American Bank & Trust Company v. Langston

• Decision Date: 16 December 1929
• Docket Number: 45
• Parties: AMERICAN BANK & TRUST COMPANY v. LANGSTON
• Court: Arkansas Supreme Court

22 S.W.2d 381

180 Ark. 643

AMERICAN BANK & TRUST COMPANY v. LANGSTON

No. 45

Supreme Court of Arkansas

December 16, 1929

[Copyrighted Material Omitted]

Appeal from Logan Chancery Court, Northern District; John E Chambers, Chancellor; affirmed.

STATEMENT OF FACTS.

The American Bank & Trust Company brought this suit in equity against Ralph W. Langston and Sewer Improvement District No 2 of Paris, Arkansas, and the commissioners thereof, to recover the sum of $ 15,547.35, alleged to be due plaintiff by said Langston, and plaintiff also sought to impound by equitable garnishment any funds owed by the sewer district to Langston.

The United States Fidelity & Guaranty Company was allowed to file an intervention as surety of said Langston, the principal contractor, and claims to be subrogated to the rights of the sewer district to whatever funds might be in its hands for the construction of the sewer in the district.

Ford & McCrea were engineers for the sewer district, and were allowed to intervene and to set up claim for an additional amount alleged to be due them as such engineers.

The sewer district claimed liquidated damages for a part of the money in its hands on account of Langston having failed to complete the sewers within the time specified in the contract.

The record shows that the sewer district was legally organized under the statutes of the State, and that it entered into a written contract with Ralph W. Langston to construct and complete a sewer system for said district in the city of Paris, Logan County, Arkansas. The contract was executed on March 24, 1926, and required the contractor to construct the sewer system, furnishing, at its own expense and cost, all material, equipment and labor, and to give a surety bond in the sum of $ 133,000, which was double the amount of the contract price. The specifications, plans and proposals were made a part of the contract. It was provided that the proposed improvement should be completed by the contractor on or before September 2, 1926. It was not completed and accepted by the sewer district until February 21, 1927. The contract provided that payments on the work should be made on the last day of each month on an approximate estimate made by the engineers, and that the contractor should be paid 90 per cent. of said estimated cost, less all amounts previously paid. The contract further provided that, upon the completion of the work, the contractor should notify the engineers, who should immediately make such inspection and tests as were provided for in the contract. When the engineers find the work satisfactory, it is made his duty to render a final estimate, and the contractor is to be paid 95 per cent. of it, less all previous payments. Before this payment is made the contractor must furnish the sewer district with a certificate under oath that he has paid all bills for material and labor, and has the written consent thereto of the surety company making the bond. Another section of the contract provides that the time of completion is the essence of the contract, and that the board of commissioners will deduct from the estimate as liquidated damages an amount equal to $ 15 for each day's delay in completion over the time stipulated. Another section provides that, should it appear at any time that the work is not being prosecuted with sufficient diligence to insure its completion within a reasonable time, the engineers may notify the contractor to employ additional help, and, should he fail to do so, the board may employ such help. The contract also provides that the construction bond must guarantee the faithful performance of the contract, and protect the district against all claims for labor and material. The bond is required to be made by a satisfactory surety company, organized in conformity with the law, and doing business in the State of Arkansas. The bond itself is conditioned that the principal contractor shall well and truly perform all the terms of the contract, and shall pay all bills for material and labor used in said work, including those due to subcontractors. A right of action is given to subcontractors and all others who have furnished material or labor on the work, against the surety company and principal of the bond. The bond further provides that any recoveries thereon by materialmen, laborers or subcontractors shall be postponed in payment until all claims under the bond by the district have been paid in full.

The bank proved that it had advanced to the contractor the sum of money sued for in its complaint. The surety company proved that it had paid out the sum of $ 7,403.61. Retained percentages remaining in the hands of the sewer district amounted to $ 10,639.64; the bank also showed that Langston had assigned to it all amounts due him by the sewer district, and that garnishment was sued out and duly served on the sewer district at the time the suit was filed. It was shown that the surety company had paid off the judgment recovered against it by holders of claims for labor and material in the sum of $ 6,406.81.

The contract provided that the engineers should be paid a certain percentage of the cost of construction, and this amount was paid them. Section 30 of the contract provides that the contractor shall pay all engineering expenses between the date agreed upon for the completion of the work and the time of the final estimate at the rate of "$ 350 per month or fraction thereof, and all expenses incident to the work." The district paid the engineers at the rate of $ 350 per month during the time of the delay in the completion of the work, but refused to pay them the salary of an assistant at the rate of $ 275 per month.

It was decreed that the surety company is entitled by equitable subrogation to the funds in the hands of the sewer district in the sum of $ 5,944.62, which was a prior lien on said funds to that held by the bank. It was further decreed that the bank has a lien on the balance of the funds in the hands of the sewer district amounting to $ 2,100.02, which is prior to the liens of the other parties to the suit. It was further decreed that the intervention of the engineers be dismissed for want of equity, and that the surety company receive from the sewer district the sum of $ 5,944.62 and the bank should receive from the district the remaining $ 2,100.02.

Any other facts necessary to a determination of the issues raised by the appeal will be stated in the opinion.

Both the bank and the engineers have prosecuted an appeal, and the surety company has been allowed a cross-appeal.

Decree affirmed.

W. B. Rhyne, James B. McDonough and Anthony Hall, for appellant.

Wm. M. Hall, Hill, Fitzhugh & Brizzolara and George A. Hall, for appellee.

OPINION

HART, C. J., (after stating the facts).

The principal question raised by the appeal is the right of priority to the retained percentage fund as between the bank and the surety company, which may be settled as a question of law under the practically undisputed facts. The percentage reserved in the contract by the sewer district out of each monthly estimate served to secure it against any loss it might sustain on account of the nonperformance of the contract, and also served to secure any others who had any rights under the contract. The right of the parties to retain a specified percentage dates from the time the contract was entered into. The right of the bank under its assignment also dates from the execution thereof. The bank, by the assignment to it by Langston of all his rights under the contract with the sewer district, acquired only such rights...