Source: https://supreme.justia.com/cases/federal/us/300/185/
Timestamp: 2019-04-21 14:49:35+00:00

Document:
Justia › US Law › US Case Law › US Supreme Court › Volume 300 › Morley Construction Co. v. Maryland Casualty Co.
1. A wrongful purpose is not an element of a cause of action for exoneration. P. 300 U. S. 189.
2. The right of a surety to be exonerated from obligations of the principal does not entitle the surety to custody or control of the fund directed to be used for the purpose. P. 300 U. S. 192.
3. In the absence of a cross-appeal, the appellee, to support the decree, may urge argument contradictory of the reasoning of the lower court, or may adduce matter in the record which the court overlooked or ignored, but cannot attack the decree to enlarge his own rights under it or to lessen his adversary's. P. 300 U. S. 191.
4. The fact that findings, if against the weight of the evidence, may be revised on appeal in equity at the instance of an appellant does not mean that they may be revised at the instance of an appellee, at least where their revision would carry with it as an incident a revision of the judgment. P. 300 U. S. 191.
5. A surety on a bond to secure the performance of a public construction contract and payment of laborers and materialmen, made a supplementary contract with the contractor to advance money for use in carrying on the work, to be deposited in a special joint account, under their joint control, in which also the contractor was to deposit all payments received from the Government. The contractor having failed to deposit its final payment from the Government (the warrant for which was impounded) the District Court held that the surety, being itself partly in default, could not have specific performance of the supplementary agreement, but was entitled, apart from agreement, to be exonerated from present liabilities, and it therefore decreed that the proceeds of the warrant be placed in a bank to be chosen by the contractor, as a special trust fund for the payment of bills for labor and material, no provision being made for any control in the surety. Upon the contractor's appeal, the Court of Appeals made its own finding that the surety's default was innocent and unsubstantial and directed that a decree of specific performance be substituted for the decree of exoneration. Held that the appellate court had exceeded its power. P. 300 U. S. 192.
84 F.2d 522, 526, reversed.
Certiorari, 299 U.S. 529, to review a decree directing that a decree of the District Court for exoneration of a surety be modified to a decree for specific performance of a supplementary agreement between the surety and its principal.
of the account, and no moneys were to be withdrawn therefrom without the approval of the surety by designated representatives, the approval to be indicated upon the check or draft in writing.
Following this supplementary agreement, the contractor went on with the work, and brought it to completion. The surety made the first payment of $5,000 in accordance with its promise, but refused to pay the $5,700 owing to the plasterers. In the meantime, a series of payments became owing from the Government upon estimates of value in advance of completion and acceptance. Warrants for these payments were forwarded by the Government to the trust company in Buffalo to be placed in the joint account, notice having been given by the contractor to issue them accordingly. However, a different course was followed when the final payment became due. Apparently through inadvertence, the Government sent a warrant for that payment ($59,780.82) to the contractor itself at its office in Kansas City, Missouri. The contractor endorsed the warrant, delivered it to the Merchants Bank of Kansas City, one of the petitioners in this Court, and directed the bank to issue a cashier's check for like amount to the order of the contractor's president. The bank made out the check, but held it to await the payment of the warrant, which it deposited in a Federal Reserve Bank to be forwarded, in the usual course of collection, to the Treasury at Washington. Neither check nor warrant has been paid, as a consequence of an injunction obtained by the respondent.
adding thereto that outstanding bills for more than $100,000 are covered by its bond. It says that it is entitled to the specific performance of the supplementary agreement, and to a decree depositing the warrant in the trust company at Buffalo to be applied upon the joint account. It says also that, by reason of the unpaid bills of materialmen and laborers, there is a duty on the part of the contractor to exonerate the surety from loss or liability and to apply the warrant to that purpose. Finally, it makes claim to a right of subrogation to the position of the contractor over against the Government, a claim which apparently has been abandoned and will not engage us further. The bill of complaint ends with a prayer for relief appropriate to the several theories of liability put forward by the pleader, the theory of specific performance, the theory of exoneration, and the theory of subrogation. To render the relief effectual, the bank in Kansas City was joined as a defendant.
The District Judge held that the surety was not entitled to the specific performance of the agreement, having failed to pay the plasterers and being therefore in default itself. He held, however, that, apart from any agreement, the contractor was subject to a duty to exonerate the surety from present liabilities. True, there was no purpose on the part of the contractor to divert the proceeds of the warrant from the uses of the contract. As to this, the finding is explicit. Even so, a cause of action for exoneration does not include among its elements the presence of a wrongful purpose. Glades County v. Detroit Fidelity Co., 57 F.2d 449; West Huntsville Cotton Mills Co. v. Alter, 164 Ala. 305, 51 So. 338; Pavarini & Wyne, Inc. v. Title Guaranty & Surety Co., 36 App.D.C. 348; Hutchinson Grocer Co. v. Brand, 79 Kan. 340, 99 P. 592. The decree conforms to the findings in its distribution of relief. It adjudges the complainant to be entitled to exoneration, but not to specific performance.
