Emanuel v. Underwood Coal & Supply Co.

• Decision Date: 10 June 1943
• Docket Number: 1 Div. 182.
• Citation: 14 So.2d 151,244 Ala. 436
• Court: Alabama Supreme Court
• Parties: EMANUEL et al. v. UNDERWOOD COAL & SUPPLY CO.

14 So.2d 151

244 Ala. 436

EMANUEL et al. v. UNDERWOOD COAL & SUPPLY CO.

1 Div. 182.

Supreme Court of Alabama

June 10, 1943

Vickers and Leigh and Norvelle R. Leigh, III, all of Mobile, for appellants.

Wm G. Caffey, of Mobile, for appellee.

LAWSON Justice.

The appellee, Underwood Coal and Supply Company, filed its bill in equity against the appellants, Nick and Pauline Emanuel and against the Security Federal Savings and Loan Association of Mobile to enforce a lien for building materials furnished by it. Demurrers filed by both respondents were overruled. From the action of the trial court in overruling their demurrer the appellants have appealed. No appeal was perfected by respondent Security Federal Savings and Loan Association.

The averments of the bill, in part, are as follows:

1. That Nick and Pauline Emanuel owned a vacant lot in Mobile and with the purpose and intent of constructing a dwelling and other improvements thereon entered into a contract with the respondent Security Federal Savings and Loan Association of Mobile (hereafter called Security Federal), by which they agreed to borrow from Security Federal the sum of $3,600 to be used in the construction of the said building and improvements, with the understanding and agreement that the said owners of the lot would agree to execute a mortgage thereon to include also buildings and improvements when constructed thereon, to secure the payment of the loan by Nick and Pauline Emanuel; that the mortgage on the lot to secure said loan had been executed.

2. That as a part of the agreement for the loan, it was understood and agreed between the owners of the lot, Nick and Pauline Emanuel, that the monies so loaned to them should be retained by the Security Federal for the purpose of paying the costs of construction of the dwelling and improvements. That such payments were only to be made as the building and improvements reached a specified stage of completion and then only in specific installments when evidence was presented to the Security Federal by receipted bills or otherwise that all indebtedness for labor and materials furnished by the contractor in the construction of the dwelling and improvements to the date of such payments had been paid by the contractor so as to protect said owners, Nick and Pauline Emanuel, against the accrual of mechanics' and materialmen's liens for labor and material furnished and to secure the payment of laborers and materialmen furnishing labor and materials in the construction of said building and improvements.

3. That the owners, Nick and Pauline Emanuel, employed Better Homes Inc., to construct said building and improvements. That the complainant notified Security Federal, which was acting as agent for the owners, that it had been requested by the contractor, Better Homes, Inc., to furnish materials for the construction of said building and improvements and that they had been informed that Security Federal had loaned the owners (appellants) the money with which to construct said building and improvements and that it (complainant) desired to know where it would receive payment for the materials so furnished. That in response to said inquiry, complainant was informed by Security Federal that it had made such loan; that it had control of the disposition thereof; that it would pay the contractor, Better Homes, Inc., no money out of said fund unless and until the contractor, Better Homes, Inc., presented receipted bills showing the payment of all of the labor and material claims and would issue no checks to the contractor except upon receipts showing the payment by it of such labor and material bills.

4. That Security Federal did not withhold payments of installments to the contractor until the building and improvements had reached the stage of completion at which payments could properly be made under the loan contract, but made payments in advance of the completion of the building and improvements to the requisite stage and in larger amounts than it was authorized to make and made such payments without requiring any evidence, by receipted bills or otherwise, that all indebtedness for labor and material furnished the contractor in the construction of said building and improvements had been paid by the contractor; that as a result of such conduct on the part of Security Federal the indebtedness for labor and material so furnished on the order of the contractor for and used in the construction of said building and improvements, including the indebtedness to the complainant for $2,005.38 worth of material furnished to be used in, and in fact used in, the construction of said building and improvements, remained unpaid at the time the contractor, Better Homes, Inc., became insolvent and discontinued its business, including the performance of said construction contract; that Security Federal, in violation of its contract with the owner and in violation of its duty to see that labor and material claims had been and were being paid by the contractor, and in violation of its promise to the complainant, without which the complainant would not have furnished material to said contractor for the construction of said building and improvements, issued the checks and made payments to the contractor on its mere representation that it needed, and did use, said money to pay labor and material bills for labor and material furnished in the construction of said building and improvements and without requiring receipts or other evidence of payment; that such payments by Security Federal were unauthorized and did not constitute valid payments from the funds so held by the said Security Federal in trust and that respondents are estopped as against the complainant, who claims that such payments have been made, and are estopped as against the complainant to deny that there was a balance due the contractor on February 6, 1942, which would and should have been subject to a lien for materials.

5. That complainants on, to wit, the 6th day of February, 1942, gave notice in writing to the owners, Nick and Pauline Emanuel, that it claimed a lien on the building and improvements on said property and also filed on that date its duly verified claim to a lien on said building and improvements in the probate court of Mobile County, Alabama.

The bill prayed for a decree declaring that the respondents were estopped as against the complainant from claiming that the payments were made as alleged in the bill and estopped to deny that the amounts so paid were not in the hands of Security Federal as part of the unpaid balance due the contractor at the time the said notice was given to the owner and prayed that the amounts improperly paid out as alleged in the bill be taken and treated as if they constituted a portion of the unpaid balance due the contractor and that the court decree the amount thereof. The bill further prays that the court decree that the complainant has a lien on the building and improvements on the lot, to the extent of complainant's claim or to the extent of the unpaid balance which respondent, Security Federal, should have on hand and that it be declared that the said lien of complainant is prior to the lien of the mortgage executed by Nick and Pauline Emanuel to Security Federal and that the lien be foreclosed and the building and improvements sold to satisfy the same.

In the alternative, the bill prays that if the complainant is not entitled to the relief sought as above indicated, that the court decree that it is equitably entitled to the equity of...