Clement v. City of Philadelphia
|20 A. 1000,137 Pa. 328
|05 January 1891
|CLEMENT, FOR USE, v. CITY OF PHILADELPHIA
|United States State Supreme Court of Pennsylvania
Argued April 8, 1890
APPEAL BY PLAINTIFF FROM THE COURT OF COMMON PLEAS NO. 2 OF PHILADELPHIA COUNTY.
On October 29, 1886, an action in debt was brought in the name of H. G. Clement, to the use of Samuel Josephs, against the city of Philadelphia, upon a contract entered into between Clement and the city. Issue.
On February 11, 1889, a verdict was rendered in the plaintiff's favor for $3,334. A rule for a new trial having been made absolute, the parties agreed upon a case stated showing the following facts:
In 1874, Henry G. Clement became surety for a clerk in the employ of the city of Philadelphia. This clerk, in 1883 became a defaulter for a sum largely in excess of the amount of the bond, and on April 24, 1883, judgment was entered on the bond for the full amount thereof, $5,000. There were two sureties on the bond. The city has failed to collect anything on the judgment from the principal.
On July 28, 1885, Henry G. Clement entered into a contract with the city of Philadelphia to complete the repairs to South street bridge. Samuel Josephs became the surety on the bond accompanying said contract.
On July 27, 1885, an agreement had been entered into between Clement and Josephs, (set out in full in the case stated,) under which Josephs was to advance to Clement, from time to time, the funds necessary to pay for the work and material needed in the completion of the west approach to the South street bridge, and, as security for the moneys thus advanced Josephs was to receive all warrants for moneys to become due to Clement from the city for or on account of said work, with the right to apply the moneys arising from the warrants to his reimbursement. As a compensation for the moneys so advanced, and in lieu of interest thereon, Josephs was to retain out of the moneys arising from said warrants, in addition to the sum necessary to repay his advances, a further sum equal to half the net profits of Clement on the contract. This agreement was given by Josephs to his counsel and the city had no knowledge of it.
On the same day of the agreement, Clement gave Josephs an irrevocable power of attorney to receive from the city all warrants issued in payment for the work, and to execute all necessary vouchers and receipts. This power of attorney was filed with the city controller within three or four days after it was given to Josephs.
The work was completed in accordance with the contract.
On February 6, 1886, a warrant was drawn in favor of Clement for $3,825 and delivered to Josephs. On April 29, 1886, a warrant was drawn in favor of Clement for $2,874.36, receipted for by him, but delivered to the city solicitor in payment of Clement's indebtedness on the judgment against him entered in 1883. For the balance of the contract price, $325.64, a warrant was drawn in favor of Clement on December 21, 1886, and delivered to Josephs.
Clement never authorized the bringing of this suit, except as authority may appear from the agreement, power of attorney, and facts above stated.
Josephs advanced money to Clement, under the agreement before referred to, to the aggregate of $10,000, all of which was expended in the performance of the contract. Clement expended of his own moneys $100, and he still owes bills incurred in the performance of the contract to the extent of $2,500.
The city claims to retain the $2,874.36 by reason of Clement's indebtedness on the judgment before referred to. At the time the warrant for that amount was given to the city solicitor, the judgment was unpaid, and that sum was the amount due by Clement.
If the court shall be of opinion that the defendant can retain said sum against the said Josephs, the equitable plaintiff, then judgment to be entered for the defendant; if otherwise, then judgment for the plaintiff for $2,874.36, with interest from May 1, 1886, either party to have the right to refer to the contract between the city and Clement, or to any ordinances of the city, as though set out herein.
After argument, judgment was entered on the case stated for the defendant; whereupon the plaintiff took this appeal, specifying that the court erred:
1. In entering judgment for the defendant.
2. In not entering judgment in the plaintiff's favor for $2,874.36, with interest from May 1, 1886.
The judgment is affirmed.
Mr. David W. Sellers (with him Mr. William Nelson West), for the appellant:
1. The contract on which Josephs was surety was awarded under § 26, act of May 13, 1856, P.L. 573, which, as modified by § 6, act of May 23, 1874, P.L. 233, required the contract to be awarded to the lowest responsible bidder, and required the contractor to give security for its performance. The first suggestion is, that a contract governed by such a law, in which the surety is guided only by that which inheres in the contract itself, is not subject to a set-off against the contractor which existed at the date of the contract, so as to prevent the surety from recouping his advances to perform the work. The city knew of Clement's indebtedness to it when the contract was awarded, and its duty was to give Josephs notice that such indebtedness was to be deducted.
2. The agreement between Clement and Josephs worked an equitable assignment, and by reason of the latter's obligation as surety to the city, neither the city nor Clement, without payment of his advances, could deprive Josephs of the sums due. The filing of the warrant of attorney was sufficient notice to the controller to deprive Clement of any further right of disposition. As surety, Josephs spent $10,000 in completing the contract, and he thus in any event suffers a loss of $3,000. His liability, when he became surety, was to expend of his own funds only such sum in excess of $7,025, the contract price, as should be required for the completion of the work. If the city's contention is sustained, the burden of his suretyship is increased to the extent of $2,874.36.
3. The agreement between Clement and Josephs, and the power of attorney, were made on the faith of decisions of this court. The agreement was drawn from the precedent approved in Hart v. Kelley, 83 Pa. 289, construing the act of April 6, 1870, P.L. 56, which authorizes loans of money upon an agreement to receive a share of the profits of a business as compensation for the use of the money. The power of attorney and the notice to the controller were drawn and given under the authority of Philadelphia v. Lockhardt, 73 Pa. 211. After notice, the city was bound to recognize the right of Josephs, and nothing outside of the contract could affect his right to be paid in cash. The city's judgment against Clement did not enhance its rights; a judgment cannot be set off against an equitable assignee for value: Ramsey's App., 2 W. 228. And Clement could not...
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