United States Fidelity & Guaranty Co. v. California-Arizona Const. Co.

• Decision Date: 09 January 1920
• Docket Number: 1648,Civil 1642,1649,1650,1645
• Citation: 21 Ariz. 172,186 P. 502
• Parties: UNITED STATES FIDELITY & GUARANTY COMPANY, a Corporation, Appellant, v. CALIFORNIA-ARIZONA CONSTRUCTION COMPANY, a Corporation, et al., Defendants, and CITIZENS' NATIONAL BANK, a Corporation, Intervener, Appellee. BENNETT LUMBER COMPANY, Appellant, v. UNITED STATES FIDELITY & GUARANTY COMPANY, Appellee. UNITED STATES FIDELITY & GUARANTY COMPANY, Appellant, v. PHOENIX-TEMPE STONE COMPANY, Appellee. UNITED STATES FIDELITY & GUARANTY COMPANY, Appellant, v. WARREN BROTHERS COMPANY, Appellee. UNITED STATES FIDELITY & GUARANTY COMPANY, Appellant, v. THE BARRETT COMPANY, Appellee
• Court: Arizona Supreme Court

186 P. 502

21 Ariz. 172

UNITED STATES FIDELITY & GUARANTY COMPANY, a Corporation, Appellant, v. CALIFORNIA-ARIZONA CONSTRUCTION COMPANY, a Corporation, et al., Defendants, and CITIZENS' NATIONAL BANK, a Corporation, Intervener, Appellee.

BENNETT LUMBER COMPANY, Appellant, v. UNITED STATES FIDELITY & GUARANTY COMPANY, Appellee.

UNITED STATES FIDELITY & GUARANTY COMPANY, Appellant, v. PHOENIX-TEMPE STONE COMPANY, Appellee.

UNITED STATES FIDELITY & GUARANTY COMPANY, Appellant, v. WARREN BROTHERS COMPANY, Appellee.

UNITED STATES FIDELITY & GUARANTY COMPANY, Appellant, v. THE BARRETT COMPANY, Appellee

Civil Nos. 1642; 1645; 1648; 1649; 1650

Supreme Court of Arizona

January 9, 1920

APPEALS from portions of a decree of the Superior Court of the County of Maricopa. Frank H. Lyman, Judge. Affirmed, with modification as to one claim.

Messrs Armstrong & Lewis and Mr. James E. Degnan, for United States Fidelity & Guaranty Company.

Messrs Kibbey, Bennett & Curtis, for Appellant, Bennett Lumber Company.

Mr John L. Gust and Mr. Harold Baxter, for Appellees, Warren Bros. Company and Phoenix-Tempe Stone Company.

Mr. C. F. Ainsworth, for Appellee, Barrett Company.

OPINION

PATTEE, Superior Judge.

