Case Name: PAGE TRUST COMPANY et al. v. CAROLINA CONSTRUCTION COMPANY et al.
Court: Supreme Court of North Carolina
Jurisdiction: North Carolina
Decision Date: 1926-04-28
Citations: 191 N.C. 664
Docket Number: 
Parties: PAGE TRUST COMPANY et al. v. CAROLINA CONSTRUCTION COMPANY et al.
Judges: 
Reporter: North Carolina Reports
Volume: 191
Pages: 664–667

Head Matter:
PAGE TRUST COMPANY et al. v. CAROLINA CONSTRUCTION COMPANY et al.
(Filed 28 April, 1926.)
1. Mechanics’ Liens — Bonds—Principal and Surety — Municipal Corporations — Statutes—-Contracts—Materialmen.
Where the contractor’s bond for the erection of a public building used in connection with the contract does not create a liability on the surety to pay for the materials furnished for the erection of the building, but only the municipality against loss, there is no presumption .prior to the enactment of ehaper 100, Public Laws of 1923, that the bond incorporated this provision, and under the provisions of C. S., 2445, no liability to the surety will be thereunder created.
2. Same — Assignment by Contractor of Funds Reserved — Priority.
Where those furnishing materials, etc., for the erection of a municipal public building have acquired no lien thereon for their payment, and the surety on the contractor’s bond has no liability thereunder, the interest of the contractor in the amount reserved for final payment to him is assignable by him in equity for money loaned him to pay for material, etc., also furnished for and used in the buildings, as against the claims of others who have furnished material, etc., for the building, and has priority of payment out of the funds so reserved in accordance with the priority of date of such assignments.
3. Same — Bills and Notes — Renewal Notes.
Where the contractor has made a valid assignment as security for money loaned- to pay for material, etc., used in a public building, the renewals of his note to the bank lending the money upon the same conditions, are enforceable by the bank as against the unpaid material fur-nishers, to the same extent as the note originally' given.
Appeal by plaintiffs, other than Page Trust Company and Bank of Hamlet, from McFlroy, J., at November Term, 1925, of ANSON.
Affirmed.
Fred J. Coxe, H. P. Taylor, B. F. McLeod, C. W. Tillett, Jr., Franlc L. Dunlap, D. B. Smith, Williams & Williams, McLendon & Covington, and Manning & Manning for appellants.
Stewart, McRae & Bobbitt for American Surely Company.
Gibbons <& LeGrand for Bank of Hamlet.

Opinion:
Adams, J.
On 16 May, 1922, the Carolina Construction Company contracted with the Board of Trustees of the "Wadesboro Graded School to provide all the material and perform all the work necessary foi} the erection and completion of a school building in Wadesboro, and a few days thereafter executed a penal bond, with the American Surety Company of New York as surety, conditioned to indemnify the board of trustees ¿gainst any loss or damage directly arising by reason of tbe contractor's failure to perform bis contract. Owing to financial difficulties tbe contractor made default, and witb bis consent and witb that of tbe surety company the board of trustees took over and completed tbe work at its own expense. In addition to tbe amount previously paid tbe contractor, tbe trustees expended $5,154.15, and after doing so bad in tbeir bands as tbe remainder of tbe retained percentage tbe sum of $4,431.08. Several creditors sued tbe contractor, tbe surety company, and tbe board of trustees, on tbeir respective accounts for labor and material; and upon issues joined tbe cause was referred to R. C. Lawrence as referee, witb instructions to bear tbe evidence and to report bis findings of fact and bis conclusions of law. Tbe referee made bis report in compliance witb tbe order of reference and tbe appellants filed exceptions. Tbe exceptions were overruled by tbe trial judge, who affirmed tbe referee's findings of fact and conclusions of law. Tbe appellants again excepted and appealed. Tbe ultimate object of tbe action, which was treated as a creditors' bill, is tbe recovery of judgments against tbe surety on tbe contractor's bond.
Tbe first conclusion of law is this: "As tbe contract does not require tbe contractor to pay for labor and material, and as tbe bond does not upon its face extend to cover tbe claims of laborers and materialmen, there is no liability against tbe surety company." This, we think, is tbe correct conclusion. Tbe bond of tbe surety company was executed in May, 1922. It was not conditioned for tbe payment of all labor done on and material and supplies furnished for tbe building, as required by C. S., 2445, but only to indemnify tbe obligee, tbe board of trustees, against loss or damage; and tbe bond is not conclusively presumed to have been given in accordance witb tbe provisions of section 2445 as amended because tbe amendment which writes this provision into every bond given by any municipal corporation for tbe erection, repairing or altering of a public building did not become effective until 17 February, 1923. Public Laws 1923, cb. 100. Tbe conclusion reached by the referee and by tbe judge is sustained -by Mfg. Co. v. Andrews, 165 N. C., 285; McCausland v. Construction Co., 172 N. C., 708; Warner v. Halyburton, 187 N. C., 414; Brick Co. v. Gentry, ante, 636. See, also, Noland Co. v. Trustees, 190 N. C., 250. In Ingold v. Hickory, 178 N. C., 614; Supply Co. v. Lumber Co., 160 N. C., 428; Gastonia v. Engineering Co., 131 N. C., 363, and Hill v. Surety Co., 200 U. S., 107, 50 Law Ed., 437, cited by tbe appellants, there were stipulations for tbe payment of debts contracted for labor and material and herein lies tbe distinction pointed out in Warner v. Halyburton, supra.
