Court Opinion

ID: 9637829
Source: CourtListenerOpinion
Date Created: 2023-08-22 15:22:36.188835+00
Date Added: 2024-06-11T18:10:00.974385
License: Public Domain

SYMES, District Judge
(dissenting). I regret I am unable to agree with the opinion of the court in this case.
Appellant’s proposition may be stated as follows: Appellant contends that the funds in the hands of the highway commission were not held to secure the indebtedness due the_ materialmen, whose claims were paid by the appellees; that neither the plaintiff, the state, nor the highway commission were in any way liable to materialmen, who were mere general creditors of the contractor; that the latter had the right to assign, and the state to pay, these percentages to the appellant upon completion of the contract, in accordance with its terms.
In answer to this, the appellees refer to the clause in the contract giving the commission, if it elects, the right to compel payment of the materialmen, or to pay them itself, .etc.; that the appellant took its assignment subject to the provisions of the contract and construction bond, and could take no greater right than its assignor, the contractor, had; that the commission had the right to hold the balance due for the benefit of the materialmen.
The argument does not go far enough. It is not alleged that the state highway commission made an election such as appellees refer to, nor that it held back final payment until the contractor settled with the material-men. On the contrary, the stipulation of facts states that the contract was fully performed, and this balance earned by the contractor, and that the commission issued its final certificate to the contractor. This was equivalent to a waiver of the clause referred to, and relieved the appellees from any liability on the construction bond, leaving only the question of their rights and liabilities under the statutory bond. This provision giving the state the right to pay materialmen, if it so elected, was for its benefit, not the surety, and the appellees cannot take anything under it.
The statute required a bond for the protection of materialmen. This is a recognition that the commission, and this fund in its hands, are not in any way subject to their claims. Being creditors of the contractor, their sole remedy was against him and his surety, and the latter, after payment, succeeded to their rights, no more, no less. This bond was intended as a substitute for any rights the materialmen might have against the commission or the fund from which the contractor is paid, and relieved them of the necessity of looking to the state or the contractor. It gives them an adequate remedy at law, and therefore they have no right to equitable relief.
Numerous authorities are cited in the briefs, only a few of which are in point. In most of the eases cited only one bond was involved, given to secure both the performance of the contract and payment of materialmen as well. A well-considered ease is that of Adamson v. Paonessa, 180 Cal. 157, 179 P. 880, holding that payment by the surety of debts of a contractor with the city, pursuant to its obligation, works a subrogation in its favor to any rights possessed by those whose claims it paid, but gives no further rights. Under facts similar to the case at bar, the court held that parties furnishing materials to a contractor doing work for the city must look solely to the contractor and the bond which the statute required him to furnish, and not to the city. The court further points out the difference between the instant ease and the line of authorities cited by appellee, in that in those decisions, either by statute or the terms of the contract itself, a fund was in effeei reserved for the benefit of materialmen and laborers, whom the contractor might fail to pay; but that, in the absence of such a proviso or fund, the materialmen have no claim against the city — distinguishing Prairie State Bank v. U. S., 164 U. S. 227,17 S. Ct. 142, 41 L. Ed. 412.
In City of Topeka v. Federal Union Surety Co., 213 F. 958, this court held that, where the surety is engaged in the business of becoming a surety in consideration of premiums supposed to be based on the amount of the risk, such contracts are construed most strongly against the surety. There the surety *423company executed a bond to the state, conditioned for the payment of labor and material on a paving contract on the conclusion of which there was a sum due the contractor from the city, and also sums due from the contractor to the subcontractor, which the surety company had paid. The contractor thereafter sued the city, which pleaded as a set-off a prior indebtedness from the contractor to it, exceeding the amount of his claim. The city recovered judgment against him thereon. This court held that, as there being no statutory lien in favor of the subcontractor against the city to which the surety could be subrogated, it could not enforce an equitable lien in their behalf on funds in the hands of the city.
In Exchange State Bank v. Federal Surety Co. (C. C. A.) 28 F.(2d) 485, cited, the bon'd was conditioned for the payment of all indebtedness incurred for labor, materials, etc., so the case is not in point.
Reinhart & Donovan Co., v. Board of Commissioners et al. is an Oklahoma ease, 70 Okl. 127, 173 P. 848. It holds that materialmen furnishing material to contractors erecting a county courthouse are chargeable with knowledge of the statutory duty of the contractor to give the statutory bond; that, in the absence from the statute of express terms authorizing it, there are no liens or claims on the buildings, and materialmen could not garnishee funds in the hands of the state due contractors for the erection of pub-lie buildings, “as no right or claim which they had against the contractors could in any manner be enforced by them as against funds of the county or board of county commissioners.” It of course followed that a surety could have no better claim.
The Oklahoma statute gives materialmen no claim to percentages retained by public authorities for their-protection. The most that the appellee can claim here is that the commission might, if it so elected,, deduct from funds due the contractor amounts due for material, but no duty was imposed upon the commission so to do. Instead it accepted the contractor’s assignment to the bank and permitted the latter to supply funds with which to complete the contract. The contract, according to the findings of the commission and its engineers, having been fully completed, the balance due was payable to the appellant as assignee.
In dealing with the materialmen, the surety company was an entire stranger to itself as surety on the construction bond, out of which no liability arose. The Henningsen Case, 208 U. S. 404, 28 S. Ct. 389, 52 L. Ed. 547, involved merely a federal statute, and does not purport to be an authority on the subject or suretyship generally. The court in that ease points out that the stipulation, of the bond was not merely that the contractor should construct the building or road as in the case at bar, but that he should pay promptly all labor and material claims as well.
The appellees have no rights against the state or the fund, for the very good reason that the materialmen had none.