ABC Supply Co., Inc. v. U.S. Fidelity & Guaranty ( 1997 )

ABC SUPPLY COMPANY, INC., ) Williamson Chancery
) No. 23986
Plaintiff/Appellant, )
)
VS. )
)
UNITED STATES FIDELITY AND ) Appeal No.
GUARANTY COMPANY; CHARLES ) 01A01-9702-CH-00081
& VINZANT CONSTRUCTION CO., )
INC.; CAP-TENN ASSOCIATES; ACI )
BUILDERS, INC. a/k/a ACI ROOFING, )
INC.; ADAM KEITH CHUNN; AND )
FILED
ALBERT NELSON CHUNN, )
December 12, 1997
)
Defendants/Appellees. )
Cecil W. Crowson
Appellate Court Clerk
IN THE COURT OF APPEALS OF TENNESSEE
MIDDLE SECTION AT NASHVILLE
APPEAL FROM THE CHANCERY COURT OF WILLIAMSON COUNTY
AT FRANKLIN, TENNESSEE
HONORABLE HENRY DENMARK BELL, JUDGE
Everett L. Hixson, Jr. R. E. Lee Davies
Phillip E. Fleenor HARTZOG, SILVA & DAVIES
Robert T. Witthauer Fifth Avenue, No. & Fair Street
SHUMACKER & THOMPSON P.O. Box 664
Suite 500, First TN Building Franklin, TN 37065-0664
701 Market Street
Chattanooga, TN 37402-4800
ATTORNEYS FOR PLAINTIFF/APPELLANT
John C. Beiter Luther Wright, Jr.
NEAL & HARWELL BOULT, CUMMINGS,
CONNERS &
2000 First Union Tower BERRY
150 Fourth Avenue, North 414 Union Street, Suite 1600
Nashville, TN 37219-2498 P.O. Box 198062
ATTORNEYS FOR DEFENDANTS/ Nashville, TN 37219-8062
APPELLEES
AFFIRMED AND REMANDED
HENRY F. TODD
PRESIDING JUDGE, MIDDLE SECTION
CONCUR:
BEN H. CANTRELL, JUDGE
WILLIAM C. KOCH, JR., JUDGE
ABC SUPPLY COMPANY, INC., ) Williamson Chancery
) No. 23986
Plaintiff/Appellant, )
)
VS. )
)
UNITED STATES FIDELITY AND ) Appeal No.
GUARANTY COMPANY; CHARLES ) 01A01-9702-CH-00081
& VINZANT CONSTRUCTION CO., )
INC.; CAP-TENN ASSOCIATES; ACI )
BUILDERS, INC. a/k/a ACI ROOFING, )
INC.; ADAM KEITH CHUNN; AND )
ALBERT NELSON CHUNN, )
)
Defendants/Appellees. )
OPINION
The captioned plaintiff, ABC Supply Co., Inc., (hereafter ABC) has appealed from the
summary dismissal of some of the captioned defendants.
Cap-Tenn Associates, (hereafter Cap-Tenn), as owner, engaged Charles & Vinzant
Construction Co., Inc., (hereafter C&V), to construct a large commercial building. United States
Fidelity and Guaranty Company executed a bond guaranteeing faithful performance by C&V,
the general contractor. The foregoing defendants were dismissed by the summary judgment.
C&V engaged ACI Builders a/k/a ACI Roofing, Inc., (hereafter ACI), as subcontractor,
to construct or apply the roof of the building. Adam Keith Chunn and Albert Nelson Chunn, as
guarantors for ACI, joined in an application for credit to be extended to ACI for the purchase of
roofing materials from ABC.
Cap-Tenn, the owner, C&V, the general contractor and USF&G, the surety of the general
contractor, were dismissed by summary judgment. The Trial Court directed entry of the partial
summary judgment as final as provided by TRCP Rule 54.02.
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Judgment was rendered in favor of ABC, the materialman against ACI, the roofing sub-
contractor, and its two guarantors for $40,418.37 plus $2,230.00 attorney fees. This portion of
the judgment is not before this Court on appeal.
ABC, the plaintiff-appellant materialman, has filed a brief in this Court presenting the
following issues:
STATEMENT OF THE ISSUES
PRESENTED FOR REVIEW
Whether the court below erred in granting Summary
Judgment to Defendants United States Fidelity Guaranty
Company (“USF&G”), Charles Vinzant Construction
Company, Inc. (“C&V”), and Cap-Tenn Associates (“Cap-
Tenn”) where:
(a) genuine issues of material fact exist under the
doctrine of quantum meruit as to whether ABC was
paid for materials supplied by it to the job under
ABC’s theory of recovery.
