Westwood Bldg. Materials Co. v. Valdez

• Decision Date: 28 February 1958
• Citation: 158 Cal.App.2d 107,322 P.2d 79
• Court: California Court of Appeals Court of Appeals
• Parties: WESTWOOD BUILDING MATERIALS CO., a California Corporation, Plaintiff and Appellant, v. Edward L. VALDEZ and Irving M. Litz, Defendants, Irving M. Litz, Respondent. Civ. 22471.

Page 79

322 P.2d 79

158 Cal.App.2d 107

WESTWOOD BUILDING MATERIALS CO., a California Corporation, Plaintiff and Appellant, v. Edward L. VALDEZ and Irving M. Litz, Defendants, Irving M. Litz, Respondent.

Civ. 22471.

District Court of Appeal, Second District, Division 3, California.

Feb. 28, 1958.

George W. Burch, Jr., Los Angeles, for appellant.

Alfred R. Meyers, Beverly Hills, for respondent.

PATROSSO, Justice pro tem.

This is an appeal by plaintiff from a judgment in favor of the defendant Litz in an action to foreclose a mechanic's lien.

There is no dispute with respect to the facts. Defendant Litz, respondent here, as owner entered into a contract with Pelton and Zahler, whereby the latter agreed to construct 21 houses upon a tract owned by respondent. The general contractors in turn entered into a subcontract with defendant Valdez under which the latter agreed to furnish the labor and material necessary to perform all of the plastering and stucco work required under the general contract. Plaintiff, pursuant to an oral contract with Valdez under which the latter agreed to pay for the same by the 10th of the following month, furnished materials required by the subcontractor in the performance of his contract of the reasonable value of $10,637.55. Claiming a balance due thereon of $5,268.49, plaintiff filed a claim of mechanic's lien therefor and instituted this action to enforce the same.

During the course of the performance of the work, respondent paid to Valdez the total sum of $21,500 in full payment of all sums due under his subcontract. Such payment was made by the medium of eight checks of the respondent, the first four being made payable to Valdez alone and the last four being made payable jointly to Valdez and the appellant. The last four checks were in the sums of $2,500, $2,800, $2,000 and $5,580, respectively, and were delivered to Valdez who in turn delivered them to the appellant. The first three of these checks were endorsed by the appellant and by it returned to Valdez who endorsed and obtained payment thereon, no portion thereof being received by the appellant. The check for $5,580 was endorsed by Valdez and delivered to appellant which received payment thereof and in turn issued its check to Valdez for $580, the balance of $5,000 being credited by appellant to Valdez' account. These joint checks bore no endorsement or notation hereon to the effect that the proceeds thereof, insofar as necessary, were to be applied by appellant in payment of Valdez' indebtedness to it, and aside from the fact that the checks were payable jointly to Valdez and appellant, respondent did not communicate to appellant his intention with respect to the application of the proceeds thereof.

The trial court found that respondent paid to appellant a sum in excess of $10,637.55, the total value of materials furnished by appellant; denied appellant a lien, and ordered judgment in favor of appellant against Valdez in the sum of $5,268.49. The sole question presented is whether the issuance of the four checks in question made payable jointly to Valdez and appellant operated to discharge respondent's liability to appellant or to bar appellant's right to claim a lien upon respondent's property.

Appellant concedes that if respondent had made plain his intention that the proceeds of the checks were to be first applied to the satisfaction of Valdez' obligation for the materials furnished by appellant and used upon respondent's property, the appellant would have been under the duty to so apply such proceeds. Appellant insists, however, that in the absence of an express direction or notation to this effect upon the face of the checks or by a covering letter so stating, appellant was at liberty to apply the proceeds of the checks in such manner as it and its copayee might agree. We do not agree. However, we see no necessity for extended discussion as all of the appellant's arguments are effectively answered in the two California cases now to be noted.

In Edwards v. Curry, 1957, 152 Cal.App.2d 726, 313 P.2d 613 (hearing denied) plaintiff Edwards was a roofing subcontractor on a school job for the defendant Curry, the general contractor. Cross-defendant Schirm Company was the material dealer supplying Edwards. At the request of Schirm defendant made all payments due Edwards under his subcontract, payable to Schirm and Edwards jointly. These checks as issued from time to time were endorsed by the payees and deposited in Schirm's bank account and a portion of one check was credited to an account of Edwards for material furnished on another job. Also pursuant to an agreement between the payees and unknown to Curry, a portion of the proceeds of these checks was by Schirm returned to Edwards for the payment of labor employed by him and for his living expenses. The joint checks would have fully paid the bill for materials furnished on the school job if Schirm had not returned a portion of the proceeds thereof to Edwards for other purposes. After the completion of the job Schirm filed a stop notice with the school district alleging that $5,109.95 of its account with Edwards had not been paid any by reason thereof the district retained this amount under its contract with Curry. In the litigation which ensued, Curry filed a cross-complaint in declaratory relief asking, among other things, that it be adjudged that he was not indebted to Schirm and that Schirm was not entitled to the amount withheld by the school district. The trial court held that as between Curry and Schirm the latter had been paid in full for material furnished to Curry on the school job and that Curry was entitled to a release of the stop notice, or upon Schirm's failure to release the notice that Curry have judgment against Schirm for the amount withheld by virtue of the notice. In affirming the judgment and answering contentions similar to those advanced by the appellant here, the court said, 152 Cal.App.2d 730, 313 P.2d at page 615:

'It is Schirm Company's contention that under section 1192.1 et seq. of the Code of Civil Procedure the general contractor, Curry, is liable to it for materials furnished Edwards which went into the school building; that Curry must have known that the checks made payable to Schirm and Edwards jointly were not intended to be solely applied to the payment of Schirm's bill; and that the laborers must be paid from these payments; that since Curry consented to this joint check arrangement he impliedly agreed to whatever application of the funds was made by Edwards and Schirm, and the fund due from...