Present: All the Justices 

INTERNATIONAL FIDELITY INSURANCE COMPANY 

v. Record No. 942210 

OPINION BY JUSTICE LAWRENCE L. KOONTZ, JR. 

 November 3, 1995 

ASHLAND LUMBER COMPANY, INC. 

FROM THE CIRCUIT COURT OF HANOVER COUNTY 

Richard H.C. Taylor, Judge 

 In this appeal, we consider whether a judgment creditor may 

obtain a lien by writ of fieri facias on, and thus reach by 

garnishment, funds retained by a principal relating to a contract 

upon which the judgment debtor has defaulted, where the judgment 

debtor's surety has assumed the duties and responsibilities of 

its indemnitee. 

 On October 16 and 22, 1992, appellant International Fidelity 

Insurance Company (IFIC) issued payment bonds on behalf of Nu-Way 

Builders of Virginia, Inc. (Nu-Way) to secure the cost of labor 

and materials on two contracts Nu-Way had been awarded from the 

Virginia Department of Transportation (VDOT). The bonds were 

issued pursuant to an agreement of indemnity between Nu-Way and 

IFIC. The agreement included a provision that if Nu-Way breached 

an indemnified contract, Nu-Way would assign to IFIC, inter alia, 

"[a]ny and all percentages retained and any and all sums that may 

be due or [t]hereafter become due on account of any and all 

contracts referred to in the Bonds" issued pursuant to the 

agreement. 

 Without indicating specific dates, the record establishes 

that Nu-Way began work under the two contracts, purchasing 

materials and letting sub-contracts for some portion of the work. 
 Prior to August, 1993, VDOT terminated both contracts because 

Nu-Way failed to pay certain subcontractors and suppliers. At 

that time, VDOT retained $34,123.47 of the contract funds. 

Thereafter, IFIC made payments to Nu-Way's suppliers and 

subcontractors in at least partial satisfaction of its bonds. 

 Appellee Ashland Lumber Company, Inc. (Ashland) was a 

material supplier on open account to Nu-Way. On August 27, 1993, 

Ashland filed a motion for judgment against Nu-Way and its 

president, C. Earl Vipperman, Jr., alleging Nu-Way's failure to 

pay on demand its account for materials received in the amount of 

$15,071.36. Ashland obtained a judgment for the full amount of 

the account plus interest, costs, and attorney's fees on February 

4, 1994. 

 On August 26, 1994, Ashland filed with the clerk of the 

trial court a suggestion for summons in garnishment to satisfy 

the February 1994 judgment. The civil process related to the 

suggestion for summons in garnishment, including a writ of fieri 

facias, was delivered to the sheriff on August 29, 1994. On 

August 31, 1994, the sheriff served VDOT with the writ of fieri 

facias and an appurtenant garnishment summons in the amount of 

$21,969.50. 

 Upon being served with the writ and summons, VDOT lodged 

with the trial court funds sufficient to satisfy the garnishment, 

noting in an accompanying letter that "[w]hile VDOT has tendered 

[the funds] to the Court pursuant to the garnishment summons, 

VDOT is not certain that the garnishment summons properly 

attached to the funds." VDOT also provided IFIC with a copy of 
the writ and summons. 

 On September 16, 1994, IFIC, pursuant to Rule 2:15, filed a 

petition to intervene in the garnishment proceeding. Following 

an ore tenus hearing on September 20, 1994, the chancellor 

directed that the parties file memoranda in support of their 

respective positions. In its memorandum, IFIC asserted that its 

equitable right of subrogation as a surety related back to the 

dates of the original surety bonds and, thus, took precedence 

over a subsequent creditor. In the alternative, IFIC asserted 

that its contractual right of assignment became effective prior 

to Ashland's judgment and thus precluded garnishment of the funds 

assigned to IFIC. Ashland asserted that IFIC failed to perfect 

its right to the funds by recording the indemnity agreement or 

otherwise obtaining a secured interest in the funds, thus 

subordinating its claim to Ashland's judgment. 

 Upon consideration of the memoranda and oral argument, the 

chancellor issued a letter opinion in which he stated: 

 [a]pplying the particular facts in this case to the 

garnishment statute, it is the opinion of this Court 

that [Nu-Way] "is or may be entitled" to the funds 

[held by VDOT] and under none of the theories of [IFIC] 

does it have priority over [Ashland]. 

 In his final order, the chancellor, while permitting the 

intervention of IFIC, ordered that the funds lodged with the 

court be paid over to Ashland in satisfaction of its judgment 

against Nu-Way. We awarded IFIC's appeal assigning error to the 

chancellor's determination that IFIC's subrogation and assignment 

rights did not preclude the garnishment. 

