Southern Surety Co. of New York v. First State Bank

• Decision Date: 27 October 1932
• Docket Number: No. 1254.,1254.
• Parties: SOUTHERN SURETY CO. OF NEW YORK v. FIRST STATE BANK OF MARQUEZ et al.
• Court: Texas Court of Appeals

Page 888

54 S.W.2d 888

SOUTHERN SURETY CO. OF NEW YORK v. FIRST STATE BANK OF MARQUEZ et al.

No. 1254.

Court of Civil Appeals of Texas. Waco.

October 27, 1932.

Rehearing Denied December 8, 1932.

Appeal from District Court, Leon County; S. W. Dean, Judge.

Suit by the First State Bank of Marquez against the Southern Surety Company of New York and others. Judgment for plaintiff, and defendant named appeals.

Affirmed.

John T. Suggs, Jr., and E. E. Hurt, both of Dallas, for appellant.

J. E. & B. L. Bradley and Mr. & Mrs. C. S. Bradley, all of Groesbeck, for appellees.

ALEXANDER, J.

This suit was brought by the First State Bank of Marquez against B. F. Brooks Construction Company, Southern Surety Company, H. G. Lanier, and others in the district court of Leon county to recover on a release bond for certain funds claimed to be due by the state highway department to the Brooks Construction Company for the construction of a road in Leon county. In December, 1928, Brooks Construction Company entered into a contract with the state highway department for the construction of a part of state highway No. 2, known as job 145b in Leon county. Brooks Construction Company sublet a part of the work to H. G. Lanier. It was alleged that during the course of the work, Lanier entered into a contract with the First State Bank of Marquez by the terms of which the bank agreed to and did make advancements to Lanier from time to time by paying the material and labor bills incurred by Lanier in such work, and Lanier agreed to and did orally assign to the bank as security for the funds so advanced, all funds coming to him from Brooks Construction Company and the state highway department for the performance of his contract, together with all rights and liens to which he might be entitled under his contract with Brooks Construction Company. Lanier failed to repay the funds so advanced by the bank and in consequence the bank filed its claim in writing with the state highway department and requested that department to withhold the amount due and unpaid to Brooks Construction Company on its contract, as provided in Vernon's Ann. Civ. St., art. 5472a. The state highway department accepted the claim and withheld from Brooks Construction Company the sum of $2,122.65. Brooks Construction Company, in compliance with the provisions of Acts 1929, 41st Leg., 2d Called Sess., p. 154, c. 78 (Vernon's Ann. Civ. St. art. 5472b—1), executed and delivered to the state highway department a release bond with Southern Surety Company as surety, and the funds then due Brooks Construction Company were released. This suit was by the bank against Lanier for its debt and against Brooks Construction Company and Southern Surety Company on the release bond. The bank claimed a lien on so much of the funds due by the state highway department to Brooks Construction Company as would be sufficient to pay the balance due by Brooks Construction Company to Lanier on his contract.

The case was before this court on a former occasion and was reversed as to the Brooks Construction Company and the Southern Surety Company because there was no evidence of an agreement between Lanier and the bank that the bank should be subrogated to his rights and liens. See Brooks Construction Company v. First State Bank of Marquez (Tex. Civ. App.) 39 S.W.(2d) 83. The second trial was had before the court without a jury and resulted in judgment in favor of the bank against Brooks Construction Company and Southern Surety Company on the release bond for the sum of $1,659.12. Southern Surety Company alone appealed.

The evidence shows that Lanier agreed with the bank that, if it would advance the money and pay the bills incurred by him for labor and material for the construction of the road in question, the bank should be subrogated to all the rights and liens to which he was entitled, and for this purpose he assigned to the bank all his rights and liens in the premises. In keeping with this agreement, the bank paid the bills of the laborers and materialmen and took Lanier's notes for the amounts so expended by it. At the same time Lanier wrote Brooks Construction Company a letter requesting that all checks coming to him for work on the job be delivered directly to the bank. This the Brooks Construction Company agreed to do and payments were by it so made to the bank up to and including the sixth estimate. Thereafter in November, 1929, the Brooks Construction Company ceased to make payment to the bank and Lanier was unable to make further payments. The bank immediately presented its claim in writing to the state highway department for the sum of $2,334.91 and requested that department to withhold the amount due and unpaid to Brooks Construction Company on its contract. The state highway department accepted the claim for the sum of $2,122.65 and withheld from Brooks Construction Company said amount. Brooks Construction Company secured a release of the funds by executing a release bond, as provided by the statute. At the time notice was served on the state highway department, Brooks Construction Company was indebted to Lanier on the job in question in the sum of $1,659.12.

