#### A. Y. BOND et al. v. THE PICKETT COTTON MILLS, Inc.

(Filed 20 May, 1914.)

1. Contracts- — Interest — Interpretation of Statutes — Unliquidated Damages.

TJie rule that all moneys due by contract except due on penal bonds shall bear interest (Revisal, sec. 1954) applies whenever a recovery is had for breach of contract and the amount is ascertained from the terms of the contract itself or from evidence relative to the inquiry, and due by one party to the contract to another; and it does not obtain as a matter of law where the interest sought does not come within the provisions of the statute and is by way of unliquidated damages, and there has been no adequate default on the part of the debtor in reference to withholding the principal sum, or a part of it.

2. Same — Statutory Liens — Material Men — Trusts and Trustees— “Ready, Able, and Willing” — Payment Into Court — Tender.

. The relationship of the owner of a building to material men, etc., claiming a balance due to his contractor after receiving from them notice of their liens, is not that of debtor and creditor, in the ordinary sense, for he holds such balance in the nature of a trust to their use; and where the material men, etc., have entered suit in the nature of a creditor’s bill to recover, pro rata, the funds so held, the owner is not chargeable with interest on the claims or held to the duty of paying the funds into court pending the action, unless so ordered, in order to avoid the payment of the interest; and the amounts of the respective claims necessarily being uncertain, it is sufficient that he has always been ready, able, and willing to pay them upon their being finally passed upon and adjudicated.

3. Costs — Court’s Discretion — -Interpretation of Statutes — Trusts and Trustees.

It is within the discretion of the trial court to tax the costs accruing upon either of the parties litigant, in an action in the nature of a creditor’s bill, brought by material men, claiming under the statutory lien, the'unpaid balance due by the owner *21of a dwelling, etc., to liis contractor for its erection (Rev., sec. 1267) ; and the action of the judge in taxing the trust funds in the owner’s hands with the cost is commended in this suit.

Appeal by plaintiffs from Lane, Jat March Term, 1914, of Gutlfobd.

Civil action beard on exceptions to report of referee.

Tbe action was one in tbe nature of a creditor’s bill, instituted to April Term, 1912, Superior Court of Guilford County, by A. Y. Bond, Tbe Odell Hardware Company, et al., subcontractors and material men, in bebalf of tbemselves and all others in like case, to establish a-lien and subject to payment of their claims the amount due the contractor for a house built for defendant The Pickett Cotton Mills.

It appeared that the Central Carolina Construction Company had built for The Pickett Cotton Mills, on the latter’s property, a cotton mills building, and that a balance of the contract price was due thereon. The principal contractor having become insolvent and adjudicated bankrupt, the present action in the nature of a creditor’s bill was instituted, with approval of the bankrupt authorities, to determine the amount and status of the claims of certain subcontractors and material men who sought to establish liens and subject to payment of these claims the balance due the contractor.

Some of the claims being questioned, both as to the amount and right of lien, at August Term, 1913, the'cause was referred to Mr. A. W. Cook xo hear evidence and make report thereon.

On 17 September, 1913, on application by the referee, an order was entered permitting parties plaintiff to file amended complaints, and many or all of them did so, demanding payment of the entire amount of their claims from The Pickett Cotton Mills, under and by virtue of a public-local statute which purported to impose upon the owner the duty of looking-after the interest and securing the claims of subcontractors and material men. Chapter 761, Public-Local Laws, Session 1911, a statute recently held void by the Supreme Court by reason of contradictory provisions therein which rendered the same inoperative.

*22In tbe full, careful, and intelligent report of tbe referee, filed to January Terra, 1914, tbe amount of plaintiffs’ claims is established, aggregating over $8,500, and tbe same are declared to be valid liens against tbe realty in question, entitling them to share pro rata in tbe balance due tbe contractor.

This balance is fixed at $6,941.06, with interest thereon from 31 November, 1911, this being tbe date when tbe sum would have been due and payable by tbe terms of tbe contract. In reference to tbe debt, tbe referee finds, among other things: “That Tbe Pickett Cotton Mills has at all times been ready and willing to pay over to respective claimants tbe amount it bolds in its bands as a balance due the contractor, but has never actually made a legal tender thereof.”

On tbe bearing, tbe court sustained an exception to tbe conclusion of law charging defendant company with interest, and gave judgment that tbe principal sum be distributed pro rata after deducting costs, etc.

