Opinion
No. 27103.
May 31, 1926. Rehearing Denied June 28, 1926.
Appeal from Third Judicial District Court, Parish of Lincoln; S.L. Digby, Judge ad hoc.
Concursus proceeding by W.H. Cook against the Ruston Oil Mills Fertilizer Company, Limited, and others. From the judgment, largely in favor of plaintiff, defendants appeal. Judgment annulled, and case reversed and remanded.
J.C. Henriques and Manning W. Heard, both of New Orleans, and Elder Everett, of Farmerville, for appellant Union Indemnity Co.
Dhu Thompson, of Ruston, for appellants North Louisiana Brick Co., W.T. Tucker, L.W. Mitchell, J.B. Smith, G.M. Lomax Lumber Co., Thompson Ritchie Co., R.G. Null, George Shinpock, Davis Jimmerson, E.A. Gaar, and B.P. Adams.
E.L. Walker, of Ruston, for appellant Ruston Hardware Furniture Co., Ltd.
Barksdale, Warren McBride, of Ruston, for appellee.
On August 2, 1923, W.H. Cook, plaintiff, entered into a building contract with E.C. Evans for the construction, according to certain plans and specifications, of a brick residence on plaintiff's lot in the town of Ruston; the contractor agreeing to perform the work for the price of $7,250, and to furnish, at his own cost, all necessary labor and material, and bond as required by law.
The work was to be begun on or before August 20, 1923, and to be completed within 90 days from that date.
Evans executed bond on August 9, 1923, in the sum of $5,000, with the Union Indemnity Company as surety, to insure the faithful performance of the contract, and the payment of all claims for labor, material, etc. The contract and bond were recorded in the mortgage records of Lincoln parish, in which the town of Ruston is located, on August 13, 1923.
The contractor commenced work on the house, but abandoned work before its completion.
The Union Indemnity Company, surety on the bond, after notification by plaintiff of the abandonment of the work by the contractor, and after request by plaintiff to take over and complete same, refused to do so, after being furnished with an estimate of the probable cost of completion.
Upon the refusal of the contractor and surety to proceed with the work, the plaintiff, after notification to both, took over the work and completed it, as provided under the terms of the bond; said bond being given pursuant to the provisions of Act 139 of the year 1922.
Plaintiff, the owner, alleges that at the time the contractor abandoned work on the contract the sum of $5,990.65 had been paid by him on the contract, and that in order to complete the work, after plaintiff was compelled to take over the same, it was necessary to spend the sum of $976.40, leaving a balance due on the contract of $282.95, which plaintiff has paid into the registry of the court, to be dealt with as the law provides.
(1) Plaintiff does not claim judgment in any sum against the contractor or the surety on his bond, but has instituted the present concursus proceeding solely for the purpose of compelling payment by the surety or by the contractor of all just claims for labor and material going into the construction of plaintiff's house, under the terms of the bond, and to obtain cancellation of the recorded accounts in so far as they operate as a lien and privilege on the property of plaintiff.
While alleging compliance with the provisions of Act 139 of 1922, and that he and his property are not subject, therefore, to any claim for unpaid labor and material, plaintiff admits in his petition that there are outstanding and unpaid claims for labor and material, amounting to $7,194.76, or an excess of $2,194.67 over the total amount of the bond furnished by the contractor.
Plaintiff contends that under section 4 of Act 139 of 1922 he is entitled to have canceled and erased all inscriptions affecting his property, created by the recordation of the claims of workmen and furnishers of material, because the claimants did not file their answers in the concursus proceedings within 10 days after the filing of said proceedings.
(2) The workmen and furnishers of material seek to obtain judgment in the concursus proceedings against W.H. Cook, plaintiff and owner, and against the contractor and the Union Indemnity Company, as surety on the bond.
They set up in their answers against plaintiff the following grounds for recovery:
(a) Fraud and collusion between the plaintiff, Cook, and the contractor, E.C. Evans.
(b) That the bond was insufficient, in that the contract price, plus the amount of the bond, was consumed in the erection of the building, resulting in an insufficient amount to pay claimants herein.
(c) That work was done and material used under the direction of the plaintiff in the construction of improvements beyond and not covered by the contract.