Tbe appellants say that there was error in bolding that tbe laborers and materialmen bad no lien on tbe school building or on tbe fund remaining after tbe trustees bad completed tbe building and in bolding that tbis fund was tbe property of tbe contractor or bis assignees. We do not concur, for all doubt seems to bave been resolved against tbis position in a number of our decisions. Noland Co. v. Trustees, supra; Warner v. Halyburton, supra; Ingold v. Hickory, supra; Scheflow v. Pierce, 176 N. C., 91; Hutchinson v. Comrs., 172 N. C., 844; Hall v. Jones, 151 N. C., 419.
On 24 October, 1922, tbe contractor borrowed from tbe Rank of Hamlet $7,000, and wrote upon tbe face of bis note, "To secure tbis note we assign $7,000 of tbe amount due us by Wadesboro High School." Tbis money was applied in payment of work done and material used in tbe construction of tbe building. Tbe Bank of Hamlet endorsed tbe note and bad it rediscounted by tbe Bank of Wadesboro, which thereby became a bolder in due course. Tbe contractor afterwards made certain payments on tbe note, and upon bis failure to pay tbe remainder due tbe Bank of Hamlet took up tbe note and reacquired title thereto, with tbe usual rights and remedies. Thereafter tbe contractor renewed tbe note from time to time, tbe last renewal dated 1 April, 1925, being a note in tbe sum of $4,427.19. Tbis note bore an assignment identical with that which was written on tbe face of tbe original note. Tbe contractor gave a written order to tbe board of trustees to pay tbe note after its transfer to tbe Bank of Wadesboro, but tbe board declined to make payment because nothing could be paid without tbe architect's certificate. When tbe contractor notified tbe trustees to pay tbe note nothing was due him in excess of the fifteen per cent which was withheld under tbe contract. It was tbe purpose of tbe contractor to assign a sufficient amount of tbe moneys due or to become due to pay tbe note to tbe Bank of Wadesboro, and after it was returned to ratify tbe assignment and to make it effective. Upon these facts tbe referee reported tbe following conclusions of law, which were challenged by tbe exceptions and affirmed by tbe judge:
"Tbe assignment made by tbe contractor to tbe Bank of Hamlet on 24 October, 1922, when considered in connection'with tbe assignment provisions written in tbe face of tbe original notes and renewals thereof, and also when considered in tbe light of tbe letter or order of tbe contractor upon tbe school board dated 19 May, T923, constitutes an equitable assignment, certainly as between tbe bank and-tbe contractor, and as tbis is tbe first and superior assignment, and as tbe amount due will entirely consume tbe fund in band, tbe Bank of Hamlet is entitled to recover tbe full and entire amount due by tbe school board to tbe contractor.
"Tbe Bank of Hamlet is entitled to bave and recover of tbe school board tbe sum of $4,431.08, balance admittedly due by tbe school board, plus tbe further sum of $. derived from tbe sale of tbe remaining material left over after tbe completion of tbe school building."
In considering tbe exceptions we must not overlook tbe fact that neither tbe contract nor tbe bond required tbe contractor to pay for labor or material. After the completion of tbe building tbe board of trustees bad on band $4,431.08, to which under tbe written agreement tbe contractor would have been entitled. Tbe question is whether as against tbe appellants be bad a legal right to make an assignment of this fund to tbe Bank of Hamlet.
At common law a mere possibility was not tbe subject of assignment. This rule was applied in tbe law of contracts; and to give validity to an equitable assignment of money due by contract it. was necessary to show that a contract existed and that tbe money assigned bad an actual or potential existence. In Motz v. Stowe, 83 N. C., 434, 439, tbe Court applied tbe general principle that anything written, said, or done for value in pursuance of an agreement to place a fund out of tbe owner's control and to appropriate it for tbe benefit of another constitutes an equitable assignment. Accordingly, it has been held that in equity contingent rights are assignable and that tbe assignee of a part of a debt acquires in equity a right of action against tbe assignor. Brown v. Dail, 117 N. C., 41; Williams v. Chapman, 118 N. C., 943; Stott v. Franey, 23 A. S. R., 132, and note; 2 R. C. L., 599. Therefore as between tbe creditor and bis assignee it is not necessary to notify tbe debtor that tbe claim has been transí erred. Ponton v. Griffin, 72 N. C., 362; Chemical Co. v. McNair, 139 N. C., 326. And in Bank v. School Committee, 121 N. C., 107, it is said that under our statute (C. S., 446), almost any contract that constitutes an indebtedness or money liability may be assigned. See, also, Godwin v. Bank, 145 N. C., 320, 326; Hall v. Jones, supra; Corporation Commission v. Bank, 164 N. C., 205. Tbe contractor's claim, then, was assignable; and as tbe exceptions do not present tbe ease of an equitable lien in favor of tbe creditors based upon tbe contract, tbe bond, or any other written instrument intended to charge tbe particular fund with paylnent of tbe appellants' claims (Garrison v. Vermont Mills, 154 N. C., 8), we discover no adequate reason for declaring tbe assignment to tbe Bank of Hamlet either void or voidable. Tbe remaining exceptions, require no discussion.
In our opinion tbe judgment is free from error and should be
Affirmed.