Opinion ID: 1690227
Heading Depth: 2
Heading Rank: 2

Heading: does the court of appeals' opinion conflict with prior decisions of this court?

Text: ¶ 16. The trial court held that Amerihost negligently or wilfully failed to ensure that Bromanco was paying the subcontractors, that such failure proximately caused the subcontractors' losses, and that Amerihost, as both owner and lender, was liable for all subcontractors' claims even if the claims exceeded the amount due to them under the contract. The court reasoned that Amerihost was liable due to its failure to monitor properly the progress of the work and, citing First Nat'l Bank v. Virden, 208 Miss. 679, 45 So.2d 268 (1950), due to its failure to ensure that the subcontractors were paid. ¶ 17. In distinguishing Virden, the Court of Appeals noted that Virden was decided in the context of mortgage law where an issue of preference arose between competing liens. 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. Id. ¶ 18. However, in the present case, a mortgage was not involved because Amerihost was self funded. A mechanic's lien case, Engle Acoustic & Tile, Inc. v. Grenfell, 223 So.2d 613 (Miss.1969), is more on point. Suit was brought by several subcontractors against the project's owners and architect for balances due them as a result of the default of Fran Builders, the prime contractor. Fran made nine applications for payment for labor and materials furnished. Each application was submitted to the owner's architect for verification before payment was remitted. Near the end of the project, it became apparent that Fran had not paid all laborers and materialmen involved in the project and work ceased shortly thereafter. Fran was later declared bankrupt. None of the laborers or materialmen filed a stop payment notice on their claims until after the owners had paid Fran in full in response to its ninth and last application for payment. ¶ 19. In reaching a favorable decision for the owners, we acknowledged the difficult consequences resulting from our decision: [I]t is regrettably true that either the subcontractors will lose their labor and materials in the amounts stated or the owners will be forced to make a double payment. It does not necessarily follow, however, that the owners were in the best position to have prevented the loss. Id. at 618. As was the situation in the case sub judice, the owners in Engle, initiated the overall project and trusted and relied heavily upon their prime contractor to complete the contracted project without any difficulties or problems. We acknowledged that the subcontractors and materialmen also relied on and trusted Fran, but their reliance and trust were as equally misguided and displaced as was that of the owners. ¶ 20. In ultimately deciding which party, the owners or the subcontractors, was in the best position to prevent the resulting losses, we held that none of the subcontractors had availed themselves of the pertinent statutory remedy. Id. So long as advance payments to the prime contractor extinguished debt and were paid prior to receipt of the statutory stop payment notices, liability was precluded on the part of the owners. Id. at 619. ¶ 21. The Court of Appeals, relying on Engle, determined that the subcontractors and materialmen were not left without recourse under the current statutory construction of § 85-7-181, provided they invoke its benefits and protections through their own due diligence and in accordance with the statutory requirements. To allow those who failed to avail themselves of its benefits, would seek to circumvent the statutory requirements and ride the coattails of those subcontractors and materialmen who actually asserted their rights. ¶ 22. We agree with the Court of Appeals that to allow such a result would offend justice and be destructive of the overall purpose and intent behind § 85-7-181. As such, we find that the Court of Appeals properly interpreted and applied Virden and Engle to the facts in this case.