First Nat. Bank of Aberdeen v. Monroe County

• Decision Date: 02 April 1923
• Docket Number: 22517
• Citation: 131 Miss. 828,95 So. 726
• Court: Mississippi Supreme Court
• Parties: FIRST NAT. BANK OF ABERDEEN v. MONROE COUNTY et al

95 So. 726

131 Miss. 828

FIRST NAT. BANK OF ABERDEEN v. MONROE COUNTY et al

No. 22517

Supreme Court of Mississippi

April 2, 1923

APPEAL from chancery court of Monroe county, 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.

Decree reversed, and cause remanded.

Paine &amp 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. Howenstein, 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. 369; United States Fidelity & Guaranty Co., v. National Bank & Trust Co., 229 F. 448 (Tenn.) ; 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 materialmen and laborers, as opposed to the claim of the appellant. We say there are two reasons which clearly show that appellant is entitled to this money in preference to these claims.

An assignment of money due, or to become due, a contractor will prevail against the claims of laborers or materialmen. This has been the holding of our courts since the case of Spengler et al. v. Stiles-Tull Lumber Co., 94 Miss. 780. The case was cited with approval by our court as recently as December, 1920, in the case of Delta Lumber Co. v. Greenwood Bank & Trust Co., 86 So. 590. It would be a waste of time to quote from the Spengler case, supra. The court is entirely familiar with it.

The public roads of the country are not subject to the lien created under section 2434, Hemingway's Code, in favor of laborers and subcontractors, and they acquired no lien on the balance in the hands of the county authorities to the credit of the principal contract of such roads by filing notice with the board or by filing answer, as was done in this suit. See McGraw v. Board of Supervisors of Winston Co., 125 Miss. 420. This case is directly in point on this proposition.

The rights of subcontractors and materialmen in the case at bar is by an action at law against the surety company, as is provided by chapter 217 of the Laws of 1918. This law provides a remedy for subcontractors and materialmen against the surety on the bond of the contractor doing public work. Section 3 provides that when a contractor quits, or abandons the contract before its completion, suit may be instituted in the law courts by any laborer or materialman, and section 4 provides that only one suit shall be brought and all must join therein. In the record, it appears that under this law a suit had been filed by a materialman and subcontractor to-wit: Clifton Pitts, against the United States Fidelity and Guaranty Co., and that the case was pending, and is yet pending, and that proper legal notice had been given all laborers and materialmen to intervene in that proceeding. Therefore, the laborers and the materialmen had a plain, adequate and complete remedy at law against this surety company in that suit; and such remedy we submit is exclusive. They have no rights in this court in the case at bar under the law cited, and as to them the appellant is clearly entitled to this money. Of course, that part of the last money tendered in court which was earned by the receiver, could not have passed by assignment to the appellant.

We, therefore, ask that the case be reversed and remanded and a judgment entered here for appellant for all that part of the money paid into court, except the part earned by the receiver.

Wilson, Gates & Armstrong, for appellant.

The attorneys for Monroe county have filed a reply brief in which they take issue with appellant's claim that by paying the eighty-five per cent. of the November estimate into court the county...