Opinion ID: 1752024
Heading Depth: 1
Heading Rank: 4

Heading: Travelers' Claim to Cross-Indemnification

Text: The bond applications contained an assignment to Travelers by Stigler of the proceeds of the contract to secure not only the obligations of the contractor under the particular contract, but any other obligation and liability of the contractor to the surety. Under this provision, Travelers claims that since the funds available on the Webster and Yalobusha contracts are insufficient to indemnify it, then it is entitled to be indemnified from the proceeds of the Chiwapa contract. Travelers relies on Horne v. State Building Commission, 233 Miss. 810, 103 So.2d 373 (1958). The Horne case, supra, is distinguishable, however, inasmuch as the owner, contractor and surety were the same in the two contracts involved. In the present case, we have three different owners. The case is further distinguishable because Horne was decided before the enactment of the Uniform Commercial Code. We hold that the assignment contained in the bond application may not be used to create a security interest in the proceeds of an entirely independent and different construction contract unless there is compliance with provisions of the Uniform Commercial Code. When the surety seeks to use the assignment in the bond applications to reach beyond the immediate contract so as to claim a security interest in another contract involving another owner, the assignment loses its identity as an aid to the equitable lien which a surety of a defaulting contractor has. The assignment thereupon becomes, to the extent that such cross-indemnification is claimed thereunder, a mere financing transaction subject to the filing requirements of the Uniform Commercial Code.