U.S. Fidelity & Guaranty Co. v. First Nat. Bank

• Decision Date: 24 March 1932
• Docket Number: 3 Div. 970.
• Parties: UNITED STATES FIDELITY & GUARANTY CO. ET AL. v. FIRST NAT. BANK OF LINCOLN.
• Court: Alabama Supreme Court

140 So. 755

224 Ala. 375

UNITED STATES FIDELITY & GUARANTY CO. ET AL. v. FIRST NAT. BANK OF LINCOLN.

3 Div. 970.

Supreme Court of Alabama

March 24, 1932

Appeal from Circuit Court, Montgomery County; Leon McCord, Judge.

Bill in equity by the First National Bank of Lincoln against the United States Fidelity & Guaranty Company and C. C. Smith and F. R. Smith, partners doing business as Bosworth Smith & Co. From a decree overruling a demurrer to the bill, respondents appeal.

Affirmed.

Coleman Coleman, Spain & Stewart, of Birmingham, and Rushton Crenshaw & Rushton, of Montgomery, for appellants.

Goodwyn & Goodwyn, of Montgomery, amici curiæ.

Knox Dixon, Sims & Dixon, of Talladega, and Steiner, Crum & Weil, of Montgomery, for appellee.

THOMAS J.

The bill is for the enforcement of a lien or collateral pledge of "all moneys due or to become due" on the described public construction contract.

It has been declared by this court that under section 8935, Code, any lien may be enforced in equity. McLendon v. Truckee Land Co., 216 Ala. 589, 114 So. 3, an attorney's lien; Broglan v. City of Huntsville, 218 Ala. 9, 117 So. 419, an assessment lien; Wade v. Kay, 210 Ala. 122, 97 So. 129, an attorney's lien; Wilkins v. Folsom, 208 Ala. 24, 93 So. 547, enforcement of a tax lien; Rowe v. Bank of New Brockton, 207 Ala. 384, 92 So. 643, on shares of bank stock; Oden v. Vaughn, 204 Ala. 445, 85 So. 779, to compel transfer of corporate stock through pledge or mortgage thereof; Mathis v. Holman, 204 Ala. 373, 85 So. 710, a mechanic's lien; Wynn, as Adm'r v. Tallapoosa County Bank, 168 Ala. 469, 53 So. 228, for accounting and lien on corporate stock; Evans as Adm'r v. Silvey & Co., 144 Ala. 398, 42 So. 62, to enforce judgment lien; Bynum Merc. Co. v. First Nat. Bank of Anniston, 187 Ala. 281, 65 So. 815, lien of assignee of mortgage and lease; Pearce v. Brilliant Coal Co., 200 Ala. 630, 77 So. 4, by holder by purchase of equitable title to land; Henderson v. Steiner-Lobman Dry Goods Co., 202 Ala. 325, 80 So. 407, to marshal assets and securities under the statute before us as section 4829 of the Code of 1907, and appropriation of property or funds of the judgment debtor; Russell v. Thornton, 216 Ala. 60, 112 So. 347, a landlord's lien as affecting a mortgage lien; and Walls v. Skelton, 215 Ala. 357, 110 So. 813, landlord's lien on crops as touching a purchaser for notice with or without notice.

The foregoing cases will illustrate the application of the statute (section 8935, Code) to all kinds of liens and pledges of which courts of equity take cognizance, where such enforcement may be done without causing a conflict of jurisdictions of courts, which was the limitation in the substituted tax record cases. Wise v. State, 208 Ala. 58, 61, 93 So. 886.

The appellant Bosworth Smith & Co. (and partners doing business under that name) insist that the bill is without equity as to them, since no specific relief is sought against them other than the accounting sought as to said fund or moneys in payment of their note. The averments of the bill are that the assignment of all moneys due or to become due on that Shelby county contract was made to secure the indebtedness evidenced by the note; and reciting that it was "pledged as collateral securing payment of this note," which was made an exhibit to the bill. The assignment not being an absolute one, but a collateral pledge, appellant Bosworth Smith Company has such an interest in the subject-matter and accounting sought as required it to be made a party. There was no misjoinder by making this contractor a party. Broughton v. Mitchell, 64 Ala. 210; Plowman & McLean v. Riddle, 14 Ala. 169, 48 Am. Dec. 92; Hodge v. Joy, 207 Ala. 198, 204, 92 So. 171; Lawson v. Alabama Warehouse Co., 73 Ala. 289; Allgood v. Bank of Piedmont, 130 Ala. 237, 29 So. 855; Town of Carbon Hill v. Marks, 204 Ala. 622, 86 So. 903; Lebeck v. Bank of Fort Payne, 115 Ala. 447, 22 So. 75, 67 Am. St. Rep. 51; New York Indemnity Co. v. Nivens, 222 Ala. 562, 133 So. 261; 5 C.J. pp. 1003-5.

