Source: https://openjurist.org/356/f2d/340/glassman-v-fidelity
Timestamp: 2017-10-23 10:36:07
Document Index: 483262908

Matched Legal Cases: ['§ 875', '§ 167', '§ 897', '§ 9', '§ 8', '§ 897']

356 F2d 340 Glassman Construction Co v. Fidelity and Casualty Company of New York Fidelity and Casualty Company of New York | OpenJurist
356 F. 2d 340 - Glassman Construction Co v. Fidelity and Casualty Company of New York Fidelity and Casualty Company of New York
356 F2d 340 Glassman Construction Co v. Fidelity and Casualty Company of New York Fidelity and Casualty Company of New York
356 F.2d 340
GLASSMAN CONSTRUCTION CO., Inc., Appellant,
GLASSMAN CONSTRUCTION CO., Inc., Appellee.
No. 18850.
Argued May 25, 1965.
Fidelity's claim to the retainages on the subcontracts it bonded is based on three independent grounds. Primarily, it seeks to establish itself as an assignee of the rights of Harman. Glassman opposes recovery on this ground, citing United States v. Munsey Trust Co., 332 U.S. 234, 67 S.Ct. 1599, 91 L.Ed. 2022 (1947), for the principle that an assignee's claim to a fund is subject to any right of set-off the stakeholder may have against the assignor. Fidelity, while admitting that Munsey Trust so holds, would limit Munsey Trust to its facts — where the United States is the stakeholder with the set-off claim.
Fidelity's second approach to recovery, designed to avoid Glassman's set-off claim, is as assignee of the rights of the materialmen whose claims it satisfied. Its title to these rights, it argues, is clear on two bases. First, it obtained the materialmen's rights by formal assignment at the time it paid the materialmen's claims, and second, under the traditional theory of subrogation the "surety who pays the debt of another is entitled to all the rights of the person he paid to enforce his right to be reimbursed." Pearlman v. Reliance Insurance Co., 371 U.S. 132, 137, 83 S.Ct. 232, 235, 9 L.Ed. 2d 190 (1962).
Fidelity's third ground for recovery, and second basis for avoiding the set-off claim, is predicated on Prairie State Nat. Bank v. United States, 164 U.S. 227, 17 S.Ct. 142, 41 L.Ed. 412 (1896). In that case the Supreme Court recognized the surety as the subrogee of the party protected by the bond against the claims of materialmen. Thus here, since Glassman was an obligee on the bonds, Fidelity would succeed to Glassman's right to use the retainages to satisfy the claims of materialmen.
As to the time the assignment in surety contracts becomes effective, there seems to be a division of authority.4 And the State of Virginia, whose law we apply,5 provides no guidance.6 We must predict, therefore, the position of the court of last resort in that state were the problem presented to it for resolution.7 We find that Virginia would follow the better reasoned cases,8 including our own,9 in holding that the assignment in a payment and performance bond is effective from the date of its execution. While the right actually to receive the retainages is subject to a condition precedent, when that condition is met, an equitable right to the funds withheld arises "from and relate[s] back to the date of the original contract of suretyship." Morgenthau v. Fidelity & Deposit Co. of Maryland, supra Note 9, 68 App. D.C. at 166, 94 F.2d at 635. See 4 CORBIN, CONTRACTS § 875.
InMunsey Trust, the Court stated that the United States has the right, "`which belongs to every creditor, to apply the unappropriated moneys of his debtor, in his hands, in extinguishment of the debts due to him.'" 332 U.S. at 239, 67 S.Ct. at 1602.
The general rule, as stated in the Restatement of Contracts, is that "[a]n assignee's right against the obligor is subject to all limitations of the obligee's right, to all absolute and temporary defenses thereto, and to all set-offs and counterclaims of the obligor which would have been available against the obligee had there been no assignment, provided that such defenses and set-offs are based on facts existing at the time of the assignment, or are based on facts arising thereafter prior to knowledge of the assignment by the obligor." RESTATEMENT, CONTRACTS § 167(1) (1932). Corbin states that "[i]n no jurisdiction is the counterclaim or set-off effective against the assignee if it was acquired by the obligor after notice of the assignment." 4 CORBIN, CONTRACTS § 897, pp. 600-601 (1951). See also UNIFORM COMMERCIAL CODE § 9-318(1) (1962), and comment thereto
"In ascertaining what the state law is, the federal court must make use of all available data. Thus, in the absence of state decisions in point the court may look to the Restatement of the Law, to treatises and law review writing, and may, where appropriate, assume that the state will follow the majority rule." 1 BARRON & HOLTZOFF, FEDERAL PRACTICE AND PROCEDURE § 8 (Wright ed. 1960, Supp. 1964). See also President and Directors of Georgetown College v. Hughes, 76 U.S.App.D.C. 123, 125, 130 F. 2d 810, 812 (1942), and Cardozo, Choosing and Declaring State Law: Deference to State Courts Versus Federal Responsibility, 55 NW.U.L.REV. 419, 423-427 (1960)
See Gray v. Travelers Indemnity Company,supra Note 4. See also Insurance, Inc. v. United States Fidelity and Guaranty Co., 9 Cir., 323 F.2d 513, 516 (1963), and Danais v. M. DeMatteo Const. Co., D.N.H., 102 F.Supp. 874, 877 (1952). See also 4 CORBIN, CONTRACTS § 897.
See authorities citedsupra Note 8.