Randall v. Colby

• Decision Date: 10 January 1961
• Docket Number: Civ. No. 741.
• Citation: 190 F. Supp. 319
• Parties: Whitney C. RANDALL, Plaintiff, v. Eli F. COLBY and John Eli Colby, d/b/a Eli Colby Company; Iowa Builders, Inc.; United Home Bank & Trust Company; and Standard Glass & Paint Co., Defendants. Eli F. COLBY and John Eli Colby, d/b/a Eli Colby Company, Cross-Petitioners. v. UNITED HOME BANK & TRUST COMPANY; Standard Glass & Paint Co.; Whitney C. Randall; and the United States of America, Defendants to Cross-Petition.
• Court: U.S. District Court — Northern District of Iowa

190 F. Supp. 319

Whitney C. RANDALL, Plaintiff, v. Eli F. COLBY and John Eli Colby, d/b/a Eli Colby Company; Iowa Builders, Inc.; United Home Bank & Trust Company; and Standard Glass & Paint Co., Defendants.

Eli F. COLBY and John Eli Colby, d/b/a Eli Colby Company, Cross-Petitioners. v. UNITED HOME BANK & TRUST COMPANY; Standard Glass & Paint Co.; Whitney C. Randall; and the United States of America, Defendants to Cross-Petition.

Civ. No. 741.

United States District Court N. D. Iowa, Central Division.

January 10, 1961.

COPYRIGHT MATERIAL OMITTED

Floyd E. Ensign, Northwood, Iowa, for Whitney C. Randall, plaintiff and cross-defendant.

Dennis G. Drugswall, Lake Mills, Iowa, and Alan Loth, Fort Dodge, Iowa, for Eli F. Colby and John Eli Colby, defendants and cross-petitioners.

William B. Danforth (of Levinson & Danforth), Mason City, Iowa, for United Home Bank & Trust Co., defendant and cross-defendant.

F. E. Van Alstine, U. S. Dist. Atty., and Philip C. Lovrien and William R. Crary, Asst. U. S. Dist. Attys., Sioux City, Iowa, for United States, cross-defendant.

David J. Butler, Mason City, Iowa, for Standard Glass & Paint Co., defendant and cross-defendant.

GRAVEN, District Judge.

In the present case a partnership which was the owner of a tract of land entered into a contract with a building contractor, a corporation, to construct a warehouse thereon. The building contractor subsequently made an assignment to a bank of the sum due it under the contract as security for a loan. The building contractor failed to pay two subcontractors who had furnished material used in the construction of the warehouse and they filed mechanic's liens against the property of the owner. The building contractor was in default in the payment of taxes owing to the United States and two tax liens resulted. The action involves several controversies which will be later referred to.

Eli F. Colby and John Eli Colby are copartners doing business under the firm name of Eli Colby Company. The office of the partnership is in Worth County, Iowa. The partnership will hereinafter be referred to as the Owner. The partnership had purchased a tract of land in Winnebago County, Iowa, from the Chicago and Northwestern Railroad Company. The Iowa Builders, Inc., is an Iowa corporation with its principal place of business at Mason City, Cerro Gordo County, Iowa. It was engaged in the business of constructing buildings. It will hereinafter be referred to as the Contractor. On June 29, 1955, the Owner and the Contractor entered into a written contract under which the Contractor agreed to furnish all the materials and labor necessary to construct a steel warehouse on the tract of land referred to. The specified contract price was $13,400. The contract provided for the payment of $3,000 upon the execution of the contract; the sum of $2,400 when the concrete work was done and steel was on the site; $7,000 from the First National Bank as soon as the Chicago and Northwestern Railroad Company furnished complete title to the Owner to the tract upon which the building was to be completed and $1,000 upon completion of the building. The contract specified that the Contractor was to complete the building in accord with the specifications and in complete conformance with good building practices, and that the work should be done in a workmanlike manner.

The contract specified that the Contractor was to complete the building not later than August 8, 1955. The Contractor commenced construction of the building promptly following the execution of the contract. On August 4, 1955, the Owner and the Contractor entered into another written contract for extra work and materials to be furnished by the Contractor in connection with the construction of the building. The amount specified to be paid for such extra work and materials was $446.76. The Owner paid the Contractor the $3,000 due on the execution of the contract and the $2,400 due when the concrete work was done and steel was on the site. On November 4, 1955, the Owner paid to the Iowa Steel Erectors, Inc., the sum of $1,446.76 for materials furnished in connection with the building. All of the parties are agreed that the Owner is entitled to credit for that amount on the contract price. The Owner has made no payments upon the contract price other than the sums of $3,000, $2,400 and $1,446.76 just referred to. The two contracts referred to will hereinafter be referred to as the Construction Contract. The Contractor furnished the last of the work and materials for the building on October 12, 1955. It is the claim of the Contractor that it had completed the building in accordance with its contract on that date. It is the claim of the Owner that the Contractor never did complete the building in accordance with its contract. The Owner asserted and in this action asserts a claim for unliquidated damages to be set off against the contract price for breaches of contract on the part of the Contractor.

