Case ID: ohio-cc-dec_30/html/0414-01.html
Source: Caselaw Access Project
Author: {"author": "KUNKLE, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

PRINCIPAL AND SURETIES.
    [Franklin (2nd) Court of Appeals,
    April 1, 1916.]
    Ferneding, Kunkle and Allread, JJ.
    Timothy S. Hogan, Atty.-Gen. v. Empire State Surety Company, a Corporation, et al.
    Deposit of Foreign Indemnity Company Subject to Claims of Creditors of Contractors Regardless of Place of Execution of Contract or Bond.
    Under act of congress of February 24, 1905, extending the liability of a surety company upon contractors’ bonds to creditors for material and labor under his contract, fixing jurisdiction for enforcement of the rights of such creditors at the place where the contract is to be performed, taken in connection with Sec. 9610 G. C., the evident purpose of which is to protect rights growing out of contracts so covered, the deposit of a foreign Indemnity company, made with the superintendent of insurance as a condition of doing business within this state, must be held to inure to the benefit of creditors for labor and material under contracts to be performed within the state and covered by a bond of such company, notwithstanding the contract and the bond guaranteeing its performance were executed outside of the state.
    Demurrer.
    
      M. J. Wright and Booth, Keating, Peters & Pomerene, for the insurance department of the state of New York.
    
      Tolies, Hogseit, Ginn & Morley, Hughes & Tripplehorn, Bussell K. Bedgood, Cable & Cable, Mackenzie & Weadock, Ralph Mackenzie, C. J. Brotherton and Paul T. La/ndis, for in-terveners.
   KUNKLE, J.

This is an action wherein Timothy S. Hogan as attorney-general brought suit under Sec. 641 G. C. to determine the rights of all persons claiming an interest in and to a certain deposit of $50,000.00 made by Empire State Surety Co., a New York corporation, with the superintendent of insurance of the state of Ohio, in order to obtain the right to transact the business of indemnifying employers and others in the state of Ohio.

Certain parties intervened claiming to be creditors of Mark P. "Wells, a contractor under the United States government for the construction, extension, remodelling and repair of a postoffice building at Lima, Ohio, and that said Empire State Surety Co. had become surety for said Mark P. Wells upon a bond given to the United States government in pursuance to an act of congress approved February 24, 1905, which said bond was, among other things, conditioned that said Mark P. Wells should promptly make all payments to persons supplying him with labor and material in the prosecution of the work contemplated in said contract.

Some of the intervening creditors, among whom was Grainger & Co. reduced their claims to judgment in an action in the United States district court in the western division of the northern district of Ohio.

To the intervening cross petitions Frank Hasbrouck, superintendent of insurance of the state of New York and Frederic G. Dunham, special deputy superintendent of insurance of the state of New York, filed a joint answer claiming the right to receive and administer the said fund of $50,000.00.

Grainger & Co. demui’red separately to each paragraph and defense of the joint answer of said Hasbrouch and Dunham.

This demurrer was sustained by the lower court. Final judgment was rendered and thereupon the case was appealed to this court.

We have carefully considered the authorities cited in the very exhaustive briefs which have been filed by counsel.

We shall not attempt to discuss or distinguish in detail the authorities so cited, but will merely announce the conclusion at which we have arrived after a careful study of such authorities.

The federal statute referred to by counsel extends the liability of the surety upon a contractor’s bond to the payment of the claims of the creditors of the contractor for labor and material furnished under the principal contract. In view of the federal statute and the liability thereby created, such creditors of the principal contractor would become policy holders within the purview of Sec. 9510 G. C.

It is evident, however, that the deposit provided for in See. 9510 was intended to be held for the benefit of the policy holders whose rights grow out of contracts made and business transacted within the state of Ohio.

It is true the contract between Wells and the United States government for the improvement of the postoffice building at Lima and the contract of Empire Surety Co. guaranteeing the performance thereof were, according to the averments of the said answer executed outside the state of Ohio.

These contracts were, however, to be performed within the state of Ohio and the parties contemplated that the contracts for labor and material would be performed within the state of Ohio.

The federal act extending liability of the surety, upon the contractor’s bond, to the creditors of the principal contractor for material and labor under the principal contract fixes the jurisdiction over the enforcement of the rights of the creditors of the place where the contract is to be performed.

The fact that the United States government has control over the postoffice site in question by cession from the state of Ohio does not supersede the jurisdiction of the state over the business involved in the performance of the contracts for labor and material.

Under this situation, we think the contract of Wells with the Empire State Surety Co. should be regarded as the transaction of business in Ohio and that the creditors of Wells growing out of the performance of the contract in question are entitled to the benefit of the deposit made by the Empire State Surety Co. under the provisions of Secs. .9510 and 641 G-. C.

We have carefully considered all of the questions discussed by counsel for the insurance department of the state of New York in their brief, but are of opinion that the demurrer to the answer of Hasbrouch and Dunham should be sustained.

Demurrer sustained.

Ferneding and Allread, JJ., concur.