Case Name: CHARLES A. HITCHCOCK v. THE UNITED STATES; CHARLES SUNDBERG & CO., FOR THE USE OF HITCHCOCK, v. THE SAME; THE PRAIRIE STATE NATIONAL BANK v. THE SAME
Court: United States Court of Claims
Jurisdiction: United States
Decision Date: 1892-02-23
Citations: 27 Ct. Cl. 185
Docket Number: No. 16875
Parties: CHARLES A. HITCHCOCK v. THE UNITED STATES. CHARLES SUNDBERG & CO., FOR THE USE OF HITCHCOCK, v. THE SAME. THE PRAIRIE STATE NATIONAL BANK v. THE SAME.
Judges: 
Reporter: United States Court of Claims Reports
Volume: 27
Pages: 185–214

Head Matter:
CHARLES A. HITCHCOCK v. THE UNITED STATES. CHARLES SUNDBERG & CO., FOR THE USE OF HITCHCOCK, v. THE SAME. THE PRAIRIE STATE NATIONAL BANK v. THE SAME.
[No. 16875.
Decided February 23, 1892.]
On the Proofs.
The Secretary of the Treasury refers conflicting claims upon a fund in the Treasury. There is no controversy on the part of the Government, the questions involved relating simply to the distribution of the fund. It consists of two elements; of the 10 per cent reserved from monthly payments due to the contractor; of the 10 per cent reserved from monthly payments due to the surety, who completed the building after the contractor had failed. The surety seeks to recover both; the adverse claimant, a bank, seeks to recover the former, under an arrangement between it and the Secretary of the Treasury and the contractor, upon the faith of which it advanced funds for the erection of the building.
I. A bank which advances funds for the erection of a public building upon the faith of an arrangement with the Secretary of the Treasury and the builder that it shall receive the 10 per cent reserved from monthly payments acquires no right or equity which can be recognized by this court, although all claims upon the 10 per cent fund are referred to the court by the Secretary under Revised Statutes § 1063; and the parties are brought before it by proceedings in the nature of interpleader.
II. A power of attorney, given by a builder to a bank to secure future advances for tke erection of a public building, wbicli authorises the bank to “ receiveowrlastestimatefrom the United States on our contract forerecUonof U. S. customhouse at Galveston,” is absolutely void under Revised Statutes § 3477. The Secretary of the Treasury could give effect to such an instrument only by paying “ the last estimate,” which paymont would be obligatory upon the contractor.
HI. The surety of a defaulting contractor who completes the work in the name of his principal may bring a suit in his own name against the other party to the contract for a balance earned by and remaining due to his principal.
IV.No officer of the Government can do any act which will take assign- , ments and powers of attorney out of the operation of the Revised Statutes § 34-77.
V.No force or effectcan be giveninlaw or equity to contracts declared by statute to be absolutely void.
VI.One of the objects of the Revised Statutes § 3Í77 was to protect the Government from liabilities to persons other than those with whom it has contract relations.
VII.A loan made to a builder, to enable him to carry out a building contract, upon the assurance that lie shall be paid out of a specific portion of the proceeds of the work, is a simple contract debt, giving the lender no lien which can be enforced in equity.
The Reporters’ statement of the ease:
This ease was referred, to the court by the Secretary of the Treasury by communication in th¿ words following:
“Washington, January 23,1891.
“I have the honor to inclosehere with a claim, with attendant papers, made by Charles A. Hitchcock and George Van Zandt, the latter for the use of the Prairie State National Bank of Chicago against the United States.
“The demand is for the payment of the last installment due Sundberg & Co. for the construction of the custom-house at Galveston, Tex., completed in October, 1890. The contract price was $118,566, and the last payment, now due and unpaid, is for 10 per cent of that amount, to wit, $11,856.60. This sum is claimed, by George Van Zandt, .who is a banker in Chicago, for the use of the bank aforesaid. He claims that in consider-t-ion of the fact that said bank made, or was to make, certain advances to Sundberg & Co., to enable them to proceed with the building, the Government had consented to send him a check, made payable to Sundberg & Co., for the last payment when the work was completed, to the end that he could have some security for his advances! This undertaking, if, indeed, any such was made, was upon the implied understanding' that Snndberg & Co. would complete the work in accordance with the contract. On the other hand, Mr. Hitchcock, who was one of the sureties on the bond of said Snndberg & Co., claims that he is entitled to have made to him said last payment. Early in 1890 it became evident that the contractors would not be able to complete the work; thereupon the United States gave notice that within eight days the Government would take charge and complete the work unless some evidence was shown of the ability of said Sundberg & Co. to do so. Charles Hitchcock, one of the bondsmen aforesaid, came forward, and, as he claims, furnished the means and completed the work, as he had a right to do, with the consent of the Department. He claims to have known nothingaboutthe arrangement with Van Zandt, and now demands that the said last payment be made to him. On the other hand, Van Zandt claims that said sum should be paid to the bank that he represents, by reason of the understanding that he claims to have with Acting Secretary of the Treasury Geo. S. Batcheller.
“These claims thus presented against the Department involve both disputed questions of fact and controverted questions of law, and the amount exceeds $3,000. The Department is ready and willing to make the said last payment to the party or parties entitled thereto, and respectfully submits this question to the court under section 1063 for its judgment.”
The answer of the defendants contained the following, among other, averments:
“That as between the petitioners herein the defendant desires to interpose only such objections to the petitioners as will effectually protect the United States in the matter in law as well as in equity.
“ That the United States acknowledges that there is due and unpaid, on account of the Government custom-house building at Galveston, Texas, the sum of $11,859.60 under the contract entered into with Charles Sundberg & Co. on the 10th day of May, 1888, and the Government stands willing and ready, and has at all times since the completion of said building stood ready and willing, to pay such sum to whomsoever is found by the court to be entitled thereto.”
In the case of Hitchcock, the judgment was that he recover the sum of $11,859.60; in the case of the Prairie State Bank, that the petition be dismissed.
