, and the result cannot under any provision of the law be visited upon the owner. The appellant did not perfect its lien until February 21, 1899, and under the express terms of the statute (sec. 2477 of the Code as amended by Acts 1897-’8, p. 488), the lien then perfected could not exceed the amount in which the owner was then indebted to the general contractor, or should thereafter become indebted to such contractor. The court is further of opinion that there was no error in crediting the bank with the amount due the White Hardware Company and Cook, Clark & Co., as preferred claims to be paid in full out of the balance due from the bank. These two claims had been perfected under section 2479, and constituted a personal liability upon the bank. The bank -was not liable for more than the price it had agreed to pay for the building, and it had always kept back more than enough to pay those sub-contractors who had given it notice as required by law, and it was entitled to have the balance thus reserved in its hands applied first to the satisfaction of such claims. Upon -consideration of the whole case, the court is of opinion that there is no error in the decree complained of to the prejudice of appellant, and it must be- affirmed. Affirmed.