188 Ind. 621 | Ind. | 1919
Lead Opinion
— This is an appeal from a decree of the Marion Superior Court. The court made a special finding of facts- and pronounced its conclusions of law thereon. Following its conclusions of law the court entered a decree by the terms of which the proceeds arising from the construction of a certain sewer under a contract between the city of Indianapolis and the Julius Keller Construction Company were ordered to be paid out on certain claims presented under the pleadings, the amounts of which were fixed and the priorities of which were determined.
For brevity in stating the substance of the finding of facts, the Equitable Surety Company will be designated as the Surety company, the Aetna Trust and Savings Company will be designated as appellant, the Julius Keller Construction Company will be designated as the Construction company, the city of Indianapolis will be designated as the city, the Indianapolis Mortar and Fuel Company will be designated as the Indianapolis company, and the Cannelton Sewer Pipe Company will be designated as the Cannelton company.
The special findings show the entering into a contract on May 5, 1913, by the city and the Construction company for the construction of the sewer which contained the agreement of the latter “to furnish at their own proper cost and expense all the necessary materials and labor of every description, and to carry out and complete in a good, firm and substantial manner the construction of local sewers with their appurtenances in Schurmann Avenue;” that on May 2, 1913, the Construction company made application for surety bond agreeing that as a part of the consideration for the making of the bond the Surety company should “be subrogated to all of the applicant’s rights, privileges and properties as principle and otherwise in said contract, and hereby assigns, transfers, conveys to said company all the deferred payments and retained percentages, and any and all moneys and properties that may be due and payable to the applicant at the time of such breach or default that thereafter may become due and payable” on account of the contract; that both prior to the beginning of this action, and since, the Cannelton company and the Indianapolis company made demands of the Surety company to pay for materials sold for and used in the sewer; that on
The court concluded that the city was entitled to retain $4,507.91 of the $45,079.13 under its contract; that the appellant should recover of the Construction company $46,817.93, of which $34,275.12 (for moneys advanced with interest) is preferred to all other creditors, and from the receiver $2,664.08, which is preferred to all claims except costs of administration, or a total of $37,939.20 preferred, and $12,542.81 general claims; that the Cannelton company is entitled to $3,-459.40, and the Surety company to $2,368.68, by assignment from the Indianapolis company, making a total of $5,828.08 to be paid next after the $34,275.12 of appellant; that the receiver is entitled to be paid $2,550 for services of an engineer, attorneys and himself, together with costs herein, which shall be preferred to all creditors ; that the receiver is entitled to receive at once from the city whatever it has in its possession derived from the assessment for the construction of the sewer less the amount held by it as a guarantee fund, and that the city be perpetually enjoined from delivering the final assessment roll to appellant. The judgment of the trial court follows its conclusions of law.
The contention of appellant is that it was and is the sole and exclusive owner of the assessment roll, a bona fide purchaser for value, and therefore no one other than appellant could have any interest therein, except the city in ten per cent, thereof as a guarantee fund. Upon this contention is based all of appellant’s assignments of error.
The balance due under the contract, including any amount may be ultimately due from the city out of the fund retained for repair of the sewer, passed to appellant under its assignment, free from any claims in favor of persons furnishing material or labor, and should be ordered paid subject only to the priority of the costs of completing the work, including money borrowed by the
The court erred in its conclusions of law, and' the judgment is therefore reversed, with instructions to the trial court to restate its conclusions of law in conformity with the rules stated in this opinion.
Rehearing
On Petition for Rehearing.
— The original opinion holds that unpaid claims for material furnished to the contractor before it abandoned the work had no priority over the claim of appellant under its equitable assignment of the proceeds of the contract. The writer of the opinion entertained some doubt as to the correctness of this statement at the time of the adoption of the opinion by the court, and, from subsequent consideration and investigation, the doubt has ripened into a conviction that the rule thus announced is erroneous.
By the appointment of a receiver the whole controversy was drawn within the jurisdiction of a court of equity. In a court of equity having jurisdiction to declare priorities and to order a distribution of the proceeds of the contract, the rights of the assignee of such proceeds were the same that those of the assignor would have-been in case no assignment had been made. If the contractor had been in court, and had been insisting on an order directing the proceeds to be turned over to him in preference to the unpaid claims allowed by the court for labor and material which entered into the construction of the work, I think there can be little doubt that the claims for such materials would be entitled to priority of payment.
For the reasons stated, I am of the opinion that the unpaid claims for materials furnished to the contractor prior to the time he abandoned the contract are entitled to preference over the claims of appellant under the equitable assignment of the proceeds of the contract.
While I vote to deny the petition for rehearing in preference to adopting the views expressed in the dissenting opinion, I do so with the mental reservation herein expressed. I have an abiding conviction that the original opinion should be modified in the manner indicated. None of the other members of the court agree that it should be so modified.
Separate Opinion.
