Lee Turzillo Contracting Co. v. Cincinnati Metropolitan Housing Authority

• Decision Date: 29 March 1967
• Docket Number: No. 40140,40140
• Citation: 225 N.E.2d 255,39 O.O.2d 3,10 Ohio St.2d 5
• Court: Ohio Supreme Court
• Parties: , 39 O.O.2d 3 LEE TURZILLO CONTRACTING CO., Appellee, v. CINCINNATI METROPOLITAN HOUSING AUTHORITY; Frank Messer & Sons, Inc., Appellant.

Page 5

10 Ohio St.2d 5

225 N.E.2d 255, 39 O.O.2d 3

LEE TURZILLO CONTRACTING CO., Appellee, v. CINCINNATI METROPOLITAN HOUSING AUTHORITY; Frank Messer & Sons, Inc., Appellant.

No. 40140.

Supreme Court of Ohio.

March 29, 1967.

Syllabus by the Court

1. Section 1311.26 et seq., Revised Code (in effect prior to September 30, (1963), afford a species of garnishment to protect a subcontractor, laborer or materialman against the risk of loss of payments due him should such payments reach his principal contractor in whose hands they may be subject to the creditors or caprice of the latter.

2. Compliance with Section 1311.26, Revised Code, constitutes a 'stop notice' to the owner by virtue of Section 1311.28, Revised Code, to prevent the payment of moneys due to the principal contractor; and a subcontractor, laborer, or materialman thereby secures an assignment pro tanto of the moneys remaining due from the owner to the principal contractor, with the right to control and direct its payment to himself. The office of Section 1311.31, Revised Code, is to provide a method for determining the amount of moneys to which a subcontractor, laborer or materialman is entitled or the extent of the pro tanto assignment.

3. If, under Section 1311.31, Revised Code, a principal contractor fails to manifest an 'intention to dispute' the claim, he assents to its correctness, but not to its payment without proof of satisfactory performance.

4. Under Section 1311.32, Revised Code, a subcontractor, laborer or materialman is not entitled to recover the amount due him in a direct action against an owner until the correctness of his claim and the performance of the work in accordance with his contract have been established.

5. Where, under Section 1311.31, Revised Code, a principal contractor assents to the correctness of a claim by failing to manifest in intention to dispute the same, a subcontractor acquires no right to have the moneys held by the owner, with whom the subcontractor is not in privity, applied to his claim against the principal contractor under Section 1311.32, Revised Code, until the latter is afforded an opportunity to assert any defense it may have against the subcontractor, except as to the correctness of the amount and value of the claim.

Lee Turzillo Contracting Company (Turzillo) had a subcontract with Frank Messer and Sons, Inc. (Messer), to install concrete pilings for a building to be erected under a general contract between Messer and the Cincinnati Metropolitan Housing Authority (Metropolitan). That subcontract called for a firm price of $112,000. For reasons not germane to this appeal, Turzillo was ordered from the job before the completion of his contract.

After a period of negotiations between all the parties relative to payment to Turzillo for its work prior to termination and payment of Messer for completing the pilings, Turzillo, on February 26, 1962, pursuant to Section 1311.26, Revised Code, filed with Metropolitan its sworn and itemized statement of the amount and value (totaling $49,034.67) of its labor performed and material furnished on the job. A copy of that statement was transmitted to Messer pursuant to Section 1311.31, Revised Code. Within five days of Messer's receipt of that copy, Messer notified Metropolitan by a letter containing the following:

'We acknowledge receipt of your registered letter of February 28, 1962, enclosing thermofax copy of letter received by you from the Lee Turzillo Contracting Company dated February 26 and sworn statement from them listing the amount of their claims for piling work on the above job.

'This should not come as a surprise to you for it flows from your letter dated October 25, 1961, wherein you ordered termination of the Turzillo contract.

'We have tried for weeks to resolve this and have not yet had any word from you as to your position in this matter.'

Thereafter, Metropolitan continued to withhold from both Messer and Turzillo, out of moneys due from it to Messer, any payment of the amount claimed. Thirteen months later, Turzillo filed this action in the Court of Common Pleas of Hamilton County against the two other parties.

On Turzillo's motion, that court granted summary judgment in its favor against both defendants for the amount claimed, on the ground that the notice of Messer, as quoted herein, did not express an 'intention to dispute such claim.' An appeal to the Court of Appeals by both judgment debtors resulted in an affirmance of the judgment of the trial court. From that judgment of the Court of Appeals, Messer is the sole appellant before this court.

