Kimmel v. State ex rel. Anderson Banking Co.

• Decision Date: 18 November 1920
• Docket Number: No. 10535.,10535.
• Citation: 128 N.E. 708,75 Ind.App. 168
• Parties: KIMMEL et al. v. STATE ex rel. ANDERSON BANKING CO.
• Court: Indiana Appellate Court

75 Ind.App. 168

128 N.E. 708

KIMMEL et al.

v.STATE ex rel. ANDERSON BANKING CO.

No. 10535.

Appellate Court of Indiana, Division No. 2.

Nov. 18, 1920.

Appeal from Circuit Court, Madison County; H. J. Paulus, Special Judge.

Action by the State, on the relation of the Anderson Banking Company, against David J. Kimmel and others. From a judgment for the relator, defendants appeal. Affirmed.

Ira M. Sharp, of Lebanan, and Bagot & Free, of Anderson, for appellants.

Walter Vermillion and Kittinger & Diven, all of Anderson, for appellee.

McMAHAN, C. J.

Action by the state of Indiana, on relation of the Anderson Banking Company, hereinafter designated as appellee, to recover on a contractor's bond signed by appellant Kimmel as surety. The facts were found specially, and are in substance as follows:

Jacob A. Jenkins, Frank H. Hines, and Daniel J. Dalton, as partners, in 1909 entered into contracts with the board of commissioners of Madison county for the construction of two gravel roads, under what is known as the “Three-Mile Road Law.” They filed a bond with the appellant David J. Kimmel as surety, conditioned, among other things, that if the contract was awarded them they would “pay all debts incurred by them in the prosecution of said work, including labor, materials furnished, and for boarding the laborers thereon.” In December, 1910, said firm borrowed $3,000 of the appellee, and as security therefor assigned the said contracts, and the estimates and allowances as made by the proper official on work, to said bank. This loan was repaid. In March, 1910, Jacob A. Jenkins and Frank J. Hines were adjudged bankrupts and discharged as such. The parties interested in said contract thereafter, upon consultation, agreed that Daniel J. Dalton should complete the work under said contract and borrow whatever money was necessary for that purpose. Dalton thereupon completed the work under said contract and said roads were accepted by the board of commissioners. In order to buy material and pay the labor necessary to complete said roads, it was necessary for Dalton to negotiate certain loans of money, and he entered into an agreement with appellee whereby it was agreed that appellee would advance or loan the money necessary to buy materials and pay the necessary labor, the appellant to draw his checks upon relator for that purpose, and that Dalton would execute his notes, with Alex Jones as surety, in addition to the security of the said bond, which appellant had signed. Appellee placed to the credit of Dalton $300 July 14, 1911, $800 August 4, 1911, and $1,000 August 11, 1911, all of which was checked out for necessary materials and labor. At the time when said several sums were placed to the credit of Dalton, he and Jones executed their notes to appellee; the first two being payable 60 days, and the last 30 days, from date. Said notes were given as additional security for said money so loaned, and at the time when they were given it was not possible to complete said contracts and have estimates made and payments made thereon until long after the maturity of said notes, which facts were well known to all the parties. When the contracts were completed and the roads accepted, materialmen had filed claims for materials, which claims were ordered paid out of the final estimate due the contractors. When these claims were so paid, there was a balance of $324.25 due the contractors on the final estimate, which was then paid to appellee on the sums so advanced by it.

Appellee later commenced suit against Dalton and Jones on said notes, and recovered a judgment thereon, which is unpaid, although Jones is solvent, and has property out of which the same may be satisfied. Dalton is insolvent, and has no property subject to execution. Appellant Kimmel knew of the condition of said work when Jenkins and Hines were discharged as bankrupts, and knew that Dalton was alone undertaking to complete said work, and that it would require money to buy material and pay the labor, and left it to him to complete the work and to devise ways and means therefor. Appellant was an accommodation surety on said bond, without hire and without being indemnified, which facts appellee knew. Appellee continued to hold said contracts and assignment of estimates as security for said money so advanced, and relied upon them as security therefor, and took said notes merely as evidence of the money so advanced, and as additional security. Each of said notes were payable in a bank in this state and were governed by the law merchant. Appellee, at the time it advanced the money to Dalton, and when the notes were executed, refused to advance such money upon the sole security of the assignment of the contracts, and as a part of the transaction of executing said notes it was agreed that appellee should continue to hold said assignments as collateral security therefor. Appellee at all times held said assignments, and it was agreed between appellee and Dalton that appellee should hold and rely upon said assignments as security for all money it might advance for the completion of said contracts, and that the notes were to be taken by the relator merely as evidence of the money advanced and as security, in addition to that afforded by the assignments of said contracts. Before the commencement of this action appellee released different tracts of land owned by Jones from the lien of said judgment, without appellant's knowledge or consent. None of the materialmen or laborers so paid out of the moneys loaned and advanced by relator made any assignment of their claims to relator.

Upon these facts the court concluded as a matter of law that there was due appellee $2,306.57, and that it was entitled to a judgment against the principals and surety on said bond for that sum. Appellant insists that the court erred in its conclusions for the following reasons:

(1) That appellee elected to accept the notes of Dalton and Jones in discharge of the indebtedness for which this action is prosecuted, and therefore waived any claim against appellant.

(2) That the taking judgment on the notes against a solvent surety is an election on the part of appellee to accept such judgment as a settlement of, instead of security for, the liability for which the notes were given.

(3) The notes being payable in bank, the right of appellee to recover from Dalton was merged in the notes and judgment, and could only...