Fidelity Nat. Bank v. Henley

• Decision Date: 14 January 1901
• Court: Washington Supreme Court
• Parties: FIDELITY NAT. BANK OF SPOKANE v. HENLEY et al.

63 P. 1119

24 Wash. 1

FIDELITY NAT. BANK OF SPOKANE v. HENLEY et al.

Supreme Court of Washington

January 14, 1901

Appeal from superior court, Spokane county; William E. Richardson Judge.

Action by the Fidelity National Bank of Spokane against D. W. Henley and another to recover money which had been assigned to plaintiff, but paid to defendants. From a judgment against plaintiff for costs, on its refusal to plead further after the overruling of its demurrer to defendants' answer plaintiff appeals. Reversed.

Happy & Hindman, for appellant.

Henley Kellman & Lindsley and A. G. Avery, for respondents.

DUNBAR J.

On July 1, 1897, the United States entered into a contract with one N. B. Rundle to construct buildings at the army post near Spokane, and in said contract it was provided, among other things, that payments upon the same were to be made from time to time as the work progressed, and that from all payments 20 per cent. was to be retained until the completion of the work and the acceptance of the same by the government.

At the time of making this contract, Rundle, as principal, and respondents herein, as sureties, subsequently to the execution of the contract, executed a bond for the faithful performance of the contract by Rundle. In consideration of the advancement of money by the appellant to enable Rundle to comply with such contract, Rundle executed and delivered to appellant a written assignment of the money due or to become due from the United States for the construction of the said buildings, and authorized and empowered it to collect, receive, and receipt for said moneys. The assistant quartermaster of the United States in charge of the construction of said work was at once notified of this assignment, and consented thereto. Relying upon this assignment, appellant advanced to Rundle something over $47,000, only about $24,000 of which has been paid. The money advanced went to pay for material and labor which were used in the construction of the building. On the 13th day of August, 1898, there was in the hands of the United States $6,186.40, which had been earned by Rundle, and which was held back by the government under the terms of the contract. At said date, Rundle failing to comply with the conditions of said contract, the respondents, as sureties, took up the work where Rundle left off, and completed the same, having, before they commenced work, been notified by the appellant of the assignment to it of the 20 per cent. held back by the government. They thereafter, however, received the same from the United States, and refused to pay it over to the appellant upon demand. Action was brought against the respondents by this appellant, on February 23, 1899, for said sum of money, and the matters and things before enumerated constituted the important part of the complaint. Respondents answered, and as a separate defense alleged the fact to be that they were sureties on the bond of Rundle, and that, when he made his default, they, as sureties, took the contract off his hands, and completed the same, and that the United States promised to pay to them the 20 per cent. held back. To this further answer a demurrer was interposed, on the ground that the same did not state facts sufficient to constitute a cause of defense to plaintiff's action, which demurrer was overruled and exceptions taken. Appellant refusing to plead further, judgment for costs was entered against it, from which judgment this appeal is taken.

This case involves the determination of the question whether or not, at the time of making this assignment, Rundle had such an interest in the fund to be so held back by the government that he could assign the same to the appellant, and vest the appellant with the title to said fund, and whether an action would lie against the respondents by the appellant for the recovery of such money. We think these questions must be answered in the affirmative. There are some cases, the most of which are early ones, holding that where two claimants for the same service apply for payment to the party bound to pay and one of them is recognized as having a just claim, and is paid to the exclusion of the other, who was in fact the one entitled, the party thus excluded derives no title, against the party receiving payment, to the money paid, and that there is no such privity between the parties as will enable the party entitled to the money to maintain an action for the same against the party receiving it. This doctrine was announced in Patrick v. Metcalf, 37 N.Y. 332, and was for a time followed by the courts of New York and some few other states, though in that case we think there was a futile effort made to distinguish the case of Bradley v. Root, 5 Paige, 632. There the holder of the mail contract from the post-office department assigned it to the complainant, who took upon himself the duty of carrying the mail according to the contract, during its continuance, and was to receive therefor all the moneys which should become payable under the contract, according to the terms thereof. No notice of this assignment was given to the postmaster general. Afterwards the assignor, who was insolvent, gave the defendant an order upon the postmaster general for the moneys which might become payable on the contract, to indemnify him against a responsibility which he had incurred as indorser for the assignor. The defendant took the order, having notice of the assignment. After the moneys had been earned by the complainant under the contract, the defendant presented his order to the postmaster general, and received thereon $430. It was held by the chancellor that he was equitably bound to pay it over to the complainant. The later New York cases, however, have been inclined to abandon the doctrine of Patrick v. Matcalf, supra, and go back to the rule announced in Bradley v. Root, supra. In Roberts v. Ely, 113 N.Y. 128, 20 N.E. 606, the court, in commenting upon this question, said: 'Assuming that the plaintiff is right in his construction of the...