Claiborne Parish Sch. Bd. v. Fidelity & Deposit Co. of Maryland
| Decision Date | 06 May 1930 |
| Docket Number | No. 5796.,5796. |
| Citation | 40 F.2d 577 |
| Parties | CLAIBORNE PARISH SCHOOL BOARD v. FIDELITY & DEPOSIT CO. OF MARYLAND et al. |
| Court | U.S. Court of Appeals — Fifth Circuit |
E. P. Lee and S. L. Herold, both of Shreveport, La. (Lee & Gilmer, of Shreveport, La., on the brief), for appellant.
P. M. Milner, of New Orleans, La., and E. Wayles Browne, of Shreveport, La., for appellees.
Before BRYAN and FOSTER, Circuit Judges, and GRUBB, District Judge.
This was an action by the appellee (plaintiff) against the appellant and others as defendants, for the recovery of amounts paid by the appellee to certain laborers and materialmen upon the construction of school buildings of the appellant under a building contract with one Casey; the performance of the contract having been secured by a bond issued by the appellee. The contractor, Casey, completed the work and there was due him in the hands of the appellant an amount of approximately $12,000, for which he gave an order to the Planters' Bank of Haynesville, and which the appellant paid to the bank on April 3, 1924. The appellee claimed to be entitled to said fund to reimburse itself for amounts it was compelled to and did pay on judgments rendered against it as surety for the contractor, Casey, aggregating $10,202.54. The plaintiff claimed that the payment to the bank by the appellant on the order of the contractor was an unlawful diversion of the fund as to it by the appellant and this was the basis of the suit.
A question as to the federal jurisdiction was presented. The plaintiff after paying off the judgments obtained by the laborers and material furnishers had taken conventional assignments of their claims, and this was alleged in its petition. If the basis of the suit was the conventional assignments taken by the plaintiff, the assignors, being citizens of Louisiana, and the defendants being citizens of the same state, under section 24 of the Judicial Code (28 USCA § 41), federal jurisdiction would be lacking. The District Judge sustained the federal jurisdiction (11 F.(2d) 404) upon the ground that the right of action was not derived through the conventional assignments of the Louisiana citizens but was an independent, equitable right of the appellee's in the fund, which was charged to have been unlawfully diverted by appellant, through the building contract and the bond securing its performance. The question on the plea to the jurisdiction, as well as upon the merits, is whether the plaintiff had a cause of action against the defendants without the need to resort to the conventional assignments through a lien created by the original transaction between the appellant, Casey, and the appellee, upon the fund that was paid the bank. All the defendants, except appellant were dismissed from the case, and the judgment of the District Court, the case having been tried without a jury on stipulated facts, was against appellant alone.
The contract for the erection of the school building and the bond to secure its performance were executed under Act No. 224 of 1918 of the Legislature of Louisiana. The bond was twofold. It secured to appellant the performance of the contract, and it also secured in favor of subcontractors, laborers, and materialmen the payment by the original contractor of amounts due them. The building contract provided that on or about the first day of each month, 85 per cent. of the value of labor and material then incorporated in the work should be paid the contractor, less previous payments; that on substantial completion of the building, 95 per cent. less previous payments should be paid him, and that forty-five days thereafter, provided the work was fully completed and the contract fully performed, the balance due under the contract should be paid him. It is the unpaid balance due Casey from appellant and paid the bank by appellant on Casey's order which is in controversy. Casey owed the bank for money loaned to him during the progress of the work. The public building act provided for the record in the mortgage office of the certificate of completion of the building and its acceptance by the authority, and that all...
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