Summary
In Virden, we held that where a bank accepted a deed of trust on property from the contractor and advanced proceeds to the contractor but failed to ensure that the funds were being spent on the construction project, the bank's lien was superior to those of materialmen only to the extent that the loan proceeds actually went into the project.
Summary of this case from Amerihost Development v. BromancoOpinion
No. 34694.
November 24, 1941. Suggestions of Error Overruled January 12, 1942.
1. MECHANICS' LIENS.
In proceeding by materialman, in determining amount owing by owners to contractor, owners were properly charged with amount they paid to contractor after receiving stop notice for repapering work defectively done by the contractor, which defects it was contractor's duty to repair and for which he was not entitled to extra pay (Code 1930, sec. 2274).
2. MECHANICS' LIENS.
In proceeding by materialman, evidence sustained finding that workman who had done plumbing in the house did not have a direct contract with the owners, and therefore workman could only share in balance due from owners to contractor.
3. MECHANICS' LIENS.
Where, under prior law, prior notice to owner of amount owing by contractor gave prior right of payment, the purpose in amending the law was to confer equal rights on all persons in the same class, regardless of when, or whether, such persons had given owner written notice, provided owner yet had in his hands funds owing to the contractor when such claimants gave notice, or if notice was not given, the claims were asserted in court (Code 1930, sec. 2274).
4. MECHANICS' LIENS.
One notice to owner of claim against contractor stops right of owner to pay contractor the amount claimed in that notice, and if other claimants in the same class subsequently give notice to the owner of their claims, or if they do not give the notice, but assert their claims in court, to which the owner is a party, all before the owner has paid out funds which he had when the first notice was received, all such claimants share ratably in those funds (Code 1930, sec. 2274).
APPEAL from circuit court of Coahoma county, HON. WM. A. ALCORN, JR., Judge.
Vincent J. Brocato, of Clarksdale, for appellants, Steve D. and Sally B. McNair.
Due to defective workmanship and noncompliance by the contractor of his building contract, it became necessary to re-paper the dwelling. This was thereafter done and after notice given payment in varying amounts for labor and materials necessary to complete the same in conformity with the contract was made to the total amount of $162.50.
It is the contention of the owners, McNair, that since the payment of this sum, to-wit: $162.50 for labor and materials was necessary to complete the premises in conformity with the contract; that therefore the same represented the amount of damages for the breach thereof. That at the time of the service of such statutory notice instead of being indebted to the contractor Dunn for the full contract price, appellant owners were rather indebted to the contractor for only the contract price less such sum as would be reasonably necessary to put the premises in such condition as would have been had by performance; that is to say, the contract price less what was paid thereunder, less such amount as would be necessary to complete the dwelling in accordance with the terms of the contract.
Having adjudicated that the contract between owners McNair and contractor Dunn had not been specifically performed, to the damage of owners by reason of defective workmanship in the amount of $162.50, the lower court erred in holding that the funds impounded by materialmen M.L. Virden Lumber Company was the amount of the entire balance of the unpaid contract price regardless of damage sustained by owners by reason of nonperformance by contractor.
The measure of damages for the breach of a building contract is the contract price less the cost of remedying the defects and omissions in such a way as to make the building conform to the contract.
Atkinson v. Jackson Brothers, 270 S.W. 848, 38 A.L.R. 1377; Springer v. Jones, 76 Ind. App. 269, 123 N.E. 816; Library Bd. v. Ohlsen, 110 Neb. 146, 193 N.W. 110; Foeller v. Heintz, 137 Wis. 169, 118 N.W. 543; Keeler v. Herr, 157 Ill. 57, 41 N.E. 750; Moore v. Carter, 146 Pa. 492, 23 A. 243; United Iron Works v. Wagner, 89 Wn. 293, 154 P. 460; Mitchell v. Caplinger, 97 Ark. 278, 133 S.W. 1032; Cullen v. Sears, 112 Mass. 299; Jacob Young v. Kent, 230 N.Y. 239, 129 N.E. 889, 23 A.L.R. 1429, and notes 1435; Beach v. Johnson, 102 Miss. 419, 59 So. 800; American Oil Co. v. Sheet Metal Works, 155 Miss. 779, 125 So. 249; Campbell v. Coon, 149 N.Y. 556, 44 N.E. 300; Mayor v. Mutchler, 50 N.J.L. 162, 13 A. 620; 40 C.J., Mechanics Lien, Sec. 324.
