Sutton Co. v. Wise Contracting Co.

• Decision Date: 16 January 1956
• Docket Number: No. 4449,4449
• Citation: 90 S.E.2d 805,197 Va. 705
• Court: Virginia Supreme Court
• Parties: SUTTON COMPANY, INCORPORATED v. WISE CONTRACTING COMPANY, INC., AND JAMES LEES AND SONS COMPANY. Record

Page 805

90 S.E.2d 805

197 Va. 705

SUTTON COMPANY, INCORPORATED v. WISE CONTRACTING COMPANY, INC., AND JAMES LEES AND SONS COMPANY.

Record No. 4449.

Supreme Court of Appeals of Virginia

January 16, 1956.

Christian, Barton, Parker & Boyd and Richard H. Catlett, Jr., for the appellant.

Williams, Mullen, Pollard & Rogers and Charles S. Glasgow, for the appellees.

JUDGE: SMITH

SMITH, J., delivered the opinion of the court.

This suit was instituted by C. W. Tate, a subcontractor, and his assignee, Sutton Company, Incorporated, against Wise Contracting Company, Incorporated, a contractor, and James Lees and Sons Company to enforce a mechanics' lien asserted by the subcontractor against the property of Lees. C. W. Tate will be referred to as Tate; Sutton Company, Incorporated, as Sutton; Wise Contracting Company, Incorporated, as Wise and James Lees and Sons Company as Lees. The case was heard on the bill of complaint as amended, certain special pleas of Wise and Lees and certain stipulations of counsel. The trial court in its final decree sustained the special pleas and dismissed the amended bill. To this decree of dismissal an appeal was granted Sutton, which is the sole appellant here.

In their original bill, Tate and Sutton alleged that on or about May 1, 1953, Tate entered into a contract with Wise that in consideration of $21,920.00 he would perform certain work in and around a spinning mill that Wise had contracted to construct for and on the land of Lees in the town of Glasgow; that to perform his contract, it became necessary for Tate to rent excavating machinery from Sutton and that in order to secure payment of the rental, Tate 'made an assignment of the amounts Wise would owe him in the future because of work he was to perform on the said job, which assignment was acknowledged by Lee Paschall, President of Wise Contracting Company, Incorporated, in a letter to Sutton Company, Incorporated, dated May 28, 1953.' The bill further alleged that on or about October 16, 1953, Wise made a payment to Sutton in the amount of $6,394.64; that on November 25, 1953, Wise paid Tate $4,306.21 by meeting Tate's payroll; and that there is still due and owing Tate from Wise the sum of $15,328.15, 'of which amount the sum of $5,748.16 is due the respondent Sutton Company, Incorporated, assignee of C. W. Tate as is more clearly shown in the itemized account attached hereto and made a part of this Bill.' The itemized account of Tate with Sutton shows that the rental of Sutton's machinery by Tate extended from May 21 to November 12, 1953. The bill prayed that the property of Lees be sold to satisfy the claims of Tate and Sutton in the sum of $15,328.15.

In its answer Wise alleged that Tate had defaulted under his subcontract; that certain payments totaling $13,391.18, including a payment of $6,394.64 to Sutton on account of equipment rentals, had been made by Wise to or on behalf of Tate prior to his default; and that the cost to Wise in completing Tate's work was more than $8,000.00 in excess of what would have become due Tate if he had fully performed his work. Lees in its answer stated that it was not informed as to the status of affairs between Wise and Tate and asked for proof of the claim asserted.

In addition to their answers, Wise and Lees filed separate special pleas in which they alleged that Tate undertook his contract with Wise without having registered as a contractor under the provisions of Code, §§ 54-113 through 54-145; that the contract was therefore illegal and neither Tate nor his assignee, Sutton, could maintain this suit to enforce the asserted claims arising under the contract.

Subsequent to the filing of these pleas Sutton twice amended its bill, to which Wise and Lees filed answers requesting that their special pleas apply to both the amendments. In the first amendment to the bill, it was alleged that because of reliance on the representations of Wise, Sutton rented excavating equipment to Tate and would not have permitted this equipment to remain on the job to be used by Tate unless assurances to pay for the rental had been received from Wise. Copies of two letters, the first of which was from Tate to Wise dated May 20, 1953, ¹ and the second from Wise to Sutton dated May 28, 1953, ² were attached to and made a part of this amendment to the bill.

In the second amendment to the bill, Sutton alleged that it believed at the time of the agreement to rent equipment to Tate, the Tate-Wise contract was in all respects valid; that it had no knowledge of the contract's invalidity, if in fact it were invalid; that if in fact Wise had no knowledge of the contract's invalidity it should have known or by the exercise of due diligence could have determined this fact. This amendment also alleged that Wise intended such reliance upon its representations, 'as heretofore set out in the Bill to Enforce Mechanics' Liens and the Amended Bill herein filed,' that Sutton would rent equipment to Tate; and that because of reliance upon the representations of Wise, Sutton was misled in believing that the contract was in all respects valid.

Counsel for all the parties stipulated that Lees was properly retaining certain sums due Wise in excess of the amounts claimed by Tate and Sutton and that it was willing and able to pay these sums in accordance with the direction of the court. It was further stipulated and agreed among counsel for Wise, Tate and Sutton that Tate undertook the performance of his contract without having registered as a contractor under Code, §§ 54-113 through 54-145, and that neither Wise nor Sutton 'were aware of the fact' that Tate was not registered as required by the above statutes 'until after C. W. Tate had abandoned his work under the contract alleged in the Bill of Complaint.' It was conceded at the bar of this court that since Tate undertook to perform a contract in excess of $20,000, without having registered as required by Code, §§ 54-113 through 54-145, his contract with Wise is illegal and unenforceable. See Lasting Products Company v. Genovese, 197 Va. 1, 87 S.E. (2d) 811, and cases there cited. It was likewise conceded that the same result would follow if the amendment of 1954 be applied.

In its brief Sutton thus states the question presented: 'The only question of law involved is whether or not the assignee of a void contract which relied on the representations of its assignor's obligor before it would accept the assignment can, subsequent to the assignment, be denied the right to recover from that obligor on whose representations it relied in accepting the assignment, or whether the party representing to the assignee that the contract was valid is to be estopped to deny liability on the grounds that the contract was void and unenforceable.'

Since the allegations of fact contained in the special pleas of Wise and Lees are by stipulation admitted to be true, we will examine the pleadings as if on demurrer. Hence, the facts sufficiently alleged in the bill as amended and the reasonable inferences to be drawn therefrom, but not the conclusions of law, must be accepted as true.

Wise contends that Sutton, solely in its capacity as assignee of Tate, has no greater right to enforce the illegal contract made by Tate than Tate himself. In support of its contention, Wise relies primarily on Bowen Electric Company v. Foley, 194 Va. 92, 72 S.E. (2d) 388, in which it was held that an unregistered contractor did not have the right to recover on its contract nor the right to enforce mechanics' liens against the property on which work had been done; and State Realty Company v. Wood, 190 Va. 321, 57 S.E. (2d) 102, in which it was held that the assignee of an illegal brokerage contract did not have the right to enforce the contract against the obligor. Sutton does...