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RILEY BUILDING SUPPLIES, INC. v. FIRST CITIZENS NATIONAL BANK

JULY 15, 1987

RILEY BUILDING SUPPLIES, INC.
v.
FIRST CITIZENS NATIONAL BANK



BEFORE ROY NOBLE LEE, P.J.; ROBERTSON AND ANDERSON, JJ.

ROBERTSON, JUSTICE, FOR THE COURT:

I

This appeal arises in a familiar context. The owner of a construction project defaults and the construction lender and materialmen scramble to minimize their losses. Today we are asked to decide whether such a construction lender owes, in favor of one holding an unperfected materialman's lien, a duty of reasonable diligence in disbursing to an owner proceeds of a construction loan, such that the materialman might recover for losses proximately caused thereby. We hold that the construction lender has no such duty, nor has the unperfected materialman any such correlative right.

 The Circuit Court dismissed the materialman's suit. We affirm.

 II.

 A.

 The cast of characters in this civil action includes:

 (1) Gene Allen Popetz, Sr., is an adult resident citizen of Itawamba County, Mississippi. At all times relevant hereto Popetz and his wife Bonnie owned certain real property located in the southwest quarter of Section 33, Township 9 South, Range 8 East, Itawamba County, Mississippi, upon which they were building a home. The Popetzes are not per se parties to this action.

 (2) First Citizens National Bank is a banking association organized, chartered and existing under the laws of the United States, having its principal place of business and domicile in Tupelo, Lee County, Mississippi. First Citizens is the construction lender involved in this case and is sometimes hereafter referred to as "construction lender" . First Citizens was the Defendant below and is the Appellee here.

 (3) Riley Building Supplies, Inc. is a corporation organized and existing under the laws of the state of Mississippi, with its principal place of business in Fulton, Itawamba County, Mississippi. Riley furnished materials and supplies that went into the construction of the Popetzes' home and, accordingly, is a materialman and is sometimes hereinafter referred to as such. Riley was the Plaintiff below and is the Appellant here.

 Prior to August of 1981, Gene and Bonnie Popetz owned the tract of real property referred to above. *fn1 In August of 1981 the Popetzes began construction of a personal residence on that property. On September 4, 1981, they made application to First Citizens for a construction loan to finance the building of their home. This loan was approved and a secured transaction was entered wherein the Popetzes gave to First Citizens a deed of trust covering the property and the home being constructed. First Citizens had approved construction financing in the amount of $35,000.00, but in fact only $30,000.00 was used.

 During the course of the construction, the Popetzes purchased certain building supplies from Riley. These supplies were used in the construction of the residence in question. The purchases were made from Riley on an open account basis. At no time has Riley filed with the chancery clerk a notice of construction lien, nor has Riley in any other way perfected any lien against the property. In the end the Popetzes owed Riley $4,496.95 on open account for materials supplied by Riley and used by the Popetzes in connection with construction of the residence in question.

 On October 7, 1981, First Citizens entered into a permanent loan arrangement with the Popetzes and took and recorded a deed of trust in connection therewith.

 On October 28, 1981, Popetz filed a petition in bankruptcy in the United States District Court for the Northern District of ...


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