This is a liberal and reasonable rule for it presupposes substantial compliance without which there can be no recovery at all.
Robinson v. DeLong, 118 Miss. 280, 79 So. 95.
Applying this rule to the admitted facts and findings by the court, it was not difficult to determine the amount of damages occasioned the McNairs by reason of the nonperformance by Dunn; it was the known and uncorrected defects in the dwelling in the amount of $16, and the amount necessary to provide the dwelling with papering in keeping with the contract, or $162.50. The one, the court allowed; the other, it denied. Both are calculable items of damages and there is no substantial difference between them.
The original contract between the owner and contractor is the limit of liability, the boundary of duty and the measure of reciprocal rights.
Spengler v. Lumber Co., 94 Miss. 780, 48 So. 966; Wenger et al. v. First National Bank of Biloxi, 174 Miss. 311, 164 So. 229.
At no time under our statutes could it be said that the McNairs were indebted to the materialmen, M.L. Virden Lumber Company, in an amount greater than they were indebted to their original contractor Dunn. Their contract with Dunn is the measure and yardstick of their obligation, their duty and, consequently, their rights.
It is respectfully submitted that upon the breach of the building contract by the contractor Dunn the owners McNair became indebted to him only in an amount equal to the contract price less payments made thereunder less the cost of remedying the defects and omissions in such a way as to make the building conform to the contract.
American Oil Co. v. Sheet Metal Works, 155 Miss. 779, 125 So. 249.
Appellee urges strenuously that the "stop notice" being in the nature of a writ of garnishment binds all funds of the contractor in the hands of the owner. This is not so. The "stop notice" only binds such funds of the contractor as may be due him by the owner under the contract. The mechanic or materialman cannot claim or achieve any higher right than the contractor could claim or achieve himself. And as to any funds that may be due and owing to the contractor by the owner, a right of set off for damages by reason of nonperformance is always allowable.
Brondun v. Rosenblum, 151 Miss. 91, 117 So. 363; Wanzer v. Truly, 58 U.S. (17 How.) 584, 15 L.Ed. 216.
The sole question at issue is simple and plain. On April 10, 1940, the day of the service of the "stop notice," what amount was due and owing by the McNairs to Dunn? It was the amount of the contract price less that sum necessary to remedy the defects and omissions in the building.
Breland Lowrey, of Clarksdale, for appellant, L.D. Hill.
It is argued that L.D. Hill is not entitled to a pro rata share of the impounded funds because he never gave the notice to the owners provided for in Section 2274 of the Code of 1930. In reply we say, first, that our main contention is that L.D. Hill was not a subcontractor but contracted direct with the owners. L.D. Hill was not concerned and is not now concerned with the subcontractor's statute. However, if it should be held, as the trial court held, that L.D. Hill is a subcontractor, then he is entitled to a pro rata share of the impounded funds without having given any notice. The statute so provides.
Appellee disagrees with us that the statute appearing as Chapter 128 of the Laws of 1918 was passed to change the rule, and did change the rule, of the case of Enochs Lumber Co. v. Garber, 116 Miss. 229, 76 So. 730. He also disagrees that the case of Citizens' Lumber Co. v. Netterville, 137 Miss. 310, 102 So. 178, was decided in contemplation of the old statute rather than the amended one. Appellee makes the erroneous statement that in the opinion of the court in the Netterville case Justice Cook referred to Section 2434 of Hemingway's Code. In fact, we find after a careful examination of the opinion in the Netterville case that the only reference therein to the statute under discussion is a reference quoted from the Enoch Lumber Company case, which unquestionably depended upon the old statute, for it was decided prior to the passage of the amended statute.
