Pratt Lumber Co., Inc. v. T.H. Gill Co.

• Decision Date: 26 February 1922
• Docket Number: 404.
• Parties: PRATT LUMBER CO., Inc., v. T. H. GILL CO.
• Court: U.S. Court of Appeals — Fourth Circuit

278 F. 783

PRATT LUMBER CO., Inc., v. T. H. GILL CO.

No. 404.

United States District Court, E.D. North Carolina.

February 26, 1922

H. G Connor, Jr., of Wilson, N.C., for Pratt Lumber Co. and City Nat. Bank of Binghamton, N.Y.

Edwin H. Moody, of Binghamton, N.Y., for receiver.

Rouse &amp Rouse, Dawson, Manning & Wallace, Cowper, Whitaker & Allen and G. G. Moore, all of Kinston, N.C., for intervening creditors.

S Brown Shepherd, of Raleigh, N.C., and John L. Baker, of New York City, for National Surety Co.

CONNOR District Judge.

This cause is ancillary to an original bill filed by plaintiff against defendant company in the District Court of the United States for the Northern District of New York in which, upon the allegation of the original bill and answer, an order was made in said court, July 13, 1920, appointing Douglas V. Ashley receiver of said defendant company, who duly qualified by filing the bond prescribed in said order, and entered upon the discharge of his duties as receiver.

On the 23d day of July 1920, plaintiff filed in the District Court of the United States for the Eastern District of North Carolina a duly certified copy of the original bill and answer, together with a copy of the orders made in said cause by said court, and at the same time filed in said court for the Eastern District of North Carolina an ancillary bill, praying that, upon the facts appearing in said bill and answer, said Douglas B. Ashley be appointed by this court ancillary receiver of said T. H. Gill Company, whereupon this court on said day made an order appointing said Douglas V. Ashley ancillary receiver of said T. H. Gill Company in said district. Said receiver duly qualified as such ancillary receiver, and entered upon the discharge of the duties of said office, all of which will appear by reference to the records of this court in said cause.

At the time said Douglas V. Ashley was appointed receiver of said T. H. Gill Company in the Eastern District of North Carolina, said T. H. Gill Company was engaged in the construction of three highways in the county of Lenoir, state of North Carolina, known as Federal Aid Projects, Nos. 1, 49, 53, and 60, under a contract entered into by and between said T. H. Gill Company and the state highway commission of North Carolina. The work to be performed by said T. H. Gill Company in accordance with the said contract was not, at that time, completed. That said contract was, after his appointment, completed by said receiver under the order of the said court and with the approval and consent of the National Security Company.

Pursuant to the provisions of the contract between the T. H. Gill Company and the state highway commission, the National Security Company, at the request of said T. H. Gill Company, executed a bond as security of said T. H. Gill Company, bearing date January 6, 1920, in the penal sum of $50,000, conditioned that--

The said T. H. Gill Company should, 'in all respects, comply with the terms of the contract and conditions thereunder, * * * complete the work contracted for and save harmless the state highway commission of North Carolina, from any expense incurred through the failure of said contractor to complete the work as specified, or for any damages growing out of the carelessness of said contractor, or its agents or servants, or for any liability for payment of wages due or material furnished said contractor; and should well and truly pay all and every person furnishing material or performing labor in and about the construction of said roadway all and every sum or sums of money due him or them, or any of them, for all such labor and materials for which the contractor is liable.'

At the time said Douglas V. Ashley was appointed receiver of said T. H. Gill Company, in the Eastern District of North Carolina, said T. H. Gill Company was also engaged in the construction of a highway in the county of Lenoir, state of North Carolina, known as the Pink Hill Road, under and pursuant to a contract entered into between the highway commission of Lenoir county and T. H. Gill Company. The work to be performed under said contract was not, at that time, completed.