■ The following are the facts as found by the court:
I. Charles Sundberg & Co., a firm composed of Charles Sund-berg and Carl C. Bushnell, entered into a contract and bond, botb set out at the end of the petition of Charles A. Hitchcock, “for furnishing all the labor and materials required to complete the erection of the United States custom-house building at Galveston, Tex., except the interior finish.”
II. The contractors, Charles Sundberg So Co., proceeded in the execution of said contract, and previous to the 3d day of May, 1890,'had received payments from the United States, which left remaining unpaid of the contract price named in said contract between $32,000 and $33,000.
III. After said Sundberg & Co. entered upon the execution of the contract they borrowed from the Prairie State National Bank the following sums of money: October 26,1888, $2,500, on a note of Charles Sundberg & Co., payable on demand to the order of said bank, with interest at 7 per cent. October 31, 1888, $1,500, on a note of Sundberg So Co., payable on demand to the order of said bank, wjlth 7 per cent interest after date. November 7,1888, $1,000, on a note of Charles Sundberg & Co., payable on demand to the order of said bank, with interest at 7 per cent per annum. January 24,1890, Sundberg So Co. had a credit at said bank of $2,882.32.
IV. January 24,1890, the account between the Prairie State National Bank and Charles Sundberg & Co., standing as stated in the last preceding finding, the bank made a demand on said Sundberg So Co. for payment of said three promissory notes and refused to make any further advances to them.
V. Upon and after this refusal an oral arrangement was made between said bank and Sundberg So Co., by which it was agreed that the bank would make to Charles Sundberg So Co. such additional loans as would be necessary to carry on the work and complete the building, not to exceed the sum of from $7,000 to $10,000, this additional loan to be made on condition that Sundberg So Co. should furnish to said bank a satisfactory order on the Government, transferring to the bank the final payment of 10 per cent, which was being held back from time to time, according to the contract. At the time of said oral agreement it was arranged that Sundberg So Co. should give, and they did give, to the said bank their note, payable on demand, for $3,500, in settlement of the balances due upon the three notes named in finding in. Charles Sundberg stated to the officers of the bank that his said work at Galveston, Tex., on tbe custom-bouse and post-office building was still incomplete, and tbat it would be impossible for bim to carry out bis contract unless tbe bank would continue to advance bim money, as it bad theretofore done. And be further stated tbat be wanted to make arrangements with tbe bank at tbat time to loan bim from $7,000 to $10,000, and more if be could get it. Sundberg further stated tbat be thought be would want tbat amount to carry on tbe work and complete tbe bnilding, and tbat be could and would give to said bank, as security, an order on tbe Government for tbe final payment of 10 per cent on bis contract, which was being held back from time to time, and tbat a large portion of it was already held back and accrued upon work tbat be had done.
YI. Said bank was induced to make said agreement for further advance upon receiving tbe security named in tbe last preceding finding, by reason of tbe representations, assurances, and promises following:
YII. In pursuance of said oral agreement, Charles Sundberg & Co. executed and delivered to tbe bank tbe following power of attorney:
“Office of Superintendent of Construction,
“TJ. S. Custom-House and Post-Office, &c.,
“ Galveston, Tex., February 3, 1890.
“Know all men by these presents tbat we, Charles Sund-berg & Co., doing a general contracting business and residing in tbe city of Chicago, Illinois, do make and appoint George Yan Zandt, of the same place, to be our true and lawiul attorney, for us and in our name to receive our last estimate from tbe United States of America on our contract for erection of United States custom-bouse at Galveston, Tex. (except interior finish). Said contract being signed by said Charles Sund-berg & Co. and Will A. Freret for tbe United States of America. And we hereby ratify all our attorney may do by virtue hereof.
“Charees Sundberg- & Co.
“I hereby acknowledge tbe above as agent for tbe United States of America.
“O. D. Anderson,
“Superintendent of Construction.”
YHI. February 8,1890, George Yan Zandt, then and now' cashier of tbe said bank, wrote to tbe Secretary of tbe Treasury tbe following letter, inclosing said power of attorney, which, upon its receipt, was placed, and now remains, on file in the Treasury Department:
“ Chicago, Feb. 8,1890.
“To tbe Secretary op the Treasury, Washington,'I). 0.:
“Hon. Sir: I inclose a power of attorney from Charles Sund-berg & Co., intended to convey to me the right to receive from the H. S. Government the draft to be issued for the final payment on their contract for erecting the H. S. custom-house building at Galveston, Texas, but not referring to any later contracts for interior finish on the same building.
“ I desire that this paper, if it sufficiently conforms to the regulations of your office, may be filed or registered, so that the draft, when issued, may be drawn on the subtreasury at Chicago and forwarded to me directly. The paper is not intended to be construed as an assignment of the contract in any part, but only to bring directly into my hands, at the proper time, the draft which the H. S. Government is expected to issue for the final payment of the contract when it is fully completed. It will greatly assist Charles Sundberg & Go. in completing their contracts with the United States, if this arrangement can be made, so that the final payment may come direct to me, as a security for money loaned to the contractors and used in their work on the Government buildings.
“Please acknowledge receipt of this paper, and kindly inform me if I may expect the draft to be drawn and forwarded to me as suggested above when the proper time shall arrive for issuing it.
“ Very respectfully,
“George Van Zandt.”
IX. To this letter the following reply was sent to said Van Zandt:
“Treasury Department,
“Oppice op the Secretary,
“ Washington, I>. 0., February 12,1890.
“ Mr. George Van Zandt,
“P. 0. Box 143, Chicago, III.:
Sir : The Department is in receipt of your letter of the 8th instant, inclosing power of attorney given to you by Messrs. Charles Sundberg & Co., of Chicago, authorizing you to receive final payment under their contract tor the erection of the custom-house at Galveston, Texas, not including interior finish, the same being given, as stated by you, as security for money loaned the contractors and used in their work on Galveston buildings.
“ Under departmental interpretation of the law, a power of attorney authorizing the collection of moneys can not be recognized unless issued subsequent to the issue of a draft in pay ment under tbe claim therefor, said draft being specifically identified in the power of attorney.
