B. F. Brooks Const. Co. v. First State Bank of Marquez

• Citation: 39 S.W.2d 83
• Decision Date: 12 March 1931
• Docket Number: No. 1004.,1004.
• Parties: B. F. BROOKS CONST. CO. et al. v. FIRST STATE BANK OF MARQUEZ.
• Court: Texas Court of Appeals

Page 83

39 S.W.2d 83

B. F. BROOKS CONST. CO. et al. v. FIRST STATE BANK OF MARQUEZ.

No. 1004.

Court of Civil Appeals of Texas. Waco.

March 12, 1931.

Rehearing Denied in Part, Granted in Part, April 30, 1931.

Appeal from District Court, Leon County; S. W. Dean, Judge.

Action by the First State Bank of Marquez against the B. F. Brooks Construction Company, the Southern Surety Company, and others. Judgment for plaintiff, and the named defendants appeal.

Judgment affirmed in part, and judgment against the B. F. Brooks Construction Company and the Southern Surety Company reversed and remanded for a new trial.

Seale & Seale, of Centerville, and O. B. Freemen and Albert B. Hall, both of Dallas, for appellants.

J. E. & B. L. Bradley, of Groesbeck, and W. D. Lacey, of Centerville, for appellee.

ALEXANDER, J.

This was a suit by the First State Bank of Marquez against B. F. Brooks Construction Company, Southern Surety Company, H. G. Lanier, and others, in the district court of Leon county. In December, 1928, said Brooks Construction Company entered into a contract with the state highway department for the construction of a part of State Highway No. 32 known as Job 145-B in Leon County. In order to secure the performance of the contract, the Brooks Construction Company executed to the state of Texas the statutory bond with Southern Surety Company as surety. Brooks Construction Company subcontracted a part of the work to H. G. Lanier. During the course of the work, it became necessary for the subcontractor to secure finances with which to complete the work. He applied to R. P. Carrington as cashier and agent of the First State Bank of Marquez for such funds. The bank advanced to Lanier the sum of $2,122.65 with which to complete the contract. In November, 1929, the bank presented its account to the state highway commission and requested that department to withhold the amount unpaid to Brooks Construction Company on this contract as provided in Revised Statutes, art. 5472a (Acts 1925, 39th Legislature, ch. 17, page 44, § 1 [Vernon's Ann. Civ. St. art. 5472a]). Brooks Construction Company, in compliance with the provisions of Revised Statutes, art. 5472b (Acts 1929 41st Leg. [1929], 2nd Called Sess., p. 154, c. 78 [Vernon's Ann. Civ. St. art. 5472b]), executed and delivered to the state highway department a release bond with Southern Surety Company as surety, and the funds then due Brooks Construction Company amounting to $2,122.65 were released. This suit was by the bank against Lanier for its debt and against Brooks Construction Company and Southern Surety Company on the release bond. There was no attempt to recover on the original bond given by the contractor under Revised Statutes, art. 5160 as amended by Acts 1927, 1st Called Sess., c. 39, § 1 (Vernon's Ann. Civ. St. art. 5160), for the construction of the road. A trial was had before the court without a jury which resulted in a judgment for the bank against Lanier, Brooks Construction Company and Southern Surety Company. The Brooks Construction Company and Southern Surety Company have appealed.

It is the contention of the appellants that the appellee cannot recover herein, because: (a) The bank did not furnish labor nor material for the construction of the road, but only furnished the money with which to pay for such labor and material; (b) if the bank did furnish such labor and material, the same was furnished to the subcontractor and not to the original contractor, and that the statute does not inure to the benefit of those furnishing labor or material to a subcontractor; and (c) there was no evidence that at the time the notice was given to the highway department there was anything due Brooks Construction Company under said contract. Article 5472a provides as follows: "That any person, firm or corporation, or trust estate, furnishing any material, apparatus, fixtures, machinery or labor to any contractor for any public improvements in this State, shall have a lien on the moneys, or bonds, or warrants, due or to become due to such contractors for such improvements; provided, such person, firm, corporation, or stock association shall, before any payment is made to such contractor, notify in writing the officials of the State, county, town or municipality whose duty it is to pay such contractor of his claim." Acts 1925, 39th Leg., ch. 17, p. 44, § 1.

We held in the case of Texas Company v. Paul Schriewer, 38 S.W.(2d) 141 (this day decided), that one furnishing labor or material to a subcontractor and not to the original contractor is entitled to fix a lien on such funds by the giving of the required notice. The holding therein made is herein adhered to. Huddleston & Work v. Kennedy, 57 S.W. (2d) 255 (decided at Eastland February 20, 1931).

The bank claims that it is entitled to a lien on the funds because it furnished the subcontractor the money with which the laborers and materialmen were paid. It appears that the subcontractor became financially embarrassed and that it was necessary for him to arrange with the bank for the necessary funds to pay the laborers and materialmen. It was then agreed between the subcontractor and the bank that the bank would furnish the necessary funds with which to pay the checks issued by the subcontractor for labor and material and that the subcontractor would execute notes to the bank from time to time to cover the overdrafts created by the drawing of such checks. It was agreed that such checks should be issued only for the purpose of paying for such labor and material and that the bank should be subrogated to and have a lien on the funds. The subcontractor issued checks upon the bank and delivered them to the laborers and materialmen in full payment and satisfaction of their claims. Some of these checks were cashed directly at the bank, and some of them were cashed by local merchants and afterwards paid by the bank. In this way the bank claims to have furnished the labor and material for the completion of the contract. It was held by the Supreme Court, in Employers' Casualty Company v. County of Rockwall, 35 S.W.(2d) 690. (of date January 21), that a bank lending money to a contractor for the payment of labor and material used in the construction of public improvements does not become subrogated to a lien on the funds for such work. See also Employers' Casualty Company v. Wolfe City, 35 S.W.(2d) 694 (decided by the Supreme Court January 21); Northwestern Casualty Co. v. First National Bank, 36 S.W. (2d) 535 (decided by this court February 19. 1931); Huddleston & Work v. Earl Kennedy, 57 S.W.(2d) 255 (decided by the Court of Civil Appeals at Eastland February 20, 1931).

However, the bank claims a lien by virtue of the agreement of...