At the request of said T. H. Gill Company the National Surety Company executed, as surety for said T. H. Gill Company, a bond in the penal sum of $15,000, conditioned that said T. H. Gill Company should 'perform the provisions of said contract for building said road and pay all claims of subcontractors, materialmen, furnishers of equipment or apparatus, foremen and laborers, any or all claims arising from the carrying forward, performing and completing the attached contract. * * * It is expressly understood that this bond shall be for the benefit of the materialmen or laborer having a just claim, as well as for the benefit of the highway commission of Lenoir county and the county.'

At the time of the appointment of said Douglas V. Ashley, receiver, certain persons had, prior to the appointment of said receiver, furnished material and performed labor in and about the construction of the roadways for the construction of which the said contracts were made; there was, at that time, and is now, due certain persons for labor and material aggregating about $12,500.

The contracts between the said T. H. Gill Company and said highway commission provide that payments shall be made for the work once a month up to 85 per cent. of the relative value of the work done as estimated by the engineers in charge, and that, pursuant to such provisions, there has been retained by said highway commission 15 per cent. of the estimated price to be paid for the work performed by said T. H. Gill Company prior to the receivership and 15 per cent. of the agreed price of the work completed by said Douglas V. Ashley under the receivership which sum amounts to approximately $35,000.

Said Douglas V. Ashley, as receiver, has completed the work which said T. H. gill Company agreed and contracted to complete under the terms of said contract, and there is now due him or such parties as may be entitled thereto, the sum of approximately $35,000, in addition to certain other sums, the amount of which is not now ascertained, which sum was in part for work done under the receivership and in part for the percentages retained out of each monthly estimate of work done prior to the receivership.

In respect to the claim of D. Ferris and A. W. Wooten, hereinbefore set forth, the contract entered into between said Ferris and Wooten and said T. H. Gill Company, upon which said claim accrued was in writing, bearing date May 21, 1920. The seventh paragraph thereof contained the following language:

'The said first party (T. H. Gill Company) shall pay unto the second parties (Ferris and Wooten) the amounts to become due thereon for the performance of the above specified work under this contract on the day succeeding that day each month when the state highway commission shall pay unto the first party herein its estimate covering the work herein provided for, but in no month shall the payment to the second parties herein be later than the 16th day of the month; provided the first party herein may withhold 15 per cent. of each monthly payment becoming due the second parties until the work provided for is completed and accepted by the state highway commission, treating each project separately.'

The aforesaid creditors of the said T. H. Gill Company, furnishing material and performing labor as hereinbefore set forth, have intervened in this cause, and ask the court to adjudge that, in respect to their said claims, they are entitled to a priority in the distribution of the amounts due the receiver over and in preference to the rights and claims of the general creditors of T. H. Gill Company.

On July 20, 1921, the National Surety Company filed in the court a motion for an order directing the receiver to hold certain funds in North Carolina, and also that an order be made for the deposit of sufficient funds received or to be received from the state highway commission by said receiver to cover the claims for labor and material as found herein.

The Pratt Lumber Company, plaintiff herein, and the City National Bank of Binghamton, N.Y., general creditors of T. H. Gill Company, intervened for the purpose of resisting the claims of the intervening creditors of T. H. Gill Company and the National Surety Company, insisting that said creditors have no lien upon, or priority in, the distribution of the amounts received by said receiver or to be received from said highway commissions on account of said contracts or the work performed thereunder.

An order was made referring to Joseph B. Cheshire, Jr., Esq., as special master, the questions of fact raised by the several matters in controversy. The foregoing statement is based upon his findings of fact and the agreement submitted by the parties and the intervening petitioners.

The first question, in order, is presented by the claim of the creditors who furnished material and performed labor under contracts with T. H. Gill Company in the construction of the roadways pursuant to the terms of the contract between said T. H. Gill Company and the highway commissions as hereinbefore set forth.

It is manifest that the rights of such creditors, in respect to liens, are dependent upon and fixed by the statute law of North Carolina. The contract was made and was to be performed in this state. Whatever rights, therefore, in respect to a lien upon the property in the construction of which, or furnishing materials or performing labor thereon, said creditors may have, if any, is dependent upon the statutes of this state.

The lien provided for work and material, or the laborers and materialmen's lien, is secured by the statutes...