 We need only address IFIC's rights of equitable subrogation, 
which we find dispositive of this appeal. A garnishment of funds 

or other intangible property cannot proceed without a valid lien 

on that property by writ of fieri facias. See Code § 8.01-512.3 

(designating form of garnishment summons to require garnishee to 

answer "by reason of the lien of fieri facias"); see also

Virginia Nat'l Bank v. Blofeld, 234 Va. 395, 400, 362 S.E.2d 692, 

695 (1987)(construing Code §§ 8.01-511 and -512.3 "against the 

background of [Code § 8.01-501]"). The writ of fieri facias 

creates a lien in favor of the judgment creditor only to the 

extent that the judgment debtor has a possessory interest in the 

intangible property subject to the writ. Lynch v. Johnson, 196 

Va. 516, 521, 84 S.E.2d 419, 422 (1954). Accordingly, when the 

judgment debtor has no interest in the property held by the 

suggested garnishee, the writ does not create a valid lien on 

that property, and the suggestion for summons in garnishment must 

fail. 

 Code § 8.01-501 provides, in pertinent part, that 

 [e]very writ of fieri facias shall . . . be a lien from 

the time it is delivered to a sheriff or other officer 

to be executed, on all the personal estate of or to 

which the judgment debtor is, or may afterwards and on 

or before the return day of such writ become, possessed 

or entitled, in which, from its nature is not capable 

of being levied on . . . . 

 Thus, the threshold question presented to the chancellor in 

this case was whether, on August 29, 1994, when Ashland had the 

writ of fieri facias delivered to the appropriate sheriff, Nu-Way 

had or would have any possessory interest in funds held by VDOT 

before or on the return date of the summons in garnishment. We 

hold that it did not. 
 By virtue of its default on the two contracts with VDOT, 

Nu-Way was terminated from these contracts and any right it had 

to receive further funds from VDOT was extinguished at that time. 

 IFIC, as Nu-Way's surety, then became responsible for the debts 

of its defaulted indemnitee, and upon payment of the 

subcontractors and materialmen, would be entitled, by equitable 

subrogation, to any receivables due on the contracts. IFIC 

correctly asserts that its rights relate back to the dates of the 

surety contracts, in this instance October 16 and 22, 1992, the 

dates the bonds were issued. Dickenson v. Charles, 173 Va. 393, 

402-03, 4 S.E.2d 351, 354-55 (1939). Although IFIC would not 

have a present right to receive the funds until it satisfied all 

the requirements of its bonds, this limitation on its rights does 

not permit the defaulted indemnitee, Nu-Way, or its judgment 

creditor, Ashland, to assert a continuing right to the funds. 

 In short, on August 29, 1994 when Ashland attempted to 

establish a lien on the funds retained by VDOT, Nu-Way had no 

possessory interest in the funds. Accordingly, no lien was 

established and no garnishment of the funds could result. 

 Ashland's reliance on Electric Transmission Company v. 

Pennington Gap Bank, Inc., 137 Va. 94, 119 S.E. 99 (1923), is 

misplaced. That case dealt with a mechanic's lien and a 

creditor's lien secured by a deed of trust which "had already 

attached, or could be asserted, when the surety assumed the 

completion of the contract." Id. at 105, 119 S.E. at 103. Here, 

the lien could not have been asserted until Ashland obtained its 

judgment against Nu-Way, several months after IFIC assumed 
responsibility for the debts on the contracts.1

 Having determined that the chancellor erred in awarding a 

garnishment in favor of the judgment creditor, there remains the 

question of the disposition of those funds lodged with the court 

by the suggested garnishee. Assuming, without deciding, that 

IFIC's petition for intervention permits it to assert a claim to 

receive the funds, compare Rule 2:15 (procedure for intervening 

in equitable suits) with Code § 8.01-365 (procedure for filing 

third party claim to funds subject to writ of fieri facias), we 

hold that the record before us does not establish affirmatively 

that at the time of the chancellor's final ruling IFIC had fully 

discharged its duties under the two bonds, thus entitling it to 

the retained funds. Although it was alleged in oral argument 

that those duties have subsequently been discharged and VDOT has 

paid the remaining funds it retained to IFIC, we are concerned 

here only with the facts that were available to the trial court. 

 Those facts do not establish the respective rights between IFIC 

and VDOT, the suggested garnishee2

, to the funds lodged with the 

 

 1Ashland has asserted that its judgment against Nu-Way 

should be afforded the same dignity as a mechanic's lien. 

However, the record of this case establishes only that Ashland 

had "an open account from numerous jobs and invoices," and not 

that it was a supplier on the specific contracts related to the 

funds retained by VDOT. We express no opinion on whether a 

different result would have been reached if Ashland's judgment 

had been obtained in lieu of a mechanic's lien on supplies for 

the contracts. 

 2

Nonetheless, VDOT was not an indispensable party to this 

appeal, as suggested by Ashland in its motion to dismiss. We 

distinguish the present appeal from Butler v. Butler, 219 Va. 

164, 247 S.E.2d 353 (1978), wherein we held that the suggested 

garnishee was indispensable to the appeal of a garnishment 

proceeding. Unlike Butler, this appeal was brought by an 

intervening third party. By intervening, IFIC placed itself in 
court. 

 For these reasons, we will reverse the chancellor's order 

directing that the funds be paid to the judgment creditor and 

remand with directions that further proceedings be held 

consistent with this opinion. 

Reversed and remanded. 

 

opposition only to the judgment creditor, thus only the judgment 

creditor was an indispensable party to the intervenor's appeal of 

the chancellor's unfavorable ruling.