(b) genuine issues of material fact exist under
ABC’s bond claim as to (i) whether the ninety day
notice provision contained in the bond is applicable
and, if so, (ii) whether USF&G, C&V and Cap-Tenn
had actual notice of the claim sufficient to satisfy the
notice requirement; and
(c) the “Joint Check Rule” relied upon by
USF&G, C&V, and Cap-Tenn to extinguish their
liability to ABC is inapplicable because of the
existence of contemporaneous contracts covering the
same subject matter which preclude the application of
the joint check rule. (Emphasis supplied)
Cap-Tenn, the owner-appellee, has filed a brief in response to appellant’s issues. C&V,
the general contractor, and USF&G, its surety, have filed a brief and supplemental brief
presenting the following issue:
Whether the Chancery Court was correct in granting
Summary Judgment for the Defendants/Appellees United
States Fidelity Guaranty Company and Charles & Vinzant
Construction Company, Inc.
On June 21, 1995, C&V, the general contractor, ACI, the roof subcontractor, and ABC,
the roofing material furnisher, executed the following “Joint Check Agreement”:
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This Joint Check Agreement entered into this 21 day of June,
1995, between (General Contractor) Charles & Vinzant
Construction Co.
500 Southland Dr., Suite 102, Birmingham, AL 35226
205-823-6761 (hereinafter referred to) as (subcontractor) ACI
Roofing, Inc.
1808 Pulaski Hwy., Fayetteville, TN 37334 615-433-6949
(hereinafter referred to as Subcontractor) and American
Builders & Contractors Supply Co., Inc. d/b/a/ ABC Supply
Co., Inc. (hereinafter referred to as ABC).
The parties hereto agree as follows:
1. Any and all payments between General and
Subcontractors in connection with the Project described
below shall be made only by checks issued in the joint names
of Subcontractor and ABC by the General pursuant to
invoices submitted by Subcontractor to General.
Cool Springs Market Building located at 2000 Mallory Lane,
Franklin, Tn. 37065 615-771-7954
2. All checks issued by General jointly to Subcontractor
and ABC as set out above shall be delivered to ABC by
Subcontractor, whereupon Subcontractor will endorse said
checks and surrender them to ABC for deposit by ABC.
Subcontract amount of $225,140.00.
3. One purpose of this Joint Check Agreement is to
provide the payment of invoices rendered by ABC on sales of
all materials to Subcontractor for use on the project, not in
excess of Subcontractor amount. This agreement does not
constitute an assignment of funds, and, except to the extent of
payment actually received and retained by ABC, the
execution of this Agreement and taking of such joint check
shall not effect (sic) or otherwise impair any bond, lien or
other creditor rights and remedies which ABC now has or
may hereafter have. This Agreement shall remain in full force
and effect until written cancellation is forwarded to General
and Subcontractor by an authorized representative of ABC
and all outstanding invoices owed by Subcontractor to ABC
are paid in full.
ABC’s rights contained herein are a portion of the
consideration for ABC’s agreement to supply materials for the
Project.
The record contains a further document entitled Joint Payment Agreement, but it
contains no date, no blanks are filled in and it contains only the signature of ABC and ACI. The
signature of C&V, the general contractor, does not appear in the space provided for it.
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Plaintiff’s reliance upon the “second contract” is misplaced because the general contractor was
not a party to it.
The record also contains a tabulation of deliveries claimed by ABC to have been made
to ACI from July 26, 1995, to August 18, 1995, amounting to a total of $82,492.21.
On July 25, 1995, ACI submitted a payment request to C&V seeking payment for
$75,234.00 worth of roofing materials. It attached to this request an invoice for these materials
dated July 24, 1995, purportedly prepared by ABC. ABC insists, without contradiction by Cap-
Tenn, C&V, or USF&G, that ACI actually forged this invoice.
In accordance with the Joint Check Agreement, C&V issued a check payable to ABC
and ACI in the amount of $67,710.60 which represented the $75,234.00 less 10% “retainage”
of $7,523.40. The “retainage” was retained by C&V to assure that ACI would satisfactorily
complete its contract to construct the roof. Sec. 13 Am Jur.2d Building and Construction
contracts §§21.p24. Upon satisfactory performance of the roof contract, ABC and ACI would
be entitled to payment of the accumulated retainage by a check payable to both under the joint
check agreement. To the extent of the retainage, the summary judgment in favor of C&V and
USF&G is reversed.
