East Atlanta Bank v. Limbert

• Decision Date: 16 January 1941
• Docket Number: 13542.
• Citation: 12 S.E.2d 865,191 Ga. 486
• Parties: EAST ATLANTA BANK v. LIMBERT et al.
• Court: Georgia Supreme Court

12 S.E.2d 865

191 Ga. 486

EAST ATLANTA BANK v. LIMBERT et al.

No. 13542.

Supreme Court of Georgia

January 16, 1941

Syllabus by the Court.

1. A petition by a subcontractor to foreclose a claim of lien for labor and material furnished, in a joint suit against the contractor and the owner, is not subject to general demurrer because it seeks recovery of a gross sum for work and materials, and fails to disclose what part of the sum is for materials furnished and what part is for labor.

2. Where land is sold under a power of sale contained in a security deed, and the sale produces a sum in excess of the debt secured by the deed, such surplus funds retain the character of real estate in so far as junior lienholders whose liens were divested by the sale are concerned; and a materialman may maintain a suit against the contractor, the owner of the property improved, and such holder of surplus funds, to foreclose his claim of lien and subject the surplus funds thereto.

3. An amendment to a petition to foreclose a lien in equity designated as a new count, in which the petitioner seeks to recover damages sustained by reason of the fraud of defendants, alleges a new and distinct cause of action, and should be dismissed on demurrer.

Don A Limbert, trading as Don A. Limbert Heating & Plumbing Company, filed his petition against Ralph Morgan, M. L Spratlin Company, Inc., and the East Atlanta Bank, seeking to perfect and enforce a materialman's lien against certain funds alleged to be in the possession of that bank. The facts as alleged are substantially as follows: On February 18, 1939, Ralph Morgan conveyed to the bank two lots of land located in a subdivision known as Emory Acres, by separate loan deeds, each being given to secure the sum of $1,254. Thereafter Morgan contracted with M. L. Spratlin Company for the construction of a residence on each lot. The plaintiff contracted with the M. L. Spratlin Company to install the heating and plumbing equipment in the houses for $290 each. He installed the equipment according to his contract, and within ninety days thereafter had his claim of lien against the two lots filed and recorded in the office of the clerk of the DeKalb superior court. M. L. Spratlin Company completed the houses, and each house and lot had a market value of $4,500 or more, or approximately $2,000 more than the actual cost of the construction. Morgan failed to sell and dispose of the houses, and the bank exercised the power of sale in the security deeds and sold the property. One of the houses were sold for $3,090.14, and the other was sold for $3,179.74, a total of $6,269.88. At the time of the sale the indebtedness of Morgan to the bank was approximately $2,508. After deducting this amount, there remained in the hands of the bank a balance of approximately $3,761.88. After deducting the expenses of the sale, there should have remained in the hands of the bank, as attorney in fact, approximately $3,700; and said sum, or a substantial part thereof, is now in the hands of the bank. At the time of the foreclosure sales the plaintiff's lien was of record, and the bank had actual notice of this lien and of the fact that the plaintiff had not been paid. He charges on information and belief that the M. L. Spratlin Company is insolvent. In view of the facts the lien was divested from the real estate by the sale under the loan deeds, and in equity attached to the surplus fund which came into the hands of the bank from the sales; and the plaintiff is entitled to payment of his claim from such surplus fund. He prayed for judgment of $580 against M. L. Spratlin Company, and that it be decreed that such judgment is a lien on the fund in the hands of the bank from the foreclosure sales, over and above the amounts due the bank under the loan deeds, and that such lien be established and foreclosed.

By an amendment designated as count 2, the plaintiff alleged substantially the same facts as before stated, and made the following additional allegations: The loan deeds from Morgan to the bank were made for the purpose of securing money advanced by the bank for meeting the pay roll for labor in the construction of houses on the lots, which were unimproved at the time of the execution of the loan deeds. Before October 7, 1939, the bank had advanced to Morgan a total of $2,129 on one of the lots and $2,304 on the other. Some of the material used in the construction of the houses was purchased by M. L. Spratlin Company from Williams Brothers Lumber Company. Morgan gave notes to the lumber company for the amount of the material used; and this company failed to file its lien against the real estate within the time allowed by law. The lumber company was a customer of the bank during the time the houses were being built and during the month of October, 1939. On or about October 7, 1939, Ralph Morgan and East Atlanta Bank and Williams Brothers Lumber Company conspired and entered into an unlawful agreement whereby the bank was to advance to Morgan a total of $1,654.39 on the two lots described in the security deeds, which amount was to be deposited in the bank to the credit of Morgan and to be paid out by the bank on two checks signed by Morgan, payable to the lumber company, dated August 22, 1939. The funds were so advanced to Morgan and paid out to the lumber company on October 7, 1939. The bank intended to institute foreclosure proceedings at the time the funds were so advanced, and the funds were advanced for the purpose of preventing the lumber company from sustaining a loss. The effect of the agreement was that the lumber company received payment for its material for which it had no lien, whereas in the absence of such agreement the funds would have been subject to an action by the plaintiff to collect the amount due him. The acts of defendants and Williams Brothers Lumber Company were a fraud upon the plaintiff. Morgan is insolvent. The plaintiff prayed that he 'have judgment against the defendants East Atlanta Bank and Ralph Morgan for the amount he has been damaged as a result of the agreement hereinabove set forth, namely the sum of $590, and for such other and further relief as to the court may seem proper.' Copies of the security deeds from Morgan to the bank showed that each was given to secure a debt of $1,254, 'or any other present or future indebtedness or liability' of Morgan to the bank.

The East Atlanta Bank demurred to the petition, on the grounds, that it set out no cause of action against the bank; that there was a misjoinder of parties defendant; and that the plaintiff had an adequate remedy at law. It demurred specially to certain paragraphs of the petition, and to the amendment, on the ground, among others, that it set up a new and distinct cause of action, 'in that this defendant was made a party defendant in the first suit on an idea of equitable garnishment, and the new cause sets out fraud which would be an action ex delicto.' The court overruled the demurrers, and the defendant excepted.

Thos E McLemore, of Atlanta, for...