At various dates during the year 1916 the superintendent of the streets of the city of Phoenix, Arizona, entered into four separate contracts with the California-Arizona Construction Company, hereinafter called the Construction Company, for the improvement of certain streets of that city. These contracts were made pursuant to the provisions of the Improvement Act of 1912 (chapter 13, tit. 7, Rev. Stats. Ariz. [Civ. Code] 1913), and were made after the proceedings provided by that act were regularly had by the municipal authorities. As required by paragraph 1962, Revised Statutes of 1913, the Construction Company executed, in connection with each of the contracts and filed with the superintendent of streets, a bond conditioned for the faithful performance of the contract, and also a bond for the payment of materials furnished or work and labor done for the improvement specified in the contract. Each of these bonds was executed by the Construction Company as principal and the United States Fidelity & Guaranty Company, hereinafter called the Surety Company, as surety. The construction Company entered upon the performance of the several contracts and subsequently completed the making of the several improvements. On February 9, 1917, shortly after the completion of the several improvements, the Construction Company was adjudged a bankrupt by the district court of the United States for the southern district of California. Soon after this adjudication the Surety Company brought this action in the court below against the Construction Company, the city of Phoenix and its treasurer, and the Elliott & Horne Company, a corporation. In its complaint the Surety Company set forth the making of the several contracts, the giving of the bonds, the performance of the work provided by the contracts, and assence that certain serial or improvement bonds which had been provided to be issued in payment for the work were about to be issued and delivered to the Elliott & Horne Company, to whom all moneys and benefits accruing or becoming due or payable under the contracts had been assigned by the Construction Company. It was also alleged that the Construction Company had failed to pay for certain materials furnished for the making of the improvements, and that certain creditors of the Construction Company had filed with the superintendent of streets their claims for the amounts due for such materials, as provided by paragraph 1962, Revised Statutes of 1913, and that such creditors were claiming, or about to claim, the right to recover such amounts from the Surety Company. Asserting that its right, as surety, to the improvement bonds was prior and superior to that of the assignee, the Surety Company alleged that, if the bonds were issued and delivered to the assignee, they would be disposed of to innocent purchasers, and, the Construction Company being insolvent, the Surety Company would lose all right of reimbursement for the amounts it might be required to pay to the creditors of the Construction Company. It prayed, therefore, that the city and its officers be enjoined from delivering to the assignee the bonds referred to, and that its right to such bonds and to reimbursement to, and that its right to such bonds and to reimbursement from the proceeds thereof for any amount it might be required to pay or become liable for to those furnishing materials, be decreed to be prior and superior to any right of the Elliott & Horne Company as assignee of the Construction possession of the bonds and dispose of the same, and that the proceeds thereof be distributed according to its asserted right. Later an amended complaint was filed making parties defendant all claimants who had filed their claims with the superintendent of streets, and who asserted the right to recover upon the bonds, and such claimants were thereupon made parties defendant. The Elliott & Horne Company answered the complaint, as did also a large number of the claimants; the latter setting forth the fact of furnishing materials to the contractor for the making of the improvements specified in the contracts and praying recovery against the Surety Company for the several amounts due them. The Citizens' National Bank of Los Angeles, California, intervened in the action, asserting that it was the holder of the warrants and assessments issued by the superintendent of streets as collateral security for certain indebtedness owing to it by the Elliott & Horne Company, and in effect asserting the priority of the rights of the Elliott & Horne Company as assignee and of itself as holder of such collateral security. Upon the issues presented by these pleadings, the cause was tried, and judgment rendered establishing the claimed right of the Surety Company and decreeing its right and equity in the proceeds of the contracts to be superior to those of the assignee and the intervener. By the decree a receiver was appointed, to whom the city was ordered to deliver the bonds, and the receiver was directed to dispose of the same, and out of the proceeds thereof to pay the Surety Company a sum sufficient to repay it for all moneys that it might be compelled to expend in order to discharge the judgments rendered against it in favor of the claimants, with interest and costs, and to pay the balance into court for the use and benefit of the Elliott & Horne Company or the intervener, as their interests might appear. The rights of the several claimants who had appeared and answered were determined by the court, and judgments were rendered against the Surety Company in favor of a number of such claimants for the amount found to be due for material furnished the Construction Company.

Among the claimants who appeared and answered were the Bennett Lumber Company, the Phoenix-Tempe Stone Company, the Warren Bros. Company, and the Barrett Company. The judgment of the court disallowed and rejected the claim of the Bennett Lumber Company, and adjudged that each of the other claimants mentioned recover a specified amount from the Surety Company.

From the judgment of the trial court the Elliott & Horne Company and the Citizens' National Bank, intervener, appealed to this court. The Bennett Lumber Company appealed from the judgment against it, and the Surety Comapny separately appealed from each judgment in favor of the other claimants above mentioned. Each of these appeals was separately docketed, but, as they are all appeals from portions of the same judgment and to some extent involve the same questions, they will, so far as they are now before the court, be disposed of in one opinion.

In view of the disposition of the appeals taken by the Elliott & Horne Company and the Citizens' National Bank, no more extended statement of the facts or summary of the lengthy pleadings is deemed necessary. Subsequent to the docketing of the appeals of the last-mentioned parties and before the argument of those appeals, a stipulation was filed by the parties to such appeals that the same might be dismissed, and accordingly it was so ordered. This order, however, did not affect the appeals taken from the judgments determining the rights of the four claimants, and those remain for determination. The judgment, so far as it affects the Elliott & Horne Company and the Citizens' National Bank, became final by the dismissal of the appeals, and the court is relieved of the duty of determining any question with regard to them. This judgment is conclusive that the rights acquired by the Elliott & Horne Company from the Construction Company are subordinate and subsequent to the rights of the Surety Company, and no opinion will or can, with propriety, be expressed with respect to any matter involved in the appeals of the assignee and the intervener. The only matters before the court are the rights of the several claimants who are parties to the appeals taken from the judgments determining those rights.

The action is one which finds many precedents in the reported cases. The Surety Company, finding itself liable or to become liable for the debts of its principals, seeks to subject the proceeds of the contracts out of which the contract of suretyship arose to the payment of the debts of the principal, or seeks subrogation to the rights of the creditors of the principal. Inasmuch as it may not be advised as to the extent of its liability or the existence of the right of recovery on the part of those claiming that it is liable as surety, it makes all such claimants parties for the purpose of determining the extent of its liability, and to avoid a multiplicity of...