City of Detroit v. Fid. & Deposit Co. of Md.
| Decision Date | 03 October 1927 |
| Docket Number | No. 106.,106. |
| Citation | 215 N.W. 394,240 Mich. 213 |
| Court | Michigan Supreme Court |
| Parties | CITY OF DETROIT v. FIDELITY & DEPOSIT CO. OF MARYLAND et al. |
OPINION TEXT STARTS HERE
Appeal from Circuit Court, Wayne County, in Chancery; Henry A. Mandell, Judge.
Suit by the City of Detroit against the Fidelity & Deposit Company of Maryland and another to determine which defendant was entitled to certain funds held by the plaintiff. From a decree in favor of defendant Fidelity & Deposit Company of Maryland, the people's State Bank appeals. Affirmed.
Argued before the Entire Bench. Lightner, Oxtoby, Hanley & Crawford, of Detroit, for appellant.
Monaghan, Crowley, Reilley & Kellogg, of Detroit, for appellee Fidelity & Deposit Co. of Maryland.
In this case most of the important facts are undisputed and so stipulated by counsel. The R. H. Hidey Company, a Michigan corporation, was successful bidder, in 1921, for constructing a portion of a public sewer described as, ‘Section 8-Six-Mile Road Sewer,’ in the city of Detroit. The contract with the city for that section is dated October 25, 1921, the contract price being $96,991. The higher bids varied from $105,596 to $168,996.
Incident to that contract two bonds were given of standard form, the first being to the city of Detroit for faithful performance of the contract, and the second to the state of Michigan for protection of subcontractors and materialmen as required by Act No. 187, Pub. Acts of 1905 (3 Comp. Laws 1915, § 14827 et seq.). They were executed by the successful bidder and its surety, the Fidelity & Deposit Company of Maryland.
While the Hidey Company made computations from which it estimated a profit on the contract of $16,000 and it is shown to have finished the work in accordance with the contract, disturbed financial conditions developed after the contract was taken, which resulted in a loss to said company of $45,000, followed by its insolvency, with labor and material claims unpaid.
The application which the Hidey Company made to the Fidelity Company was executed October 31, 1921. It contains a protecting assignment to the latter and inducing statements upon which it relies in this case, amongst them being that payments on the contract were to be made monthly in cash, with percentage reserved from payments until completion of 10 per cent. on completed work and 20 per cent. on material furnished, it had not assigned and would not otherwise assign its payments on the contract or any part thereof. The Hidey Company paid the Fidelity Company an initial premium of $1,454.86, following which the bonds were duly executed and delivered.
Work was promptly commenced and payments were made by the city to the Hidey Company amounting to $22,854.15 on March 6, 1922. On that date the latter made arrangements with the People's State Bank of Detroit for a line of credit and as security therefor executed to the bank an assignment of all money subsequently accruing to the company on the contract. That assignment was filed in the office of the city controller and marked: ‘approved, except as to labor claim and claims for materials for this work.’ Thereafter the city made payments as they became due on the contract to the bank holding this assignment. Those payments were applied by the bank on notes given it by the Hidey Company, some of them being paid in full and others renewed.
The contract was completed some time in September, 1922, when it developed the Hidey Company had failed to pay for certain labor and material furnished in the execution of the contract. Those unpaid claims amounted to $10,769.79. The creditors owning them made demand upon the Fidelity Company for payment of their respective claims under the statutory bond. Investigation showed that each of those claims was a proper demand under such bond. The Hidey Company then wrote the attorney of the Fidelity Company a letter acknowledging their correctness in detail, and saying:
‘We are unable to pay these bills and would ask that the Fidelity & Deposit Company pay them at its convenience.’
The Fidelity Company thereafter paid all of those claims and obtained a release from the respective claimants with an appropriate description of the claims and other recitals about which there is no question.
The Hidey Company, on July 10, 1922, borrowed $7,000 from the bank, giving two notes therefor, one for $3,000 and the other for $4,000. As between themselves this money was treated as secured by the assignment of payments on the sewer contract. At the time this case was heard those notes were not paid and there was due to the bank upon them, including interest, $8,121.25. It also appears that later in July the Hidey Company borrowed $14,000 more from the bank upon its note, indorsed by the father and brother of Ralph Hidey, president of said company. This note was renewed and payments made on it from time to time, there being at the time of the hearing a balance due and yet unpaid of $2,800.
The money borrowed from the bank by the Hidey Company was used by the latter to pay for labor and material which went into its sewer contract with the city, it being the only contract the Hidey Company had at that time.
The result of these various transactions as a whole is that labor and material claims were all paid either by the Hidey Company or the Fidelity Company, and the city of Detroit still owed upon said contract the sum of $8,604.17, with interest amounting to $659.89. When this bill was filed the city had made total payments on the contract amounting to $89,063.67, and was yet owing a balance as above stated.
Plaintiff's bill of complaint was filed December 5, 1922, setting up that the Fidelity Company claims this balance yet due from the city under the contract because of the payments it had made for labor, material, and other claims of like nature, while the People's State Bank claims the same under its assignment of March 6, 1922, from the Hidey Company; that the city had no claim upon the money yet owing by it on the contract and was ready to apy the same to such corporation or persons as the court should direct. It therefore prayed for injunction restraining the Fidelity Company and bank from taking legal proceedings...
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