Plaintiff creditors having excepted to tbe judgment denying their right to recover interests and deducting costs from tbe principal sum before distribution, appealed.

F. P. Hobgood, Jr., and T. G. Hoyle for plaintiffs.

W. P. Bynum and Roberson & Bernhardt for defendant.

Hoke, J.,

after stating tbe case: Tbe decisions of this State recognize tbe position, and some of tbe distinctions growing out of it, that interest may be a charge for tbe use of money expressly stipulated for by tbe contract, or it may be imposed by way of damages for its wrongful detention. King v. Philips, 95 N. C., 245.

When considered in tbe nature of damages, and unless otherwise provided by statute, it is very generally held that there must be some kind of default established on tbe part of a debtor before interest can be collected. Thus, in case of agency and except in case of fraudulent conversion, etc.; tbe liability will not arise until demand made. Porter v. Grimsley, 98 N. C., 550; Neal v. Freeman, 85 N. C., 441. And in case of unliqui-dated demands generally, interest is not allowed except when *23collectible by tbe usage of trade or by reason of vexatious or unreasonable resistance- or delay in regard to tbe principal sum.

Tbis last position, and some of our former decisions applying it, bave been very mucb modified with us by a statute in tbe Revisal of 1905, sec. 1954, to tbe effect, “Tbat all-sums of money due by contract of any kind whatsoever, except money due on penal bonds, shall bear interest,” etc. From tbis it would seem to follow in tbis State tbat whenever a recovery is bad for breach of contract and tbe amount is ascertained from tbe terms of tbe contract itself or from evidence relevant to tbe inquiry, tbat interest should be added (Kester v. Miller Bros., 119 N. C., 475); a requirement that does not seem to bave been sufficiently recognized on tbat point in Lewis v. Rountree, 79 N. C., 122.

In cases, howev.er, not coming within tbis statutory provision, tbe principle, as stated, prevails here and elsewhere, tbat interest by way of damages is not allowed as a conclusion of law unless there has been some adequate default on tbe part of a debtor in reference to withholding tbe principal sum or part of it. Smith v. Smith, 101 N. C., 461; United States v. Denver, 106 U. S., 536; Thornedyke v. Wells Memorial Association, 146 Mass., 699; Ledyard v. Ball, 119 N. Y., pp. 62-74; Shipman v. The State of Wisconsin, 458; 22 Cyc., 1496.

In tbe present case tbe contract contains no express stipulation for tbe payment of interest. Tbe amount involved is not a debt due from tbe defendant company, in tbe ordinary sense, bringing plaintiffs’ claims within tbe meaning of tbe statutory provision as to interest. On tbe contrary, it is considered as a trust fund, to be distributed, under tbe statute, among tbe creditors who shall make tbe proper proof as to tbe amount and status of their Maims. It has been so decided in Manufacturing Co. v. Anderson, 165 N. C., 285, in which tbe position is made tbe basis or reason for upholding a pro rata distribution instead of one by priorities according to tbe date of tbe respective claims. Until ascertained and declared by tbe referee, tbe number and amount of tbe claims entitled to share in tbe distribution could not be known, and, after amendments allowed and *24made .under tbe public-local law referred to, and until same was declared invalid by decision of tbis Court, tbe amount to be paid by defendant was necessarily uncertain. Tbe defendant company, therefore, was not in a position to make a valid tender to any of tbe claimants, and, on tbe facts in evidence, unless ordered to do so, it should not be penalized for not paying tbe money into court. In addition, it is found by tbe referee, as stated, “That Tbe Pickett Cotton Mills, Incorporated, bas at all times been ready and willing to pay over to respective claimants tbe amount it holds in its bands as a balance due tbe contractor, but bas never actually made a legal tender thereof.” From these considerations, we concur with bis Honor’s view, that no default is attributable to defendant company, and that, on tbe facts presented by tbe record, it is not properly chargeable with interest.

On tbe ruling as to costs, tbe question, under our decisions and in actions of tbis character, is referred to tbe discretion of tbe court (Revisal, sec. 1267), and we concur, also, in' bis Honor’s view, that tbe costs in tbis case should be paid out of the fund held for distribution. Partin v. Boyd, 104 N. C., 422; Smith v. Smith, supra; Gully v. Macy, 89 N. C., 1343.

There is no error, and tbe judgment of tbe lower court is

Affirmed.