Case Title: T.L. Garden & Associates v. First Savings Bank

Citation: 

Docket Number: 001849

State: virginia

Court: Virginia Supreme Court

Date: 2001-06-08T00:00:00Z

Document:
Present:  All the Justices 
 
T.L. GARDEN & ASSOCIATES, T/A 
LIFE SAFETY SYSTEMS 
 
v.  Record No. 001849     OPINION BY JUSTICE ELIZABETH B. LACY 
 
 
 
June 8, 2001 
FIRST SAVINGS BANK OF VIRGINIA 
 
FROM THE CIRCUIT COURT OF PRINCE WILLIAM COUNTY 
Richard J. Jamborsky, Judge Designate 
 
 
In this appeal arising from a bank's agreement to reserve 
funds for payment of a subcontractor's equipment costs, we 
must determine whether the trial court properly set aside a 
verdict in favor of the subcontractor. 
 
Although the trial court set aside the jury verdict, we 
recite the facts and all reasonable inferences in the light 
most favorable to T.L. Garden & Associates, Inc. (T.L. 
Garden), the recipient of the jury verdict.  Kim v. Douval 
Corp., 259 Va. 752, 756, 529 S.E.2d 92, 95 (2000).  On April 
9, 1998, T.L. Garden entered into a contract with BIP 
Electrical, Inc. (BIP) to install a fire alarm system.  The 
total cost of the subcontract was $314,000.  The fire alarm 
system was part of a $1.4 million contract between BIP and the 
federal government for the construction of the Naval Annex to 
the Pentagon. 
Shortly after executing the contract, T.L. Garden learned 
that BIP had a negative credit history and informed BIP that 
it required additional safeguards to assure payment.  T.L. 
Garden also had the equipment for the project delivered to its 
warehouse, rather than the construction site, to assure 
payment before delivery.  On April 23, 1998, T.L. Garden sent 
Invoice Number 25701 to BIP for $289,000, the entire cost of 
the equipment. 
First Savings Bank of Virginia (FSB) conducted the 
project accounting for BIP's contract, which included 
processing payments of T.L. Garden's invoices.  Unknown to 
T.L. Garden, BIP had previously assigned to FSB payments due 
from the federal government on the Naval Annex project as 
security for amounts BIP owed FSB on two promissory notes, a 
line of credit, and a variable interest commercial note.  At 
BIP's suggestion, Thomas Garden, president of T.L. Garden, 
called Jeffery Constantz, president of FSB, to explore options 
for guaranteeing payment to T.L. Garden.  Constantz declined 
T.L. Garden's request that FSB execute a guaranty in the form 
of a letter of credit.  Instead, Constantz agreed to reserve 
sufficient funds received under BIP's contract with the 
federal government to pay T.L. Garden's equipment costs. 
On April 29, 1998, Constantz sent a letter to T.L. 
Garden, stating in pertinent part: 
I am writing this letter on behalf of BIP, Inc[.] 
to confirm that, upon payment from the government, 
FSB will reserve an amount from contract number 
MDA9469763003 sufficient to pay your invoice for 
equipment supplied for this contract. 
 
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The letter also contained discount provisions for early 
payments and asked that T.L. Garden acknowledge the terms set 
out in the letter.  T.L. Garden signed the letter on May 5 and 
that same day sent a letter to FSB regarding its Invoice No. 
25701.  That letter stated that Invoice No. 25701 had been 
"[r]evised due to Partial Shipment 5/5/98" and $197,328 was 
due June 5.  On May 21, FSB received BIP's initial $431,781.82 
payment from the federal government.  From this payment, FSB 
distributed $27,565.29 to BIP, approximately $5,900 to two BIP 
creditors, $66,113.95 to T.L. Garden, and retained 
approximately $332,000 in full satisfaction of BIP's 
indebtedness to FSB on its line of credit. 
 
On June 4, FSB received BIP's second payment from the 
federal government.  From those funds, FSB paid T.L. Garden 
the $131,214.05 balance due on the May 5 invoice.  FSB paid 
the remainder of the second payment to BIP for its operating 
expenses.  On June 9, T.L. Garden submitted Invoice No. 25878 
requesting payment of $110,000 by July 9, which it 
subsequently revised, increasing the amount to $116,672. 
On July 16, BIP filed a petition for Chapter 11 
Reorganization in the United States Bankruptcy Court for the 
Eastern District of Virginia.  On July 25, FSB received BIP's 
third payment from the federal government in the amount of 
 
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$189,061.17.  Because BIP had filed for bankruptcy, FSB was 
required to deposit the entire third payment in the bankruptcy 
court for the benefit of BIP's creditors.  As part of the 
bankruptcy proceeding, T.L. Garden received $60,000, leaving 
an unpaid balance of approximately $30,000 for the equipment 
costs. 
In its motion for judgment, T.L. Garden sought recovery 
of the unpaid $30,000 balance on the theory that FSB's April 
29 letter fraudulently induced T.L. Garden to perform its 
subcontract with BIP.  In support of its position, T.L. Garden 
produced evidence at trial showing that Constantz did not 
inform T.L. Garden that BIP was indebted to FSB and had 
assigned the construction contract to FSB, that Constantz told 
Thomas Garden that FSB would reserve sufficient funds to cover 
the cost of the equipment supplied by T.L. Garden, and that 
Constantz told Thomas Garden that BIP would not receive any 
money from the contract until T.L. Garden had been paid in 
full.  On appeal, T.L. Garden contends that this evidence was 
sufficient to support the jury's verdict in its favor and the 
trial court erred in setting aside that verdict. 
In reaching a verdict, a jury is required to follow the 
instructions given by the court.  In this case, the jury was 
instructed by the court as follows: 
 
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If you find that the letter dated April 29, 
1998, which is Joint Exhibit 1, required the 
Defendant to reserve from the first payment it 
received by assignment of the Government Contract, 
the full amount of Plaintiff's subcontract with BIP, 
and if you further believe by clear and convincing 
evidence that at the time the Defendant signed the 
April 29, 1998 letter it intentionally and knowingly 
made a false representation of a material fact to 
the Plaintiff with the intention to mislead 
Plaintiff into taking action based upon the 
representation, and that Plaintiff took action in 
reliance on the representation and that Plaintiff's 
reliance on the representation caused Plaintiff 
damage, then you shall return your verdict in favor 
of Plaintiff.  (emphasis added) 
 
This instruction was an agreed instruction and became the law 
of the case.  Owens-Illinois, Inc. v. Thomas Baker Real Estate, 
Ltd., 237 Va. 649, 652, 379 S.E.2d 344, 346 (1989).  In order 
for T.L. Garden to prevail under this instruction, the jury had 
to find that the April 29 letter required FSB to pay T.L. 
Garden the full amount of its subcontract with BIP "from the 
first payment" FSB received from the federal government. 
 
However, the April 29 letter states that FSB "will reserve 
an amount from contract number MDA9469763003 sufficient to pay 
[T.L. Garden's] invoice for equipment supplied for this 
contract."  (emphasis added)  This language is not ambiguous.  
Nothing in the letter identifies any specific payment from the 
federal government as the source of payment to T.L. Garden.  
Because the letter cannot be construed to require that T.L. 
Garden be paid from the first payment made by the federal 
 
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government, as required by the jury instruction, the evidence 
was insufficient, as a matter of law, to support a jury verdict 
in favor of T.L. Garden.  The trial court, therefore, correctly 
set aside that verdict. 
 
Accordingly, for the reasons stated, we will affirm the 
judgment of the trial court setting aside the jury verdict and 
entering judgment in favor of FSB. 
Affirmed.
 
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