It will be necessary that the material averments of the bill be stated under its several aspects. City of Birmingham v. Louisville & N. R. Co., 216 Ala. 178, 185, 112 So. 742. It is alleged, in substance, that appellant Bosworth Smith Company, on May 22, 1929, entered into a contract with the state of Alabama for the construction of certain bridges in Shelby county, known as project No. S-330-331-A and 376, and for the faithful performance of this contract for construction work they executed a bond with appellant United States Fidelity & Guaranty Company, as surety. This bond is made an exhibit to the bill, and contains, among other things, the provision that "The said principals and sureties agree as part of this obligation that such contractor shall promptly make payment to all persons supplying him or them with labor, material, feed stuffs or supplies, in the execution of the work provided for in such contract, as provided for in section 28 of the Act of the Legislature approved August 23, 1927, and designated as 'The Alabama Highway Code."' See General Acts 1927, pp. 348, 356; State, for Use of Wadsworth v. Southern Surety Co., 221 Ala. 113, 127 So. 805, 70 A. L. R. 296; Union Indemnity Co. v. Handley, 220 Ala. 292, 124 So. 876.

Bosworth Smith Company undertook the construction work and, during its performance, appellee advanced to it funds amounting to, to wit, $3,000, for the averred purpose and with the understanding that the funds so advanced would be used in the payment of labor, material, feed stuffs or supplies in the execution of the work, and the funds so advanced were so accordingly used. See case of Sherrill Oil Co. v. Taylor, 223 Ala. 457, 137 So. 295; United States F. & G. Co. v. Benson Hardware Co., 222 Ala. 429, 132 So. 622.

To evidence the indebtedness for the money so advanced, and to secure its payment, appellant Bosworth Smith Company executed its promissory note in favor of appellee and transferred and assigned, "deposited and pledged as collateral security for the payment of this note or any other liability or liabilities of the undersigned to the owner thereof, *** all monies due or to become due on the contract." A copy of the note and assignment is made an exhibit to the bill, and the exhibits and averments of the bill will be taken together, as one aids the other. Grimsley v. First Avenue Coal & Lumber Co., 217 Ala. 159, 115 So. 90.

It is further averred that the contract was performed by Bosworth Smith Company and settlement was made with the state highway department, and a balance of $7,756.03, then unpaid and due the contractor on the contract, was paid for the contractor by the state to appellant United States Fidelity & Guaranty Company, as surety on the construction bond. The bill further avers that appellant United States Fidelity & Guaranty Company had due notice of the assignment of the funds so made by Bosworth Smith Company to appellee of "the moneys due, or to become due, to them, under or by virtue of said contract, shortly after the said assignment was made, and long before it, the said defendant, United States Fidelity & Guaranty Company, received said funds, and complainant is entitled to have its said assignment enforced in this Honorable Court, and the said United States Fidelity & Guaranty Company to account to it for the funds so received by it from said State Highway Department to the extent of the indebtedness due and owing complainant as aforesaid;" that "in and by the provisions of the said note or instrument in writing, of which Exhibit 'B' is a copy, the said defendants Bosworth Smith Company expressly agreed to pay all costs of collecting or securing, or attempting to collect or secure said note, including a reasonable attorney's fee, whether the same be collected or secured by suit or otherwise. And complainant avers that it is entitled to be allowed out of the fund so assigned by the said Bosworth Smith Company to it, a reasonable attorney's fee for the services of its attorneys in the premises." It is likewise averred in the alternative that at or about the time appellant Bosworth Smith Company was engaged in the performance of the contract for the construction of the bridges it was also under contract with the state of Alabama for the construction of a bridge across the Coosa river at Wetumpka, Elmore county, and for the faithful performance of this separate contract had executed a separate bond with appellant United States Fidelity & Guaranty Company; that appellant Bosworth Smith Company was financially unable to perform the contract for the construction of the bridge at Wetumpka, and appellant surety company took over and completed the contract, and in doing so sustained a loss; that the contract for the construction of the bridges in Shelby county was profitable to appellant contractor and beneficial to the surety company, and sufficient funds were realized therefrom to pay for all of the supplies furnished to the said contractor and the debts and obligations created, leaving a profit to Bosworth Smith Company, had the funds realized from the performance of the contract been so used or applied.

It is further averred that appellant United States Fidelity &amp Guaranty Company "caused, procured or induced the said contractors to use a large amount of the funds" so realized from the performance of the contract to erect the Shelby county bridges, to wit, in excess of $3,000, "towards the expenses incident to the construction" of the bridge at Wetumpka called "Bibb Graves Bridge," thereby diverting these funds to relieve the surety company from, or to minimize its losses on account of its suretyship on the separate bond and contract given for the construction of the Wetumpka...