MacDonald v. Calumet Supply Co.
| Decision Date | 06 March 1939 |
| Docket Number | 27086. |
| Citation | 19 N.E.2d 567,215 Ind. 536 |
| Parties | MacDONALD v. CALUMET SUPPLY CO. et al. |
| Court | Indiana Supreme Court |
Appeal from Hancock Circuit Court; Arthur C. Van Duyn, Judge.
Arthur L. Gilliom, Howard P. Travis, and Pickens Gause, Gilliom & Pickens, all of Indianapolis, and Otto O. Fickeissen, of St. Louis, Mo., for appellant.
Hodges Ridgely & Davis, of Gary, Gavit, Hall, Smith & Gavit of Whiting, Bomberger, Peters & Morthland, of Hammond, and Frank Pattee, of Crown Point, for appellee.
In November, 1930, the General Construction Company contracted with the School City of Gary to furnish all of the material and labor for, and to construct, a school building, and furnished a per formance bond with the Southern Surety Company of New York as surety. In June, 1931, with the building approximately one-third completed, the contractor defaulted, leaving unpaid bills for material and labor. The school city notified the surety that it would look to it for completion of the contract. At the time of the default of the contractor, it was indebted to various subcontractors, materialmen, and laborers, in connection with the contract, in a sum exceeding the amount that had been withheld by the school city, which was under the contract 15 per cent. of the estimated amount of work done, and which amounted to $20,582. The surety paid sufficient of the claims of the creditors of the contractor to reduce their claims to $20,053, which sum remains unpaid. The school city still retains the sum of $20,582, which is the fund involved in this litigation.
The court below found that the surety fully completed the contract. For the purpose of carrying out its obligations to complete the work, the surety entered into a contract with the appellant to do all of the work and furnish all of the material necessary to complete the contract, and the appellant immediately entered upon his contract and completed the original contract for the surety. Afterward the surety became insolvent, and the Insurance Commissioner of the State of New York began liquidation proceedings. The appellee Oscar Smith was appointed Indiana receiver for the company by the Marion Superior Court. In the receivership proceeding the court made an order directing the receiver to allow the school city to make payments under the contract directly to the appellant as estimates were made by the architect, and, pursuant to the receiver's agreement, the school city thereafter made all payments to appellant, including the amount finally determined due under the contract, except only the sum of $20,582 above referred to, which is conceded to be due under the contract, but which is withheld under section 53-201, Burns' Ann.St.1933, section 14084, Baldwin's Ind.St.1934, for the benefit of subcontractors, materialmen, and laborers. The appellant paid for all labor and material furnished by him in the completion of the work. He had no contract with the school city. His contract was exclusively with the surety, and the school city paid the surety upon estimates until the surety, through its receiver, directed payments to be made to the appellant. After crediting to the surety all payments made to the appellant by the surety, and by the school city at the direction of the surety, the surety is still indebted to the appellant for labor and material which he furnished for the completion of the building in the sum of $9,377.03, and, it seems, in an additional sum with which we are not concerned.
When the building was completed there was a conference between the appellant and the representatives of the school city, at which the surety or its receiver was not represented, in which certain adjustments and deductions claimed by the city were agreed to, and the amount due the surety under the contract determined to the satisfaction of the school city. Of this amount the school city retained the sum of $20,582 above referred to, and paid to the appellant the balance amounting to $40,279.03, in two checks, one of $10,000 payable to the appellant, and one of $30,279.03 payable to the appellant and a representative of the school city, to be held in joint account for the purpose of insuring the payment of unpaid bills for labor and material contracted by the appellant. All of such obligations have been paid. The settlement under which the payments last referred to were made to appellant was made less than sixty days after the completion of the work. The appellant thereafter, and within the sixty days provided by statute, filed his claim for labor and material furnished for the completion of the contract with the school board. Some of those who furnished material or labor to the original contractor filed claims with the school board within sixty days after they had performed their last labor or furnished their last material to the contractor, as provided by section 53-201, Burns' Ann.St.1933, section 14084, Baldwin's Ind.St.1934, supra. Others did not file claims. The appellee Calumet Supply Company began this action to collect the amount of its claim out of the fund, and the remaining claimants intervened or were brought into the action. The appellant filed a cross-complaint against the plaintiff and all of the unpaid creditors of the contractor, asserting his right to have the balance of his claim against the surety for labor and material allowed against the fund. Some of the defendants to this cross-complaint, including those who had not filed their claims with the school board within sixty days, as provided by statute, were defaulted.
It was the contention of the claimants who were creditors of the original contractor that the appellant could not claim a lien or participate in the fund retained out of the estimates earned by the original contractor; that that fund belonged exclusively to those who had furnished labor, material, or services to the original contractor. It was also contended that, in the event the appellant had the right to participate in the funds, he had waived his right by accepting the final payment made by the school board in full payment of all claims against it.
There was a special finding of facts and conclusions of law thereon. The court found, among other things, that the appellant agreed with the school city that, in consideration of the checks that were given him, he would forego any claim that he might have had to the sum of $20,582, which had been withheld for the payment of claims. The court concluded the law to be that the claimants who were the creditors of the original contractor, including those who were defaulted and those who had not filed claims within the sixty days provided for by statute, were entitled to be paid out of the fund; and that after their payment in full the appellant was entitled to be paid any balance in the fund; and there was judgment accordingly. The appellant, by motion for a new trial, challenged the sufficiency of the evidence to sustain the finding above referred to, and assigns the overruling of his motion as error, and assigns error in the conclusions of law.
Whether the court's conclusion was based upon the contention that only the creditors of the original contractor were entitled to participate in the fund, or upon the finding that the appellant had waived his right to participate therein, is not disclosed by the record. It is therefore necessary to consider both questions.
The appellee claimants contend that in order for the appellant to claim as a subcontractor it will be necessary to give the surety the legal status of a contractor; that the surety cannot be classified as a contractor because it had no contract; that it merely elected to finish the work to minimize its own loss; that, since it did not at any time become the general contractor, persons employed by it could not become subcontractors; that the laws are not designed for the protection of paid sureties or persons employed by them to minimize their losses; that the only purpose of the Lien Acts is to protect persons who have furnished material to the general contractor, and not to protect persons who may have furnished materials to a paid surety.
The right to be paid out of the fund arises out of the statute. Section 53-201, Burns' Ann.St.1933, section 14084 Baldwin's Ind.St.1934, supra, provides that when any public building is being constructed under contract it shall be the duty of the public agency to withhold final payment to the contractor 'until such contractor has paid to the subcontractor or subcontractors, materialmen for material furnished, labor employed in such construction or those furnishing any service in relation to or in connection with such construction, erection, alteration or repair, all bills due and owing the same; Provided, That there is a sufficient sum owing to the contractor to pay all such bills, and if there is not a sufficient sum owing to such contractor on such contract to pay all such bills, then the sum owing on such contract shall be prorated in payment of all such bills among the parties entitled thereto,' provided that claimants shall file a claim within...
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