First Nat. Bank Of Aberdeen v. Monroe Cty.

• Decision Date: 01 January 1920
• Docket Number: 22517
• Citation: 131 Miss. 828,95 So. 727
• Court: Mississippi Supreme Court
• Parties: First Nat. Bank Of Aberdeen v. Monroe County Et Al.

95 So. 727

131 Miss. 828

First Nat. Bank Of Aberdeen v. Monroe County Et Al.

No. 22517

Supreme Court of Mississippi

January 1, 1920

1 ASSIGNMENTS. First assignee giving notice to debtor has preference provided he has no notice of prior assignment.

As between successive assignees of a debt, the assignee who first gives notice to the debtor has the preference, provided that at the time of taking the assignment he had no notice of a prior assignment.

2 HIGHWAYS. County not authorized to withhold sum stipulated to be advanced under road contract to pay claims of laborers materialmen, or subcontractors.

Laborers materialmen, and subcontractors have no lien against the state or any subdivision thereof for labor or material furnished on any public work, and where a contract for the construction of a public road provided that eighty-five per cent. of the engineer's monthly estimate of the value of the work done would be paid to the contractor as the work progressed, in the absence of a lien or contractual authority for so doing, the county had no right to withhold this monthly payment for the purpose of paying the claims of laborers, materialmen, or subcontractors.

3 ASSIGNMENTS. Surety on contractor's bond held not entitled to prior lien on proceeds against bank financing contractor and taking subsequent assignment.

Where a contract for the construction of a public road provided that eighty-five per cent. of the relative value of the work done would be paid to the contractor monthly as the work progressed, and in the application for a bond the surety on the contractor's bond took assignment of all the funds earned under the contract, but did not disclose this assignment until after the default of the contractor more than a year thereafter, and, relying on the provisions of the contract, and without notice of any prior assignment of or claim of any character against, said fund, a bank took an assignment of the fund and gave immediate notice of such assignment by filing it with the clerk of the board of supervisors, and thereafter advanced the money necessary to enable the contractor to carry on the work, and collected each monthly payment for a period of twelve months, and where the surety had knowledge, or means of knowledge, of the fact that the contractor had assigned this fund to the bank, and that the bank was financing its principal and collecting each month the earned percentage of eighty-five per cent., but it made no protest until after the contractor became insolvent and defaulted, and where, after default of the contractor, the surety had relet the balance of the work at a profit to itself, and when the county was under no obligation, either by law or contract, to withhold any part of the fund for the payment of laborers or materialmen, and was asserting no right to withhold the same for any purpose, held, that the surety had no superior equity in this fund over that of the bank which would entitle it to have the fund applied for its exoneration to the payment of the claims of furnishers of labor and material which accrued prior to the contractor's default.

HON. A. J. McINTYRE, Chancellor.

Proceeding between the First National Bank of Aberdeen and Monroe County and others. From the decree rendered, the former appeals. Reversed and remanded, with directions.

Paine & Paine, for appellant.

The law in this state has been clearly announced as to the rights of successive assignees to a debt, to-wit: that as between successive assignees he who first gives notice to the debtor will prevail although the other assignee may have been prior in time of getting the assignment. We will refer the court to the following authorities directly in point: Lumber Co. v. Newcomb, 79 Miss. 462; Matthews v. Hamblin, 28 Miss. 611; Ex parte Est. Phillips, 66 L. R. A. page, 700, note page 764; 2 R. C. L. page 628.

It makes no difference, therefore, whether the board of supervisors, in this case, accepted the assignment or notice of appellant or not. All that was necessary was that the board be given notice. See Spengler v. Stiles-Tull Lumber Co., 94 Miss. 780. 5 Corpus Juris, page 937, letter J, and in cases in note 64.

It is not necessary that the notice to the board of supervisors be given by the appellant itself. It is sufficient that notice of the assignment has been acquired by the board. See 5 Corpus Juris, page 935, div. 2. It has been held that the communication by which the notice is imparted may be merely casual and for no definite purpose and yet be sufficient notice. Dale v. Kimpton, 46 Vermont, 76.

And notice to one of a board of commissioners is a notice to the board. Spring City Bank v. Rhea Co., Tenn. Ch. A., 59 S.W. 442; Moody v. Kyle, 34 Miss. 506.

