Mid-Continent Cas. Co. v. Jenkins
| Decision Date | 21 February 1967 |
| Docket Number | MID-CONTINENT,No. 40704,40704 |
| Citation | 1967 OK 54,431 P.2d 349 |
| Parties | CASUALTY COMPANY, Plaintiff in Error, v. F. A. JENKINS, d/b/a Zion Construction Company et al., Defendants in Error. |
| Court | Oklahoma Supreme Court |
Syllabus by the Court
Where a bank made a loan to a Church Corporation for payment of construction costs, under agreement that disbursements would be made only upon an architect's certificate of approval as to work completed, the reationship between the bank and the Church Corporation is contractual and the bank is obligated to honor the church's check when properly drawn and presented for payment where the church wants and expects such check to be honored and paid upon presentment.
Appeal from District Court, Tulsa County; W. Lee Johnson, Judge.
Action by surety to enjoin payment of certain funds, and to enforce equitable claim of subrogation rights under bond to funds held on deposit in one bank under special agreement with depositor. From adverse judgment, surety appeals. Affirmed.
Wheeler & Wheeler, Tulsa, for plaintiff in error.
Baker & Baker, Tulsa, for defendants in error.
This appeal evolved from an action by Mid-Continent Casualty Company herein called 'Surety', seeking a permanent injunction restraining the named defendants (Northside State Bank, F. A. Jenkins, d/b/a Zion Construction Company, First National Bank of Broken Arrow and Fellowship Baptist Church, Inc.) from issuing or paying to the Bank of Broken Arrow, hereafter the 'Bank', any check against funds of the church deposited in the Northside State Bank, referred to as 'Northside'. The following statement is sufficiently comprehensive to disclose the basis of the issue presented, thus no statement of the pleadings or chronological recitation of the various hearings and matters presented by different parties, in support of their respective positions, is attempted.
On July 6, 1961, the Church contracted with Jenkins for new construction on the existing church edifice, at a cost of $30,778.00. Among other provisions the contract required Jenkins to secure a performance and payment bond guaranteeing completion and payment of liabilities incurred during construction. Under the contract the Church was to make payments as different stages were completed, as shown by issuance of the architect's certificate. In order to finance construction Jenkins established financial arrangements with the Bank for advancement of funds necessary to meet payroll and material costs. Shortly after execution of the contract Jenkins began construction, and on July 19 assigned all his rights under the contract to the Bank
To finance construction the Church had secured a loan of $45,000.00 from Northside, part of which was utilized to discharge existing indebtedness. The loan was to be handled as a special fund from which cash transfers into the Church's account were authorized upon receipt of the architect's certificate of approval of the work completed. On September 6, 1961, the Church and Northside executed a supplemental agreement wherein the original loan agreement was ratified, and the Church assigned all rights under the performance bond to Northside. Work continued until September when the Church refused further payment, upon the architect's recommendation, until Jenkins secured the bond required under the contract.
On September 13, 1961, Jenkins applied to the Surety for issuance of a bond. Pursuant to the Surety's requirement for issuance of the bond, the Bank notified the Surety on September 20 that Jenkins had deposited $10,000.00 in a special account, payable to the Surety in event of default in the construction contract. The performance bond was issued effective September 21, 1961.
Construction continued and was substantially complete on November 29 when an architect's certificate of approval was issued, authorizing Northside to transfer $3,000.00 into the Church's account. The certificate was presented to the Church Treasurer and then delivered to Northside. The Church then issued its check for the amount, drawn on Northside and payable to Jenkins and the Bank, which Jenkins endorsed and delivered to the Bank as payment upon his...
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