Since Lanier, through the bank, had paid for and furnished the labor and material for the construction of the road, he was entitled to fix a lien on so much of the funds in the hands of the state highway department and owing to Brooks Construction Company as was necessary to pay the amount due him by the Brooks Construction Company. He could have fixed his lien on such funds by filing written notice thereof with the state highway department. Texas Company v. Schriewer (Tex. Civ. App.) 38 S.W.(2d) 141. If he had so perfected his lien he could have assigned same, together with his debt, to the bank and the bank could have enforced same. The evidence shows, however, that neither the materialmen nor laborers, whose claims were paid by the bank, nor Lanier ever undertook to perfect their liens on the funds owing by the state highway department for the construction of the road in question either by filing same with the county clerk, as provided in Revised Statutes, art. 5160, as amended in 1929 (Vernon's Ann. Civ. St. art. 5160), or by filing same with the highway department, as provided in Vernon's Ann. Civ. St. art. 5472a. The bank, after it had purchased Lanier's right, undertook to perfect the lien by filing claim with the highway department.

Appellant's proposition is that the assignment of a laborer's or materialman's claim prior to the perfection of the lien, by compliance with the terms of the statute creating it, confers upon the assignee no right to have or perfect the lien to which the assignor was entitled. In other words, it contends that the assignment of a claim carries no lien unless the mechanic or materialman has previously proceeded to acquire or perfect a lien as provided by the statute. Vernon's Ann. Civ. St. art. 5472a, provides: "That any person * * * furnishing any material * * * or labor to any contractor for any public improvements in this State, shall have a lien on the moneys * * * due or to become due to such contractors for such improvements; provided, such person * * * shall, before any payment is made to such contractor, notify in writing the officials of the State * * * whose duty it is to pay such contractor of his claim."

Whether or not the bank, as the assignee of Lanier, had a right to perfect the lien created by the statute by filing the claim with the state highway department, is a question on which the courts are not agreed. Some courts hold that the right to perfect the lien is personal to the materialman or laborer mentioned in the statute and that his assignee who purchases the claim prior to the perfection of the lien cannot fix the lien; while others hold that the assignment of a lienable claim carries with it the right to the lien and clothes the assignee with the authority to take the necessary proceedings to perfect and enforce the lien. The authorities presenting the two views are correlated in 21 Ann. Cas. at p. 962. See, also, 40 C. J. 309, § 407.

We are inclined to the view that the authorities supporting the theory that the assignee acquires the right to perfect and enforce the lien present the better reasoning. The general policy of the law in creating the lien is to protect the laborer or materialman to the end that he may receive full compensation for the labor or material so furnished and which has gone into the construction of the road. To allow the assignee to perfect the lien does the debtor no harm. He owes the debt and the funds are held by him subject to the right to fix the lien. It is of no concern to him who fixes it. On the other hand, it is of material advantage to the laborer or materialman that he be allowed to collect his claim as quickly as possible and that he receive full value therefor. If he be denied the privilege of assigning his equitable right to fix the lien along with his debt, it will often result that he must either suffer the delay and expense incident to fixing the lien or else assign his claim at a discount and suffer the loss. He should be permitted to avail himself of the security which the statute gives him in the way most beneficial to himself, and, if he can better himself, without injury to the debtor, by giving his assignee the right to perfect the lien, he should be permitted to do so. Murphy v. Adams, 71 Me. 113, 36 Am. Rep. 299; Kinney v. Duluth Ore Co., 58 Minn. 455, 60 N. W. 23, 49 Am. St. Rep. 528; Smoot v. Checketts, 41 Utah, 211, 125 P. 412, Ann. Cas. 1915C, 1113, par. 7; Sprague Investment Co. v. Mouat Lumber & Investment Co., 14 Colo. App. 107, 60 P. 179, 180; McDonald v. Kelly, 14 R. I. 335, 338; Bristol Iron & Steel Co. v. Thomas, 93 Va. 396, 25 S. E. 110. Under our blended system a very liberal policy is recognized in the assignment of both legal and equitable rights. If a laborer can perfect his lien and assign it...