U.S. Fidelity & Guar. Co. v. Sidwell

• Decision Date: 24 July 1975
• Docket Number: 74--1795,Nos. 74--1794,s. 74--1794
• Citation: 525 F.2d 472
• Parties: UNITED STATES FIDELITY AND GUARANTY COMPANY, a corporation, Appellee, v. T. W. 'Tony' SIDWELL, Appellant. LIBERTY MECHANICAL & ELECTRICAL CONTRACTORS, INC., Appellant. MAXWELL SHEET METAL CONTRACTORS, INC., a corporation, et al., Defendants.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 472

525 F.2d 472

UNITED STATES FIDELITY AND GUARANTY COMPANY, a corporation, Appellee, v. T. W. 'Tony' SIDWELL, Appellant LIBERTY MECHANICAL & ELECTRICAL CONTRACTORS, INC., Appellant MAXWELL SHEET METAL CONTRACTORS, INC., a corporation, et al., Defendants.

Nos. 74--1794, 74--1795.

United States Court of Appeals Tenth Circuit.

July 24, 1975.

Rehearing Denied Aug. 20, 1975.

Kent F. Frates, Oklahoma City, Okl., for appellant T. W. 'Tony' sidwell.

John B. Estes, Oklahoma City, Okl., for appellant Liberty Mechanical & Electrical Contractors, Inc.

Robert J. Petrick, Oklahoma City, Okl., for appellee United States Fidelity and Guaranty Co.

Before CLARK ^*, etired Associate Justice, and HILL and BARRETT, Circuit Judges.

CLARK, Retired Associate Justice.

This appeal is the aftermath of a controversy between the several contractors, as well as the bonding company, arising out of the construction of three grade school buildings for School District No. 8 in Comanche County, Oklahoma. The prime contract for the construction work was awarded to Buckner and Moore. It subcontracted the mechanical work to J. C. Hester Co., Inc. (Hester) and the latter subcontracted the sheet metal work to the Maxwell Sheet Metal Contractors, Inc. (Maxwell), whose surety on its payment and performance bond was United States Fidelity and Guaranty Company (USF&G). On August 8, 1973, Maxwell and Universal Dynamic and Scientific Engineering, Inc. (UDS) assigned the Maxwell Sheet Metal contract to Liberty Mechanical and Electrical Contractors, Inc. (Liberty) and the latter proceeded to complete that work. However, Maxwell had already performed a large part of the installation and had incurred some material supply debts thereon which it had not paid. USF&G was called upon to pay these material suppliers and, after August 8, 1973, paid the same in the sum of $20,871.45 and then filed this suit upon those claims against Liberty, Maxwell, UDS and T. W. (Tony) Sidwell. ¹

In the meanwhile, the School District had paid the prime contractor, Buckner and Moore, in full of its contract and the latter interpled in this suit paying $20,602.00 into the registry of the court as the proceeds of the prime contract then remaining. USF&G then made claims to this fund by virtue of its subrogation rights under the liens of the unpaid material suppliers of Maxwell; but Liberty also claimed the fund and filed a cross claim, including a plea, against T. W. (Tony) Sidwell alleging that in the event USF&G prevailed with reference to the funds paid into court that Sidwell was liable to it by reason of his wrongfully appropriating funds that Liberty paid soon after the time it was assigned the Maxwell subcontract for the express purpose of paying the materialmen's claims. Sidwell was the managing corporate officer and director of Maxwell as well as UDS. Liberty's claim against Sidwell was based on Oklahoma Statutory law. On trial before the court without a jury USF&G was held to be entitled to the funds paid into court, less a fee of $608.00 paid to Ralph Newcombe for the filing of the interpleader, and a judgment against Liberty, Sidwell, Maxwell and UDC, jointly and severally, was entered for USF&G in the sum of $20,602.00. Judgment for Liberty was entered against Sidwell and by default against Maxwell and UDS for $20,602.00, jointly and severally.

Liberty raises several questions of law, including (1) that the claim of USF&G was not lienable under Oklahoma law; (2) that its plea of estoppel as to USF&G should have been sustained; and (3) that the fee to Newcombe should not have been paid from the funds in the registry of the court. As to Sidwell, Liberty claims that his appeal is untimely, while Sidwell asserts that Liberty neither pled nor proved fraud in the trial court and, therefore, cannot raise it here. In addition, Sidwell says that he was not liable to Liberty as a trustee.

We have concluded that the trial judge was correct in his appraisal of the case and, after careful consideration of the record and of the points and authorities submitted, affirm the judgment.

1. It was stipulated at trial that USF&G paid the material suppliers the sum of $20,871.45 after demand was made upon it. There can be no question but that under Oklahoma Law, USF&G is subrogated to the rights of the materialmen. The recent case of Mid-Continent Casualty Company v. First National Bank & Trust Company of Chickasha, 531 P.2d 1370 (Okl.1975), specifically holds that a surety on the bond of a public contractor 'has an equity, under the doctrine of subrogation, in money retained . . .' by reason of the contract, 'for the payment of laborers and materialmen.' At p. 1374. Also see Fidelity National Bank of Oklahoma City v. United States Casualty Company, 191 Okl. 496, 131 P.2d 75 (1942). The cases cited by Liberty are inapposite. They are based on the proposition that liens do not lie against public property because 'the seizure and sale of such property would interrupt and suspend the functions of government and would therefore be against public policy.' Hutchinson v. Krueger, 34 Okl. 23, 124 P. 591, 592 (1912). But USF&G makes no claim to any lien on public property. It merely seeks a prior right to the proceeds of a contract which have been paid to the general contractor by the School District. Furthermore, the USF&G also claims under 42 Okla.Stat. 152, as a subrogee. Here the District Court found that the claims of the materialmen were lienable under Section 152 and, as such, the proceeds held in trust by Buckner & Moore were held for the benefit of USF&G. We agree.

Nor is there any merit to Liberty's claim that in ordering the funds in the registry of the court to be paid to USF&G that the court was entering an award of damages against Liberty. We believe that the court properly invoked its equity jurisdiction in rendering a declaratory judgment and in granting a money judgment where the funds have been paid into court for the specific purpose of determining who among the various claimants are entitled to the same. In so doing, the court renders a complete adjudication of the matter and the funds then before it by finding who is entitled to the funds and then ordering them paid accordingly. To hold otherwise would be to frustrate the very purpose of Congress in enacting the Declaratory Judgment Act.

2. Nor do we find any merit to Liberty's claim of estoppel. It seems to argue that USF&G stood by and permitted it to complete the work under the Maxwell subcontract without advising that USF&G intended to and later had paid the materialmen suppliers. We note, however, that Liberty makes no claim that it was without knowledge of the payments to the suppliers by USF&G nor does it allege that it had no means of ascertaining the real facts. Indeed, it knew of...