Denver United States Nat. Bank v. Asbell Bros. Const., 6582.

• Decision Date: 23 August 1961
• Docket Number: No. 6582.,6582.
• Parties: DENVER UNITED STATES NATIONAL BANK, a corporation, Appellant, v. ASBELL BROTHERS CONSTRUCTION, a partnership; and William R. Asbell and Keith V. Asbell, partners, associated and in business under the common name and style of Asbell Brothers Construction, Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

294 F.2d 289 (1961)

DENVER UNITED STATES NATIONAL BANK, a corporation, Appellant, v. ASBELL BROTHERS CONSTRUCTION, a partnership; and William R. Asbell and Keith V. Asbell, partners, associated and in business under the common name and style of Asbell Brothers Construction, Appellees.

No. 6582.

United States Court of Appeals Tenth Circuit.

August 23, 1961.

Arthur W. Zarlengo, Denver, Colo. (Roncalio, Pattno & Graves, Cheyenne, Wyo., and C. Mert Reese, Denver, Colo., on the brief), for appellant.

G. L. Spence, of Spence, Hill, Oeland & Tschirgi, Riverton, Wyo., for appellees.

Before PHILLIPS, PICKETT and LEWIS, Circuit Judges.

PICKETT, Circuit Judge.

The Denver United States National Bank appeals from a judgment denying a recovery from a United States prime contractor on an assignment of the proceeds due on a subcontract. The defendants, Asbell Brothers Construction, a partnership, and William R. Asbell and Keith V. Asbell, the individual partners,¹ contracted with the United States for the construction of certain irrigation works on the Bureau of Reclamation Eden Project near Farson, Wyoming. Howard Deal and Lewis J. Oster² entered into a subcontract to perform a portion of the work covered by the prime contract. Deal and Oster were without adequate finances or machinery to do the work required by the subcontract. A portion of the required machinery was purchased by conditional sales contract from Studer Tractor Equipment of Casper, Wyoming, and Asbell Brothers were directed to deliver to Studer the monthly payment of $2,625.00, together with interest, which was to be deducted from the monthly progress payments due on the subcontract. The rest of the necessary machinery was acquired from Studer on a rental basis. The plaintiff bank agreed to advance adequate funds to Deal and Oster to meet their operating expenses. To secure repayment of these advances, the balance of the progress payments were assigned to it, with the approval of Asbell Brothers.³

Deal and Oster commenced work on the subcontract in June of 1957, and their work was terminated on October 17, 1957. During the months of June, July, August, and September, 1957, the bank advanced a total of $30,000. Of this amount the bank received payments of $1,975.16 and $10,944.48 by virtue of the assignment.

The bank brought this action alleging that Asbell Brothers had not made payments to the bank when they were due under the terms of the subcontract and its assignment, and had never made payment in full of the total amount earned under the subcontract. The defense was that under the terms of the subcontract⁴ there was no money due Deal and Oster which was subject to the assignment, and that, after settlement of unpaid claims for labor and material furnished Deal and Oster in the performance of the subcontract, the total of the amounts paid out by Asbell Brothers exceeded the amount earned by $3,629.22. The trial court found that, in addition to the sums paid by Asbell Brothers on behalf of Deal and Oster, expenses totaling $11,409.29 were still due before any monies would be payable under the subcontract. On this basis the trial court concluded, and we think correctly so, that "The assignee-bank acquired no greater right than was possessed by its assignor, Deal and Oster, but simply stands in the shoes of the latter. In such case the Bank takes subject to all equities and defenses which could have been set up against the chose in the hands of the assignor." Under the terms of their subcontract, Deal and Oster were not entitled to the monies earned until they had paid all labor and material bills and other obligations arising from the performance thereof. Since this had not been done, the bank, as assignee, had no right to insist upon payment by Asbell Brothers. 3 Williston on Contracts § 432 (3rd Ed. 1960).

The bank contends that the documentary evidence produced from the records of the Bureau of Reclamation conclusively establishes that Deal and Oster earned a total of $51,263.54 under their subcontract, and that deduction of the sum of $45,419.87 paid out by Asbell Brothers on their behalf leaves a balance due of $5,843.73 subject to...