State v. A. D. Ingalls, Inc.

• Decision Date: 31 January 1964
• Citation: 105 N.H. 244,197 A.2d 214
• Parties: STATE v. A. D. INGALLS, INC., et al.
• Court: New Hampshire Supreme Court

Page 214

197 A.2d 214

105 N.H. 244

STATE v. A. D. INGALLS, INC., et al.

Supreme Court of New Hampshire.

Argued Dec. 3, 1963.

Decided Jan. 31, 1964.

William Maynard, Atty. Gen., and Alexander J. Kalinski, Asst. Atty. Gen., for the State.

G. Wells Anderson, Concord, ancillary trustee in bankruptcy of A. D. Ingalls, Inc., pro se.

Upton, Sanders & Upton, Frederic K. Upton, Concord, for defendant National Fence & Granite Co., Inc.

Donald W. Cushing, Franklin, for defendant Sigrid J. Tuttle.

McLane, Carleton, Graf, Greene & Brown and G. Marshall Abbey, Manchester, for defendant Trimount Bituminous Products Co., Inc.

Devine, Millimet, McDonough, Stahl & Branch and Jarlath M. Slattery, Manchester, for defendant Maine Bonding & Casualty Co.

LAMPRON, Justice.

The main issue to be decided is whether the funds in the amount of $9280 retained by the State under its contract with Ingalls should be paid to the unpaid sub-contractors and materialmen or to the Trustee in Bankruptcy of the contractor Ingalls.

The contract between the State and Ingalls was signed March 21, 1961. The work commenced April 3, was completed August 22, and the project accepted the next day, August 23, 1961. The revised final estimate on this project was submitted by the State and accepted by Ingalls on March 13, 1962. It showed a balance due of $9280 which was withheld by the Commissioner of Public Works and Highways and later paid into Court in this proceeding. On March 16, 1962 Ingalls filed a voluntary petition in bankruptcy in the United States District Court of Maine.

The 'Standard Specifications for Road and Bridge Construction' of the Department of Public Works and Highways (approved and adopted November 1, 1960) were incorporated in and made a part of this contract. Section 9.02 of these specifications reads in part as follows:

'No moneys, payable under the contract or any part thereof, except the estimate for the first month or period, shall become due and payable, if the Commissioner so elects, until the Contractor shall satisfy the Commissioner that he has fully settled or paid for all labor peformed or furnished * * * for all materials used * * * and supplies purchased by the Contractor and used in carrying out said contract * * * and the Commissioner, if he so elects, may pay any and all such bills, in whole or in part, and deduct the amount or amounts so paid from any monthly or final estimate, excepting the first estimate.'

RSA 229:1 provides that the Commissioner shall exercise the powers of the Department of Public Works and Highways and serve as its executive head. Section 6 grants him general supervision, control and direction on behalf of the state over all matters pertaining to the construction of highways. This court held in Francoeur v. State, 102 N.H. 339, 157 A.2d 49 that the Commissioner was not authorized either expressly or by implication to act or enter into a contract agreement by which as final arbitrator he could obligate the State for the payment of sums not required by the contract. However section 9.02 is limited by its terms to moneys payable under the contract. Furthermore it can have the beneficent effect of encouraging materialmen and laborers to undertake construction of highway facilities for the State. This is in addition to the benefits conferred by RSA ch. 447. Toner & Co. v. Long, 79 N.H. 458, 111 A. 311. We hold that such a provision comes within the statutory authority granted to the Commissioner over the construction of state highways. See Wiseman v. Merrill, 99 N.H. 256, 259, 109 A.2d 42; Fortin v. Morton, 101 N.H. 477, 479, 147 A.2d 644; MacGregor v. Morton, 105 N.H. ----, 194 A.2d 762.

By its terms section 9.02 gave the State the right to withhold at the election of the Commissioner, the moneys payable to Ingalls under the contract (except the estimate for the first month or period) and to pay thereform any and all bills due laborers and materialmen on the project. Ingalls granted this right to the State when it executed the contract on March 21, 1961, almost one year before it became a bankrupt. The law is well settled that the nature of the rights created by this provision is to be determined by the law of our state which is binding on the trustee in bankruptcy. Pitcher and Company v. Ralph Nay Construction Co., 103 N.H. 357, 360, 172 A.2d 360; United States v. Durham Lumber Company, 363 U.S. 522, 80 S.Ct. 1282, 4 L.Ed.2d 1371; Meyer v. United States, 84 S.Ct. 318, 321.

By agreeing to section 9.02 Ingalls subjected its right to receive payment under the contract to the right it granted the State to use the reatined funds to pay laborers and materialmen who thus acquired a right to be paid out of these funds. Toner v. Long, 79 N.H. 458, 111 A. 311; Hunt v. New Hamphsire Fire Underwriters' Association, 68 N.H. 305, 308, 38 A. 145, 38 L.R.A. 514. These rights arise independently of and are enforceable without the necessity of compliance with the requirements of RSA ch. 447. American Employers Ins. Co. v. School District, 99 N.H. 188, 107 A.2d 684; Toner v. Long, supra; See Petition of Keyser, Inc., 97 N.H. 404, 89 A.2d 917. These rights were created by the contract at the time of its execution although not available and enforceable until the Commissioner elected to retain funds for this purpose. American Employers Ins. Co. v. School District, supra.

When in accordance with this contract provision the Commissioner elected to retain money for this purpose the State held it for the benefit of the unpaid laborers and materialmen who had a right to be paid therefrom. Since their claims exceeded the retained funds, the contractor Ingalls had no interest or property right in these funds. Pearlman v. Reliance Insurance Company, 371 U.S. 132, 83 S.Ct. 232, 9 L.Ed.2d 190; United States Fidelity & Guaranty Co. of Baltimore, Md. v. Marathon Lbr. Co., 119 Miss. 802; United States Fidelity & Guaranty Co. v. Triborough Bridge Authority, 297 N.Y. 31, 74 N.E.2d 226; Carney v. United States Guarantee Co., 168 Md. 312, 177 Atl. 157 (1935).

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