“It will be necessary, therefore, for the voucher, in final payment under the contract in question, to issue in the name of the contractors, but, upon his specific request, the same may be presented to you, to be held by you for indorsement by the contractors. If this arrangement is satisfactory to yourself and the contractors, please advise the Department, that proper instructions may be given.
“Respectfully, yours,
“ George S. Batcheller,
u Acting Secretary.”
Said Yan Zandt again wrote to the Secretary of the Treasury as follows:
“ Chicago, February 14,1890.
“Secretary oe the Treasury, Washington, D. G. :
“HONORABLE Sir: .Referring to your letter of the 12th inst., under initials of ‘J. B. P.,’ regarding a certain power of attorney given to me by Charles Sundberg <fe Co., by which I am authorized to receive the final payment under their contract for the erection of the custom-house at G-alveston, Texas, in which letter I am informed that it will be necessary for the voucher in said payment to issue in the name of the said contractors, but that the same may be sent to me to be held for endorsement by the said contractors, I beg to reply that such an arrangement will be satisfactory to myself, and also to the contractors, and I respectfully request that the proper instructions may be given to procure that result, which will be in harmony with the intention of the power of attorney already exhibited to you, to indicate the wishes of the said contractors, Charles Sundberg <fe Co. If a more specific request on their part is necessary, will you kindly suggest the form required by the Department, and I will undertake to procure its fulfillment.
“Very respectfully,
“ George Yan Zandt.”
X. February 19 the Assistant Secretary of the Treasury wrote to N.. W. Ouney, disbursing agent of the United States at Galveston, the following letter:
“Treasury Departmeet,
“ Washington, I). 0., February 19, 1890.
“Mr. N. W. Cuney,
“ Disbursing Agent, Custom-House, <&e., Galveston, Texas:
“ Sir: On the 3d instant a power of attorney was givenjiy Messrs. Charles Sundberg «fe Co., contractors for the erection of the custom-house, «fee., at Galveston, to George Yan Zandt; cashier of the Prairie State National Bank, Chicago, autlioriz- ing him to receive the amount due in final settlement under said contract, excepting the interior finish of the building.
“This paper has been filed with the Department by Mr. Yan Zandt, with the request that the same be registered, so that draft, when issued, may be forwarded to him direct.
“In reply to letter advising him that final voucher could only be issued in the name of the contractors, but in view of the fact that the authority had been given to secure Mr. Yan Zandt for moneys advanced Messrs. Sundberg & Co. for the purpose of carrying out their contract, the check issued in final payment would be forwarded to him for indorsement by the contractors.
“To this communication Mr. Yan Zandt replied that such an arrangement would be satisfactory to himself and to the contractors.
“You will please, therefore, make note of the facts, and, when authority shall have been given for final payment under the contract in question, issue your check to the order of the contractors and forward the same to Mr. Yan Zandt, whose address is P. O. box 143, Chicago, Ill.
“ Respectfully, yours,
“George S. Batoheller,
uAssistant Secretary.”
XI. After the delivery of said power of attorney and after the same had been forwarded to the Treasury Department the following additional advances were made by the Prairie State National Bank: February 8, 1890, $3,500; April 18, 1890, $1,200; and July 14, 1890, $1,350.
XII. The notes which constitute the basis of the bank’s present claim are as follows:
(a) One dated January 27,1890, payable on demand, $3,500;
(b) One dated February 8, 1890, payable on demand, $3,500;
(c) One dated April 18,1890, payable on demand, for $1,200.
Interest on said three notes is paid to the 1st of July, 1890.
(d) One other note, dated July 14,1890, payable on demand, for $1,350.
The aggregate of the above four notes, amounting to $9,550, is still due and unpaid, and is the amount now claimed to be payable to said bank.
XIII. The following exhibits present a full and accurate statement of the checking, deposit, and loan accounts between said bank and Sundberg & Co. from January 24,1890, to August 15,1890, showing on the one hand the amount of loans and deposits made during said period, and, on the other hand, the amount and dates of payment of checks against said deposits and loans:
XIY. May 3,1890, tbe Supervising Arebitect of tbe Treasury-sent tbe following telegram:
“ Treasury Department,
“Oeeioe oe the Supervising- Architect,
“ Washington, D. 0., May 3rd, 1890.
“Charles Sundberg- and Company,
“ Galveston, Teso.:
“ You are notified that unless within eight days from this date you can give evidence of your ability to complete contract for tbe public building at Galveston, Tes., the Government will assume charge of the work and complete it at your expense.
. “Jas. H. Windrim,
“ Supervising Architect.”
On tbe same day tbe Supervising Arebitect, inclosing a copy of said telegram, sent a letter to each of said bondsmen, of which tbe one sent to tbe claimant, Hitchcock, like tbe others, is as follows:
“ Treasury Department,
“ Oeeioe oe the Supervising- Architect,
“ Washington, JD. G., Many 3rd, 1890.
“ Mr. Charles A. Hitchcock,
, “ Chicago, III.:
“ Sir : For your information I enclose herewith copy of telegram this day addressed to Charles Sundberg & Co. in regard to completiqn of their contract for the erection of the U. S. custom-house, &e., building at Galveston, Texas, as you are a bondsman under this contract.
“ Respectfully, yours,
“ Jas. H. Windrim,
“ Supervising Architect.”
Charles Sundberg, at Galveston, Tex., having received said telegram, telegraphed to said Hitchcock at Chicago:
“ Come here on first train.”
And at the same time he telegraphed to the Supervising Architect of the Treasury:
“Take no action immediately. Have wired my bondsmen to come and complete- the work.”
To a telegram from Hitchcock, asking for particulars, Sund-berg answered by telegraph as follows:
“ The Government threatens canceling contract. Your presence here will prevent, and you are fully guaranteed against loss.”
Hitchcock thereupon, the next day, left his home at Chicago, HI., for Galveston, Tex. The day after his arrival,at Galves ton be sent tbe following telegram to tbe Supervising Architect of tbe Treasury:
“ Galvestoh, Texas, May 6,1890.
