American Sur. Co. of New York v. Bellingham Nat. Bank

• Decision Date: 02 December 1918
• Docket Number: 3183.
• Parties: AMERICAN SURETY CO. OF NEW YORK v. BELLINGHAM NAT. BANK et al.
• Court: U.S. Court of Appeals — Ninth Circuit

254 F. 54

AMERICAN SURETY CO. OF NEW YORK v. BELLINGHAM NAT. BANK et al.

No. 3183.

United States Court of Appeals, Ninth Circuit.

December 2, 1918

Hastings & Stedman, of Seattle, Wash., Kellogg & Thompson, of Bellingham, Wash., and Livingston B. Stedman, of Seattle Wash., for appellant.

Sather & Livesey and George Livesey, all of Bellingham, Wash., for appellees.

Before GILBERT and HUNT, Circuit Judges, and WOLVERTON, District Judge.

GILBERT Circuit Judge.

The appellant brought a suit to enjoin the city of Bellingham Wash., from paying to the Bellingham National Bank certain warrants of the city. The city had made two contracts with Moran Bros. for street improvements, one of date July 29 1916, for the improvement of Maryland street, the other of date September 22, 1916, for the improvement of Iowa street. On both contracts the appellant became surety on the bonds of the contractors; the first bond being dated July 27, 1916 and the second September 20, 1916. The bank advanced to the contractors money to prosecute both contracts, and took assignments of warrants from them; one assignment on September 11, 1916, for advances on the Maryland street contract, and one on October 20, 1916, for advances on the Iowa street contract. At the time of the completion of the contracts no payment had been made by the city on either contract. The bank had advanced considerable sums on each contract, all of which were used in payment for labor, supplies, and material, in the improvements. Claims in considerable amounts for sums which had not been paid by the contractors were filed against the bonds; all the items thereof being valid claims against the bonds under the law of Washington. The contractors were insolvent. It was the contention of the appellant that its right of lien was superior to that of the bank, and the bank contended that, having paid various claims for labor, material, and supplies actually used in the construction of the improvements, its equity was superior to that of the appellant. The contract price of the improvements was not sufficient to pay all the sums so advanced by the bank and the claims presented against the bonds.

The court below held that the equities were with the bank distinguished the case from Prairie State Bank v. United States, 164 U.S. 227, 17 Sup.Ct. 142, 41 L.Ed. 412, on the ground that in the latter case the assignment of warrants was prohibited, and distinguished it from Title Guaranty & Surety Co. v. Dutcher (D.C.) 203 F. 167, on the ground that in that case no account was kept of the particular work on which the borrowed money was disbursed, and distinguished it from the decision of this court in First Nat. Bank v. City Trust, Safe Deposit & Surety Co., 114 F. 529, 52 C.C.A. 313, on the ground that in that case no equities obtained in favor of the bank, evidently meaning that there was nothing to show that the money loaned by the bank to the contractor in that case was actually devoted to the payment of labor or material for which lienable claims would have arisen against the contractor's bond. Without entering into discussion of the points of difference between the present case and the decisions so cited, we are disposed to hold that the decision here appealed from should be sustained on the ground that in the state of Washington it is now, and has for many years been, the settled law that, where a contractor has assigned to a bank the sums to become due on a city contract as collateral for advances, payments due to the contractor in case of his default are to be applied...