Page Trust Co. v. Carolina Const. Co.

• Decision Date: 28 April 1926
• Docket Number: 425.
• Parties: PAGE TRUST CO. et al. v. CAROLINA CONST. CO. et al.
• Court: North Carolina Supreme Court

132 S.E. 804

191 N.C. 664

PAGE TRUST CO. et al. v. CAROLINA CONST. CO. et al.

No. 425.

Supreme Court of North Carolina

April 28, 1926

Appeal from Superior Court, Anson County; McElroy, Judge.

Action by the Page Trust Company, the Bank of Hamlet, and others against R. H. Halyburton, trading as the Carolina Construction Company, and others. From a judgment plaintiffs, other than the Page Trust Company and Bank of Hamlet, appeal. Affirmed.

Unpaid laborers and materialmen have no lien on school building nor on balance due contractor, which balance is contractor's property, where contract does not bind contractor to pay them.

Fred J Coxe and H. P. Taylor, both of Wadesboro, B. F. McLeod, of Buie's Creek, C. W. Tillett, Jr., of Charlotte, Frank L Dunlap, of Wadesboro, D. B. Smith, of Charlotte, Williams & Williams, of Sanford, McLendon & Covington, of Wadesboro, and Manning & Manning, of Raleigh, for appellants.

Stewart McRae & Bobbitt, of Charlotte, for American Surety Co.

Gibbons & Le Grand, of Hamlet, for Bank of Hamlet.

ADAMS J.

On May 16, 1922, the Carolina Construction Company contracted with the board of trustees of the Wadesboro graded school to provide all the material and perform all the work necessary for the erection and completion of a school building in Wadesboro, and a few days thereafter executed a penal bond, with the American Surety Company of New York as surety, conditioned to indemnify the board of trustees against any loss or damage directly arising by reason of the contractor's failure to perform his contract. Owing to financial difficulties the contractor made default, and with his consent and with that of the surety company the board of trustees took over and completed the work at its own expense. In addition to the amount previously paid the contractor, the trustees expended $5,754.15, and after doing so had in their hands as the remainder of the retained percentage the sum of $4,431.08. Several creditors sued the contractor, the surety company, and the board of trustees, on their respective accounts for labor and material; and upon issue joined the cause was referred to R. C. Lawrence as referee, with instructions to hear the evidence and to report his findings of fact and his conclusions of law. The referee made his report in compliance with the order of reference, and the appellants filed exceptions. The exceptions were overruled by the trial judge, who affirmed the referee's findings of fact and conclusions of law. The appellants again excepted and appealed. The ultimate object of the action, which was treated as a creditors' bill, is the recovery of judgments against the surety on the contractor's bond.

The first conclusion of law is this:

"As the contract does not require the contractor to pay for labor and material, and as the bond does not upon its face extend to cover the claims of laborers and materialmen, there is no liability against the surety company."

This, we think, is the correct conclusion. The bond of the surety company was executed in May, 1922. It was not conditioned for the payment of all labor done on and material and supplies furnished for the building, as required by C. S. § 2445, but only to indemnify the obligee, the board of trustees, against loss or damage; and the bond is not conclusively presumed to have been given in accordance with the provisions of section 2445 as amended, because the amendment which writes this provision into every bond given by any municipal corporation for the erection, repairing, or altering of a public building did not become effective until February 17, 1923. Pub. Laws 1923, c. 100. The conclusion reached by the referee and by the judge is sustained by Morganton Mfg. & Trading Co. v. Andrews, 81 S.E. 418, 165 N.C. 285, Ann. Cas. 1916A, 763; McCausland v. Construction Co., 90 S.E. 1010, 172 N.C. 708; Warner v. Halyburton, 121 S.E. 756, 187 N.C. 414; Ideal Brick Co. v. Gentry (N. C.) 132 S.E. 800, at this term. See, also, Noland Co. v. Trustees, 129 S.E. 577, 190 N.C. 250. In Ingold v. Hickory, 101 S.E. 525, 178 N.C. 614; Supply Co. v. Lumber Co., 76 S.E. 273, 160 N.C. 428, 42 L. R. A. (N. S.) 707; Gastonia v. Engineering Co., 42 S.E. 858, 131 N.C. 363, and Hill v. Surety Co., 26 S.Ct. 168, 200 U.S. 197, 50 L.Ed. 437, cited by the appellants, there were stipulations for the payment of debts contracted for labor and material, and herein lies the distinction pointed out in Warner v. Halyburton, supra.

The appellants say that there was error in holding that the laborers and materialmen had no lien on the school building, or on the fund remaining after the trustees had completed the building, and in holding that this fund was the property of the contractor or his assignees. We do not concur, for all doubt seems to have been resolved against this position in a number of our decisions. Noland Co. v. Trustees, supra; Warner v. Halyburton, supra; Ingold v. Hickory, supra; Scheflow v. Pierce, 97 S.E. 167, 176 N.C. 91; Hutchinson v. Com'rs, 90 S.E. 892, 172 N.C. 844; Hall v. Jones, 66 S.E. 350, 151 N.C. 419.

On October 24, 1922, the contractor borrowed from the Bank of Hamlet $7,000, and wrote upon the face of his note, "To secure this note we assign $7,000 of the amount due us by Wadesboro high school." This money was applied in payment of work done and material used in the construction of the building. The Bank of Hamlet indorsed the note and had it rediscounted by the Bank of Wadesboro, which thereby became a holder in due course. The contractor afterwards made certain payments on the note, and, upon his failure to pay the remainder due, the Bank of Hamlet took up the note and reacquired title thereto, with the usual rights and remedies. Thereafter the...