Riverview State Bank v. Wentz

• Decision Date: 23 July 1929
• Docket Number: No. 8111.,8111.
• Citation: 34 F.2d 419
• Parties: RIVERVIEW STATE BANK v. WENTZ et al.
• Court: U.S. Court of Appeals — Eighth Circuit

34 F.2d 419 (1929)

RIVERVIEW STATE BANK v. WENTZ et al.^*

No. 8111.

Circuit Court of Appeals, Eighth Circuit.

July 23, 1929.

John Embry, of Oklahoma City, Okl. (Charles E. Johnson and Raymond A. Tolbert, both of Oklahoma City, Okl., on the brief), for appellant.

Frank E. Lee, of Oklahoma City, Okl. (Rittenhouse, Lee, Webster & Rittenhouse, of Oklahoma City, Okl., on the brief), for appellees.

Before STONE, Circuit Judge, and FARIS and SYMES, District Judges.

FARIS, District Judge.

Plaintiff bank, herein appellant, as assignee of the Sam Ward Paving Company, a copartnership, sued the members of the Oklahoma highway commission, the United States Fidelity & Guaranty Company, R. L. Davis, and one Melone, as the administrator of Ward, deceased, and being cast below, has brought the case here for review.

The facts are few and fairly simple: The Sam Ward Paving Company, a partnership, composed of Sam Ward (now deceased) and defendant Davis, had a contract with the Oklahoma highway commission for the construction of certain public highways in Oklahoma. Under apposite state statutes, the Sam Ward Paving Company was required to make and execute, and did on the 4th day of April, 1925, make and execute, a bond to the state of Oklahoma, with the United States Fidelity & Guaranty Company as surety, conditioned that said obligors should "pay all indebtedness incurred for all labor and material furnished in the construction of the above described project," which project was definitely described in the contract. This contract was made and executed on the same day as was the above bond. Also on the same day the Sam Ward Paving Company executed another bond to the same obligee, with the same surety, which bond was conditioned for the completion of the work in accordance with the contract and specifications. The latter bond cuts a figure here which is incidental and a matter of argument only, since it is conceded that the United States Fidelity & Guaranty Company caused full completion of the work embraced in the contract, or at least such work was fully completed.

Under this contract, payment was made to the contractors, the Sam Ward Paving Company, upon monthly estimates, less perhaps 10 per cent. withheld pursuant to the contract. As a result of withholding such percentages, there remained in the hands of the Oklahoma highway commission, when the project was fully finished, the sum of $12,428.10. This sum is the money here in controversy. Upon the institution of this action, this money was tendered into court by the Oklahoma highway commission, which agreed to pay such money in accordance with such judgment as might be rendered by the court. At least so the agreed facts recite, though no such affirmative tender is printed in the record.

The claim of appellee United States Fidelity & Guaranty Company to this money is bottomed on assignments to it of certain claims of materialmen aggregating more than the sum in dispute. The claim of appellant, Riverview State Bank, is bottomed on certain notes made to it by the Sam Ward Paving Company, also aggregating more than the sum in dispute, which notes were secured by an assignment, dated April 17, 1925, whereby the Sam Ward Paving Company assigned to plaintiff bank the "proceeds from estimates to become due said contractor under the terms and provisions of said contract." This assignment also directed the Oklahoma state highway commission to issue all checks and vouchers to plaintiff bank. The Oklahoma highway commission acknowledged receipt of this assignment on the 21st day of April, 1925. The consideration, for the notes made by the Sam Ward Paving Company to plaintiff bank, was for moneys advanced or loaned by it to the paving company for use in the prosecution of the project, and such moneys were so used.

The sole question in controversy here is whether the equity of the surety, the United States Fidelity & Guaranty Company (hereinafter called simply the guaranty company), is or is not, upon the facts and the applicable law, superior to that of the Riverview State Bank, hereinafter called simply the bank. Many errors are assigned, but all of them resolve themselves, in the last analysis, into the above query. Stated still another way, Is the claim of the bank under the assignment to it superior in equity to the claim of the guaranty company, the surety on the materialmen's bond, and as assignee of such materialmen, whose claims it paid in an amount exceeding that here in dispute? The appellant bank contends that it is, and the appellee guaranty company, very naturally and as was to be expected, contends contra.

As forecast, apposite statutes of the state of Oklahoma require that a contractor, such as was the Ward Paving Company, shall execute two bonds; one to secure to the state the completion of the work in accordance with the contract, and the other to secure laborers and materialmen in the payment to them of money due for labor and materials used in doing the work. Section 12, State Highway Commission Act of March 14, 1924, S. L. of Okl. 1923-24, p. 51, c. 48; section 7486, C. O. S. 1921. Obviously, the state of Oklahoma is directly and financially interested in the bond first mentioned. But, while under the statute the state is named as obligee therein, it has no financial interest in the bond last mentioned. It merely requires such bond in order that the laborers and materialmen, having no enforceable lien against the work itself, may yet have protection and be enabled to collect the money due them for their labor and materials. Neither of the two statutes above cited, and which constitute the legal reasons for the making of these two bonds, deals with any question of subrogation, or with the comparative superiority of the equities existing between a lender of money used in the work and a materialman who furnished materials likewise used in the work. The claim of the bank is bottomed here wholly upon an assignment. The claim of the guaranty company is bottomed upon an assignment from certain materialmen, and also upon the well-known doctrine of subrogation. The existing diversity of opinion touching whether an actual assignment is a condition precedent to the invocation of the doctrine of subrogation need not therefore be considered, for upon either view the guaranty company is subrogated in both the ordinary and legal senses; that is, it is substituted for, or stands in the shoes of, the materialmen.

A few cases from states other than Oklahoma are called to our attention which hold, as appellant contends, that under similar statutes the bank has a superior equity. But we need not, we are of opinion, consider whether this is or is not a correct construction of the rulings cited. Obviously there is nothing contained in the local statutes above cited bearing upon the question of the comparative equities as between the bank here and the guaranty company. All that these statutes say that is relevant here is that the two bonds which were here made must be made. The question of comparative superiority of opposed equities is left to and is relegable to the general law.

The provision in the contract which permits, if the Oklahoma highway commission shall so elect, the holding of any balance due the contractor for the payment of labor and materialmen, clearly aids the bank here in no wise. All inferences to be deduced from this provision of the contract militate against the contention of the bank and not in its favor, since the Oklahoma highway commission has tendered the money in controversy into court to abide the judicial event. Lanstrum v. Zumwalt, 73 Mont. 502, 237 P. 205.

Absent a statute, and none has been called to our attention by the diligence of counsel, the decisive question before us is, we repeat, one of general law. The case of Henningsen v. United States Fidelity & Guaranty Co., 208 U. S. 404, 28 S. Ct. 389, 52 L. Ed. 547, seems to us to be decisive of this question of general law above propounded.

Upon the categorical question whether a surety, which pays the claims of materialmen, has a superior equity in money in the hands of the owner of the work, as against a bank which lends money and secures it by an assignment of the moneys to be earned in performing the contract, the Supreme Court of the United States said: "Whatever equity, if any, the bank had to the fund in question, arose solely by reason of the loans it made to Henningsen. Henningsen's surety was, upon elementary principles, entitled to...