Don Burkholder, Cincinnati, and Fred H. Zollinger, Canton, for appellee.

Taft, Stettinius & Hollister, Nicholas L. White and David W. Matthews, Cincinnati, for appellant.

SCHNEIDER, Judge.

Jurisdiction of this appeal was accepted for the reason that the operative effect of the controlling legislative enactments, although of long standing, has never received more than the cursory attention of this court. See State ex rel. Nixon v. Merrell, 126 Ohio St. 239, 185 N.E. 56; 127 Ohio St. 72, 186 N.E. 806.

Portions of the statutes (in effect prior to amendments effective September 30, 1963) pertinent to the issues here involved and to their resolution read as follows:

'Section 1311.26. Any subcontractor * * * who has performed labor or furnished material, * * * who is performing labor or furnishing material, * * * or is about to perform labor or furnish material, * * * for the construction * * * of * * * (a) public building provided for in a contract between * * * (a) public authority and a principal contractor, and under a contract between such subcontractor * * * and a principal contractor * * * at the time be beginning to perform such labor * * * or at any time, not to exceed four months from the performance of the labor or the delivery of the * * * material, may file with the (public authority) * * * a sworn and itemized statement of the amount and value of such labor performed, and to be performed, (and) material * * * furnished * * *.'

'Section 1311.28. Upon receiving the notice required by section 1311.26 of the Revised Code, such * * * public authority * * * shall detain in * * * (its) hands all subsequent payments from the principal (contractor) * * * to secure such * * * (claim).'

'Section 1311.31. The (public authority), * * * upon the receipt of the statement referred to in section * * * (1311.26) of the Revised Code, shall, or the lien claimant (subcontractor) * * * in the name of such * * * (public authority) may, furnish the principal contractor * * * with a copy thereof, within five days after receiving it. If such principal (contractor) * * * fails within five days after such receipt by him, to notify, in writing, such * * * (public authority) of his intention to dispute such claim, he has assented to its correctness. Thereupon such subsequent payment shall be applied by such * * * (public authority) pro rata, upon such claim, and the amounts, when due, of such claim or estimates as have been meanwhile filed by other subcontractors, * * * and assented to or adjusted as provided for in sections 1311.01 to 1311.68, inclusive, of the Revised Code * * *.'

'Section 1311.32. If within five days after his assent to * * * any claim, a head contractor * * * fails to pay to the subcontractor * * * the amount thereof and costs incurred, the * * * (public authority) when due, shall pay the whole or a pro rata amount thereof, as provided in sections 1311.30 and 1311.31 of the Revised Code, out of payments subsequently falling due. On * * * (its) failure to do so, within ten days thereafter, the subcontractor * * * when due, may recover against the * * * (public authority) in an action for money had and received, the whole or a pro rata amount of his claim or estimate, not exceeding in any case the balance due to the principal contractor.' (Emphasis supplied.)

In granting summary judgment against Messer on its finding that Messer's letter of notice did not express an 'intention to dispute' Turzillo's claim, the trial court necessarily considered that single fact as constituting, under Sections 1311.31 and 1311.32, Revised Code, a complete truncation of all of Messer's rights against Turzillo. This view is entirely too severe upon the party against whom the statute was employed, and its liberality in favor of the party benefited places the law far beyond he reach of the purpose sought to be accomplished.

We regard the statutes under consideration as affording a species of garnishment to protect the subcontractor against the risk of loss of the payments properly due him should they reach his principal contractor in whose hands they may be subject to the latter's creditors or to his own caprice. (It is here noted that the general statutes relating to attachment and garnishment (Section 2715.01 et seq., Revised Code) would not provide the remedy apparently intended by the Legislature in enacting Section 1311.26 et seq., Revised Code. The former are generally applicable upon a suggestion of the contract debtor's fraudulent intent to hinder the collection of the debt by absence or abscondment, and, in all but several instances, require a bond in double the amount of the property to be seized. Manifestly, they would not be adequate to protect a construction subcontractee under a contract which ordinarily provides for periodic payments as the work progresses.)

The conclusion we reach is required if equal weight is to be accorded to every feature of the statutes and if conflict is to be avoided and a balance maintained between two precepts, viz., that remedial laws, on the one hand, are to be liberally construed and that statutes purporting to confer a substantive right in derogation of common law, on the other, will be resolved against one claiming their benefits. Robert V. Clapp Co. v. Fox, 124 Ohio St. 331, 178 N.E. 586; American Guaranty Co. v. Cliff Wood Coal & Supply...