Southern Sur. Co. v. Mobile Nat. Bank

• Citation: 223 Ala. 463,137 So. 297
• Decision Date: 15 October 1931
• Docket Number: 1 Div. 659.
• Parties: SOUTHERN SURETY CO. v. MOBILE NAT. BANK.
• Court: Supreme Court of Alabama

137 So. 297

223 Ala. 463

SOUTHERN SURETY CO. v. MOBILE NAT. BANK.

1 Div. 659.

Supreme Court of Alabama

October 15, 1931

Appeal from Circuit Court, Mobile County; Joel W. Goldsby, Judge.

Action on contractor's bond by the Mobile National Bank against the Southern Surety Company. From a judgment for plaintiff defendant appeals.

Affirmed.

Lyons Chamberlain & Courtney, of Mobile, for appellant.

Harry T. Smith & Caffey, of Mobile, for appellee.

THOMAS J.

The suit was by the assignor of a claim and upon the bond of a contractor of highway construction.

The equitable nature of such a suit by the assignor of contractors and those who furnished labor and material for road construction on state contracts was the subject of decision in United States F. & G. Co. v. Benson Hardware Co., 222 Ala. 429, 132 So. 622; United States F. &amp G. Co. v. Andalusia Mfg. Co., 222 Ala. 637, 134 So. 18; Sherrill Oil Co. v. Taylor (Ala. Sup.) 137 So. 295; Sherrill Oil Co. v. Taylor (Ala. Sup.) 137 So. 296. So, also, claims of interveners for work and labor done and material furnished in such construction, and duly assigned were likewise considered and sustained in the foregoing cases.

A general statement of the case under the pleading is as follows:

Ziliak-Schafer Milling Company filed the original suit against appellant, Southern Surety Company, as surety on the bond of Gillis Construction Company, the original contractor, for the construction of Project No. 6 in said county; the appellee Mobile National Bank intervened in said suit and propounded its claim against said surety, for $3,252.55, under an assignment from one Malone, a subcontractor, of the amount due him as such subcontractor for labor, materials, supplies, etc., furnished by him as such subcontractor in the construction of said Project No. 6.

No plea of payment, or of discharge by novation or accord and satisfaction, was filed by appellant. The court thus stated the issues and findings of fact in the judgment entry: "This cause coming on to be heard on June 18th, 1930, on the original complaint and the several intervening claims as shown by the record, all the parties in open Court waived trial by jury and consented to the trial by the undersigned Judge. The Court thereupon proceeded to hear the cause on the testimony taken in open court, and at the conclusion thereof took the same under consideration, and after a careful consideration of all the testimony, it is now considered, ordered, adjudged and decreed by the Court that the Southern Surety Company, defendant in this cause, became surety on the bond of Gillis Construction Company, given to the County of Mobile to guarantee the faithful performance of the contract between the County and the Gillis Construction Company for the grading and drainage work in and about the construction of the public highway in Mobile County between Theodore and Fowl River, and sometimes called the Delchamps Road, being County Improvement No. 6, and that the penal sum of the said bond is greater than the total of all claims filed in this cause against the Defendant; and that the Plaintiff and the Claimants in whose favor judgments are hereinafter awarded supplied labor, material, feedstuffs, or supplies in the execution of the work provided for in such contract, and that Plaintiff and the said Claimants, respectively, are entitled to recover of the Southern Surety Company, defendant in this cause, the amounts respectively hereinafter set opposite their respective names, being the balances due them, respectively, for the labor, material, feedstuffs and supplies so furnished, viz.:"

Then followed the specific amounts due each of the parties named, including the Mobile National Bank, or assignee of L. W. Malone, $2,381.90.

