New Amsterdam Casualty Company v. Wurtz
| Decision Date | 07 May 1920 |
| Docket Number | 21,718 |
| Citation | 177 N.W. 664,145 Minn. 438 |
| Parties | NEW AMSTERDAM CASUALTY COMPANY v. ADOLPH WURTZ AND OTHERS |
| Court | Minnesota Supreme Court |
Action in the district court for Hennepin county against Adolph Wurtz, Independent School District No. 1, Lincoln County First National Bank of Lake Benton, and the holders of claims of laborers and materialmen, that to the extent of $1,821.18 plaintiff be subrogated to the rights of claimants in the funds in the hands of defendant school district and defendant bank; that the bank be required to refund to School District No. 1 the sum of $4,735.22; that the court decree that the funds in possession of defendant school district and of defendant bank be declared a fund for the payment solely of the just claims for labor and material proven in the action that defendant claimants be required to present and prove their respective claims and when correctly ascertained the defendant school district be required to pay them to the extent of the funds in its possession; that such funds be used for no other purpose; that after the fund became exhausted the court should adjudge whether plaintiff was obligated under its bond to pay any deficit, and that Adolph Wurtz be adjudged to have no right to the funds. The case was tried before Clague, J., who made findings and ordered judgment in favor of plaintiffs for $3,235.53 against defendant school district, and in favor of defendant bank. From an order denying its motion to amend the findings and conclusions of law or for a new trial, New Amsterdam Casualty Company appealed. Affirmed.
Advances by bank to public building contractor -- right of surety to subrogation as against bank.
A contractor agreed to deposit in the defendant bank all the money he received for constructing a school building. The bank agreed to advance the money he might need to enable him to complete the building and to take his notes for the amounts advanced. Money so advanced, as well as money received on the contract, was to be used only to pay claims of laborers and materialmen. Pursuant to such agreement, the bank took the contractor's notes for $5,000 and an order on the school district for that amount and advanced $4,500 to pay claims for labor and materials. The contractor had given the bond required by section 8245, G.S. 1913, and plaintiff was surety thereon. He failed to pay claims of laborers and materialmen and also failed to pay his notes to the bank. The school district, having paid the bank's order, was adjudged liable to the surety only to the extent of the unpaid balance of the contract price, and the surety was required to pay the remaining claims of the laborers and materialmen. Held:
(1) That the right of the bank to retain the money received from the school district is superior to the right of the surety to be subrogated to the interest which laborers and materialmen had in the money retained by the school district until the contractor completed the building.
(2) Under the agreement between the bank and the contractor the former was not a volunteer in advancing money to the latter. National Surety Co. v. Berggren, 126 Minn. 188, distinguished.
(3) The school district was bound to make payment of the contract price in accordance with its contract and neglected no duty it owed the surety in honoring the bank's order, although the surety had theretofore notified it not to pay orders given by the contractor.
Henry Deutsch and John O. Loeffler, for appellant.
Morris Evans and Robinson & English, for respondents.
Appeal from an order denying a motion for a new trial, after a trial by the court without a jury and findings adverse to plaintiff.
On July 17, 1917, one Wurtz entered into a contract with defendant school district for the construction of a public school building at Lake Benton. The contract price was $52,381, 85 per cent of which was payable in installments upon estimates to be made by the supervising architect during the progress of the work, and 15 per cent of which was to be withheld until the building was completed and accepted. The contractor furnished the statutory bond required of public contractors, with the plaintiff as surety thereon. Wurtz completed the building, except in certain minor particulars not here material, and it was accepted August 10, 1918. There was then due him $7,970.75, which was the unpaid portion of the contract price.
On September 13, 1917, Wurtz and the defendant bank agreed that the former should deposit with the bank all money he received on the architect's estimates, and that, if it was insufficient to enable him to carry on the work, the bank should make advances to him, crediting the amount thereof to his account and taking his notes therefor. It was agreed that the money credited to this account should be drawn out only to pay for labor and material furnished for the construction of the school building. The agreement was performed by both parties.
On February 7, 1918, Wurtz had insufficient money to carry on the work. The bank took his notes for $5,000 and credited his account as agreed. At the same time it took from him an order on the school district for the payment of the amount of the notes and interest. When the building was accepted nothing had been paid on the notes. The sum of $4,500 had been advanced by the bank and paid out to laborers and materialmen in accordance with the original agreement. On October 24, 1918, the school district honored the order by paying $4,735.22 to the bank.
On July 10, 1917, Wurtz undertook, in writing, to indemnify plaintiff against any loss or expense it might incur as surety on his bond, and agreed that, if default occurred in the conditions of the bond, it should have the right to receive all reserve percentages which might become due under the contract secured by the bond.
When the school building was accepted, Wurtz owed large sums to laborers and materialmen, which he could not pay, and plaintiff is liable to them as surety on his bond.
These facts are embraced within the findings, which are not challenged on this appeal.
This action was brought against Wurtz, the school district, the bank and the holders of claims for labor and material. The prayer for relief was that the bank be required to refund $4,735.22 to plaintiff or to the school district, that the amount retained by the school district be applied upon the claims of laborers and materialmen, and that they be required to present and prove their claims against plaintiff.
The court gave judgment in favor of plaintiff and against the school district for $3,235.53 and interest, found in favor of the bank, and found the amount due to laborers and materialmen, and gave them judgment against plaintiff.
1. Plaintiff contests the right of the bank to retain the money it received from the school district, upon the theory that its liability for the payment of the claims of laborers and materialmen entitles it to be subrogated to their rights and that, by virtue of such subrogation, it is entitled to the money.
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