Bennett v. Fidelity & Deposit Co. of Maryland

• Decision Date: 29 October 1982
• Docket Number: No. 13568,13568
• Citation: 98 Nev. 449,652 P.2d 1178
• Parties: J. Lamarr BENNETT and Anilde A. Bennett, Appellants, v. FIDELITY & DEPOSIT COMPANY OF MARYLAND, Respondent.
• Court: Nevada Supreme Court

Page 1178

652 P.2d 1178

98 Nev. 449

J. Lamarr BENNETT and Anilde A. Bennett, Appellants, v. FIDELITY & DEPOSIT COMPANY OF MARYLAND, Respondent.

No. 13568.

Supreme Court of Nevada.

Oct. 29, 1982.

Nitz & Schofield, James H. Walton, Las Vegas, for appellants.

Jack J. Pursel, Las Vegas, for respondent.

OPINION

PER CURIAM:

This appeal results from a judgment awarding $9,428 to respondent under a construction contract. We affirm.

In 1975, appellants entered into a contract with Benefield Construction Company, Inc. (Benefield), wherein Benefield agreed to build a Pizza Inn Restaurant for the sum of $94,280. The agreement provided for a 10% retainage of the contract price ($9,428), to be paid after final inspection and the issuance of lien waivers to appellants. In addition, respondent Fidelity & Deposit Company of Maryland (Fidelity) and Benefield entered into a labor and material payment bond as well as a performance bond. Both of these bonds inured to the benefit of appellants to assure that all claims for labor and material would be paid and that the contract would be performed.

By December, Benefield had substantially performed its obligations under the construction contract. However, a dispute arose between Bennett and Benefield as to the total amount of the latter's entitlement. Benefield claimed, and appellants denied, that an additional $22,716.44 was owed for "extras." Benefield thereafter filed a mechanic's lien against the property for the cost of the extras. Several subcontractors also filed mechanic's liens against appellants' property for sums they insisted were due them but had not been paid by Benefield.

Eventually one of the subcontractors brought an action against Benefield and Bennett alleging non-payment for goods supplied. Appellants filed their answer together with a third party complaint against Fidelity. Appellants also cross-claimed against Benefield for indemnity and to have Benefield's claims for the extras as well as its mechanic's lien declared to be discharged and released. Appellants obtained a default judgment against Benefield which disposed of the claim for extras and the mechanic's lien. In addition, the district court awarded appellants $4,000 in attorney's fees. Thereafter, Fidelity continued to pay and discharge all lien claims against the property, the last of which was not satisfied until 1979. After the lien claims were resolved, and without knowledge of the $4,000 judgment, Fidelity made an offer of judgment in the amount of $1,878.95 to cover appellants' attorney's fees. The offer was accepted by appellants. Fidelity paid the $1,878, and then demanded the 10% retainage of $9,428 held by appellants. After appellants refused to relinquish the money, Fidelity brought suit to recover the retained amount. The district court entered judgment against appellants for the entire amount of the retainage.

On appeal, appellants contend that Fidelity is foreclosed from collecting the retainage by reason of the default judgment entered against Benefield. It is further argued that any claim for the 10% is barred by the doctrines of res judicata and collateral estoppel and should have been brought as a compulsory counterclaim in the prior action between the parties. Appellants' positions are without merit.

Appellants' argument, that the default judgment entered against Benefield adjudicated any claim that Benefield, and, by right of subrogation, Fidelity, had against appellants for the retained amount, is not supported by the record. Our review of the record reflects that the default judgment dealt only with Benefield's mechanic's lien and its claim for $22,000 worth of extras. The default judgment had nothing whatsoever to do with the amount retained by appellants pursuant to the written contract. We conclude, therefore, that Fidelity is entitled to the amount retained by appellants since the subrogation right attaches to retained percentages. "A surety who completes a contract or satisfies the claims of laborers and materialmen has established a subrogation right to all funds, progress payments, or retained percentages, which are in the hands of the contractee." Reliance Insurance Co. v. Alaska State Housing Authority, 323 F.Supp., 1370, 1373 (D.C.Alaska 1971). In addition, if we were to accept appellants' argument, appellants would be unjustly enriched in that they have already accepted the completed building without having paid 10% of the contract price. Since equitable principles apply to subrogation, we cannot permit such enrichment. See, May Trucking Co. v. International Harvester Co., 97 Idaho 319, 543 P.2d 1159 (1975).

Appellants also contend that Fidelity's claim for the retained 10% is barred by the doctrines of res judicata and collateral estoppel. Bernhard v. Bank of America Nat. Trust & Sav. Ass'n, 19 Cal.2d 807, 122 P.2d 892 (1942), is a landmark case on the doctrine of res judicata. We approved the Bernhard decision for Nevada in the case of Paradise Palms v. Paradise Homes, 89 Nev. 27, 505 P.2d 596 (1973), cert. denied, 414 U.S. 865, 94 S.Ct. 129, 38 L.Ed.2d 117 (1973). In the latter case, we held that the Bernhard decision is "equally...