“ Mr. James H. Windrim,
“Supervising Areht., Washington, I>. O.:
“Dear Sir: Permit me to 'state that I am bere on tbe ground and propose to furnish all tbe necessary moneys and push tbe work to as rapid a completion as consistent with good work.
“ Respectfully submitted,
“ C. A. Hitchcock,
“One of the Bondsmen for Oha/rles Sundberg & Go.”
Hitchcock, upon bis arrival at Galveston, found-tbe work on tbe building almost entirely suspended, as tbe contractors could get no materials, several attachments having been laid on material already on tbe ground and some tied up in tbe freight bouse awaiting tbe payment of freight charges. Tbe firm of Charles Sundberg & Co., as well as Charles Sundberg individually, were insolvent and without credit or financial standing, and could not get trusted for any material. Hitchcock thereupon assumed control of tbe work, took a bill of sale of all material on hand from Charles Sundberg & Co., paid up and settled tbe claims for which attachments bad been made, paid up tbe mechanics and laborers who were in arrears, put a skilled and experienced expert in charge, and proceeded with tbe prosecution of tbe work, and completed tbe same at his own cost and expense. Said expert, as Hitchcock’s agent, before proceeding with tbe work, examined tbe records of tbe office of tbe superintendent of tbe work at Galveston, to ascertain if there bad been any transfer of tbe funds, and found none. In tbe course of carrying out tbe work said Hitchcock incurred a total expenditure of $36,734.18.
It was arranged between tbe contractors, Sundberg & Co., said Hitchcock, and tbe disbursing officer at Galveston, that all future checks in payment of tbe work were to be drawn as before, to tbe order of Charles Sundberg & Oo., and were to be thereupon indorsed by Sundberg, and then turned over to Hitchcock or bis agent. This arrangement was carried out, and in this manner Hitchcock received $17,684 previous to November 12,1890, and $3,394.58 since.
After Hitchcock took charge, as aforesaid, be returned to Chicago, and did not go back to Galveston; it does not appear that Sundberg & Go. exercised any control over the work, but Sundberg- remained at Galveston.
By the 1st of November, 1890, the entire building was completed, and the superintendent reported that—
* * * £‘I was informed that about the latter part of May last the bondsmen of Messrs. Sundberg & Go. practically took charge of the work, since when I have noticed a marked improvement in the management, and believe that the contract has been pushed through with commendable zeal and dispatch.
“I consider that the work under the contract with Charles Sundberg & Co. has been satisfactorily performed, and respectfully recommend that it be received and final voucher issued.”
XY. No actual notice was given to the sureties of Sundberg & Co. of the existence of the power of attorney set out in finding vn nor of the action of the Secretary of the Treasury set out in finding ix until the building was completed. No officer or agent of the Prairie State National Bank had any actual knowledge of the giving or the existence of the notice contained in the telegram by James H. Windrim, Supervising Architect of the Treasury, to Charles Sundberg & Co., dated May 3, 1890, set out in finding xiv, until January or February, 1891, nor of the existence of any steps on the part of the Government set out in said finding, nor of any interruption in the prosecution of said work by the said Sundberg & Co., nor that they were not faithfully prosecuting the same, nor of their embarrassment or insolvency, nor of the taking possession of said work by the bondsman Hitchcock, nor of his prosecution of the same, until months after the bank had made all the advances which it ever did make on the faith of the power of attorney set out in finding vii.
At the time of making said advances by the bank to said Sundberg & Co., and before and after that time, said bondsman Hitchcock resided in Chicago, in the same city where said bank was and is located, and at the time when said advances were being made, and at the time when said Hitchcock took possession of said work, he, said Hitchcock, knew in a general way that the bank was furnishing assistance by advances to Sundberg & Co. for carrying on certain public works in which they had been and were engaged at Galveston and elsewhere as contractors. Neither said Hitchcock nor any agent of his furnished to said bank, nor to any of its officers or agents, notice or information of the insolvency of Sundberg & Co., nor of tbeir failure to prosecute said work on said customhouse, or of the taking possession of said work by said Hitchcock, who had no actual knowledge of the facts set out in findings tii to m
XYI. The price of the work has been paid except the retained 10 per cent on whole contract price, including the work done before and after Hitchcock took control, amounting to $11,859.60, all of which is claimed by said Hitchcock, part of which is adversely claimed by said bank, aud none of which is claimed at the Treasury Department by said Charles Sund-berg & Co. The defendants recognize the rights of one of the petitioners herein to favorable findings and conclusions, and are ready and willing to pay the same to whomsoever is found by the court to be entitled thereto.
Mr. George A. King for Charles A. Hitchcock and Charles Sundberg & Co.
Mr. A. A. Koehling, jr. and Mr. Samuel Shellabarger for the Prairie State National Bank.
The principles of law and equity laid down in the cases of the Buffalo Bayou Railroad (16 C! Cls. B., 238), and of Bailey v. U. S. (109 U. S. E.j 432), and of the Kreechnm’s Banh Shepherd, (127 TJ. S. B., 494), and of Lopes (24 C. Cls. B., 84), establish, as in favor of the bank, such rights and equities in the final payment of ten per cent as the courts will respect and enforce by directing the payment to the bauk of such amount of said ten per cent as will pay to the bank the debt intended to be secured.
The giving of a bond for the completion of this work does not give to the bondsmen any specific property, lien, or claim in or to any part of the pay coming under the contract from the (government to the contractors. The contractor is at liberty to assign, mortgage, or pledge his interest in said pay, notwithstanding the existence of said bond, precisely as if the said bond did not exist. If the bondsmen desire to hold the pay coming to the contractors as security to indemnify them against their liability under the bond, they must in some competent form take an assignment, mortgage, or pledge of such pay. All this is such familiar and obvious law as not to require citation or argument.
Considered independently of section 3477, the order and power, Exhibit A, gives the bank a lien on this fund. (See Trist v. Child, 21 Wall., 447, and cases cited.)