Appellee argues that the court had before it the amended statute when the Netterville case was decided because Section 2434 of Hemingway's Code, Supplement of 1921, which is the amended statute, was cited in appellant's brief in that case. We respectfully submit that if the court had noted the citation and had gone to Hemingway's Supplement of 1921 to find the statute, the decision still might have been wrong because there is a serious error in the printing of the statute in the 1921 Supplement. The all important words "who might lawfully have given notice in writing" were omitted by mistake by the printer.
The statute as printed in the Mississippi Code of 1930 is not identical with the statute as printed in the General Laws of 1918. The statute as printed in Hemingway's Supplement of 1921 is not at all correct. The very words upon which the pro rata distribution to persons who have not given notice depends are omitted from the Supplement to which counsel in the Netterville case cited the court.
If the Legislature contemplated that only those who had given the notice should share in the pro rata distribution, then why did it provide for all persons entitled to the benefits of the statute to be summoned into court? Why not have only those summoned into court who had given the statutory notice prior to the filing of the suit? When L.D. Hill filed his pleading in this case, the impounded funds were still in the hands of the owner; they had not been paid to the contractor nor had they been paid into court. Mr. Hill's pleading was notice in writing of the amount due him and notice that he was claiming his share of the amount yet due from the owner to the contractor.
Holcomb Curtis, of Clarksdale, for appellee.
Appellee submits that under the authorities a "stop" notice served by a materialman or subcontractor under Section 2274, Code of 1930, binds the amount then owing by the owner to the contractor; that such notice is in the nature of a writ of garnishment and, therefore, the impounded funds are trust funds and in "custodia legis" and the owner has no right to pay out any of the impounded funds to anyone and if he does so, it is done at his own peril; that under the facts of the case at bar, it is undenied that the re-papering job was entirely satisfactory and that, consequently, the contractor substantially and exactly performed his contract with respect to this part of the building and that, consequently, this is no case where damages should be allowed for non-substantial performance of the contract; that since the contractor, H.B. Dunn, never abandoned his contract, there can be no just application of American Oil Company v. Sheet Metal Works, 155 Miss. 779, 125 So. 249, and that under McDonald Stone Company v. Stern and Marx et al. (Ala.), 38 So. 643, the lower court was unquestionably correct in its holding that the owners had unlawfully paid out the $162.50 to the general contractor and that therefore it could not be deducted from the balance determined to be owing under the contract.
See, also, Herrin v. Warren Mobley, 61 Miss. 509; Enoch Lumber Mfg. Co. et al. v. Garber et al., 116 Miss. 229, 76 So. 730; Citizens' Lumber Co. et al. v. Netterville et al., 137 Miss. 310, 102 So. 178; Hartford Accident Indemnity Co. v. Natchez Investment Co., 155 Miss. 31, 119 So. 366; Dothan Grocery v. Wofford Son (Ala.), 76 So. 432; White's Lumber Supply Co. v. Rea, 158 Miss. 695, 131 So. 259; Brondum v. Rosenblum, 151 Miss. 91, 117 So. 363; Dixie Lumber Co. et al. v. Young et al. (Ala.), 82 So. 129; David Lupton's Sons Construction Co. v. Hugger Bros. Construction Co. (Ala.), 148 So. 610; Standard Sanitary Mfg. Co. v. Aird (Ala.), 129 So. 285; Richardson Lumber Co. v. Howell (Ala.), 122 So. 343; Rosenbaum v. Carlisle, 78 Miss. 882, 29 So. 517; Mississippi Code of 1930, Sec. 2274; 28 C.J. 259, par. 357; 40 C.J. 155, par. 175.
A judge's findings of fact, when he is sitting as judge and jury, are entitled to the same weight on appeal as is a verdict of the jury.
