Lanstrum v. Zumwalt

• Decision Date: 09 June 1925
• Docket Number: 5690.
• Citation: 237 P. 205,73 Mont. 502
• Parties: LANSTRUM et al. v. ZUMWALT et al.
• Court: Montana Supreme Court

237 P. 205

73 Mont. 502

LANSTRUM et al. v. ZUMWALT et al.

No. 5690.

Supreme Court of Montana

June 9, 1925

Appeal from District Court, Lewis and Clark County; W. H. Poorman Judge.

Suit by George W. Lanstrum and others, as the State Highway Commission of Montana, against W. A. Zumwalt and another copartners doing business under the firm name and style of Zumwalt & Duckers, and the Fidelity & Deposit Company of Maryland and others. From the decree, defendant last named appeals. Reversed and remanded.

Day & Choate, Lester H. Loble and Hugh R. Adair, all of Helena, for appellant.

Stewart & Brown, of Helena, O'Hara & Madeen, of Hamilton, Edward Horsky, of Helena, and Harry H. Parsons, of Missoula, for respondents.

STARK J.

The plaintiffs constituted the state highway commission of Montana, which had general control over the construction of roads and the primary control over the fund known as the "state highway trust fund," and on November 17 1921, acting through their executive committee, entered into a contract with the defendants Zumwalt & Duckers for the construction of a road in Ravalli county, known as federal aid project No. 120A, which contract, in reference to payments to be made thereunder, contained the following provisions:

"(64) Scope of Payments. * * * No moneys payable under the contract or any part thereof, except the estimate for the first month or period, shall become due and payable, if the committee so elects, until the contractor shall satisfy the said committee that he has fully settled or paid for all materials and equipment used in or upon the work and labor done in connection therewith, and the committee, if it so elects, may pay any or all such bills, wholly or in part, and deduct the amount or amounts so paid from any monthly or final estimate, excepting the first estimate."

"(65) Partial Payments. The engineer shall make current estimates in writing on or before the 10th day of each month of the materials in place complete and the amount of work performed, * * * in accordance with the contract, during the preceding month, and the value thereof figured at the unit prices contracted. Of the total amount so ascertained, an amount equivalent to ten per centum (10%) of the whole will be retained by the committee until after the completion of the entire contract and the balance, or a sum equivalent to ninety per centum (90%) of the whole, will be certified by the committee to the state treasurer for payment. * * *"

To secure the faithful performance of this contract on their part, the defendants Zumwalt & Duckers furnished a bond to the state with the defendant Fidelity & Deposit Company of Maryland (hereafter referred to as the surety company) as surety, the conditions of which, so far as necessary to be considered on this appeal, were that if the defendants Zumwalt & Duckers "shall in all respects comply with the terms of the contract * * * and * * * their * * * obligations thereunder, * * * and shall well and truly, and in a manner satisfactory to the executive committee of the state highway commission, complete the work contracted for, and shall save harmless the state of Montana, from * * * any liability for payment of wages due or material furnished said contractor, and shall well and truly pay all and every person furnishing material or performing labor in and about the construction of said roadway, all and every sum or sums of money due him, them or any of them, for all such labor and materials for which the contractor is liable, * * * then this obligation to be void or otherwise to be and remain in full force and virtue."

After this contract was entered into, Zumwalt & Duckers arranged with the defendant First National Bank of Stevenville (hereafter referred to as the bank) to finance them in carrying out its terms, and as security for the funds to be advanced to them, on March 11, 1922, made a written assignment to the bank of all moneys due or to become due to them under the terms of said contract, which assignment was duly filed with, received, and accepted by the plaintiffs, under which assignment the plaintiffs caused to be paid to the bank, on eight separate occasions between March 23 and September 5, 1922, a total sum of $21,000. Zumwalt & Duckers having become insolvent, were unable to discharge all their obligations for labor and materials furnished under their contract upon its completion, and on July 19, 1923, there was available in the state highway trust fund the sum of $5,192.48, which was due and owing for work and labor performed and materials furnished under the contract, and each of the above-named defendants (except Zumwalt & Duckers) were claiming the right to receive all or portions of the same, the total claims being in excess of the amount available in said fund for distribution, and the plaintiffs, being unable to determine to whom the same should be paid, brought this action against all of the defendants, stating their willingness to deposit in court warrants of the state of Montana aggregating the total sum so held in the trust fund, payable in such amounts and to such of the defendants as the court might order, and asked that the defendants be required to appear, set forth and establish their several claims and rights to said fund, and that the same should be adjudicated. Of the amount so available in the trust fund, $2,700 represented the 10 per cent. retained by plaintiffs under the provisions of section 65 of the contract, and the remainder of $2,492.48 was the amount due on the contract as shown by the engineer's final estimate.

By appropriate pleadings, the defendants appeared and set forth their respective claims to the amount available for payment of claims against the defendants Zumwalt & Duckers in said trust fund. The defendant bank set up the assignment from Zumwalt & Duckers to it, that the same was duly filed with and accepted by the proper officers of the state, and that by virtue of advances made to, and for the benefit of Zumwalt & Duckers, there was then due to it the sum of $3,900, besides $295.05 interest on the same, and asked that it be awarded that amount out of said fund.

The defendant surety company asserted that by reason of the provisions of the contract and bond it was the duty of defendants Zumwalt & Duckers to pay all persons in full who had performed labor or furnished materials for use in construction of the highway mentioned in the contract; that Zumwalt & Duckers had not fully complied with their contract until they had paid such persons; that the plaintiffs had rightfully withheld the sum of money available in said trust fund, and that the defendants who had performed labor or furnished material were entitled to payment of their claims out of the money in the hands of the plaintiffs prior to the payment of any sum to the defendant bank upon its assignment and that no part of said fund was due to Zumwalt & Duckers or their assignee, the defendant bank, until the claims of those who had performed labor or furnished material had been fully paid; that the defendants Zumwalt & Duckers were insolvent, and, unless the money in said trust fund should be applied to the claims for labor and material, it would have no adequate remedy to compel the defendants Zumwalt & Duckers to pay the claims or to reimburse it as surety if it paid those for whose benefit the bond was given; that the bond did not inure to the benefit of the defendant bank, as assignee, and that it could not safely pay the claims of creditors for whose benefit the bond was given, without determination of the amount and extent of its liability, and asked that there be a determination of the amount of each of the claims for labor and material furnished to the defendant Zumwalt & Duckers under the contract, and that, if it should be adjudged to be liable therefor as surety, the plaintiffs be ordered to issue and deliver to the several claimants the amount of their claims before any amount was...