United States Fid. & Guar. Co. v. R.I. Covering Co.

• Decision Date: 26 June 1933
• Docket Number: No. 1136.,1136.
• Parties: UNITED STATES FIDELITY & GUARANTY CO. v. RHODE ISLAND COVERING CO. et al.
• Court: Rhode Island Supreme Court

167 A. 143

UNITED STATES FIDELITY & GUARANTY CO.

v. RHODE ISLAND COVERING CO. et al.

No. 1136.

Supreme Court of Rhode Island.

June 26, 1933.

Appeal from Superior Court, Providence and Bristol Counties; Edward W. Blodgett, Judge.

Suit by the United States Fidelity & Guaranty Company against the Rhode Island Covering Company, the Industrial Trust Company, and others. From the decree entered, respondent trust company and another appeal.

Appeals denied and dismissed, decree affirmed, and cause remanded.

Gardner, Moss & Haslam, William W. Moss, and Harry A. Tuell, all of Providence, for complainant.

Comstock & Canning and Andrew P. Quinn, all of Providence, for Industrial Trust Co.

Russell W. Richmond, of Providence, for Allen & Reed, Inc.

Hartigan, Mullen & Roberts and John E. Mullen, all of Providence, for Federal Steam & Gas Supply Co.

Thomas J. Flynn, of Providence, for Pignat-Vincenzi Mosaic Co., Inc.

Conaty & Coen, of Providence, for Providence Steam Trap Co.

George J. Sheehan, of Providence, for Tucker Const. Co., Inc. Samuel Workman, of Providence, for Rhode Island Covering Co.

Harry A. Tuell, of Providence, for Rhode Island Nickel Plating Co.

Greenough, Lyman & Cross and Richard E. Lyman, all of Providence, amici curiÆ.

HAHN, Justice.

This is a bill in equity in the nature of a bill of peace to prevent multiplicity of suits and to settle a controversy upon the question of the liability and rights of the various parties under a certain bond given by the respondent, Sarantos Anastos, doing business as the Dean Plumbing Company, to the respondent city of Providence, with the complainant, United States Fidelity & Guaranty Company, as surety thereon. The other respondents are the Industrial Trust Company, a creditor of Anastos which attached his funds in the hands of the city of Providence, and various subcontractors and materialmen who furnished labor and materials used by Anastos under his contract with the said city. After hearing in the superior court and entry of final decree therein, the cause is before this court on the appeal of respondent Industrial Trust Company on the ground that the decree is against the law and the evidence and that an interlocutory decree entered January 13, 1932, is against the law. Respondent Federal Steam & Gas Supply Company also filed an appeal on the ground that the final decree, so far as it relates to the period of time for the computation of interest, is against the law and the weight of the evidence.

It appears from the evidence and admissions of fact set up in the bill of complaint that in December, 1929, Anastos entered into a contract with the city of Providence, hereinafter called the city, whereby he was to provide the entire system of plumbing, drainage, and gas piping for the Hartford Avenue Junior High School for $59,374, and he furnished the city the bond above mentioned. On the date that the bond was executed, December 6, 1929, Anastos made an indemnity agreement with the complainant which provided: "That the said company as surety on said bond, as of this date, shall be subrogated to all our rights, privileges and properties, as principal and otherwise in said contract, and said principal does hereby assign, transfer and convey to said company all the deferred payments and retained percentages, and any and all monies and properties that may be due and payable to said principal at the time of such breach or default, or that may thereafter become due and payable to said principal on account of said contract, or on account of extra work or materials supplied in connection therewith, hereby agreeing that all such monies and the proceeds of such payments and properties shall be the sole property of said company, and to be by it credited upon any loss, damage, charge and expense sustained or incurred by it as above set forth in its bond of suretyship."

On January 17, 1930, while engaged in carrying out his contract with the city, Anastos borrowed $5,000 from the Industrial Trust Company, hereinafter called the trust company. On this debt there is still due the sum of $4,000. The transcript of testimony shows that the money loaned to Anastos was not restricted to use under his contract with the city, and could be used by him for any purpose that he saw fit. The contract was completed to the satisfaction of the city on June 2, 1931, and at that time, when the work was accepted, there was due Anastos from the city the sum of $12,234.80. At the time of the completion of the contract there were claims against Anastos of various materialmen, amounting in the aggregate to $18,828.25.

By letter dated November 4, 1931 the complainant notified the city of the assignment contained in the indemnity agreement. On December 18, 1931 the trust company brought suit against Anastos and attached the funds retained by the city. The complainant offered to pay all the materialmen in full, provided, on so doing, it could without litigation obtain the entire amount held by the city. The trust company, however, notified the complainant that, if the latter paid the materialmen, the trust company would contend that the complainant had paid said sums voluntarily and without being legally bound to pay them, and that therefore the complainant would not be entitled to receive any part of the money held by the city. The trust company also notified the complainant that, if complainant was legally bound to pay said materialmen, it was equally bound to pay the trust company the sum due it from Anastos. The subcontractors and materialmen threatened to bring proceedings against the complainant, and the complainant brought this bill in equity against all the respondents to have the rights of the various parties adjudicated.

After the hearing upon the prayer for a preliminary injunction, a decree was entered in which the respondent subcontractors and materialmen were enjoined from bringing any actions at law or suits in equity against the complainant; the attachment was vacated, and the respondent city was ordered to pay into the registry of the court the sum due Anastos under the contract, such payment to be without prejudice to any rights that the respondent trust company might have obtained by its attachment. The decree further provided that, upon such payment into said registry, the bill of complaint be dismissed as to the city of Providence.

Following the hearing on the merits, a final decree was entered requiring the complainant to pay to the respondent subcontractors their respective claims, together with interest to October 16, 1931, the date on which said complainant made offer of payment. It was further decreed that the respondent trust company was not entitled to recover from the complainant any sums loaned to Anastos, and that the complainant was entitled to the money deposited in the registry of the court, after it had paid to said subcontractors and materialmen the claims aforesaid.

The primary question raised by the appeal of the trust company is whether the complainant, as surety on Anastos' bond to the city, is liable thereunder to the respondent subcontractors for the payment of their respective unpaid claims for labor and materials furnished to and used by Anastos in carrying out his contract with the city. The complainant has not seriously questioned its liability to the materialmen under the bond. It offered to pay them in full, provided it would thereby without litigation obtain the funds withheld by the city; and it has not appealed from the decree requiring it to pay the materialmen.

The contract between the city and Anastos required the city to make payment, upon Anastos "well and faithfully performing said contract in all its parts, and satisfying said city that no liens or other claims for labor done or materials furnished in the aforesaid work exist." The fact that the provisions of the lien law might not be available to subcontractors and materialmen as against, the municipality was...