Key v. Withers Wellford, 159 Miss. 125, 131 So. 868; Aaron v. Citizens Insurance Co., 144 Miss. 480, 110 So. 120; Ellis v. S. Pellegrini, Inc., 163 Miss. 385, 141 So. 273; 17 C.J.S. 1270, par. 611; 17 C.J.S. 1274, par. 611-b.
The rule which should govern an appellate court in reviewing a finding of fact by a trial judge when trying a case without a jury is that such finding of fact should not be disturbed unless manifestly wrong. This cannot ordinarily be said of a finding of fact on conflicting evidence.
Ellis v. S. Pellegrini, Inc., 163 Miss. 385, 141 So. 273; Magee Laundry Cleaners, Inc., v. Harwell Appliance Co., Inc., 184 Miss. 435, 185 So. 571; Kemp v. Turman, 104 Miss. 501, 61 So. 548; Aaron v. Citizens Ins. Co., 144 Miss. 480, 110 So. 120; A. V. Ry. Co. v. Bolding, 69 Miss. 255, 13 So. 844, 30 Am. St. Rep. 541; Aldridge v. Drainage District, 106 Miss. 626, 64 So. 377; Brooks-Scanlon Co. v. Stogner, 114 Miss. 736, 75 So. 596.
Under the authorities from our Mississippi court and other jursdictions, it is unquestionably the law that under the "New York System" a subcontractor or materialman only has an inchoate or potential lien, which does not ripen into a real lien until the statutory notice is given to the owner. Since the appellant, L.D. Hill, failed to give any notice to the McNairs, then he stands only as a common creditor and has no lien on the impounded funds, and is not entitled to a share thereof.
Spengler v. Stiles-Tull Lumber Co., 94 Miss. 780, 48 So. 966; Standard Sanitary Mfg. Co. v. Aird (Ala.), 129 So. 285; LeGrand v. Hubbard et al. (Ala.), 112 So. 826; Enochs Lumber Mfg. Co. v. Garber et al., 116 Miss. 229, 76 So. 730; Citizens Lumber Co. v. Netterville, 137 Miss. 310, 102 So. 178; City Coal Lumber Co., Inc., v. Gulf Refining Co. et al., 184 Miss. 260, 185 So. 250; McLenden v. Indianola Lumber Co., 128 Miss. 265, 90 So. 885; White's Lumber Supply Co. v. Rea, 158 Miss. 695, 131 So. 259; Mississippi Code of 1930, Section 2274; 40 C.J. 157, par. 177.
Under these holdings of our Supreme Court, there arises the inescapable conclusion that a subcontractor or materialman who wishes to derive any of the benefits of Section 2274 of the Code of 1930 must give the required statutory notice to the owner of the premises.
Appellant argues that under that portion of Section 2274, Mississippi Code of 1930, which reads, "should be bound in the hands of such owner for the payment in full, or if insufficient, then pro rata of all sums due such person, sub-contractor, journeyman, or laborer, who might lawfully have given notice to the owners hereunder," it was the intention of the Legislature to allow anyone to share in the impounded funds whether or not he gave any statutory notice to the owner. Appellee respectfully submits that such contention was not the intention of the Legislature, but that if any pro rata distribution is to be made of the impounded funds, then at most, the funds are to be distributed only among those who give the statutory notice to the owners.
Under some statutes giving subcontractors, materialmen, etc., a lien on the amount due the contractor from the owner, claimants are sometimes entitled to priority of payment, out of such funds, in the order of the time in which their notices were served upon the owner or are to be preferred or postponed according to their diligence or lack of diligence. Under other statutes, the amount is to be distributed pro rata among claimants, who have complied with the statute by giving the proper notice.
40 C.J. 285, par. 358.
Consequently, the notice is absolutely essential to the subcontractors' or materialmen's liens and unless the claimant gives the proper notice, then he is not entitled to share in the impounded funds. As above shown, this is the general rule of law, regardless of whether the state adheres to a pro rata distribution or a distribution in order of the service of notice on the owner.
