Fidelity & Deposit Co. v. Claiborne Parish School Board, 1528.

• Decision Date: 25 January 1926
• Docket Number: No. 1528.,1528.
• Citation: 11 F.2d 404
• Court: U.S. District Court — Western District of Louisiana
• Parties: FIDELITY & DEPOSIT CO. OF MARYLAND v. CLAIBORNE PARISH SCHOOL BOARD et al.

11 F.2d 404 (1926)

FIDELITY & DEPOSIT CO. OF MARYLAND v. CLAIBORNE PARISH SCHOOL BOARD et al.

No. 1528.

District Court, W. D. Louisiana, Shreveport Division.

January 25, 1926.

Cook & Cook, of Shreveport, La., and P. M. Milner, of New Orleans, La., for plaintiff.

McClendon & Seals, of Homer, La., and Thigpen, Herold, Lee & Cousin, of Shreveport, La., for defendants.

DAWKINS, District Judge.

Plaintiff, a Maryland corporation, alleges that on March 26, 1923, it became the surety of one Ben F. Casey, for the faithful performance of a contract with the school board of Claiborne parish, La., for the erection of a school building for the stipulated price of $130,000, that the said contractor failed to pay certain furnishers of materials for the completion of the work, and that plaintiff, as surety, was sued and compelled to pay judgments in the aggregate of $10,202.54, and that it is additionally liable upon other amounts which have not been paid. In this proceeding it seeks reimbursement from the said contractor, the school board, the officers and members thereof, and the Planters' Bank of Haynesville, La., upon the ground that the balance due by the school board to the contractor of $12,357.59, for the completion of said work had been wrongfully, collusively, and fraudulently diverted by the said defendants to the payment of a personal debt of Casey to the said bank, without it having any lien upon or right to said funds; that said building had been accepted by the school board, although it had not recorded its acceptance, as required by the statute; that the claimants paid by petitioner had served and recorded their said claims according to law; that the balance due the contractor "was a sacred fund, pledged by the laws of this state to the payment of laborers, subcontractors, and material furnishers, to whom your petitioner was directly liable as surety for Ben F. Casey"; that the said bank had loaned to Casey its money upon unsecured notes, and, to defeat petitioner's rights, he had directed the school board to "pay to the Planters' Bank of Haynesville, La., balance of funds on contract price and extra work due me on the Haynesville grammar and high school buildings, in the town of Haynesville, La."; and that the said sum of $12,642.59 was on April 3, 1924, paid to said bank pursuant to the said illegal and fraudulent scheme of said defendants to prefer it to the prejudice of plaintiff. Petitioner further alleges as follows:

"Petitioner shows and charges that the Claiborne parish school board and John S. Patton, superintendent, knew of the existence of claims of the subcontractors and material furnishers against the balance due the contractor, Ben F. Casey, on the contract for the building of the high school and their recorded liens against the building to an amount in excess of the balance in its hands, and that the money was legally due and payable for its own protection and the protection of your petitioner as surety for Ben F. Casey, and yet the said Claiborne parish school board and John S. Patton, superintendent, and John E. Gray, president, did unlawfully, illegally, in bad faith, pay over to the Planters' Bank of Haynesville on April 3, 1924, by check No. 248, $12,642.59, balance due Ben F. Casey, with the result that the said claimants, not being paid, brought suit against Ben F. Casey and your petitioner, and obtained judgments against your petitioner, which it has paid in the proceedings as follows: Here follows a list of the claims and judgments which plaintiff alleges it had paid."

Plaintiff further alleges that, when it paid said claim, as it was legally bound to do, it received from said claimants conventional assignments and full subrogations to all their rights under said contract flowing from the timely recording and service of attested accounts upon said school board, and that it had made demand upon the said defendants for the restoration of said funds and its reimbursement for the outlay so made, but without avail.

The prayer was for service upon all defendants and for judgment "setting aside and annulling the payment by the said Claiborne parish school board to the Planters' Bank of Haynesville, La., of the $12,642.59, made by it on April 3, 1924, under the alleged and illegal assignment of December 31, 1923, * * * of the balance due * * * upon the high school building, * * *" and that petitioner have judgment in solido against said parties in the sum paid by it "as subrogee and assignee" of the several claims, with interest and costs. In the alternative, it prayed for judgment against all of said defendants, including the school board, in the sum of $12,642.59.

