Title: Corrugated Industries, Inc. v. Chattanooga Glass Co.

State: mississippi

Issuer: Mississippi Supreme Court

Document:

317 So. 2d 43 (1975) CORRUGATED INDUSTRIES, INC. v. CHATTANOOGA GLASS COMPANY et al. No. 48104. Supreme Court of Mississippi. July 7, 1975. Rushing & Guice, William Lee Guice, III, Biloxi, for appellant. White & Morse, William M. Rainey, Gulfport, for appellees. Before PATTERSON, SMITH and BROOM, JJ. *44 SMITH, Justice. The action, out of which this appeal arises, was brought in the County Court of Harrison County by Corrugated Industries, as plaintiff, against Chattanooga Glass Company, as owner, and John E. Shavers, as contractor, under Mississippi Code Annotated section 85-7-181 (1972). The suit sought to bind in the hands of Chattanooga Glass the sum of $6,684.48, alleged to be due Corrugated Industries by Shavers for material furnished to him by it and alleged to have been used for the repair of the Chattanooga Glass Company building, it being further alleged that notice of Shavers' debt had been given Chattanooga Glass at a time when it had in its hands funds owed Shavers. Section 87-7-181, supra, provides in part: The material facts of the case are not in dispute. Chattanooga Glass contracted with Shavers to repair the roof of its building for a total contract sum of $22,257.60. Work under the contract having proceeded, Chattanooga Glass issued its check to Shavers for $10,500.00 as a progress payment upon the contract sum. On May 2, 1972, the work having been completed, Chattanooga Glass issued its check to Shavers for $11,757.60, in payment of the final balance owing to Shavers under the contract. On May 10, 1972, the check so issued to Shavers was cashed or negotiated by the First Mississippi National Bank, Biloxi. On May 11, 1972, the check was cleared by Whitney Bank, New Orleans, Louisiana, a correspondent bank. On May 11, 1972, the Gulfport office of Chattanooga Glass received a stop payment notice from Corrugated Industries, claiming that Shavers owed for material which had gone into the job. On May 15, 1972, the check cleared American National Bank and Trust Company, Chattanooga, Tennessee, the bank on which it was drawn. It appears incidentally that on May 26, 1972, Corrugated Industries received Shavers' check in payment for all amounts due it but that on June 5, 1972, Shavers' check proved to be "no good." In the county court the case was submitted to a jury which returned a verdict for Corrugated Industries in the amount sued for against both Chattanooga Glass and Shavers. On motion, however, the judgment was set aside and judgment non obstante veredicto entered for Chattanooga Glass Company. The verdict against Shavers remains in full force and effect. The Circuit Court of Harrison County affirmed that judgment and Corrugated Industries now appeals here. It appears to be conceded that the issue presented by the present appeal is whether Chattanooga Glass, as owner, owed Corrugated Industries, as a materialman, the affirmative duty to stop payment on its check issued to Shavers, in final settlement with him under the contract, the check having been issued, delivered and negotiated prior to the receipt of any stop notice from Corrugated Industries. The check, issued on May 2, 1972, was duly honored upon presentment in due course by the payor bank in Chattanooga. Only one case has been cited, and no other has been found, where this precise question has been dealt with by a court of last resort. The Supreme Court of North *45 Carolina in Parnell-Martin Supply Co. v. High Point Motor Lodge, Inc., 277 N.C. 312, 177 S.E.2d 392 (1970), passed upon a case which involved an almost exactly similar factual situation. North Carolina has a statute analogous to section 85-7-181, supra, designed like the Mississippi statute, to protect laborers and materialmen by providing a means of binding undisbursed funds due a contractor which remain in the hands of an owner. In Parnell-Martin, supra, the North Carolina Supreme Court set out the following chronology of events: The North Carolina Supreme Court prefaced its conclusion that the owner was under no duty to stop payment of its check, by stating: In Tonnar v. Wade, 153 Miss. 722, 121 So. 156 (1929), the question before the Court was whether a defendant in an election suit was a qualified elector. To be a qualified elector the law required that he pay his taxes on or before February 1 of the election year. The taxes had been paid by check on February 1 and a receipt issued by the tax collector. The check did not clear the bank on which it was drawn until February 9. The Court found that, nevertheless, the defendant was a duly qualified elector, saying: In Parnell-Martin, the North Carolina Court drew an analogy between the obligation of an owner to a materialman under circumstances such as those involved and that of a garnishee-defendant, quoting with approval an Illinois decision wherein the Illinois Court stated: In Parnell-Martin, supra, the North Carolina Court observed: The North Carolina Court concluded: This Court has never dealt with this precise factual situation, but Chancellor v. Melvin, 211 Miss. 590, 52 So. 2d 360 (1951), presented a case in which the owner, in an owner-contractor relationship, had paid his contractor with a promissory note. Subsequently, stop notices from several unpaid materialmen were received by the owner, after delivery of the note but prior to the due date of the note. This Court held that under such circumstances the owner had not been indebted to the contractor at the time he had received the stop notices, saying: As stated by the North Carolina Court in Parnell-Martin, supra, while a debt is not paid by the giving and acceptance of a check until the check is paid on presentment in due course, authorities cited to that effect are not relevant to the issue in the present case. Such authorities relate to the extinguishment of an existing debt as between the debtor-maker of a check and creditor-acceptor to whom it is given. Of course, in such a case, if the check is no good the debt is not paid. No privity exists between an owner and those furnishing material independently to his contractor and no obligation to such a materialman on the part of the owner arises until after receipt of notice. Notice given by a materialman to an owner after the owner has, in good faith, made final settlement with his contractor, as he was obligated by his contract to do, by issuing the contractor his check, which the contractor, in good faith, has negotiated, does not undo the settlement or require the owner to stop payment of the check. Deposit of such a check by a contractor and the issuance of checks of his own against the deposit, not only would involve endorsers but laborers, materialmen and other innocent persons might be drawn into expensive and time consuming litigation as a result of inexcusable neglect on the part of the claimant-materialman to give timely notice. The judgment of the Circuit Court of Harrison County, affirming the judgment entered for Chattanooga Glass Company by the Harrison County Court, non obstante veredicto, is affirmed. Affirmed. GILLESPIE, C.J., RODGERS, P.J., and INZER, ROBERTSON, SUGG and WALKER, JJ., concur.