The evidence shows without dispute that Malone originally subcontracted (under Gillis Construction Company) a portion of the construction of that project; that he had completed about 65 per cent. of the work required to be done under his subcontract, when the original contractors became involved and were unable to pay him for his work as they had agreed to do. At this time Malone owed the Mobile National Bank $1,200, which he had borrowed from that bank to finance his operations under said subcontract. The original contractors then owed Malone, the subcontractor, $1,314.85, which they were unable to pay him. Under these conditions the original contractors and the subcontractor went to the president of the Mobile National Bank with a plan for financing the completion of the entire uncompleted portion of the contract for that road construction; it was agreed to borrow from the bank, $3,500 on the note of Gillis Construction Company, the original contractor, indorsed by Malone, the subcontractor, and secured by a mortgage on Malone's construction equipment. At the time Gillis Construction Company owed the Merchants' Bank $810.12, which was secured by an assignment of Gillis Construction Company's estimates on that construction project. Malone did not owe any part of this $810.12, and was not concerned with its payment except as a step in the plan indicated and for refinancing the completion of the project. It was estimated that it would take $2,300 in addition to the $1,200 already due the Mobile National Bank to pay off the claim of the Merchants' Bank and to refinance the completion of the work. The Mobile National Bank then agreed to loan $3,500 on Gillis Construction Company's note, provided it was indorsed by Malone and secured by a mortgage on Malone's equipment, and the further agreement that Malone, as subcontractor, would complete the work (1) that remained to be done by said original contractors, as well as (2) the remainder of the work Malone had originally subcontracted. It was further agreed between these parties that $1,200 (of this $3,500 secured by the loan) should be used to take up Malone's past]due note to the bank; that $810.12 should be paid the Merchants' Bank in discharge of Gillis Construction Company's obligation to it, and to secure a release of Gillis Construction Company's assignment of estimates to the Merchants' Bank, and that the balance of the proceeds of the $3,500 be turned over to Malone, with which he was to finance and effectuate the completion of that road building project.

Pursuant to the agreement the $3,500 note was signed by Gillis Construction Company, indorsed by Malone, and in addition the latter executed a mortgage on his construction equipment to secure this note which he had so indorsed. The $3,500 thus secured was credited on the books of the Mobile National Bank, to Gillis Construction Company, and a check was drawn to the Merchants' Bank for $810.12 to pay Gillis Construction Company's debt to that Bank. On the same day, three checks were issued by Gillis Construction Company to Malone on the balance of the deposit so raised on the joint credit of Gillis Construction Company and Malone and on the security of their equipment, viz., one for $1,789.88, one for $500, and one for $400, totaling the entire balance of $2,689.88. Out of the moneys so placed in the hands of Malone, he gave his check to that bank to take up his $1,200 note. The balance of the money so borrowed by Gillis Construction Company on his indorsement and secured by his property (as we have stated) was to be used and was used in financing the completion of that construction project. That balance not being sufficient to that end, Malone borrowed $650 on his credit alone in order to complete the contract.

The Mobile National Bank was to receive and apply on this note for $3,500, all of the moneys earned under the contract and the subcontract (by Gillis Construction Company or by Malone), and it was contemplated that the earnings would be sufficient to pay the note. This was not the fact; the bank collected from the county only $676.67, leaving Gillis Construction Company and Malone owing it (on the note) the sum of $2,823.33 with interest, and Malone owing on his own account the $650 later borrowed and with interest accruing thereon.

It was undisputed by the evidence that Malone earned (as subcontractor for Gillis Construction Company on Project No. 6) the total of $4,265.89, and was paid $1,019.83, so that there was an admitted indebtedness to him as subcontractor for this project, for labor, material, and supplies furnished, the balance or difference of $3,246; unless the same was paid or discharged in whole or in part by virtue of the transaction above outlined. This is the question for decision.

In addition to the fact that under the law Malone remained liable to repay the moneys that came into his hands including the $1,200 that was paid to the bank, there was the further obligation to repay $810.12 that was used to pay Gillis Construction Company's debt to the Merchants' Bank, and Malone had mortgaged his property to secure the repayment to the bank of the full sum of money borrowed. The testimony shows there was no arrangement, agreement, or intent to discharge the indebtedness of Gillis Construction Company to Malone for money already earned under the subcontract, nor for the money to be earned in the future under his subcontract as then modified; that Malone never credited Gillis...