— I agree with the prevailing opinion wherein it holds that the superior court erred in requiring that out of the assessment roll should be paid two claims for materials purchased by the contractor for
The superior court was doubly wrong in allowing payment out of the assessments to the surety of an amount the surety had paid out in a pretended purchase of one of these material accounts, because: first, such account was not chargeable against the assessment roll; and, second, the surety was liable therefor directly, and had no right as against others having equities in the fund to buy this claim and assert a prior equity securing its payment.
I cannot agree, however, that the prevailing opinion is correct in allowing as prior to the claim of appellant for money advanced on faith and security of the assessment roll the amount the receiver borrowed for use in completing the contractor’s work, or in allowing priority to the costs and expenses of the receivership. While it is a fact that the receiver borrowed from appella'nt the sum needed and used in completing the work, and the superior court ordered that the sum so borrowed be repaid to appellant as a prior claim, it may seem on first impression to matter little, in dollars and cents, to appellant that this sum is deducted from the assessment, as it is paid to appellant after such deduction; but appellant loaned the total amount of the assessment roll, and in addition thereto loaned the amount needed to complete, and is entitled to recover both sums, and its equities as to both should be considered. If the contractor had purchased the amount of material and labor necessary to complete his contract, and had not paid therefor, there can be no doubt that his surety would have been directly liable therefor and the assessment
This is a proceeding in equity, and the result sought is a marshalling of priorities and the application of a certain fund in accord with equity. As shown by the prevailing opinion, the amount derived by assessment for sewer construction primarily constitutes the fund. The relations of the parties to this fund were originally such that the contractor would be entitled thereto under his contract. To mature his said right thereto he must perform his contract, including payment of all expenses of labor and material. Thus far his rights and obligations are rights at law. He abandoned the work. Out of this failure no equities grow in his favor. He filed bond securing such performance. The surety on this bond then became bound at law in some manner to make good the default. Such a surety is not a favorite at law or in equity. It received compensation it deemed sufficient to protect it in the event of liability on the bond.
In this case the surety refused on demand of the city to do anything. This did not add to its. equities. It was expressly obligated to pay material and labor claims. ' This it refused to do. In an effort to save itself from one such claim it purchased the same, and asserted that it thereby was entitled, as against all others interested, to an allowance of this claim. No equity arises in its favor out of this attempted evasion of its legal obligation. If it had performed its obligation, this litigation and receivership would have been
The city is a party to this proceeding. It is not involved at this stage, except as a stakeholder, ready to pay the right party, or to pay to the court of equity, that the court may distribute to the right party. The material claimants are parties, but they have legal remedies against the surety, and have no claims, legal or equitable, to the fund. The only other party is the Aetna Trust Company. It was induced to loan money to the contractor by the fact that a legal contract had been made between the city and the contractor, the performance of which was secured by a bond. The payment of all material and labor claims necessary to completion was secured by the bond. This was assurance that the sewer would be completed, and that the city would resort to the bond in event of default by the contractor, or that the city would complete the sewer, or cause it to be completed, at the expense of the contractor or his surety. Thus an assessment roll and the collection thereof was assured, and the statute in force when this contract was made created a lien upon the property affected at the date of the contract. Acts 1905 p. 236, §108, §8711 Burns 1914.
It might have resisted, as might others, the appointment of a receiver, because an ample legal remedy existed in the city to cause completion at the expense of the surety. There may have been need, however, for a receiver, because neither the city, nor the contractor, nor his surety would move or act toward completion. The assignee of the roll waived nothing by allowing a court of equity to undertake working out the duties, obligations and equities of all parties. It had a right to anticipate that a court of équity would so do at the expense of those obligated therefor, and that the court would use its powers to bring in from such obligated parties the expense of so doing. When all this is considered, where does equity range the rights and priorities of the surety and the Aetna Trust Company? That is the only question here. The defaulting surety cannot stand on the same plane, as to any part of the Aetna company’s advancement, with the Aetna company, which company has defaulted in nothing.
The prevailing opinion holds that in any event the
The prevailing opinion admits that the assignee of an anticipated assessment roll takes an equitable interest, but states that this amounts to nothing except as ripened by performance of the contract. Such an equitable interest included a right to the protection of performance by those obligated thereto. The surety became responsible for the completion, and thus for the ripening of the equitable rights of the assignee, and cannot take advantage of its own wrong in failing to cause completion, and assert that its own default having prevented the assignee’s rights from ripening, the assignee must suffer and the surety benefit.
Therefore I am of opinion that the trial court also erred in protecting the surety by requiring that the amount borrowed by the receiver be paid out of the assignee’s assessments, and in requiring that the costs of the receivership be paid out of the assessments.
The reversal of the decree is approved, but the mandate should be that the total amount of the assessments be paid over to appellant, less the inspection charges, and including that to be released by the city at the end of the guaranty period, and, further, that the'receiver be directed to proceed against the surety for the amount expended in completion, and the costs of the receiver
Note. — Reported in 122 N. E. 421,125 N. E. 213,123 N. E. 353.