It was never the intention of the Mississippi Legislature to confer any rights upon a subcontractor or materialman who did not give notice to the owner, and the only reason why all persons are required to be made parties to the materialman's suit is so that all rights may be adjusted and adjudicated in one suit, thus avoiding a multiplicity of suits.
Argued orally by Stovall Lowrey and Vincent J. Brocato, for appellants, and by Chester H. Curtis, for appellee.
In the fall of 1939 Mr. and Mrs. Steve McNair procured plans and specifications for the erection of a residence some four miles from Clarksdale, in Coahoma County. They invited bids for the construction of the residence in accordance with those plans and specifications. They considered all bids too high. They had the plans revised, and again asked for bids according to the revised plans. Mr. H.B. Dunn was the lowest bidder. He was awarded the contract. It was written and dated November 8, 1939. It set out what Dunn was to do, but also expressly stated that certain parts of the job, such as electric work, were not in the contract, and would be done by the McNairs themselves. But Dunn's bid included the plumbing. Dunn proceeded with the work, and the McNairs moved into the new home December 12, 1939.
On February 13, 1940, appellee, Virden Lumber Company, Inc., gave Mr. McNair written notice that it had furnished to Dunn lumber which went into the construction of the building, and that the balance owing to it by Dunn was $549.09, and on April 10, 1940, it gave a like notice to Mrs. McNair. These notices were under section 2274, Code 1930.
About May 8, 1940, Virden filed a petition, in accordance with said section, in the county court of Coahoma County, making defendants thereto Dunn, the contractor, and the McNairs, the owners, and Hill, who had done plumbing work in the house, asking (1) that any balance owing by McNair to Dunn be impounded in the hands of McNair and be applied to the payment of the balance of its account against Dunn; (2) that a lien be impressed on the property to secure the payment of its balance; and, (3) for a personal judgment against Dunn.
The McNairs answered this petition, admitting the contract with Dunn, the receipt of the notice to Mr. McNair, and that they owed Dunn a balance of $326.80 on the contract, offered to tender this amount into court, and asked that all claims of laborers and materialmen be brought into court and adjudicated.
Hill answered, claiming (1) that his contract was direct with the McNairs, and that he had a first lien on the house to secure payment of his account of $325, and was entitled to a personal judgment against the McNairs; but that if mistaken in this, (2) he was entitled to share pro rata with all other unpaid laborers and materialmen in the balance owing by the owners to the contractor.
About August 15, 1940, Memphis Sash Door Company gave written notice to the McNairs that it had furnished materials which went into construction of the house and had not been paid, claiming a balance of $178.62. On or about August 16, 1940, this concern intervened in the pending case by filing a petition therein, claiming that its contract was direct with the McNairs, and it was entitled to a personal judgment against them and a lien on the house for its unpaid balance, but, if mistaken in this, that it was entitled to share, pro rata, with the other laborers and materialmen in the balance owing by the owners to the contractor.
No written notice was ever given the owners by Hill, unless the filing of the petition in this case constituted such notice.
The judgment of the county court was that the McNairs owed Dunn, the contractor, on February 13, 1940, the date Mr. McNair received the Virden notice, a balance of $548.57; that neither Hill nor the Memphis Sash Door Company had a contract direct with the McNairs, but were sub-materialmen under the contractor, and that Virden, having given the first notice to the owners, was entitled to full payment of its balance out of the funds owing by the McNairs to Dunn, after payment of costs, and, if after such full payment there remained any balance, this would next be applied to the debt of Memphis Sash Door Company, and any balance would then be applied to the debt to Hill, the plumber. In other words the county court held that priority of notice conferred priority of right of payment.
The judgment of the county court was affirmed by the circuit court, from which the McNairs and Hill appeal. Memphis Sash Door Company did not appeal.
In determining the amount owing by the McNairs to the contractor the lower court charged the McNairs with $162.50 which they paid to Dunn after receiving the stop notice February 13th and gave the McNairs credit for $16. It found that the first item was paid for re-papering work defectively done by the contractor, which defects it was the contractor's duty to remedy, and for which he was not entitled to extra pay, but that the second item was the sum necessary to do other work to complete the contract. The McNairs assign this as error. The testimony supports the finding of the lower court, and we approve the finding of fact and conclusion of law.
