Barfield v. Henderson

• Decision Date: 09 September 1971
• Docket Number: No. 636,636
• Citation: 471 S.W.2d 633
• Parties: J. W. BARFIELD dba J. W. Barfield Asphalt Contractor, et al., Appellants, v. George HENDERSON dba George Henderson Construction Co., Appellee.
• Court: Texas Court of Appeals

Page 633

471 S.W.2d 633

J. W. BARFIELD dba J. W. Barfield Asphalt Contractor, et al., Appellants, v. George HENDERSON dba George Henderson Construction Co., Appellee.

No. 636.

Court of Civil Appeals of Texas Corpus Christi.

Sept. 9, 1971.

Rehearing Denied Oct. 21, 1971.

Bonner & Ball, Nile E. Ball, Harlingen, for appellants.

Nielsen & McCormick, Alvin F. McCormick, Raymondville, for appellee.

OPINION

BISSETT, Justice.

This case involves the rights of several claimants to funds retained by Willacy County Navigation District, a state governmental authority, pursuant to a public works contract.

J. W. Barfield, d/b/a J. W. Barfield Asphalt Contractor, plaintiff, filed suit against Willacy County Navigation District, George Henderson, d/b/a George Henderson Construction Company, Hanover Insurance Company, Raymondville State Bank, White's Mines and The Roy Klossner Company, defendants, asserting a claim to funds retained and held by Willacy County Navigation District under a public improvements contract with George Henderson Construction Company.

There were no disputed facts. The contract was in writing. It was executed on February 12, 1969, by Willacy County Navigation District, as owner, and by George Henderson Construction Company, as contractor. It provided for the construction of certain improvements to the Port Mansfield Airport in Willacy County, Texas. All work pursuant to the contract was completed during November 1969, and the improvements were accepted by the Navigation District shortly thereafter. The total contract price was $28,437.96. The Navigation District retained $6,853.71 of the contract funds due the contractor.

Hanover Insurance Company executed a 'performance bond' and a 'payment bond' as surety for George Henderson Construction Company, the prime contractor on the project.

Plaintiff was a subcontractor on the project; he sued to recover $2,627.33. White's Mines furnished certain materials to the contractor; its unpaid claim amounted to $1,966.44. The Roy Klossner Company furnished certain equipment to the contractor; it claimed $1,152.02 to be due. The Raymondville State Bank claimed that a sum in excess of $8,000.00 on a note was due it by the contractor.

All defendants other than George Henderson filed answers. The answering defendants who were asserting claims to the retained funds properly set up their claims in their respective pleadings. The Navigation District denied any liability, deposited the retained funds with the clerk of the trial court, and asked that an attorney fee of $250.00 be allowed it, to be paid out of the retained funds.

Plaintiff and the defendants, White's Mines, The Roy Klossner Company and Raymondville State Bank, filed motions for summary judgment on their respective claims.

Hanover Insurance Company did not make any claim to the retained funds, refused to pay any part of the claims asserted by the claimants, and also filed a motion for summary judgment whereby it asked that it be discharged from any liability. The trial court granted the motions for summary judgment filed by Raymondville State Bank and by Hanover Insurance Company. The motions filed by plaintiff and by the defendants, White's Mines and The Roy Klossner Company, were denied. Judgment was rendered and entered, whereby among other holdings, (a) an attorney fee of $250.00 was allowed in favor of the Navigation District and was ordered paid out of the deposit to the attorneys for the Navigation District; (b) the remaining balance ($6,603.71) of the money paid into the registry of the court was awarded to Raymondville State Bank; and (c) all claims against the Navigation District and Hanover Insurance Company were denied.

J. W. Barfield, White's Mines and The Roy Klossner Company have duly and timely perfected an appeal to this Court from that part of the judgment that awards $6,603.71 to the Raymondville State Bank. We affirm.

The sole question presented in this appeal is phrased by appellants in their brief, as follows:

'Does the subject public improvement contract give the subcontractors and materialmen a paramount interest in the retention fund to satisfy unpaid claims as against a bank which has advanced funds to the contractor in the course of work and was assigned the contract payments as security?'

We answer the question in the negative.

