Court Opinion

ID: 3671038
Source: CourtListenerOpinion
Date Created: 2016-07-06 06:19:27.575012+00
Date Added: 2024-06-11T14:08:54.054061
License: Public Domain

This suit was instituted by the plaintiff against the owners of the property on 24 November, 1914, summons being served on the 25th, and at September Term cause was referred to E. V. Cowper, Esq., of the Kinston bar, and in the order of reference there was inserted by consent of the parties a provision that any amount *Page 235 
found to be due by or in the hands of the defendants under the contract shall be applied to the payment and discharge of all the debts and liabilities properly incurred in the construction and completion of the building, arising out of labor, services or material that went into such construction, etc.
On the hearing, a large number of such claims were presented and filed before the referee and embodied and set forth in section 12 of the report. The referee then classified certain of those claims in sections 14 and 15, section 14 showing an itemized statement, aggregating $3,021.44 for material used in and upon the building, and which had not been filed with the owners; and section 15 showing an itemized statement for material, etc., aggregating $4,426.77, which had, in this proceeding, been filed with the said owners; and the referee thereupon holds as one of the conclusions of law that those claims which had been filed with the owner should be paid in full out of the amount found due from the owners, and the balance, $402.38, shall be shared pro rata among the claimants in section 14.
To this conclusion the claimants in section 14, styled intervenors, having obtained leave of court for the purpose, filed an exception, contending that all of these material men should share equally in the amount to be apportioned. The ruling of the referee was, no doubt, based upon a construction of sections 2019, 2020, 2021, 2022, 2023 of Revisal, giving to subcontractors furnishing material a valid claim on any amount due from the owner, and also a lien on the building to that amount, if required, when they shall have given notice and filed an itemized statement of their claims with the owner.
The meaning and proper applications of these sections have been before the Court in several recent cases — Foundry     (219)Co. v. Aluminum Co., 172 N.C. 704; Brick Co. v. Pulley, etal., 168 N.C. 371; Mfg. Co. v. Andrews, 165 N.C. 285 — and a perusal of these cases, and of the statute referred to, will disclose that such subcontractor may, by filing an itemized statement, acquire a claim against any balance then due from the owner, or which may be earned under the contract, and a lien therefor on the building, not exceeding that amount. And in the Foundry v. Mfg. Co. case, more particularly, it is held that this amount is to be considered as a trust fund, to be divided equally among those claimants who have complied with the statute by filing a proper notice. This interpretation is emphasized by the language of section 2023, to the effect that in such a case "it shall be the duty of the owner to distribute the amount pro rata among the several claimants, as shown by the itemized statement which has been furnished him." *Page 236 
While this view might sustain the conclusion of the referee on this question if the matter was an adjustment inter partes, and possibly if the claimants had filed their itemized statements with the owners before suit brought, the position cannot obtain in the present instance by reason of the terms and effect of the order of reference, and by which it was agreed that all claims for material should share in any amount due from the owners to the contractors. Under that order and the provision agreed upon, these claimants all appeared and presented their claims, and the amount due under the contract, by their consent, to be considered and dealt with as a trust fund in which the designated material men were to share equally. After that time no one creditor or claimant could obtain advantage over another by filing his claim with the owner. The action as to them had taken on the nature of a creditor's bill for the proper distribution of a common fund and was no longer subject to a preference by action inter partes. In such suit, unless a claim is contested, in which case it is customary to file special pleadings in reference to it, that the issues may be the more intelligently determined, no formal order is necessary to make these claimants parties. They became such by presenting and filing their claims with the referee, and were thereby bound by the terms and significance of the order of reference, which clearly contemplates and requires an equal distribution of the fund. These positions are in accord with the recognized principles applicable to general creditors' bills, and are sustained by decisions of this Court dealing with the subject. Fisher v. Bank,132 N.C. 771; Bank v. Bank, 127 N.C. 432; Pipe Co. v. Woltman,114 N.C. 178; Hancock Bros. v. Wooten, 107 N.C. 9; Warden v. McKimmon,94 N.C. 378; 6 Pomeroy's Eq., secs. 894-895.
It is urged, on behalf of the owners, that a pro rata
(220)    distribution should not now be ordered, because they have paid some of these claimants in (section 15) in full, and, after the report of the referee awarding such payments, had remained on file for some time unexcepted to.
It is well understood that the report of a referee is subject to modification on proper application at any time before it is confirmed, and after that and before final judgment, the order of confirmation may be set aside for good cause shown.
These exceptions entered, filed by leave of court and before confirmation, are in accord with regular order and procedure, and the defendants paying with full notice of this and before confirmation must be held to have paid at their peril. 34 Cyc., pp. 870 and 871. A position all the stronger here as they had agreed to an order of reference requiring the amount due from them should be shared *Page 237 
equally by material-men, and these claims for material had been duly filed with the referee in the cause.
It is insisted further for intervenors that the amount of $1,061.96 allowed the owners as damages for delay is a personal claim against the contractor plaintiff and should not be considered a proper deduction from the balance to be shared by claimants. Whatever may be the merits of such a position, we think it is not open to appellants on this record and by reason of the stipulation in the order of reference that the "amount due from defendants under the contract" shall constitute the fund to be divided. The contract, in express terms, provides for damages for this delay, and the appellants are concluded by this clause of the order.
There is error, and this will be certified that the judgment be so modified as to allow the claimants in sections 14 and 15 of the report to share equally in the balance due as found by the referee.
Error.
BROWN, J., did not sit.
(221)