On or about July 1, 1955, the Contractor entered into an oral contract with Whitney C. Randall, hereinafter referred to as Randall, under which Randall was to furnish materials to be used in constructing the building. Randall furnished the first of the materials on July 11, 1955. He furnished the last item of material on August 24, 1955. There is undisputedly owing Randall for the materials so furnished the sum of $3,233.64 with interest at five per cent from August 24, 1955, no part of which has been paid.

On August 15, 1955, the Commissioner of Internal Revenue duly assessed federal withholding and federal insurance contribution taxes for the second quarter of 1955 against the Contractor in the principal sum of $9,231.13. On August 16, 1955, notice of that assessment and demand for the payment was served upon the Contractor.

On September 19, 1955, the Contractor secured a loan of $3,000 from the United Home Bank & Trust Company of Mason City, Iowa, evidenced by a promissory note. The Contractor on the same date executed and delivered to that Bank a written assignment of the monies due it under the construction contract with the Owner. The United Home Bank & Trust Company will hereinafter be referred to as the Bank. On September 26, 1955, the Bank served notice of its assignment upon the Owner. There is undisputedly owing to the Bank on that loan the sum of $3,000 with interest at six per cent from September 19, 1955.

On or about September 6, 1955, the Contractor entered into an oral contract with the Standard Glass & Paint Company for the furnishing of certain materials to be used in connection with the building. The first of those materials was furnished on September 6, 1955, and the last of them on September 24, 1955. The Standard Glass & Paint Company will hereinafter be referred to as Standard. There is undisputedly due Standard for the materials so furnished the sum of $69.41, with interest at the rate of five per cent from September 24, 1955, no part of which has been paid.

On November 8, 1955, the United States filed notice of its tax lien in the office of the County Recorder of Cerro Gordo County, Iowa, for the federal taxes due from the Contractor for the second quarter of 1955 which had been assessed by the Commissioner of Internal Revenue on August 15, 1955. On November 15, 1955, the Commissioner of Internal Revenue assessed federal withholding and federal insurance contributions taxes against the Contractor for the third quarter of 1955 in the principal sum of $9,302.56. On November 13, 1955, the Government served notice of levy upon the Owner for the tax assessments against the Contractor for both the second and third quarters of 1955. On November 15, 1955, notice of the assessment of the assessments against it for the third quarter of 1955 was served upon the Contractor. On January 12, 1956, the Government filed notice of its tax lien for the federal taxes of the Contractor for the third quarter of 1955 in the office of the County Recorder of Cerro Gordo County, Iowa. It will hereinafter appear that the amount claimed by the Government on its first tax lien is in excess of any possible amount it may recover herein. Therefore, only that lien will be hereinafter referred to, and it will be referred to as the Government's tax lien.

On November 29, 1955, Randall filed a mechanic's lien against the property of the Owner in the office of the Clerk of Court of Winnebago County, Iowa, in the principal sum of $3,233.64. On the same day he gave the Owner written notice of the filing of the lien. On December 16, 1955, Standard filed a mechanic's lien against the property of the Owner in the office of the Clerk of Court of Winnebago County, Iowa, in the principal sum of $69.41. On December 30, 1955, Standard gave the Owner written notice of the filing of the lien.

On November 29, 1955, Randall commenced an action in the District Court of Iowa in and for Winnebago County for the foreclosure of his mechanic's lien. The original defendants to that action were the Owner, the Contractor, the Bank, and Standard. By cross-petition (complaint) the United States became a party to the action. Upon being made a party, the United States removed the action to this Court. The United States will hereinafter be referred to as the Government.

On December 3, 1955, the Contractor filed a mechanic's lien against the property of the Owner in the office of the Clerk of Court of Winnebago County, Iowa, in the principal sum of $7,098.08. On December 6, 1955, the Contractor executed an assignment of that lien to the Bank. That assignment was filed for record in the office of that Clerk on December 8, 1955.

There is a controversy between the Government, the Bank and the mechanic's lienholders as to their rights in and to the balance alleged to be due on the contract price from the Owner. There is related to that controversy a controversy as to the claimed breaches of contract on the part of the Contractor and damages for such...