The obligation or implied agreement of Sundberg <& Co. to indemnify their bondsmen against loss under their bond and to reimburse the bondsmen for expenses incurred owing to their bond does not create a lien. (See Tris tv. Child, 21 Wall., 447; Wright v. Mlison, 1 Wall., 16; Hoyt v. Storey, 3 Barber, 246; Malcolm v. Scott, 3 Hare, 39; Rogers v. Hosack, 8 Wendell, 19; Porter v. White, 127 U. S. R., 244, 245; Peugh v. Porter 112 U. S., 737.)
An assignee, whether for benefit of creditors or his own benefit, takes the assets assigned subject to all charges theretofore made on them. (See 3 Parsons on Contracts, 6th ed., S. P. 466.)
The subrogation which equity gives to sureties, and all others having rights of subrogation, as against their principal, is the creature of equity, and will, therefore, never be enforced against superior equities of third persons. (See 1 Leading Cases in Equity, l6l; Patterson v. Pope, 5 Dana, 241; Erbs’s Appeal, 2 Penrose & Watts, 296; G-aswilePs Estate, 2 Penrose & Watts, 300; Hinds v. Keller, 3 Watts & Sargeant, 401; Houston v. Bank, 25 Ala., 260; Bank of Pennsylvania v. Potius, 10 Watts, 148; Grump v. MoMnrty, 8 Mo., 408; Union Bank v. Bdwards, 1 Gill & Johnson, 346; Hardoastle v. Bank, lHarrington, 374.)
From the three last-named propositions and the authorities, it results that—
(а) The bondsmen took, in virtue of their implied rights as sureties, no vested lien in the pay for the custom-house.
(б) That said assignment of 10 per cent of said pay did give to the bank a vested equity or lien in said pay, assuming now that section 3477 does not defeat that equity.
(c) That the right of the bondsmen under the law of subro-gation, or otherwise, is subject to said prior and superior equities of the bank arising out of Exhibits set out in Findings VH, IX, and X.
• This which has just been stated of course applies to a case where there is no law prohibiting an assignment by the contractor of his claim, such as is true in the case of a building contract with a citizen. If what we have said above about the transactions evidenced by Exhibits referred to did result in giving us an equity in the 10 per cent, which the courts will enforce, then the case stands as if this were a contract wltb a private citizen instead of with the Government; and in such case the taking of possession by the bondsman of the contractors and the finishing of the job was all the while subject to the claim and equities of the bank created by the transactions evidenced by said Exhibits.
Instead of its being inequitable for the bank to make said advances and to set up the claim, as against the bondsmen, which the bank here asserts, it was really for the benefit of the bondsmen that said arrangement and advances thereunder were made. It enabled the contractors to continue their said work for two years and to fully complete the same, except to the amount of about $35,000. It thus delivered the bondsmen from a proportionate amount of their liability under their bond.
Again: As a matter of law, when the bank arranged for making the said advances and receiving said final payment, it thereby entitled itself to all assurances and obligations that were held at the time of the advancement by said contractors, going to insure the completion of the job and the earning of the 10 per cent. This entitled the bank to the guaranty of completion furnished by the' said bond. This bond and the right of the bondsmen to complete the job stands upon a principle totally different from that which the Government sustains to the contract and to the party making the advances. The Government’s contract was and is one which, if the Government were obliged to complete the job, would forfeit all right to the 10 per cent and such other part of the pay as would indemnify the Government.
On the other hand, where the bondsmen, for their own indemnification against the liability created by their bond, complete the contract, they step into the shoes of the contractors, and their completion of the job has the effect of entitling the contractor to the payment by the Government of the 10 per cent, subject only to the right of the bondsmen to be reimbursed what they expended in so completing the job — this as between the bondsmen and the contractors — but as between the bondsmen and the bank it does not entitle the bondsmen to be reimbursed their expenditures in completing the job before the said lien held by the bank is satisfied.
See the decision of the United States Circuit Court for the District of Oregon in the case of Emmons v. The United States, 48 Fed. Eep. 43, the opinion being by Deady, J.
This case is one wbicb, if rightly decided, is conclusive of the present case, because it bolds that the Act of Congress of the 3d of March, 1887,1 Supp. Eev. Stat., 2d ed., p. 559, enlarging the jurisdiction of the Coiu’t of Claims, etc., has so changed and modified the section 3477 as to allow assignments like that sued for in that case to be assigned, and to enable the assignee to sue in the courts in his own name for the recovery of the assigned claim.'

Opinion:
Richakdson, Ch. J.,
delivered the opinion of the court:
The actual claimants in this case are the Prairie State National Bank and Charles A. Hitchcock, who each seek to recover the amount admitted by the defendants to be due to one or the other.
Sundberg & Co. entered into a written contract with the defendants' officers to build a custom-house at Galveston, Tex., and gave bond for its faithful performance with Charles A. Hitchcock and others as sureties.
They entered upon the work, and from time to time borrowed money from the Prairie State National Bank upon their own promissory notes. On January 24,1890, they owed the bank $5,000 on their promissory notes previously given, payable on demand. At the same time they had on deposit to their credit on the books of the bank $2,882.32.
On that date the bank made a demand of said Sundberg & Co. for payment of said notes and refused to make any other advances. Thereupon an oral arrangement was made, by which Sundberg & Co. were to have such additional loans as should be necessary to complete their contract, not to exceed $10,000, upon condition that they should forward to the bank a satisfactory order on the Government transferring the final payment of 10 per cent held back as security for their completion of the work under the following provision of the contract :
"Payments to be made in the following manner,'viz: 90 per cent (nine-tenths) of the value of the work executed to the satisfaction of the party of the first part will be paid from time to time as the work progresses in monthly payments (the said value to be ascertained by the party of the first part), and 10 per cent (one-tenth) thereof will be retained until the comple tion of tbe entire work and tbe approval and acceptance of tbe same by tbe party of tbe first part, wbicb amount shall be forfeited by tbe said party of tbe second part in tbe event of tbe nonfulfillment of tbis contract, subject, however, to tbe discretion of tbe Secretary of tbe Treasury."
