Opinion ID: 1906076
Heading Depth: 1
Heading Rank: 2

Heading: The Surety's Appeal.

Text: On this side of the case, the surety claims entitlement to the entire fund as subrogee to the rights of the town as owner of the swimming pool. The bank's response is to argue that the surety's leading cases, National Shawmut Bank v. New Amsterdam Cas. Co., 411 F.2d 843 (1st Cir. 1969) and Finance Co. of America v. United States Fid. and Guar. Co., 277 Md. 177, 353 A.2d 249 (1976), do not apply to this case because chapter 573 of the Code governs the conflict. It asserts that no similar statute was involved in the cases which the surety relies upon. Of course, in both cases the surety bond was required by statute. National Shawmut, 411 F.2d at 844; Finance Co., 353 A.2d at 250. We pass the question of similarity in the various statutes, however, to consider whether, by its own language, chapter 573 affects the conflict at hand. The bank first contends that the town was required by § 573.15 to pay the earned but unpaid progress payment to the contractor. Section 573.15 provides: No part of the unpaid fund due the contractor shall be retained as provided in this chapter on claims for material furnished, other than materials ordered by the general contractor or his authorized agent, unless such claims are supported by a certified statement that the general contractor had been notified within thirty days after the materials are furnished or by itemized invoices rendered to contractor during the progress of the work, of the amount, kind, and value of the material furnished for use upon the said public improvement, and no part of such unpaid fund due the contractor shall be retained as provided in this chapter because of the commencement of any action by the contractor against the Iowa state department of transportation under authority granted in section 613.11. (emphasis added) This section was the subject of discussion in Sinclair, 235 Iowa at 598, 16 N.W.2d at 362. There the question was what the phrase unpaid fund due the contractor meant. The disposition of the instant argument, however, rests on the phrase on claims for material furnished. We deal here with the rights of the town against the contractor. Section 573.15, by the phrase just quoted, refers only to the claims of materialmen. The claims of materialmen (as well as laborers) were, of course, the subject with which Sinclair dealt. The section simply has no application to a dispute between the town and the contractor over progress payments which are earned before the contractor's default. Nothing in chapter 573 would apply to this dispute. This conclusion is not surprising, in light of chapter 573's title: Labor and Material on Public Improvements. [1] With the question of whether chapter 573 governs answered, this case closely parallels National Shawmut. The town of Malvern had the right to keep the earned but unpaid progress payments, at least where the excess cost of completion was greater than those earned payments. National Shawmut, 411 F.2d at 848, citing American Bridge Co. v. City of Boston, 202 Mass. 374, 88 N.E. 1089 (1909). Because any dispute between town and contractor would therefore be resolved in the town's favor, the surety, as the town's subrogee, must prevail. On remand, trial court shall enter judgment for the entire $10,500 fund in favor of the surety. Reversed on the appeal, affirmed on the cross-appeal, and remanded. All Justices concur except UHLENHOPP, J., who takes no part.