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Paulson v. Hajoca Corp.
Citations: 202 Va. 447; 117 S.E.2d 692; 1961 Va. LEXIS 128Docket: Record No. 5176
Court: Supreme Court of Virginia; January 16, 1961; Virginia; State Supreme Court
Hajoca Corporation (plaintiff) sued Frank Paulson, operating as Peninsula Construction Company, and Aetna Casualty and Surety Company (defendants) to recover $5,608.21 for materials supplied for a school building project in New Kent County. The lawsuit was based on a performance and payment bond issued under Code 11-23, ensuring compliance with the construction contract and payment to those supplying labor or materials. A jury ruled in favor of Hajoca, prompting the defendants to appeal, arguing that the verdict contradicted the law and evidence, and that the trial court mismanaged jury instructions. In December 1957, Paulson contracted with the local school board to build an elementary school, executing a performance bond of $174,400 with Aetna as surety. Paulson subcontracted plumbing and heating work to Burlee Rowe, who purchased materials from Hajoca worth $15,885.33. Due to Rowe's inability to secure a performance bond, Hajoca extended credit under specific conditions, which included joint checks made payable to both Rowe and Hajoca for monthly payments. Throughout the project, Paulson issued five joint checks totaling $15,245.68 to Rowe, who presented these to Hajoca, which deducted the amounts owed and refunded the remainder to Rowe. The final joint check was for $3,000, leaving Rowe with a debt of $5,608.21 to Hajoca. The defendants argue that Hajoca's “refunds” from the joint checks were improper and should have been credited against Rowe's debt, claiming an agreement existed that Hajoca would retain all proceeds from the joint checks to settle Rowe's ultimate bill. The defendants contend that Hajoca's actions released part of its claim against them under the bond. No contention regarding an agreement was presented in the lower court by the defendants, making it too late to introduce this claim. Additionally, there is insufficient evidence to support the existence of such an agreement. Folse's testimony indicated that the joint check arrangement aimed to secure payment for materials supplied to Rowe, allowing for deductions from the proceeds of each check. The defendants referenced Paulson’s testimony, which suggested Folse wanted to ensure payment for materials, but this does not confirm an agreement to retain all proceeds as security for Rowe’s debts. Instead, it aligns with Folse’s explanation that the arrangement was to collect Rowe’s account as bills became due. Rowe testified that withholding all proceeds would jeopardize his ability to continue work, and both Folse and Paulson were aware of Rowe’s financial struggles. Consequently, it is unreasonable to assert they would have agreed to an arrangement that could lead to Rowe's default on his contract. The defendants argued that Hajoca should be estopped from denying its obligation to withhold funds, but no estoppel was claimed in the lower court, nor was there evidence of Folse misleading Paulson. Finally, the defendants contended Hajoca had a duty to withhold funds as security for its bill against Rowe, yet Paulson did not instruct Hajoca to do so. The joint check arrangement initiated by Rowe and Folse was contingent on Hajoca retaining only the amount due for Rowe's past debts, meaning Hajoca had no authority to withhold additional funds without Rowe's consent. Therefore, the lower court correctly instructed the jury that Hajoca’s failure to withhold extra funds did not affect its claim against the defendants, and the judgment was affirmed.