All the equities in this case are with the appellant. It has the equity of being an innocent purchaser for value of the eighty-five per centum due under the contract without notice of any other assignment. By the appellants furnishing the contractor money to finance the work, the laborers and materialmen were paid up to this last month and thereby the liability of the surety company on its bond was lessened pro tanto. If appellant had not continued to finance the contractor under this assignment, the work would have stopped and the contract would have been breached many months before it was; the court can see by this use of appellant's money the liability of the surety company on the bond was largely decreased. In addition to these equities the appellant also has a legal title to the money paid into court. The surety company has nothing at most more than an equitable assignment, or the equity of subrogation. Therefore, under the maxim that where the equities are equal the legal title will prevail, the appellant should prevail and the money be awarded it. See 5th Corpus Juris, page 955.

But the court may hold that the assignment to the appellant was simply an equitable assignment. We reply to that, that in cases similar to the one at bar assignments to banks had been held to create an equity in the bank superior to the equity of subrogation of the surety company on the bonds of the contractors. See American Surety Co. v. Bellingham National Bank, 254 F. 54; New Amsterdam Casualty Co. v. Wurtz (Minn.), 77 N. W. 664; N. W. National Bank of Bellingham v. Guardian Casualty & Guaranty Co. (Wash.), 167 P. 473.

By not filling their application containing the assignment and subrogation with the clerk of the board of supervisors, or by not having it recorded in some manner, in view of the fact that the public was given notice under the contract between Monroe county and the contractor that eighty-five per cent. of the monthly estimate was to be paid the contractor, which eighty-five per centum the surety company knew was the main line of credit of this contractor, the United States Fidelity & Guaranty company, is equitably estopped now to claim any part of the eighty-five per centum paid into court under the maxim that where one of two innocent parties must suffer a loss, it must be borne by that one whose conduct has rendered the injury possible. See 10 R. C. L. page 695, sec. 23; Bowen v. Howwnstein, American Ann. Case 1913E., pages 1179 and 1181; Brant v. Virginia Coal & Iron Co., 93 U.S. 326; 23 U.S. (L. Ed.), page 927.

The record does not disclose that the surety company has suffered any damages, but on the contrary it does appear that after the default by the contractor, the uncompleted part of the contract was let by the surety company at several thousand dollars profit. (2) The equity of subrogation will never be enforced when it will work injustice to those having equal equities. (3) A surety is not entitled to subrogation until it fully pays and discharges the obligation of its principal. These three propositions are elementary law, and it would be a needless consumption of the time of the court to do more than to cite a few authorities which hold that the doctrine of subrogation can never come into existence or be invoked by a surety unless the above first and third conditions exist, and that it will never be enforced if the second condition will result. See U. S. v. National Surety Co., 41 S.Ct. 29; Southern Trust Co. v. Garner, 223 S.W. (Ark.) 369; United States Fidelity & Guaranty Co., v. National Bank & Trust Co., 229 Fed. (Tenn.) 448; Weir-Booger Dry Goods Co. v. Kelly, 80 Miss. 64, 37 Cyc., pages 374-375, 25 R. C. L., page 1321; New Amsterdam Co. v. City of Astoria, 225 F. 560 (Ore.)

We now discuss the legal point upon which the court decided this case; a point not raised by appellee in any of their bills and amended bills, or in any of their answers, to-wit: That the contract between the surety company and Monroe county was indivisible, and having been breached by the contractor before its completion, none of the money for the work done prior to the breach was due to the contractor. That since it was not due the contractor there was nothing passing to the appellant under the assignment. Therefore, the surety company, under its clause of subrogation, could have this money applied to the payment of the laborers and materialmen in exoneration of its liability to said laborers and materialmen. We submit that this holding of the court upon which he decided the case is clearly erroneous for two reasons: (1) The contract is not an entire contract, and (2) admitting for the sake of argument that it is an entire contract, yet the county waived this right and admitted it owed for the work done in November and paid it into court, and the surety company cannot avail itself of this right waived by the county. 13 Corpus Juris, page 562; 6 R. C. L., page 858, sec. 246; Ganong v. Brown, 88 Miss. 53.

We discuss under this section of our brief the claims of the...