In re Fowble

• Decision Date: 06 May 1914
• Citation: 213 F. 676
• Parties: In re FOWBLE.
• Court: U.S. District Court — District of Maryland

213 F. 676

In re FOWBLE.

United States District Court, D. Maryland.

May 6, 1914

John Milton Reifsnider, of Westminster, Md., for trustee.

F. Neal Parke, of Westminster, Md., for Springfield State Hospital.

Benjamin A. Stansbury, of Baltimore, Md., for Fidelity & Deposit Co.

German H. H. Emory and C. John Beeuwkes, both of Baltimore, Md., for lien claimants.

ROSE District Judge.

John H Fowble is a bankrupt. He was a builder. He will be so called. The state of Maryland owns and controls an insane asylum. Its official title is the Springfield State Hospital. It will be referred to as the hospital. The controversy is over a fund of $11,709.93. The builder put up two buildings for the hospital. The fund is the balance due upon the contract price. The Fidelity & Deposit Company went on the builder's bond. It will be called the surety. Certain persons who supplied materials for the buildings are unpaid. As a class they will be described as materialmen. Some of their number have filed mechanic's lien claims against the buildings. When special reference is made to those who have done so, they will be designated as lien claimants. For convenience the state commits the management of the hospital to a board. The latter is made up of the incumbents of certain state offices and of six other persons appointed by the Governor, subject to the confirmation by the Senate. They are declared to be a body corporate. In 1912 the General Assembly appropriated $175,000 for the erection of additional buildings for the hospital. The builder at an aggregate price of $83,220 was the successful bidder for two of these. The contract provided for the protection of the hospital against any liens for which it might become liable. The builder was, of course, required to give bond. He applied to the surety. He was not thought to be financially strong. The chairman of the hospital's building committee had had in his individual capacity a large and successful experience in building operations. The president of the surety asked him what the builder would make out of the contract. He said if the work were carefully and economically done he thought there would be a profit of $6,000 or $7,000. The president of the surety thereupon said his company would furnish the bond. He added that he would require the builder to deposit with the surety all checks received from the hospital on account of the contract. The builder was not present at this interview. Subsequently, out of the presence of any one connected with the hospital, the president of the surety had a talk with him. He was told that the bond would be given, provided he first agreed in writing that all payments received under the contract would be deposited with the Fidelity Trust Company, a trust company with whom the surety's relations were intimate, and that he would not use any of the money for payments on account of other contracts until this was completed and all material and labor men on it had been paid. He assented. The understanding was put in writing and signed by him. It provided that he should have the right to do what he chose with any balance of profit left. Thereafter the bond was executed. Among other things it provided:

'The surety shall not be liable under this bond to any one except the owner, but it is agreed that the owner, in estimating his damage, may include the claims of mechanics and materialmen arising out of the performance of the contract and paid by him only when the same by the statutes of the state where the contract is to be performed are valid liens against his property.'

The hospital was required to retain the last payment until the builder had finished the work in accordance with the contract and until all possibility of the properties being legally subject to any lien had passed. Before the last payment was made, the surety was to be notified in writing. No copy of the agreement between the builder and the surety was ever delivered to the hospital or as much as exhibited to any one acting for it. No formal or official action upon its part was ever requested. The surety never asked the hospital to make any payments directly to it, and none ever were so made. All parties recognized that the builder was the only person who had the right to receive or receipt for them. The surety availed itself of the good offices of the chairman of the hospital's building committee to obtain prompt information as to when such payments were likely to be made or when they had in fact been made. More it did not ask. The builder always deposited checks received with the Fidelity Trust Company. He could not withdraw the deposits so made upon his checks unless countersigned by one of the surety's employes.

No copy of the agreement between the builder and the surety appears ever to have been shown to any materialman. To one of them the employe of the surety, who countersigned the builder's checks and who endeavored to keep in touch with the condition of the builder's affairs, expressed the opinion on at least one occasion that there would be enough money for everybody. He was not authorized by the surety to assume any obligations on its behalf to any of the materialmen, and, in point of fact, he never did so, nor with a single exception did the surety ever in any way bind itself to any of them. The builder had ordered iron work from one of them. It had made up the iron as required. It then refused to make delivery unless the surety guaranteed its bill of $650. The guaranty was given. Since bankruptcy the surety has made it good. For repayment of this sum it here asks. On its own behalf and for its own benefit it makes no other claim.

On the 19th of October, 1913, the builder was upon his own petition adjudicated a bankrupt. At that time the work on both buildings was substantially completed. Only $300 worth of work remained to be done. By agreement among all the parties the hospital had undertaken to do this work, deducting the sum of $300 from what otherwise would have been due by it. Subsequent to the adjudication in bankruptcy, the lien claimants served notices of liens upon the hospital. They took such other steps as would have been sufficient under the state law to have perfected their liens had the property of the state been subject to liens. The other materialmen claimed that the agreement of the builder with the surety amounted to an equitable assignment of all sums due or to become due for the benefit of persons furnishing labor and material. The sum due by the hospital has been paid into the registry of the court. All parties have submitted themselves to its jurisdiction.

If the surety or any of the lien claimants or other materialmen have any claim which, subsequently to the adjudication in bankruptcy, they could have in any form of proceeding successfully asserted against the fund or the property of the hospital, it is to be here held good.

The Mechanic's Lien Claims.

The pretensions set up under the mechanic's lien law cannot be sustained. Lands or buildings belonging to the state are not subject to such liens. In Maryland, municipal property is not liable to be taken on execution. Darling v. Mayor &amp City Council of Baltimore, 51 Md. 1. ...