C&V delivered the $67,710.60 check to ACI, and ACI endorsed the check and delivered
it to ABC which endorsed and deposited it to the credit of ABC in its bank account on or about
August 22, 1995. However, ABC drew and delivered a check to ACI for $23,324.12 and now
seeks to recover from C&V and its surety this amount of $23,324.12 which it has already
received from C&V and paid to ACI. Nothing in this record supports the right of ABC to
collect this $23,324 from C&V or its surety for the second time. Therefore, we affirm the
summary judgment in favor of C&V and USF&G on this claim.
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ABC attempts to rely upon the above mentioned “Joint Payment Agreement” which
contains the words:
NOW, THEREFORE, in consideration of Supplier
furnishing the work for said Project, and other valuable
consideration, Contractor agrees to make payment for said
Work by issuance of a check made payable jointly to
Supplier and Subcontractor. Subcontractor agrees that such
joint check payment shall be applied against
Subcontractors’s contract price with Contractor. Payment of
the aforesaid amount shall be due at Supplier’s place of
business.
In the event Contractor and Subcontractor are for any
reason in disagreement as to monies due from Contractor to
Subcontractor, at the time payment for the aforesaid work is
due to Subcontractor, Contractor agrees to make full
payment to Supplier directly, in lieu of issuing a joint check,
and Subcontractor agrees that said money so paid by
Contractor to Supplier shall be applied against
Subcontractor’s contract price with contractor. Contractor
shall not be obligated to make payment to Supplier if
Subcontractor becomes indebted to Contractor for default
under said contract.
Nothing contained herein in this agreement shall be
construed as a waiver of any of the Contractor’s rights or
remedies against the Subcontractor or others. Additionally,
this agreement shall in no way create an obligation upon
Contractor to make payments in excess of the amounts due
Subcontractor under the subcontract, or that this agreement
shall not be construed to create a contractual obligation to
supplier on the part of Contractor except as set forth in this
agreement.
As stated above, this “Joint Payment Agreement” was signed only by ABC and ACI.
No other party executed it.
ABC asserts that it has furnished a total of $81,921.71 of materials used in the roofing
job and has received only $75,234.00 therefor. C&V responds that ABC has not yet proven the
actual delivery and use of the invoiced materials in the roofing project. Moreover, C&V has
its right of retainage, or delay of payment, until the roof contract has been satisfactorily
performed by ACI. Upon proof of such performance, the rights of ABC and ACI to the
retainage may be enforced. Until such performance is proved the question of liability of C&V
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and its surety cannot be determined. Moreover, the performance of the notice provision of the
surety undertaking of USF&G has not been shown by ABC or ACI.
It is undisputed that ABC received and deposited a check for the full amount of its bill.
Its voluntary payment of part of the check to ACI did not create any obligation upon C&V or
USF&G to reimburse ABC for said voluntary payment. The only claim which ABC might have
against Cap-Tenn, the owners of the land, would be unjust enrichment. However, the record
is clear that Cap-Tenn. has paid all it was obligated to pay under its contract. Therefore, no
claim for unjust enrichment may be asserted against Cap-Tenn. See Paschall’s Inc. v. Dozier,
219 Tenn. 45, 407 S.W.2d 150 (1966). As we read the complaint ABC did not assert this claim
against C&V and USF&G.
The case is not closed in the Trial Court, where ABC will have an opportunity to prove
and enforce such rights as it may be able to establish to the retainage held by C&V to assure
satisfactory performance of the roofing contract by ACI. Any dispute as to satisfactory
completion of the roof will remain open for litigation in the Trial Court.
The summary judgment dismissing C&V, the general contractor, and USF&G, the
surety, on the general contract, is reversed to allow ABC to assert its right to the retainage. In
all other respects, the summary judgment dismissing Cap-Tenn, C&V and USF&G is affirmed.
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Costs of this appeal are taxed against the appellant, ABC. The cause is remanded to the Trial
Court for further necessary procedure.
AFFIRMED AND REMANDED
HENRY F. TODD
PRESIDING JUDGE, MIDDLE SECTION
CONCUR:
____________________________
BEN H. CANTRELL, JUDGE
____________________________
WILLIAM C. KOCH, JR., JUDGE
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