Hill says the lower court was in error in finding that he had no contract direct with the McNairs. It would unnecessarily lengthen this opinion to detail the testimony on this point. We have examined it carefully, and we find it not only supports the finding of the lower court but that the preponderance thereof is in favor of such finding.
The most important question is whether, under the facts of the case, and under section 2274, Code of 1930, priority of notice confers priority of right as between those in the same class, or whether they share ratably regardless of the time of giving notice, or whether any notice is given at all. We are not considering a case where the owner pays the balance to the one giving notice before he receives such notice from others, or before others assert their claims in court. That is not this case. We will deal with that when and if such situation arises.
Section 2274, Code 1930, is as follows: "When any contractor or master workman shall not pay any person who may have furnished materials used in the erection, construction, alteration, or repair of any house, building, structure, fixture, boat, water craft, railroad, railroad embankment, the amount due by him to any subcontractor therein, or the wages of any journeyman or laborer employed by him therein, any such person, subcontractor, journeyman or laborer may give notice in writing to the owner thereof of the amount due him and claim the benefit of this section; and, thereupon the amount that may be due upon the date of the service of such notice by such owner to the contractor or master workman, shall be bound in the hands of such owner for the payment in full, or if insufficient then pro rata, of all sums, due such person, subcontractor, journeyman or laborer who might lawfully have given notice in writing to the owner hereunder, and if after such notice, the contractor or master workman shall bring suit against the owner, the latter may pay into court, the amount due on the contract; and thereupon all persons entitled hereunder, so far as known, shall be made parties and summoned into court to protect their rights, contest the demands of such contractor or master workman and other claimants; and the court shall cause an issue to be made up and tried and direct the payment of the amount found due in accordance with the provisions hereof; or in case any person entitled to the benefits hereof, shall sue the contractor or master workman, such person so suing shall make the owner and all other persons interested, either as contractors, master workmen, subcontractors, laborers, journeymen or materialmen, so far as known, parties to the suit (and any such party not made a party in any suit hereunder authorized may intervene by petition), and, thereupon the owner may pay into the court the amount admitted to be due on the contract or sufficient to pay the sums claimed, and the court shall cause an issue to be made up and award the same to the person lawfully entitled; in either case the owner shall not be liable for costs; but if the owner, when sued, with the contractor or master workman, shall deny any indebtedness sufficient to satisfy the sums claimed and all costs, the court shall, at the instance of any party interested, cause an issue to be made up to ascertain the true amount of such indebtedness and shall give judgment and award costs according to the rights of the several parties in accordance herewith. In case judgment shall be given against such owner, such judgment shall be a lien, from the date of the original notice, and shall be enforced as other liens provided in this chapter. The owner shall not be liable in any event for a greater amount than the amount contracted for with the contractor."
This is the amendment of section 3074, Code of 1906, passed by the Legislature in 1918, Ch. 128, L. 1918. The amendment very materially changed section 3074 with respect to the rights of laborers and materialmen and subcontractors furnishing labor or materials to contractors, which labor and materials go into the construction of the buildings being erected by such contractors.
Section 1381, Code 1880, conferred the right upon laborers and materialmen under contractors to give notice to the owners, and the amount then owing by the owners to the contractor "shall be bound and liable in the hands of such owner, for the payment of the sum so claimed."
Section 2714, Code 1892, is in the words of said section 1381, except that it extends the right to subcontractors.
Chapter 153, L. 1904, amended section 2714 by conferring the right to a lien on the property "in favor of the person giving the notice."
Section 3074, Code 1906, is the same as Ch. 153, L. 1904.
Next appears the amendment of 1918, which is the existing law.
Under the law before the 1918 amendment this court held that prior notice gave prior right of payment. Enochs Lbr. Co. v. Garber et al., 116 Miss. 229, 76 So. 730.