The proceeds of the warrant are to be placed in a bank to be chose by the contractor, the deposit to be "designated as a special trust fund for the payment of bills for labor and material used on the United States Veterans Hospital in Batavia, New York." No provision is made that the surety, or indeed any one other than the contractor, shall have any control thereof.
"an injunction against using the moneys except as agreed upon, and an order to place said moneys when received in the joint account and disburse the same in payment of just claims for labor or materials, would meet the requirements and rights of plaintiff and would not be impossible of performance,"
and that "a decree along such lines should be granted by the trial court." 84 F.2d 522, 526. Accordingly, the mandate of the appellate court provides that the cause be remanded to the District Court with directions to modify its decree in accordance with the views expressed in the opinion. We granted certiorari to fix the measure of relief available to a nonappealing suitor.
"urge in support of a decree any matter appearing in the record, although his argument may involve an attack upon the reasoning of the lower court or an insistence upon matter overlooked or ignored by it."
"attack the decree with a view either to enlarging his own rights thereunder or of lessening the rights of his adversary, whether what he seeks is to correct an error or to supplement the decree with respect to a matter not dealt with below."
Ibid. The rule is inveterate and certain. Canter v. American & Ocean Insurance Co., 3 Pet. 307, 28 U. S. 318; Chittenden v. Brewster, 2 Wall.191, 69 U. S. 196; The Maria Martin, 12 Wall. 31, 79 U. S. 40-41; Field v. Barber Asphalt Co., 194 U. S. 618, 194 U. S. 621; Landram v. Jordan, 203 U. S. 56, 203 U. S. 62; Union Tool Co. v. Wilson, 259 U. S. 107, 259 U. S. 111; Peoria & Pekin Union Ry. Co. v. United States, 263 U. S. 528, 263 U. S. 536; Langnes v. Green, 282 U. S. 531, 282 U. S. 538; Alexander v. Cosden Co., 290 U. S. 484, 290 U. S. 487. Findings may be revised at the instance of an appellant, if they are against the weight of evidence, where the case is one in equity. This does not mean that they are subject to like revision in behalf of appellees at all events in circumstances where a revision of the findings carries with it as an incident a revision of the judgment. There is no need at this time to fix the limits of the rule more sharply.
appellate court, nor can he be heard if the proceedings in the appeal are correct, except in support of the decree from which the appeal of the other party is taken."
had held, at least by implication, that the breach by the surety, viewed in the light of all the circumstances, was something more than unsubstantial. It is to find the law anew and differently, for the trial judge had held that a surety chargeable with such a breach was not entitled to a decree upon the footing of the contract. Even more important, it is to give a new measure of relief, for the trial judge had ruled that the fund was not to be held upon the restrictions stated in the contract, but upon different restrictions originating in the conscience of the Chancellor. True, the relief proper to the theory accepted at the trial is almost as favorable from the viewpoint of the protection of the surety as the one adopted on appeal, though distinctly less burdensome from the viewpoint of the principal. Exoneration is not the same as specific performance, but it is not very different, and may be nearly, if not quite, as good. This is surely not a reason why an appellate court should be at liberty to treat the two as interchangeable. One might as well say that at the instance of a nonappealing plaintiff a judgment for specific performance could be made to take the place of one for the recovery of damages.
The decree should be reversed, and the cause remanded to the Court of Appeals to pass upon the question, not yet definitively answered, whether relief in the form of a decree for exoneration is proper in the circumstances, and for other proceedings in accord with this opinion.
* State decisions on the question of the review of findings at the instance of an appellee who has not taken a cross-appeal exhibit a wide variance of procedure. For cases of the stricter type, see Turner v. East Side Canal Co., 168 Cal. 103, 108, 142 P. 69; Clark v. Corser, 154 Minn. 508, 191 N.W. 917; Cox v. Stockes, 156 N.Y. 491, 51 N.E. 316; In re Werdebach's Estate, 280 Pa. 26, 124 A. 268. With these contrast the following: Bullman v. Cooper, 362 Ill. 469, 200 N.E. 173; Wyatt v. Town of Manning, 217 Iowa, 929, 250 N.W. 141; Oppenheimer v. Bank, 97 Tenn.19, 36 S.W. 705; Huntington v. Love, 56 Wash. 674, 106 P. 185.

References: v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.