First Nat. Bank v. City Trust, Safe Deposit & Sur. Co. of Philadelphia

• Decision Date: 24 February 1902
• Docket Number: 719.
• Citation: 114 F. 529
• Parties: FIRST NAT. BANK OF SEATTLE v. CITY TRUST, SAFE DEPOSIT & SURETY CO. OF PHILADELPHIA et al.
• Court: U.S. Court of Appeals — Ninth Circuit

114 F. 529

FIRST NAT. BANK OF SEATTLE v. CITY TRUST, SAFE DEPOSIT & SURETY CO. OF PHILADELPHIA et al.

No. 719.

United States Court of Appeals, Ninth Circuit.

February 24, 1902

The appeal in this case is taken from an order dismissing the bill of intervention of the appellant, the First National Bank of Seattle, in a suit begun by the City Trust, Safe Deposit & Surety Company of Philadelphia against Frank H Paul, as comptroller of the city of Seattle to compel the issuance of city warrants to the complainant in the bill for work done upon a contract for a city improvement, which contract had been made between McCauley & Delaney contractors, and the city of Seattle, and which, upon the abandonment thereof by said contractors, had been completed by the complainant, who was their surety. The intervener denied the right of the surety company to the warrants, and asserted its own right thereto upon the ground that the contractors had, in consideration of moneys to be advanced by the intervener, assigned to it certain moneys to be earned by them under said contract. The facts of the case, as alleged in the two bills, are these: On or about August 2, 1900 McCauley & Delaney entered into a paving contract with the city of Seattle. They applied to the First National Bank of Seattle for a loan of money to enable them to carry out their contract, and accompanied their application with a promise to provide a reliable surety company bond to the city, and to assign to the bank all moneys bonds, and warrants that should become due from the city under the contract for the months of August, September, October, and November, 1900. Upon those conditions the bank promised to loan and advance the necessary money. The contract for the street improvement provided that on or before the 20th day of each month bonds or warrants should be issued for 70 per cent. of the contract price of the estimated amount of the work returned by the city engineer as having been performed during the preceding month. The remaining 30 per cent. was to be retained to secure the payment of laborers and material men until 30 days after the completion of the work. The City Trust, Safe Deposit & Surety Company of Philadelphia became the surety on the bond which was entered into with the city for its own use and for the use of all persons who should perform work or labor in the execution of the contract. On August 2, 1900, the contractors, in writing, assigned to the bank the proceeds of the contract for the months of August, September, October, and November. The consideration of the assignment was the sum of $2,000, then advanced, and other moneys thereafter to be advanced, including the money to be paid to procure a surety company's bond. The bank subsequently, as the work progressed, advanced $5,000 making a total of $7,000, which was intended to be secured by the assignment, no part of which has been repaid. The bank, upon obtaining the assignment, served upon the comptroller, and caused to be filed in his office, a written notice that it held the assignment, and that it would present an order for the warrants to be issued in payment of the amount so assigned and so to become due. The notice was written on an official blank furnished by the comptroller for the use of banks and others who advanced money under like circumstances. The city engineer subsequently estimated that the work done on the contract for the months mentioned in the assignment amounted to $12,619.14. But in the meantime, early in October, the contractors discontinued the work, and shortly thereafter the city called upon the surety company to complete the same, to which it assented. Before it assumed the contract of its principals, it had notice of the assignment to the bank. At the time when the contractors abandoned their contract there had been earned thereunder, $3,924.31, as shown by the estimates made by the city engineer. The surety company completed the contract, and paid the expenses thereof, and all the unpaid bills incurred by the original contractors. The bank, in its bill of intervention alleged that when the contractors abandoned the contract there was due to certain laborers and material men sums of money, the amount of which was unknown to the bank, but which sums would have been liens upon no more than 30 per cent. of said sum of $3,924.31 so earned by the contractors according to the terms of the contract. To the bill of intervention the trust company and the comptroller of the city of Seattle each demurred for want of equity. The demurrers were sustained, and the bill of intervention was dismissed.

Walker & Munn, for appellant.

John P. Hartman, for City Trust, Safe Deposit & Surety Co.

W. E. Humphrey and Edward Von Tobel, for appellee.

Before McKENNA, Circuit Justice, and GILBERT and ROSS, Circuit Judges.

GILBERT Circuit Judge, after stating the case as above, .

The appellant earnestly contends that its bill of intervention presents ground for equitable relief at least as to $2,747, or 70 per cent. of $3,924.31, the amount which the city admitted to have been the value of the work done by the contractors at the time when they abandoned their contract; and it insists that the sum of $2,747 is beyond any doubt payable to it under its assignment; that that sum was earned by the contractors by work done in a public improvement which was accepted by the city, and for which the city stood ready to pay, notwithstanding that claims and liens for work done and material furnished in said improvement to the amount of $3,168.38 were outstanding and unpaid; that the city never declared a forfeiture of the contract, and that in fact the contract never was forfeited, but that the surety company had simply undertaken and completed the work, which it was bound to do under its bond; that the appellant's equities are prior to those of the surety company and to those of the unpaid claimants and lienholders, for the reason that the arrangement to obtain money from the bank was entered into by the contractors before they had obtained the bond from the surety company, and that when the surety company took up the contract it did so with knowledge of the assignment to the bank, and subject thereto.

The doctrine announced in Prairie State Nat. Bank v U.S., 164 U.S. 227, 17 Sup.Ct. 142, 41 L.Ed. 412, must control the decision of these questions. The controversy in that case was between a bank which had advanced money to Sundberg & Co., the contractors who had undertaken to erect a custom house for the United States, and...