To tbis arrangement both parties agreed, and it was carried out thereafter in tbe following manner: Tbe bank made loans to said Sundberg & Co. on their four promissory notes as follows:
1890. January 27. $3,500.00
February 8 . 3,500.00
May 12. 1,200.00
July 16. 1,350.00
Sundberg & Co. made, executed, and delivered to George Yan Zandt, tbe bank's cashier, tbe following power of attorney:
"Office of Superintendent of Construction,
"U. S. Custom-House and Post-Office, etc.,
' , u Galveston, Tex., February 3,1890.
"Know all men by these presents that we, Charles Sundberg & Go., doing a general contracting business and residing in tbe city of Chicago, Illinois, do make and appoint George Yan Zandt, of tbe same place, to be our true and lawful attorney, for us and in our name to receive our last estimate from the United States of America on our contract for erection of United States custom-house at Galveston, Tex. (except interior finish). Said contract being signed by said Charles Sundberg & Co., and Will A. Freret for tbe United States of America. And we hereby ratify all our attorney may do by virtue hereof.
"Charles Sundberg- & Co.
"I hereby acknowledge tbe above as agent for tbe United States of America.
"C. D. Anderson,
"Superintendent of Construction."
Yan Zandt, on February 8, sent tbis power of attorney to tbe Secretary of tbe Treasury with a letter in which be said:
# «n wiii greatly assist Charles Sundberg & Co. in completing their contracts with tbe United States if tbis arrangement can be made, so that tbe final payment may come direct to me, as a security for money- loaned to tbe contractors and used in their work on Government buildings.
" Please acknowledge receipt of tbis paper, and kindly inform me if I may expect tbe draft to be drawn and forwarded to me as suggested above when tbe proper time shall arrive for issuing it."
On February 12, tbe Secretary wrote, acknowledging the receipt of the power of attorney, and stating that—
"Under departmental interpretation of the law a power of attorney authorizing the collection of moneys can not be recognized unless issued subsequent to the issue of a draft in payment under the claim therefor, said draft being specifically identified in the power of attorney.
"It will be necessary, therefore, for the voucher, in final payment under the contract in question, to issue in the name. of the contractors; but upon his specific request the same may be presented to you to be held by you for indorsement by the contractors. If this arrangement is satisfactory to yourself and the contractors, please advise the Department, that proper instructions may be given."
To this Yan Zandt replied that the arrangement would be satisfactory to him as well as to the contractors, and asked that proper instructions be given to produce the result.
The Assistant Secretary, on February 19, sent the following letter to the disbursing agent of the custom-house building:
" Treasury Department,
" Washington, D. C., February 19, 1890.
"Mr. N. W. Cuney, .
"Disbursing Agent, Custom-Souse, etc., Galveston, Texas:
"Sir: On the 3d instant a power of attorney was given by Messrs. Charles Sundberg & Co., contractors for the erection of the custom-house, etc., at Galveston, to George Yan Zandt, cashier of the Prairie State National Bank, Chicago, authorizing him to receive the amount due in final settlement under said contract, excepting the interior finish of the building.
" This paper has been filed with the Department by Mr. Y an Zandt, with the request that the same be registered, so that draft, when issued, may be forwarded to him direct.
"In reply to letter advising him that final voucher could' only be issued in the name of the contractors, but in view of the fact that the authority had been given to secure Mr. Yan Zandt for moneys advanced Messrs. Sundberg & Co. for the purpose of carrying out their contract, the check issued in final payment would be forwarded to him for indorsement by the contractors.
" To this communication Mr. Yan Zandt replied that such an arrangement would be satisfactory to himself and to the contractors.
"You will please, therefore, make note of the facts, and, when authority shall have been given for final payment under the contract in question, issue your check to the order of the contractors and forward tbe same to Mr. Van Zandt, whose address is P. O. box 143, Chicago, Ill.
" Respectfully, yours,
"George S. Batcheller,
"Assistant 8eereta/ry."
The custom-house has been completed, and the retained 10 per cent, amounting to $11,859.60, admitted by defendants to be due, is now payable.
Sundberg & Co. still owe the bank $9,500 on their four promissory notes before mentioned, and the latter sues for so much of the retained 10 per cent.
It can not be doubted, after all the decisions of this court and the Supreme Court on the subject, that the power of at-tory given to Van Zandt is made " absolutely null and void" by the following section of the Revised Statutes:
"Sec. 3477. All transfers and assignments made of any claim upon the United States, or of any part or share thereof or interest therein, whether absolute or conditional, and whatever may be the consideration'therefor, and all powers of attorney, orders, or other authorities for receiving payment of any such claim, or of any part or share thereof, shall be absolutely null and void, unless they are freely made and executed in the presence of at least two attesting witnesses, after the allowance of such a claim, the ascertainment of the amount due, and the issuing of a warrant for the payment thereof.
" Such transfers, assignments, and powers of attorney must recite the warrant for payment, and must be acknowledged by the person making them, before an officer having authority to take acknowledgments of deeds, and shall be.certified by the officer; and it must appear by the certificate that the officer,at the time of the acknowledgment, read and fnlly explained .the transfer, assignment, or warrant of attorney to the jmrson acknowledging the same."
In Lopez's Case (24 C. Cls. R., 84) we reviewed the decisions on that section, and while we held that a power of attorney to receive payment of a claim, unrevoked and uncontroverted, might be recognized, and payments made upon them to the attorney, at the option of the defendants, in all other cases they are to be held as absolutely void.
In Gillis's Case (95 U. S. R., 413) the Supreme Court says:
"No language could be broader or more emphatic than these enactments. The words embrace every claim against the United States, however arising, of whatever nature it may be, and wherever and whenever presented.
u So far are they from giving new potency to assignments and transfers of rights in action, so far from, changing the common law rule that such rights are not assignable, the statute strikes down and denies any effect to powers of attorney, orders, transfers, and assignments which-before were good in equity, and which a debtor was bound to regard when brought to his notice."
