Carr Hardware Co. v. Chicago Bonding & Surety Co.

• Decision Date: 08 March 1921
• Docket Number: 33168.
• Citation: 181 N.W. 680,190 Iowa 1320
• Parties: CARR HARDWARE COMPANY, Appellee, v. CHICAGO BONDING & SURETY COMPANY, Appellee et al., Interveners and Appellants
• Court: Iowa Supreme Court

181 N.W. 680

190 Iowa 1320

CARR HARDWARE COMPANY, Appellee, v. CHICAGO BONDING & SURETY COMPANY, Appellee et al., Interveners and Appellants

No. 33168.

Supreme Court of Iowa, Des Moines

March 8, 1921

Appeal from Story District Court--H. E. FRY, Judge.

ACTION in equity by interveners, to recover $ 810 on a bond furnished by a contractor, as principal, and the defendant bonding company, as surety, by virtue of claimed subrogation to the rights of laborers, whose wages interveners had advanced. Judgment and decree dismissing the petition, and taxing costs to interveners. Interveners appeal.

Affirmed.

Lee & Garfield and C. W. Garfield, for appellants.

R. E Nichol, Coffin & Rippey, and E. H. Addison, for appellees.

DE GRAFF, J. EVANS, C. J., PRESTON, STEVENS, and ARTHUR, JJ concur. WEAVER, J., dissents.

OPINION

DE GRAFF, J.

The J. B. Evans Construction Company, of Mexico, Missouri, entered into a written contract with the Iowa State Board of Education for the construction of the science building at the Iowa State College of Agriculture and Mechanic Arts, at Ames, Iowa, and furnished a bond, executed by the defendant, Chicago Bonding & Surety Company, whereby the contractor, as principal, and the defendant company, as surety, "are held and firmly bound unto the Iowa State Board of Education, and to all persons who may be injured by any breach of any of the conditions of this bond," and conditioned that:

"The said J. B. Evans Construction Company shall well and truly keep, do and perform each and every, all and singular the matters and doings in said contract set forth and specified to be by said J. B. Evans Construction Company, kept, done and performed at the time and in the manner in said contract specified, and shall well and promptly pay all claims for labor and material furnished for or used in and about the said building and shall save the said Iowa State Board of Education harmless from any and all claim for damages which may arise under said contract and from any lien or claims for labor and material under the laws of the state of Iowa."

Plaintiff instituted suit at law to recover value of materials furnished; and subsequently, divers materialmen and laborers, as interveners, filed similar petitions, which were consolidated for the purpose of trial, and by stipulation transferred to equity.

The Story County Bank, a trade name used by Parley Sheldon in conducting a banking business at Ames, then filed its petition of intervention, alleging, in substance, that, by virtue of an oral agreement with the construction company, the pay roll checks issued by it to laborers in its employ should be paid by the bank upon presentment and indorsement by the holders thereof; that this was done; and that, by reason thereof the bank is subrogated to the rights of the laborers by equitable assignment, and entitled to the security afforded by the bond.

The checks, before issuance under this arrangement, were in words and figures, as follows:

"No

"J. B. Evans Construction Co.

"Mexico, Missouri.

"Job No. 31 Pay roll check 1916.

"Pay to $ for Hrs. at "Story County Bank

"Ames, Iowa J. B. Evans Construction Co.

"W. J. Althaus, Supt. J. M. Wilson, Aud."

Neither the surety company nor the laborers had any knowledge

of the agreement made between Mr. Sheldon and Superintendent Althaus, and at the time the checks were presented for payment at the bank by the laborers, the holders thereof indorsed in blank, surrendered the check, accepted the money, and did nothing more.

It is further disclosed that, prior to the presentment for payment of these checks at the bank by the laborers, the construction company, as part of the agreement aforesaid, gave to the bank its check, in words and figures, to wit:

"J. B. Evans Construction Co. No. 4070.

Mexico, Missouri, March 10, 1916.

Mexico Savings Bk.

Mexico, Mo.

Pay to Story County Bank $ 810.00

Eight Hundred Ten Dollars Only Dollars.

J. B. Evans Construction Company,

Signed: J. B. Evans.

Countersigned: J. B. Wilson."

This check represented a deposit with the bank by the company, with which the bank was to pay the time checks issued to the laborers by the company. It was forwarded in the usual course of business to the Missouri bank for collection, and payment thereon was refused. The company at that time was insolvent, and soon thereafter suspended work on the building, and abandoned the scene of its activities.

Some questions and answers by Parley Sheldon, the only material witness in the case, indicate clearly the theory of intervener bank on this appeal:

"Q. You assumed that, by keeping these checks, you have an assignment of the laborer's claim? A. Yes, sir. Q. And that you stand in the same situation that the laborers, do you, with regard to this case? A. Yes, sir.--Q. You are asking now that the bonding company be held liable because you are a laborer, having taken the laborers' place by an assignment of the claim? A. I claim I stand in the same light as the laborers did stand, by having taken an assignment of their claim. I did not have any special arrangement with the laborers. Q. You did not have any arrangement with Mr. Gilcrest to pay his check marked Exhibit B? A. But we advanced him the money. Q. You did not have any arrangement with him? A. No, sir. Q. You did not have any arrangement with any payee in any check? A. No, sir, I could not say we had. Q. You do not claim that you had? A. No, sir. I do not presume we had. The arrangement was with the representative (Mr. Althaus) of the Evans Construction Company."

Under these facts and circumstances, is the intervener bank subrogated to the rights of the laborers against the surety by virtue of a legal or equitable assignment, and therefore entitled to the security afforded by the bond?

I. An assignment may rest in parol; and, under certain circumstances, a presumption will exist that an assignment was intended, solely from the nature of the transaction.

The pay checks in question were assignable, but not negotiable instruments. They were indorsed by the laborers in blank, when presented for payment, but without any knowledge of Sheldon's agreement, and clearly without any intent on their part to assign their rights against the bond company. Suppose laborer Gilcrest had presented his check to some other bank at Ames, and had been paid, would the intervener bank occupy a vantage ground not possessed by the other bank? If so, it must be by virtue of the secret agreement between the construction company and Sheldon, as neither the surety company nor the laborers had requested Sheldon to advance a dollar on behalf of a laborer, and neither knew that such an arrangement had been made by Sheldon.

In Small v. Smith, 120 Minn. 118 (139 N.W. 133), the holder of a time check "sold or assigned to the plaintiff the indebtedness so owing to him, and at the same time indorsed in blank his time check and delivered it," and under these facts it was held:

"This indorsement was, in effect, a legal assignment in writing of the claim of the assignor."

In Leach v. Hill, 106 Iowa 171, 76 N.W. 667, the payee, Hill, and the indorsee, Leach, "intended and understood that all rights which Hill had growing out of the transaction were to pass to the plaintiff." The laborers in this case did not so intend or understand.

II. When a person lends...