T.L. Garden & Associates v. First Savings Bank

Present: 	All the Justices
T.L. GARDEN & ASSOCIATES, T/A
LIFE SAFETY SYSTEMS
v. 	Record No. 001849 	OPINION BY JUSTICE ELIZABETH B. LACY
June 8, 2001
FIRST SAVINGS BANK OF VIRGINIA
FROM THE CIRCUIT COURT OF PRINCE WILLIAM COUNTY
Richard J. Jamborsky, Judge Designate
In this appeal arising from a bank's agreement to reserve
funds for payment of a subcontractor's equipment costs, we
must determine whether the trial court properly set aside a
verdict in favor of the subcontractor.
Although the trial court set aside the jury verdict, we
recite the facts and all reasonable inferences in the light
most favorable to T.L. Garden & Associates, Inc. (T.L.
Garden), the recipient of the jury verdict. 	Kim v. Douval
Corp., 259 Va. 752, 756, 529 S.E.2d 92, 95 (2000). 	On April
9, 1998, T.L. Garden entered into a contract with BIP
Electrical, Inc. (BIP) to install a fire alarm system. 	The
total cost of the subcontract was $314,000. 	The fire alarm
system was part of a $1.4 million contract between BIP and the
federal government for the construction of the Naval Annex to
the Pentagon.
Shortly after executing the contract, T.L. Garden learned
that BIP had a negative credit history and informed BIP that
it required additional safeguards to assure payment. 	T.L.

Garden also had the equipment for the project delivered to its
warehouse, rather than the construction site, to assure
payment before delivery. 	On April 23, 1998, T.L. Garden sent
Invoice Number 25701 to BIP for $289,000, the entire cost of
the equipment.
First Savings Bank of Virginia (FSB) conducted the
project accounting for BIP's contract, which included
processing payments of T.L. Garden's invoices. 	Unknown to
T.L. Garden, BIP had previously assigned to FSB payments due
from the federal government on the Naval Annex project as
security for amounts BIP owed FSB on two promissory notes, a
line of credit, and a variable interest commercial note. 	At
BIP's suggestion, Thomas Garden, president of T.L. Garden,
called Jeffery Constantz, president of FSB, to explore options
for guaranteeing payment to T.L. Garden. 	Constantz declined
T.L. Garden's request that FSB execute a guaranty in the form
of a letter of credit. 	Instead, Constantz agreed to reserve
sufficient funds received under BIP's contract with the
federal government to pay T.L. Garden's equipment costs.
On April 29, 1998, Constantz sent a letter to T.L.
Garden, stating in pertinent part:
I am writing this letter on behalf of BIP, Inc[.]
to confirm that, upon payment from the government,
FSB will reserve an amount from contract number
MDA9469763003 sufficient to pay your invoice for
equipment supplied for this contract.
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The letter also contained discount provisions for early
payments and asked that T.L. Garden acknowledge the terms set
out in the letter. 	T.L. Garden signed the letter on May 5 and
that same day sent a letter to FSB regarding its Invoice No.
25701. 	That letter stated that Invoice No. 25701 had been
"[r]evised due to Partial Shipment 5/5/98" and $197,328 was
due June 5. 	On May 21, FSB received BIP's initial $431,781.82
payment from the federal government. 	From this payment, FSB
distributed $27,565.29 to BIP, approximately $5,900 to two BIP
creditors, $66,113.95 to T.L. Garden, and retained
approximately $332,000 in full satisfaction of BIP's
indebtedness to FSB on its line of credit.
On June 4, FSB received BIP's second payment from the
federal government. 	From those funds, FSB paid T.L. Garden
the $131,214.05 balance due on the May 5 invoice. 	FSB paid
the remainder of the second payment to BIP for its operating
expenses. 	On June 9, T.L. Garden submitted Invoice No. 25878
requesting payment of $110,000 by July 9, which it
subsequently revised, increasing the amount to $116,672.
On July 16, BIP filed a petition for Chapter 11
Reorganization in the United States Bankruptcy Court for the
Eastern District of Virginia. 	On July 25, FSB received BIP's
third payment from the federal government in the amount of
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$189,061.17. 	Because BIP had filed for bankruptcy, FSB was
required to deposit the entire third payment in the bankruptcy
court for the benefit of BIP's creditors. 	As part of the
bankruptcy proceeding, T.L. Garden received $60,000, leaving
an unpaid balance of approximately $30,000 for the equipment
costs.
In its motion for judgment, T.L. Garden sought recovery
of the unpaid $30,000 balance on the theory that FSB's April
29 letter fraudulently induced T.L. Garden to perform its
subcontract with BIP. 	In support of its position, T.L. Garden
produced evidence at trial showing that Constantz did not
inform T.L. Garden that BIP was indebted to FSB and had
assigned the construction contract to FSB, that Constantz told
Thomas Garden that FSB would reserve sufficient funds to cover
the cost of the equipment supplied by T.L. Garden, and that
Constantz told Thomas Garden that BIP would not receive any
money from the contract until T.L. Garden had been paid in
full. 	On appeal, T.L. Garden contends that this evidence was
sufficient to support the jury's verdict in its favor and the
trial court erred in setting aside that verdict.
In reaching a verdict, a jury is required to follow the
instructions given by the court. 	In this case, the jury was
instructed by the court as follows:
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If you find that the letter dated April 29,
1998, which is Joint Exhibit 1, required the
Defendant to reserve from the first payment it
received by assignment of the Government Contract,
the full amount of Plaintiff's subcontract with BIP,
and if you further believe by clear and convincing
evidence that at the time the Defendant signed the
April 29, 1998 letter it intentionally and knowingly
made a false representation of a material fact to
the Plaintiff with the intention to mislead
Plaintiff into taking action based upon the
representation, and that Plaintiff took action in
reliance on the representation and that Plaintiff's
reliance on the representation caused Plaintiff
damage, then you shall return your verdict in favor
of Plaintiff. 	(emphasis added)
This instruction was an agreed instruction and became the law
of the case. 	Owens-Illinois, Inc. v. Thomas Baker Real Estate,
Ltd., 237 Va. 649, 652, 379 S.E.2d 344, 346 (1989). 	In order
for T.L. Garden to prevail under this instruction, the jury had
to find that the April 29 letter required FSB to pay T.L.
Garden the full amount of its subcontract with BIP "from the
first payment" FSB received from the federal government.
However, the April 29 letter states that FSB "will reserve
an amount from contract number MDA9469763003 sufficient to pay
[T.L. Garden's] invoice for equipment supplied for this
contract." 	(emphasis added) 	This language is not ambiguous.
Nothing in the letter identifies any specific payment from the
federal government as the source of payment to T.L. Garden.
Because the letter cannot be construed to require that T.L.
Garden be paid from the first payment made by the federal
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government, as required by the jury instruction, the evidence
was insufficient, as a matter of law, to support a jury verdict
in favor of T.L. Garden. 	The trial court, therefore, correctly
set aside that verdict.
Accordingly, for the reasons stated, we will affirm the
judgment of the trial court setting aside the jury verdict and
entering judgment in favor of FSB.
Affirmed.
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