The attorney for the bank argues in his brief that the amount due on the contract is a liquidated debt admitted by the defendants, and so not within the ban of the statute (Rev. Stat., sec. 3477). He cites a circular of the First Comptroller, issued in 1853, with the indorsement thereon of Mr. Justice Strong, after the decision in Gillis's Case, printed in full in Lopez's Case (24 C. Cls. R., 94.)
It is within my personal knowledge that the cases represented to the consideration of Mr. Justice Strong were those of powers of attorney by judges and other officers of the Government to draw their salaries, and it was with special reference to such cases that he made the indorsement. It must be observed that this was done before the decision in Bailey's Case (15 C. Cls. R., 490, affirmed on appeal in 109 U. S. R., 432), McKnight's Case (98 C. Cls. R., 185, affirming the decision of this court in 13 C. Cls. R., 292), and Lopez's Case above cited, in all of which the doctrine is enunciated as stated in the latter case:
" The jiractical effect of the law thus interpreted is that such assignments and transfers, whatever be the consideration, are mere naked powers of attorney, revokable at pleasure."
Probably that was the real meaidng of the First Comptroller's circular, which concludes as follows:
" My conclusion is, that ordinary debts and accounts against the Government, which have been legally contracted and never disputedare not claims within the meaning of those statutes, and that the statutes do not apply to them, but apply to uncertain damages and losses, extra allowances, pensions, equitable demands, claims for the correction of alleged errors, claims for a return or repayments of duties, items of account which have been rejected or are disputed, and such classes of cases as are usually referred to the Committee on Claims and to committees other than the Committee of Ways and Means."
In the light of more recent decisions we must conclude that Mr. Justice Strong did not intend to go further in this note than these later decisions have gone.
It is argued for tbe bank tbat tbe correspondence of tbe Secretary of tbe Treasury, set out in findings vm to x, added force to tbe power of attorney and induced tbe bank to make tbe loan on tbe faitb of tbe representations there made, by wbicb.it acquired an equitable if not a legal right to tbe retained.
It is well settled tbat no officer of tbe Government can do any act which will relieve assignments and powers of attorney from tbe operation upon them of Revised Statutes, section 3477. In McKnight's Case (13 C. Cls. R., 292), tbe Secretary of War made a requisition upon tbe Secretary of the Treasury for a warrant in favor of tbe assignees. Tlie accounting officers (tbe Third Auditor and Second Comptroller) stated an account in their favor; tbe Secretary of tbe Treasury drew a warrant in their name, and tbe First Comptroller countersigned it as " warranted by law" (Rev. Stat., sec. 269). Part, payment was made thereon by tbe Treasurer.
With all these six high officers of tbe Government recognizing in writing tbe validity of tbe assignment, it was held to be void and of no force.
Tbe question remains whether or not this is all changed by tbe provision of tbe Act of March 3, 1887, chapter 359, section 1 (1 Supp. Rev. Stat., 2d ed., p. 559), giving tbe court jurisdiction of claims "in respect of which claims tbe party would be entitled to redress against tbe United States either in a court of law, equity, or admiralty if tbe United States were suable."
This question involves more than tbe mere right of an assignee to maintain a suit against tbe United States, which seems to have been tbe only point considered in Emmons v. United States (48 Fed. Rep., 43), cited by counsel for tbe bank. It involves tbe further question whether or not any force or effect can be given in equity or law to contracts declared by statute to be " absolutely void."
In Mattox v. Highstine (39 Ind., 95) it was enunciated as a general principle tbat—
"An equity can not grow out of an illegal and void transaction."
In Gillis's Case (95 U. S. R., 413) tbe Supreme Court said, what we have quoted in another connection:
"The statute strikes down and denies any effect to powers of attorney, orders, transfers, and assignments which before were good in equity, and wbicb a debtor was bound to regard when brought to bis notice."
The application of equity in such cases was considered by the Supreme Court in Spofford v. Kirk (97 U. S. R., 484). The court there says:
"We are brought, then, to the inquiry whether such an assignment of a claim against the United States, made before the claim has been allowed, and before a warrant has been issued for its payment, has any validity, either in law or in equity."
Then, after reciting the statutes, the opinion proceeds to say:
u It would seem to be impossible to use language more comprehensive than this. It embraces alike legal and equitable assignments. It includes powers of attorney, orders, or other authorities for receiving payment of any such claim, or any part or share thereof. It strikes at every derivative interest in whatever form acquired, and incapacitates every claimant upon the Government from creating an interest in the claim in any other than himself."
The final conclusion in that opinion is this:
u It follows that, in our opinion, the accepted' orders under which the appellant claims gave him no interest in the claim of the drawer against the United States and no lien upon the fund arising out of the claim. His bill was therefore rightly dismissed."
That was a case in equity by an assignee upon orders drawn upon, not the United States, but upon the attorneys of the original contracter, and accepted payable out of any money received by them from the United States on a claim of such contractor. ' It was brought in the Supreme Court of the District of Columbia, which had full equity powers. And yet in that case and under those circumstances the court held that even in equity the orders were void and of no effect, and that no force whatever could be given to them. On appeal that decision was affirmed.
It is clear from the authorities that one of the objects of the statute was to protect the United States from liabilities, directly or indirectly, at law or in equity, to other claimants than those with whom they have contract relations, and from being drawn into controversies between parties claiming different interests. Here the bank makes ño claim to the whole, but only to part of the money due, and to admit their right would make it necessary to compel tbe defendants to divide tbe indebtedness between different parties.
If no force whatever is to be given to tbe power of attorney to Tan Zandt, then tbe case of tbe bank stands on this: It made loans to Sundberg & Co. upon their promissory notes, for tbe purpose of aiding them to carry on their contract with tbe Government, upon tbe assurance that they were to be paid out of tbe proceeds finally due for tbe work. This was a simple contract debt, and gave tbe bank no ben on tbe money due or which might become due on tbe contract which could be enforced in equity.