And in the case of Citizens' Lbr. Co. v. Netterville, 137 Miss. 310, 102 So. 178, decided after the 1918 amendment, the court followed the Enochs case and announced the same rule. But the Citizens case is not binding on us, for the reason that it is clear the court in that case was not considering the amendment of 1918 and did not pass upon that statute. It had in mind, and was construing, the old statute. The attention of the court was never called to the change in the statute. We have examined the original briefs of counsel in that case, and neither mentions the change in the statute. On the contrary, the brief of appellee copies section 3074, Code 1906, and all parties and the court proceeded upon the assumption that the Enochs case was controlling, and that section 3074 was the existing statute. The meaning of the old statute had been materially changed by the amendment, and it is not conceivable that the amendment would not have been mentioned and discussed if it had been in the minds of the attorneys and court. The oversight was not unlikely because there had been no official Code since that of 1906 to the time of the decision in the Citizens case.
We will now compare the two statutes. In the first place the title to the act of 1918 declares that one object of the amendment is "to make said rights concurrent," as between laborers, subcontractors, materialmen and journeymen.
The old law provided that notice to the owner would bind in his hands the amount owing the contractor "for the payment of the sum so claimed." The present act binds it for the payment, "in full, or if insufficient then pro rata, of all sums due such person, subcontractor, journeyman or laborer who might lawfully have given notice in writing to the owner hereunder." The old law provided that if after notice the contractor should bring suit against the owner, the owner could pay into court the amount owing under the contract, "and the person giving notice" should be summoned to contest the demand of the contractor. The present act provides in such case that "all persons entitled hereunder, so far as known, shall be made parties . . . to protect their rights," and contest the demand of the contractor "and other claimants." The old law provided that out of the amount found owing the contractor the court should direct payment of the claim of the "person giving notice." The present law directs the court to apply it to the claims "found due in accordance with the provisions hereof." The old law provided that if the person giving notice sued the contractor, he should make the owner a party. The present law provides "any person entitled to the benefits hereof," may sue the contractor, in which case the owner "and all other persons interested, either as contractors, master workmen, subcontractors, laborers, journeymen or materialmen, so far as known," shall be made parties to the action; if not, then such person may become a party thereto by intervening in the action. Other differences might be pointed out.
Thus it appears that the very purpose in amending section 3074, Code of 1906, was to confer equal rights on all persons in the same class, regardless when, or whether, such persons had given the owner written notice, provided the owner yet had in his hands funds owing to the contractor when such claimants gave notice, or if notice was not given, the claim or claims were asserted in court. In other words, one notice stops the right of the owner to pay the contractor the amount claimed in that notice.
If other claimants in the same class subsequently give notice to the owner of their claims, or if they do not give the notice, but assert their claims in court, to which the owner is a party, all before the owner has paid out the funds which he had when the first notice was received, then all such persons share ratably in those funds.
If this was not the effect of the amendment, it is difficult to understand why the amendment was enacted.
The old law involved practical difficulties. It is hard to perceive how notices could be given simultaneously unless contained in the same writing. Under the old law one giving notice one minute prior to such notice by other claimants was entitled to all of his money before the others were entitled to anything, which often resulted in that one receiving all the money yet owing by the owner to the contractor, just as in the case at bar, and the others receiving nothing.
The construction given the present statute works right and justice.
Furnishing materials or labor for the construction of the building is the basis of the right — not the giving of notice.
Why should one materialman or laborer, just because he happens to get notice to the owner one minute, or any other time, before other like claimants, be entitled to priority of payment, when the materials and labors of the others also go into the construction of the same building?
As was said in Morganton Mfg. Co. v. Anderson et al., 165 N.C. 285, 81 S.E. 418, 422, Ann. Cas. 1916A, 763, "This is not only in accordance with law, but also with justice and equity, for when men have put their money and labor in a building, and the balance due is insufficient to pay all, it is not right for one to have the whole fund, in the absence of negligence, because he gets to the clerk's office first."
Affirmed in part, and reversed in part, and remanded.