Maryland Casualty Co. v. Dulaney Lumber Co.
| Citation | 23 F.2d 378 |
| Decision Date | 14 January 1928 |
| Docket Number | No. 4980.,4980. |
| Parties | MARYLAND CASUALTY CO. v. DULANEY LUMBER CO. et al. BANK OF RULEVILLE v. MARYLAND CASUALTY CO. |
| Court | United States Courts of Appeals. United States Court of Appeals (5th Circuit) |
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Wm. H. Watkins, of Jackson, Miss. (Geo. F. Cushwa, of Baltimore, Md., and Watkins, Watkins & Eager, of Jackson, Miss., on the brief), for Maryland Casualty Co.
J. Ed. Franklin, of Ruleville, Miss., J. W. Cutrer and Edward W. Smith, both of Clarksville, Miss., and Percy Bell, of Greenville, Miss., for Dulaney Lumber Co., Pidgeon-Thomas Iron Co., Gulf Refining Co., and Bank of Ruleville.
Before WALKER, BRYAN, and FOSTER, Circuit Judges.
BRYAN, Circuit Judge (after stating the facts as above).
The bank appeals, and insists that its equity is superior to that of the surety. The surety appeals from the decree in favor of the Dulaney Lumber Company, which it contends should be reduced by the amount the contractor received upon sales of the empty cement sacks in question. The surety also appeals from the decree in so far as it was in favor of the Gulf Refining Company and the Pidgeon-Thomas Iron Company, but it is made to appear that their claims have been settled, and therefore the appeal as to them is dismissed.
The bank's appeal will be considered first. The surety stood in contractual relation to the construction of the highway. The law required the contractor to give bond with surety to insure both the completion of the work and the payment of valid claims for labor and material. The bond thus became an essential part of the contract. The law also required the highway department to retain 15 per cent. of the contract price until the highway was completed. Notice, therefore, was imputed to the bank of the fact that there was a surety, and of its rights and obligations under the contract. Derby v. United States Fidelity & Guaranty Co., 87 Or. 34, 169 P. 500. The rights of the surety related back to the date of the bond. Labbe v. Bernard, 196 Mass. 551, 82 N. E. 688, 14 L. R. A. (N. S.) 457. Where performance of the contract results in a loss, it is the settled general rule in the federal courts that the right of a surety under its bond to the retained percentage is superior to the right of a bank, which advances money under an assignment from the contractor taken subsequently, or without notice to the surety. Prairie State Nat. Bank v. United States, 164 U. S. 227, 17 S. Ct. 142, 41 L. Ed. 412; Henningsen v. U. S. Fidelity & Guaranty Co., 208 U. S. 404, 28 S. Ct. 389, 52 L. Ed. 547. That rule has recently been approved in Mississippi. Canton Exchange Bank v. Yazoo County, 144 Miss. 579, 109 So. 1.
We are of opinion, also, that the bank is not entitled to recover of the surety the amount of the current estimate paid to the contractor, and applied by him and the surety in discharge of bills for labor and...
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