It has been held that—
" Before simple contract creditors can resort to a court of equity to collect their debts or to remove obstacles interposed to collecting them, they must show a lien, or that they have obtained judgments at law tbe collection of which they can not enforce without the aid of a court of equity." (Reese v. Bradford, 13 Ala., 837.)
So that, with or without the power of attorney, the bank had no valid claim at law or in equity, and their petition must be dismissed.
The bank's claim being disposed of and out of the way, the next question arises, to whom are the defendants liable1?
Charles A. Hitchcock is the only other claimant in this court or before the Treasury Department. He was one of the sureties of Sundberg & Go. on their bond, given at the same time with the execution of the contract, in the penalty of $30,000, for the faithful performance thereof.
May 3, 1890, the Supervising Architect of the Treasury telegraphed to Sundberg & Go. that unless within eight days they could give evidence of their ability to complete the contract the Government wouid assume charge of the work and complete it at their expense, and at the same time he sent a copy of the telegram to each of the bondsmen. This seems to have made no impression upon any of the bondsmen but Hitchcock, who proceeded to Galveston, and immediately upon his arrival there telegraphed to the Supervising Architect as set out in finding xiv. His proceedings thereafter appear by said finding to have been these:
" Hitchcock, upon his arrival at Galveston, found the work on the building almost entirely suspended, as the contractors could get no materials, several attachments having been laid on material already on the ground, and some tied up in the frieght house awaiting the payment of freight charges. "
" The firm of Charles Sundberg & Co., as well as Charles Sundberg individually, were insolvent and without credit or financial standing, and could not get trusted for any material. "
" Hitchcock thereupon assumed control of the work, took a bill of sale of all material on hand from Charles Sundberg & Co., paid up and settled the claims for which attachments had been made, paid up the mechanics and laborers who were in arrears, put a skilled and experienced expert in charge, and proceeded with the prosecution of the work and completed the same at his own cost and expense.
" In the course of carrying out the work said Hitchcock incurred a total expenditure of $36,734.18.
" It was arranged between the contractors, Sundberg & Co., said Hitchcock, and the disbursing officer at G-alveston, that all future checks in payment of the work were to be drawn as before, to the order of Charles Sundberg & Co., and were to be thereupon indorsed by Sundberg, and then turned over to Hitchcock or his agent. This arrangement was carried out, and in this manner Hitchcock received $17,684 previous to November 12,1890, and $3,394.58 since."
Thus it will be seen that after the failure of Sundberg & Co. Hitchcock alone, upon the call of the defendants and as one of the sureties on the original contract, finished the work
at an expense of. $36,734.18
towards which he has received. 21,078.58
Balance against him. 15,655.60
And if he receives the retained amount. 11,859.60
he will still be a loser to the extent of. 3,796.00
This retained money he claims not as assignee, but as one of the parties as surety on the original contract, and as one who has expended his own money on the work. His case differs very little and only in matters of form from Behan's Case (18 C. Cls. R., 687), affirmed on appeal (110 U. S. R., 339).
Behan was surety, with others, for one Roy, on a contract for making certain improvements on the harbor of New Orleans. The contract was annulled by the Engineer Office, and the sureties were notified that they had a right to continue the work under the contract if they desired to do so. The sureties were asked to notify the Engineer's Office in writing if they desired "to continue the work on their own account and under the contráete Beban, as one of tbe sureties, elected to go on with the work. He expended large sums of money in its prosecution and maintained an action therefore in his own name.
The only difference between the positions of Behan and Hitchcock was that in Behan's case the contract was formally annulled and in Hitchcock's case it was not; but each-was allowed to go on with the work under the original contract (annulled or not annulled) as a matter of right, on account of being a party thereto as surety on the bond. Thé right of a surety to finish a contract in his own name when his principal is in default has often been recognized by the defendants' officers. It was so in Behan's case, as hereinbefore pointed out, and it was so in this case of Hitchcock, as stated in the letter of the Secretary of the Treasury transmitting the case.
But Hitchcock's right to sue on this contract does not depend altogether upon his having done the work. The claim was transmitted to the court by the Secretary of the Treasury as involving a controversy between Hitchcock and the Prairie State National Bank as the only claimants. (See letter of transmission.) This gave to each of them a right to file the petition, and each is therefore rightly a claimant. The petition of the bank being dismissed, Hitchcock is left as the only claimant, and he lias sustained his claim to the money in controversy.
In completing the contract Hitchcock had expended nearly $4,000 more than all the balance due thereon when the work was finished, including the retained amount now in controversy. This, although held back upon different estimates, was all along payable upon, in the words of the contract, "the completion of the entire work and the approval and acceptance of the same" by the defendants. Had not Hitchcock come forward, put his own money into the work, and finished the contract this retained money would never have become payable to anybody. Not even the bank, had its claim been valid, would have been entitled to it or to any part of it, because the cost of completion was greater than the balance of the contract and the retained amount would have been used up. It was wholly Hitchcock's money employed in completing the work that makes the amount now in controversy payable at all.
The mere form of tbe judgment is not very material in this court, which is not bound by the strict rules of pleading and practice of the common law. Whether it should be in favor of Charles A. Hitchcock alone or of Charles Sundberg & Co., to the use of Hitchcock, as primarily prayed for them, or of Charles Sundberg & Co. alone, as they pray in the alternative, may be somewhat doubtful.
That Hitchcock is ultimately entitled to the money in controversy is settled, and that the whole of it is to go to him in the end is clear; and we may enter judgment in such form as best to accomplish that result. This may be done by giving judgment in favor of Hitchcock alone. All the defendants ask in that regard is that they shall be protected from any other suits and demands in this matter. This they will be'. Sundberg & Co., the original contractors, never have been claimants before the Treasury Department. They filed a petition in this court with the petition of Hitchcock, in which they pray for judgment in favor of the latter. By that prayer they will be forever estopped from setting up a claim in their own behalf if we give judgment, as they request, in favor of Hitchcock.
The judgment of the court, upon the petitions of Charles A. Hitchcock and Sundberg & Co., is that Charles A. Hitchcock recover the sum of $11,859.60.