Globe Indemnity Co. v. West Texas Lumber Co.

• Decision Date: 03 December 1930
• Docket Number: No. 7521.,7521.
• Citation: 34 S.W.2d 896
• Parties: GLOBE INDEMNITY CO. v. WEST TEXAS LUMBER CO. et al.
• Court: Texas Court of Appeals

34 S.W.2d 896

GLOBE INDEMNITY CO. v. WEST TEXAS LUMBER CO. et al.

No. 7521.

Court of Civil Appeals of Texas. Austin.

December 3, 1930.

Rehearing Denied December 23, 1930.

Appeal from District Court, Tom Green County; J. P. Hill, Judge.

Action by the West Texas Lumber Company, in which certain parties intervened as plaintiffs, against the Globe Indemnity Company and another. Judgment in favor of plaintiff and interveners against defendants, and judgment over in favor of named defendant against J. W. Fuqua. The indemnity company was denied judgment on its cross-action and plea against L. B. Cox & Co., and against the Central National Bank of San Angelo, and it appeals.

Affirmed.

Thompson, Knight, Baker & Harris, of Dallas, for appellant Globe Indemnity Co.

Collins, Jackson & Snodgrass, of San Angelo, for appellees L. B. Cox & Co.

BLAIR, J.

By a mechanic's lien contract, dated February 8, 1928, L. B. Cox & Co., a copartnership, as owner, contracted with J. W. Fuqua, as contractor, to construct a business house on its certain lots in San Angelo, Tom Green county, Tex., for a consideration of $24,155, to be paid when the building was completed. The contractor agreed to furnish all labor and material used in the building, and his bond with the Globe Indemnity Company as surety, hereinafter called surety, provided for the faithful performance of the contract, and for the payment of all labor and material used in the building, and expressly provided that laborers and materialmen had the right of action on the bond. The contractor's application for this bond, dated January 22, 1928, contained a conditional assignment and subrogation agreement to surety in consideration of executing the bond of all moneys due or to become due the contractor under the contract, and of all liens securing same, conditioned to become effective only upon some breach of the contract by contractor. This assignment was not acknowledged; nor was it filed or recorded in the mechanic's lien records of Tom Green county, Tex., where the property was located. About March 1, 1928, Fuqua found that he could not finance the building contract, and entered into an agreement with Cox & Co. and the Central National Bank of San Angelo, hereinafter called bank, whereby Cox & Co., at Fuqua's instance and request, agreed and promised to pay the bank upon completion of the building by Fuqua, any loans the bank made him up to the amount of the contract price of the building; and, as additional security to this obligation of Cox & Co. and Fuqua, the bank acquired from Fuqua a written assignment of the contract price of the building, or so much thereof as might be necessary to cover loans made to Fuqua, and also an assignment of the mechanic's lien securing the contract price of the building, and to all of which Cox & Co. verbally assented and agreed. This transfer or assignment was duly acknowledged and delivered to the bank on March 3, 1928, and was on the same day filed for record, and was on March 9, 1928, duly recorded in the mechanic's lien records of Tom Green county. Under this agreement the bank loaned Fuqua on his fourteen notes, dated from March 3, 1928, to June 15, 1928, the sum of $14,005.14 including interest. Cox & Co. accepted and took possession of the building on July 1, 1928, under agreement with Fuqua that he would remedy certain defects and deficiencies in the building. On September 19, 1928, upon demand of the bank and under agreement made, Cox & Co. repaid the bank the $14,005.14 represented by Fuqua's notes; and on the same date the bank indorsed Fuqua's notes thus paid to Cox & Co., without recourse, and delivered them to Cox & Co. Neither Cox & Co. nor the bank had any notice of the prior assignment by Fuqua to the surety until after the loans to Fuqua had been made by the bank and paid by Cox & Co. under the agreement. By agreement of counsel, the $10,149.51 balance due on the contract price of the building was distributed to laborers and materialmen who furnished the contractor labor and (or) material in the building, and who are plaintiffs and interveners in this suit, all of whom had complied with the requirements with respect to fixing their statutory liens upon the property involved, to the extent of this unpaid balance of the contract price in the hands of the owner.

At the conclusion of the evidence the trial court withdrew the case from the jury, and under the preceding facts rendered judgments aggregating $4,850.67 against J. W. Fuqua and Globe Indemnity Company, as surety on his bond, in favor of plaintiff and interveners for the unpaid balance of their respective claims for labor and (or) material furnished the contractor in the construction of the building; and judgment was rendered for surety over against J. W. Fuqua in the event it was compelled to pay the judgments in favor of plaintiffs and interveners. The surety was denied a judgment for a sufficient amount to pay the claims of plaintiff and interveners, for whose benefit as well as its own benefit surety sued, on its cross-action and plea against the bank that its assignment was prior in point of time to the bank's assignment, and that the bank was therefore guilty of conversion of the funds paid to it by Cox & Co. on Fuqua's loans under their agreement; and likewise surety was denied judgment against Cox & Co. on its cross-action and plea that Cox & Co. had wrongfully paid the money due on the contract to the bank under their agreement, after notice of its assignment; hence this appeal by surety.

We do not sustain surety's contention that its assignment should be given priority over the bank's assignment, under the rule stated in Hess & Skinner v. Turney, 110 Tex. 148, 216 S. W. 621, that successive "equitable assignments have priority according to the date of their creation or execution," because surety's assignment was invalid as between the owner, the bank, and surety for the following reasons:

1. The assignment was a part of the contractor's application for his bond, which was dated January 22, 1928, and contained the following stipulation: "This assignment shall be in full force and effect, as of the date hereof, should the undersigned fail, refuse or be unable to complete the said work in accordance with the terms of the contract covered by said bond, or in event of any default on the part of the undersigned under the said contract."

The application further stipulated that the contractor "does hereby assign, transfer and convey to said Company all the deferred payments, and retained percentages, and any and all moneys and properties that may be due and payable at the time of such breach or default, or that may thereafter become due and payable to said undersigned on account of said contract."

The building contract was not executed until February 8, 1928. Future earnings or profits under a contract not yet made have no potential existence, and any attempt to assign them is void. Johnson v. Amarillo Imp. Co., 88 Tex. 505, 31 S. W. 503; First Nat. Bank v. Campbell (Tex. Civ. App.) 193 S. W. 197; Campbell v. Grant, 36 Tex. Civ. App. 641, 82 S. W. 794. But, if we are mistaken in the conclusion that surety's assignment should be given the date of the application for the bond, which date the parties clearly intended to give to it by the preceding stipulations; and if instead it should be given the date of the bond or the contract which the bond secured, still it was merely a conditional assignment, conditioned upon some future breach of the contract by the contractor, and its effective date was postponed until the happening of the event which would make it absolute, and which event the bond specifically guaranteed would not happen. This left the contractor free to assign the contract price of the building and the lien securing same to any person he might see fit, and such assignment, whether legal or equitable, before the happening of the event which would make surety's assignment absolute, should be given priority, under the rule that it was in fact first created or executed.

In this connection, it is also settled law that the rule "first in time is first in right," as between successive assignees of a chose in action, does not apply to the debtor. He is not affected by the assignment until notified of it, and may, prior to notice of it, settle with the original creditor or his assignees, and cannot be made to pay more than the amount of his...