The contractor borrowed various sums of money from the Raymondville State Bank in order to obtain funds for operational purposes. Several promissory notes, secured by a security agreement, were executed by the contractor payable to the order of the bank. Financing statements evidencing such security agreement were executed by the contractor, one of which was filed in the office of the County Clerk of Willacy County on March 7, 1969, and another was filed in the office of the Secretary of State on March 10, 1969. Both financing statements gave notice that all moneys due contractor by the Navigation District for work performed under the contract had been assigned to the bank. All of these notes were paid by the contractor except the one dated June 4, 1969, in the original principal sum of $8,000.00, due on July 10, 1969, bearing interest as therein provided, and secured by a security agreement, duly executed by the contractor. Written notice of the assignment of all moneys due the contractor under the contract was given by the bank of the Navigation District on March 5, 1969.

On May 3, 1969, J. W. Barfield entered into a verbal contract with the contractor whereby he agreed to furnish certain material and perform certain services as a subcontractor under the contract. He commenced the work on June 9, 1969, completed the same on June 11, 1969 and submitted his invoice to the contractor on June 12, 1969. The contractor paid him $2,500.00 on June 15, 1969, leaving a balance due of $2,627.33, which was never paid. J. W. Barfield, by letter dated September 2, 1969, notified the Navigation District that he had not been paid. Under letter dated November 5, 1969, he advised Hanover Insurance Company of the balance owed him by the contractor.

White's Mines furnished materials to the contractor on May 26, 1969.

During the interval from April 15 to April 30, 1969, The Roy Klossner Company furnished the equipment to the contractor.

On December 19, 1969, the contractor, George Henderson, notified the Navigation District that he did not have the necessary funds with which to pay the bills then owing by him to creditors who had furnished labor and materials on the project.

Under the terms of the contract, the Navigation District was obligated to make periodic payments to the contractor as the work progressed but was authorized to retain 10% Of the value of the work and materials then incorporated in the improvements or on the job-site as of date of payment. In addition to the 10% Retainage provision of the contract, the Navigation District was also authorized to withhold from such progress payments any sums of money necessary to protect itself in the event the contractor failed to pay promptly the subcontractors and materialmen who furnished labor, services and materials on or to the project. The contract contained a provision whereby the contractor would indemnify, save and hold harmless the Navigation District from all lawful claims of subcontractors and materialmen for services and materials furnished in the course of the construction of the improvements. In the event the contractor failed to pay such bills, the Navigation District had the option to pay the same and to charge contractor's account with any such payment. Final payment was due the contractor between the 30th and the 35th day after certification by the engineer on the project that the contract had been completed in accordance with the contract documents.

Appellants contend that it was the intention of the contracting parties to protect the subcontractors and materialmen by giving them an equitable lien on the retained funds. They argue that their claims are superior to the claim of appellee, who did not furnish labor or materials on the project, but loaned money to the contractor and took as security therefor an assignment of his contract rights to the money due him under the contract.

On the other hand, appellee contends that the appellants did not acquire or perfect any lien, equitable or otherwise, to the retained funds. It further says that none of the appellants complied with any statutory procedure so as to enable them to assert a personal right to the retained funds. Finally, it argues that even if it be held that appellants did perfect some species of lien to the retained funds or did establish some kind of personal right thereto, nevertheless appellee's security interest has priority because it is first in time.

There are two statutes, Article 5472a and Article 5160, Vernon's Ann.Civ.St., that afford protection to persons who furnish labor or materials to a contractor under a prime contract for the construction of public improvements. Although both statutes are designed to insure the payment of all persons who furnish labor or materials on public works contracts, they have a different scope and operation. 47 Tex.Jur.2d, Public Works and Contracts, § 54, p. 513.

Articles 5472a and 5160, were amended by Acts 1959, 56th Legislature, ch. 93, p. 155. Apart from some details not necessary to notice herein, the effect thereof was that after April 27, 1959, the effective date of the amendments, the lien on moneys due the contractor was available to persons who furnish labor and materials to a contractor in the construction of public improvements only if the prime contract did not exceed $2,000.00. Both statutes, as so amended, were in force and effect at all times pertinent to this case.

As amended, Article 5472a provides, in part, that any person furnishing labor or material, etc., to 'any contractor under a prime contract where such prime contract does not exceed the sum of...