Alleged copies of the contract between the school board and Casey, the bond upon which plaintiff was surety, certificate of mortgages showing recordation of attested accounts, assignments, and subrogations by the several claimants, were attached to and made part of the petition.

Defendants excepted upon the ground that, plaintiff having sued upon assignments of claims of persons who were not alleged to have been citizens of states other than Louisiana at the time of the transfer, this court was without jurisdiction under the first paragraph of section 24 of the Judicial Code (Comp. St. § 991). The matter now to be decided is the sufficiency of the plea.

Opinion.

The contract for the erection of the building in this case was executed, and the bond for its performance given, under Act No. 224 of 1918, affecting buildings by the state, its subdivisions and public boards. It requires that contracts for more than $500 shall be reduced to writing, and the contractor shall furnish bond for not less than 50 per cent. of the price to guarantee faithful performance, and that "an additional obligation for the payment by the contractor and by all subcontractors for all work done, labor performed, or materials furnished, * * *" shall exist "and no modifications, omissions, additions in or to the terms of the said contract, in the plans or specifications or in the manner and mode of payment shall in any manner affect the obligation of the surety." The contract and bond are required to be recorded in the mortgage office on the day the work begins and not later than 30 days thereafter. Section 2 of the act reads as follows:

"Be it further enacted, etc., that any person, firm or corporation, association of persons or partnership to whom any money shall be due on account of having done any work, performed any labor on, or furnished any material in the construction, erection, alteration or repair of any such building, road work or improvement, may file with the said authority having the said work done, and record in the office of the recorder of mortgages for the parish in which the said work is being done, any time after the maturity of his claim, a sworn statement of the amount due him, and any payments made thereafter by said authority without deducting the amount of the claims so served on it, shall be at its own risk."

Said act further provides, in section 3, that any one having a claim on account of work done or material furnished, shall file a sworn statement thereof within 45 days after the acceptance of the work by the official body, or the defaulting of the contractor, and record it in the mortgage office, but that the said delay shall not begin to run until "the said authorities shall record in the mortgage office of the parish in which the work was done an acceptance of the work, or notice of the default; * * * provided further that nothing in this act shall be so construed as to deprive any person or claimant within the terms of this act of his right of action on the board bond?, which right shall accrue at any time after the maturity of his claim."

Section 4 provides that, if, at the expiration of the 45 days, there are recorded claims, the authorities shall file a proceeding citing all claimants, the contractor, surety, etc., into court, and "said authorities shall assert whatever claims they have against any and all of them in said petition, and require the said claimants to assert whatever claims they have against any and all of them, and all of said claims shall be tried in concursus." Section 5 subordinates the claim of the official body to those of laborers and materialmen, and gives any claimant the right to provoke the proceeding if the authorities do not. Section 6 declares that, if no objections are made "by any claimant to the solvency or sufficiency of the bond, the said authorities shall, ten days after the service of judicial notice on each claimant having recorded claims * * * of the concursus proceeding, obtain from the clerk a certificate to that effect, and the said certificate shall relieve the said authorities of any personal liability, and the recorder of mortgages shall cancel all claims recorded as aforesaid"; and, if objection is made to the bond, and it is found insufficient or the surety not solvent, or if bond was not exacted or timely recorded, "the said authorities shall be in default and shall be liable to the same extent as the surety would have been. The surety on the bond shall be limited to such defenses as the principal on the bond." (All italics by the author of this opinion.)

In this case the allegation, in effect, is that the contract was entered into, the bond given, and the whole recorded as required by law, under the terms of which the contractor agreed to furnish the labor and materials and to erect the building for a lump price. It was stipulated that the bond should be given, and, with respect to the payment of the price, it was provided:

"Article 3. The owner agrees to pay the contractor in current funds for the performance of the contract one hundred thirty thousand and no/100. ($130,000.00) dollars, subject to additions and deductions as provided in the general conditions of the contract and to make payments on account thereof as provided therein as...