Fewell v. American Surety Company

• Decision Date: 28 May 1900
• Citation: 80 Miss. 782,28 So. 755
• Court: Mississippi Supreme Court
• Parties: JOHN W. FEWELL ET AL. v. AMERICAN SURETY COMPANY ET AL. [*]

28 So. 755

80 Miss. 782

JOHN W. FEWELL ET AL. v. AMERICAN SURETY COMPANY ET AL. ^[*]

Supreme Court of Mississippi

May 28, 1900

March 1902

FROM the circuit court of Lauderdale county HON GREEN B HUDDLESTON, Judge.

Fewell and another, appellants, were plaintiffs in the court below the American Surety Company, and others, were defendants there. The facts are stated in the opinion of the court.

Judgment reversed and cause remanded.

Fewell & Son, for appellants.

First. Was the contract set out in the traverse, that is to say, the contract, of June 30, 1897, between the defendants and the garnishees, whereby the contract for the construction of the United States postoffice building at Meridian by F. B Stowell & Co., the contractors with the government, was turned over to the defendants and the Citizens Savings Bank, one of the garnishees, void under sec. 3477 or sec. 3737 of the revised statutes of the United States in such sense that the defendants could have no right of action against the garnishees for the money collected by them from the government for work done on the building referred to under the contract between the contractors and the government, and under the said contract of June 30, 1897, and wrongfully appropriated to the use of the garnishees in violation of the contract last referred to?

It is contended that under said sec. 3477 the contract of June 30, 1897, whereby the proceeds of the contract with Stowell & Co. with the government were to be paid to the defendants and the Citizens' Savings Bank, or to certain committeemen for them, was void as to all persons, and conferred no rights upon the contracting parties, and that the garnishee, Citizens' Savings Bank, which bank is alleged to have collected a large sum of money from the government under the contract, and to have wrongfully appropriated the whole amount of such collection to its own use, in violation of its contract, can now plead the statute referred to and escape all liability to its co-contractors for their share of such collections.

That the contract of June 30, 1897, was void as between the United States government and the parties to that contract, or rather that the government had a right to disregard such assignment (if assignment it was), may be conceded; indeed, that very question had been decided by this court in the case of The American Surety Company v. United States, use of Melton Hardware Company, 76 Miss. 289, a case arising upon this same contract between the government and the same contractors.

In that case the surety of the contractors sought, in the defense of the suit upon the bond given as such surety, to avoid the obligation of the bond by pleading a wrongful refusal of the government to recognize the contract of June 30, 1897, and this court held that such contract was void as to the government under sec. 3477 aforesaid, and that therefore there was no violation by the government of any duty it owned the surety which operated to release the surety. The sole question presented and decided in that case was the question of the validity of the contract of June 30, 1897, as between the government and the parties to that contract, and no other question was or could have been decided; but the question now presented is a very different one; it is as to the validity of the contract of June 30, 1897, between the parties to that contract, the government having no interest in or connection with the matter.

Whilst the case of Spofford v. Kirk, and some other early decisions of the supreme court of the United States, laid down the law to be that such assignments were void as to and between all parties, and could not be the predicate of suits between persons claiming under such contracts the later and better decisions hold with great unanimity that while such contracts may be void in so far as they are set up as the basis of any recovery against the government, they are valid and binding between the parties thereto, and that they confer rights on the parties which will be enforced by the courts.

A leading case, and one exactly like the case at bar, is that of Yorke v. Conde--decided first at nisi prius, then in the supreme court of New York, and again in the New York court of appeals--in all of which courts it was held that the assignment was good as between the parties. In that case there was contract with the government, there was an assignment by the contractor to one of his creditors, of moneys to come from the government under the contract, and there was a collection by a third party of certain of these moneys and a suit by the party to whom the money had been assigned against the person so collecting such moneys, which suit was sustained. This case went to the supreme court of the United States, where, although the court held that it had no jurisdiction, the opinion of the court of appeals of New York was cited with evident approval. This case is reported, 42 N. E., 193, in 147 N.Y. 486, and 168 U.S. 642. It will be noted that this case is authority directly in point on the question of the validity of the assignment, and also on the promise to be implied by the law from one person to another arising from the appropriation by one of the money of another.

