State ex rel. Dinneen Excavating Co. v. Sykes

531 N.E.2d 1309, 40 Ohio St. 3d 84, 1988 Ohio LEXIS 408
CourtOhio Supreme Court
DecidedDecember 14, 1988
DocketNo. 87-344
StatusPublished
Cited by5 cases

This text of 531 N.E.2d 1309 (State ex rel. Dinneen Excavating Co. v. Sykes) is published on Counsel Stack Legal Research, covering Ohio Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
State ex rel. Dinneen Excavating Co. v. Sykes, 531 N.E.2d 1309, 40 Ohio St. 3d 84, 1988 Ohio LEXIS 408 (Ohio 1988).

Opinion

Holmes, J.

The pertinent law is set forth in R.C. 1311.26 through 1311.32.

R.C. 1311.26 provides that any subcontractor who has performed labor or furnished material for the construction of any public building provided for in a contract may file with the owner or agent thereof (here, the director) a sworn and itemized statement of the amount and value of labor and materials furnished, stating when the last of each was furnished.

R.C. 1311.28 provides that:

“Upon receiving the notice required by section 1311.26 of the Revised Code, such owner, board, officer, public authority, or authorized clerk, agent, or attorney thereof, shall detain from the principal contractor all subsequent payments as do not in the aggregate exceed such claim or claims.

“An owner referred to in section 153.01 of the Revised Code shall place such detained funds in an escrow account as provided for under section 153.63 of the Revised Code, to be released at such times, in such amounts, and to such persons as may be ordered by a court of competent jurisdiction or by agreement of the principal contractor and the subcontractor, material-man, laborer, or mechanic who filed the notice provided for in section 1311.26 of the Revised Code.” (Emphasis added.)

R.C. 1311.29 defines the priorities awarded when there are several claimants, such as in this case. Any claimant filing a statement pursuant to R.C. 1311.26 must notify other potential claimants by filing, within ten days of filing the R.C. 1311.26 statement, a copy of the statement with the county recorder of the county where such property is situated. The filing for record of such notice gives the subcontractor preference, as to payments subsequently due from the owner, over other subcontractors or claimants who have failed to file an R.C. 1311.26 statement prior to the date any payment is due. All claimants who have filed statements have no priority among themselves; payment is to be made on a prorata basis.2

R.C. 1311.31 provides:

“The owner, board, officer, or clerk, agent, or attorney thereof, upon the receipt of the statement referred to in section 1311.26 of the Revised Code shall, or the lien claimant, his agent, or attorney, in the name of such owner, board, or officer, may furnish the principal contractor with a copy thereof, [86]*86within five days after receiving it, together with the notice that such principal contractor must give notice of his intention to dispute such claim within ten days. If such lien claimant performed such labor for, or furnished such material, fuel, or machinery to, a subcontractor or such principal contractor, such lien claimant shall, within ten days after the filing of such statement, furnish a copy thereof to such contractor. If such principal contractor fails within ten days after such receipt by him to notify, in writing, such owner, board, officer, or clerk, agent, or attorney thereof of his intern tion to dispute such claim, he has assented to its correctness, provided that within ten days after receipt by any subcontractor of a copy of such statement, such subcontractor may give such notice of such intention to dispute on behalf of such principal contractor. Thereupon, provided all statements filed on the same improvement have been assented to, the amount detained from the principal contractor shall be applied by and payment made by such owner, his agent, or attorney, in the order of preference prescribed in section 1311.29 of the Revised Code, pro rata, upon such claims on which statements have been filed. Where more than one statement has been filed with respect to the same improvement, and one or more of such statements has not been assented to, then the amount detained shall be applied pro rata among all such lien claimants in the order of preference prescribed in section 1811.29 of the Revised Code, payment being made in the amount of their pro rata shares to all lien claimants whose statements have been assented to, and the pro rata shares of lien claimants whose statements have not been assented to shall be detained by the owner until the dispute with respect to any such statement has been resolved in any manner provided by law, whereupon payment in whole or in part shall be made to such lien claimants in whose favor such dispute is resolved and any remaining part of said pro rata shares shall be applied pro rata among and payment made to all lien claimants as provided in this section. Each subsequent payment falling due shall be applied among and payment made to the lien claimants as provided in this section.” (Emphasis added.)

Finally, R.C. 1311.32 provides that the duty to pay lien claimants the amounts and in order of preference provided may be enforced by an action in mandamus or the subcontractor may, when such amounts are due, recover against the owner the whole claim or pro-rata share of the amount.

Appellant contends that, pursuant to R.C. 1311.28, the court of appeals should have ordered him to pay specific amounts to specific parties as the court determined to be proper. Appellant further urges that R.C. 1311.28 conflicts with R.C. 1311.31 and that the procedures set forth in R.C. 1311.28 supersede the procedures in R.C. 1311.31, citing Lee Turzillo Contracting Co. v. Cincinnati Metro. Housing Auth. (1967), 10 Ohio St. 2d 5, 39 O.O. 2d 3, 225 N.E. 2d 255.

R.C. 1311.28 does not clearly conflict with R.C. 1311.31. R.C. 1311.28 provides that whenever an owner receives notice of claims statements having been filed, he must detain the funds in an escrow account. Escrow funds are released at such times, and in such amounts, and to such persons as may be ordered by a court of competent jurisdiction, or by agreement of the principal contractor and the subcontractors).

R.C. 1311.31 provides that if the principal contractor fails to notify the owner of intent to dispute such claim, [87]*87the correctness of the claim is assented to. Thereafter, if all statements (claims) are assented to, the owner applies the funds held in escrow to all claimholders on a pro-rata basis.

The court of appeals, acting pursuant to R.C. 1311.31, held that because the principal contractor assented to all the claims, the owner (the director) was under a clear legal duty to apply the funds on a pro-rata basis to each of the claimholders whose claims were not disputed.

Appellant contends that R.C. 1311.28 controls and he can not release or apply any of the escrow funds without a court order, relying on Lee Turzillo Contracting Co., supra.

In Turzillo, supra, this court held, in paragraph three of the syllabus, that even though a principal contractor assents to the correctness of a claim, he does not assent to payment of the claim without satisfactory proof of performance.

Further, in paragraph five of the syllabus, the Turzillo decision held that where a principal contractor assents to the claim, a claimholder acquires no right to have escrow funds applied to his claim until the principal contractor has the opportunity to assert any defense he may have against the claimholder, except as to the correctness of the amount and value of the claim.

Turzillo, a 1967 decision, involved the language contained in both R.C. 1311.28 and 1311.31 prior to amendments effective in 1963 (130 Ohio Laws 349, 350-351).

The prior language of R.C.

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Bluebook (online)
531 N.E.2d 1309, 40 Ohio St. 3d 84, 1988 Ohio LEXIS 408, Counsel Stack Legal Research, https://law.counselstack.com/opinion/state-ex-rel-dinneen-excavating-co-v-sykes-ohio-1988.