(d) That material changes, increasing the cost of building to the amount of at least 10 per cent. or more, were made at the suggestion and under the direction of the plaintiff after the contractor had in truth and in fact defaulted.
(e) That the plaintiff anticipated payments in violation of his contract.
(f) That the plaintiff took over the work and was in actual charge and direction thereof from the time the foundation was laid until completion, but failed and neglected to give claimants herein any notice whatever of the default on the part of the contractor, direct or indirect, or by recording notice thereof in the records of Lincoln parish.
The Union Indemnity Company has also made defenses similar to those urged by the claimants for labor and material, as reasons for its release as surety from liability on the bond.
The trial Judge, however, excluded all testimony as to the claims against the owner made by the workmen and furnishers of material, and as to the defense urged by the surety company against plaintiff, reserving their right to present said claims and to make such defenses in appropriate proceedings.
The position taken by the trial judge is that the issues of the case were confined to the question of the distribution of the amount of the bond and the balance of the contract price among the claimants establishing the justice of their claims, and that no other issues were admissible in the concursus proceeding.
Judgment was rendered:
(a) In favor of the claimants as furnishers of labor and materials against the Union Indemnity Company in the sum of $5,000, less the amount necessary to pay costs.
(b) In favor of the claimants against the contractor, E.C. Evans, in the full amount of their claims.
(c) Recognizing the amount deposited by plaintiff, W.H. Cook, in the registry of the court, to wit, $282.95, as being the correct amount due by him on the contract price and making that amount subject to the judgment of the claimants.
(d) Canceling and erasing the liens and privileges resulting from the recordation of the contract and bond and claims only so far as the judgment in favor of the claimants is satisfied out of the $5,000 and the $282.95 deposited in the registry of the court.
(e) Reserving the right to claimants to enforce their liens for the balance due them by Cook, and reserving to him the right to take such proceedings as appear necessary to have said liens canceled.
(f) In favor of the Union Indemnity Company and against the Ruston Hardware Furniture Company, Limited, its indemnitor, in the sum of $5,000.
In our opinion the trial judge should have admitted testimony as to the claims made against the owner by the workmen and furnishers of material, and as to the defenses presented by the Union Indemnity Company against the plaintiff, who completed the building after the default by the contractor.
Plaintiff raised in the petition for a concursus the direct issue as to his right to have all liens recorded against his property canceled, and as to his compliance with the contract in the completion of the building.
Section 2 of Act 139 of 1922 provides that —
"When the owner files a concursus proceeding he must deposit in court whatever funds, if any, remain in his hands after paying the costs of completing the building if he was compelled to complete it by reason of the default of the contractor; but any claimant shall have the right to show in that suit or other appropriate proceeding that the amount claimed to have been paid by the owner for such completion was not really paid or that work was done not covered by the original contract and pending the trial of such issue the liens and privileges herein given to subcontractors and others shall remain in full force and effect."
The claimants have alleged in this case, as a basis of liability on the part of the plaintiff, the owner completing the building, "that work was done not covered by the contract."
It is for the claimant, and not for the trial judge, to decide whether this issue shall be raised in the concursus proceeding, or later in some other proceeding. This right is clearly given to any claimant by the statute, and the option as to its exercise rests with the claimant, and not with the court.
It was error, therefore, on the part of the judge ad hoc to refuse to hear the issue presented, and it was error also for him to order the cancellation of the liens at all, as it is provided in section 2 of Act 139 of 1922:
"That pending the trial of such issue the liens * * * herein given to subcontractors and others shall remain in full force and effect."
This provision is intended as a protection to claimants for labor and material furnished, until the differences between them and the owner are adjusted and settled.
It is also provided in section 5 of said act that —
"In all cases where surety has been furnished, the surety shall be entitled to make only the same defenses that the contractor for whom he signed the bond is authorized to make except as to the owner who has made payments in anticipation."
That the plaintiff made advanced payments is alleged by the surety company in this case, and such defense may be properly made in the concursus proceeding, in which the owner seeks discharge from all liability, and the shifting of the burden of the claims for labor and material upon the shoulders of the contractor and surety.
It is therefore ordered that the judgment appealed from be annulled and reversed. It is now ordered that this case be remanded to the lower court and proceeded with in due course, and in accordance with the views herein expressed.