Another leading and strong case as to the validity of certain assignments between the parties is The Farmers National Bank v. Robinson, 53 Pacific, 762.

The same conclusion was reached in Leonard v. Whaly, 36 N.Y. 147. And the cases of Hobbs v. McLean, 117 U.S. 567; Bailey v. United States, 109 U.S. 432; Trust Company v. Shepperd, 127 U.S. 494; Goodman v. Niblack, 102 U.S. 556, were cited in support of the decision. In the case of Leonard v. Whaly, supra, the court wound up its decision sustaining the assignment between the parties with the expression, "The judgment is just, and in the interest of good morals and preventive of an outrageous fraud." This expression may be used with great propriety on the facts of the case now at bar.

The same ruling was made in the case of Jernegan v. Osborne (Sup. Judicial Court of Mass.), 29 N. E., 520. To the same point is Dexter v. Meigs (N. J. Eq.), 21 A. 114, and in this case the court expressed the opinion that the decision in Spofford v. Kirk was erroneous.

In the case of Price v. Forest, decided by the supreme court of the United States, in 1899, the court virtually decided that the assignment of a claim against the government was good, even as between the government and the assignee, notwithstanding sec. 3477 referred to. And such assignment was held good as between the parties In re Hone, N.Y.Ct. of Ap., 47 N. E., 798.

In all these decisions the court say the statute was designed only to protect the government, and not individuals, and not intended to be the support of fraud such as attempted to be set up in this case.

In the case of Dulaney v. Scudder, U.S.C. C. of Ap., 5th Circuit, decided March, 1899, very much such a contract as the one now before the court was held good and binding between the parties, notwithstanding secs. 3477 and 3737 of the revised statutes of the United States. 94 Fed. Rep., 6. See the authorities cited in that case.

Aside from the many decisions on this subject we have in our own supreme court analogous decisions; decisions which deny the rights of a party to a contract that is even illegal to put in his pocket the proceeds of such contract against his co-partner in the illegal transaction. Gilliam v. Brown, 43 Miss. 641: Howe v. Jolly, 68 Miss. 323.

The second question is: Was the debt of the garnishees, arising as it did, and being of the nature set out, an indebtedness which could be reached by garnishment at law?

Under the well established rule if an action of assumpsit would have laid between the defendants and the garnishees, the debt is garnishable. Williams v. Gage, 49 Miss. 777.

That such an action--assumpsit--would be maintainable by the defendants against the garnishees, we think is clear. The action of assumpsit has itself something of an equitable nature, and has been likened to a bill in equity. It may be founded not only upon a claim for money due under a contract, but it is sustainable in any case where ex aequo et bono, the law will imply a promise to pay.

The essential facts set up in the traverse are the agreement to divide the proceeds of the work to be done, the appointment of agents to do the work, the completion of the work, the collection of the money by one of the parties to the contract, and the appropriation of all of it to its debt in violation of the rights of the other parties. It is a case for money had and received, and the implied promise to pay it over--assumpsit.

If there be an element of trust (which we deny to exist in the sense that a trust cannot be enforced in a court of law), it is what is called a dry or terminated trust. 14 Am. & Eng. Enc. Law (2d ed.), 762. There are no accounts to settle. It is simply the case of an agreement between several persons creditors of the third person to do certain things and collect certain moneys, and divide the money pro rata between them. One has taken it all, and may be sued by the others for their shares. There is nothing complicated, nothing which cannot readily be decided by a jury. Nothing is needed but to ascertain whether the garnishees collected the money under the contract as alleged, and to what amount plaintiffs (defendants) are entitled.

Miller & Baskin and Alexander & Alexander, for appellees.

The traverse viewed in connection with the contract between the bank and the materialmen shows no debt or liability due by the garnishees to the defendants such as is subject to garnishment.

The agreement for completing the work constituted a partnership between the bank and the materialmen, and, if...