178 P. 764 | Utah | 1919
The facts ont of which this controversy grew, as shown by the record and findings of the court, are as follows :
On or about July 5, 1913, defendant A. A. Clark Company entered into a written contract with Sevier school district of Sevier County, Utah, to construct a high school building at an agreed price of $44,282, at Richfield, in said county. Within a few days after the date of the contract the A. A. Clark Company assigned to the-Merchants’ Bank in writing all sums of money that might become due to it from time to time under, and by virtue of said contract, and at the same time, issued and delivered to the bank a written order authorizing the school district to pay the said bank all moneys to become due to Clark Company on account of the erection of said building. The school district, however, was not notified of such assignment until after the delivery of the final warrants in January, 1914. During the construction of the building the plaintiff lumber company furnished certain materials for use and which were used in the construction of the building. The defendant Price, and certain other defendants, furnished materials and performed labor in the erection of the building. On or about January 17,1914, Clark Company, through its representative, A. A. Clark, went to the officers of said distinct and represented that the building was substantially completed, and, after an examination by the board of education and the architect, and it being ascertained that the building was not completed, but was thought to be substantially so as represented by said A. A. Clark, the board of education accepted said building upon the promise and assurance of said Clark Company that it would continue its work on the building and complete the same according to plans and specifications. It was also determined at that meeting that there was then unpaid as part of the con
To that complaint the Merchants’ Bank interposed a demurrer, and, among other grounds, alleged that the district court of Salt Lake County was without jurisdiction to entertain the action, and that the complaint failed to state sufficient facts to constitute a cause of action. The demurrer was overruled, and an answer was filed in which objection was still interposed to the jurisdiction of the court. The bank, in addition to the answer, filed a cross-complaint against its co-defendant the Sevier school district and prayed for judgment for the amount of the warrants held by it.
The defendant Clark Company and the trustee in .bankruptcy filed disclaimers to any interest in the fund, and they did not thereafter appear in the action. ’
The school district in its answer admitted the execution of the contract for the erection of the building, admitted issuing the warrants to the Clark Company, but alleged the same were so issued because and by reason of the false representations
The other defendants holding claims against the Clark Company filed an answer, and by way of cross-complaint alleged the indebtedness of the defendant Clark Company to each defendant respectively for the amounts claimed for labor done or materials furnished in the construction of the building.
Upon the issues thus made the matter was tried before the court without a jury, and judgment entered allowing the offset or counterclaim of the school district for the amount expended by it, to-wit, $1-,041.69. Judgment was entered in favor of the plaintiff for the amount found due it for materials furnished, and also in favor of the several defendants claiming indebtedness from the Clark Company. It was decreed that such amounts should be paid out of the fund due the school district prior to any claim or right on the part of the Merchants’ Bank, and that whatever remained of said fund, if any, should be paid to the said bank.
It is conceded that the right of the plaintiff to maintain this action, if at all, is by reason of the provisions of Comp. Laws Utah 1907, section 1400x. The provisions of that section, so far as material here, are as follows:
“Any person, partnership, or corporation who has done work or labor or furnished materials to any principal contractor for the construction or repair of any public work of any character for any county, town, city, village, or school district, may maintain an action therefor in the county in which such work, labor, or materials were done or furnished, against such principal contractor and such county, town, city, village, or school district, jointly, for the recovery thereof; but no judgment shall be rendered against any defendant therein, other than such principal contractor, for any amount greater than the amount due from it to such principal contractor at the time of the commencement of such action.”
The entire section will be found in the opinion of this court in South High School Dist. v. McMillan P. & S. Co., 49 Utah, 477, 164 Pac. 1041, to which reference is hereby made.
It is further contended on the part of appellant bank that the execution and delivery of the warrants by the school district was a payment of any indebtedness it owed to the defendant Clark Company, and that by reason of such payment the school district was not thereafter liable to hold or retain
“Such, instruments are not subject to the rules of the law merchant or in any manner to be treated like negotiable bonds. Whatever difference of opinion may have existed among the courts fifty years ago as to the negotiability of such warrants, the courts are now unanimous that, while such warrants establish prima facie the validity of the claims allowed and authorize their payment, they have no other effect; that they are in form negotiable, and transferable by delivery, so far as to authorize the holder to maintain in his own name an action on them, hut they are not negotiable instruments, in the sense of a law merchant, so that, when held by a bona fide purchaser, evidence of their invalidity or defenses available against the original payee would be excluded.”
This rule is also stated iu the following language in the first headnote to the case of Clatskanie State Bank v. City of Rainer, 72 Or. 243, 143 Pac. 909:
‘'City warrants are not negotiable instruments in the sense applied to unmatured commercial paper; and, while they are prima facie valid, yet as against any holder they are subject to all defenses, the same as any open account or nonnegotiable paper.”
See, also, Merrill v. Monticello, 138 U. S. 673, 11 Sup. Ct. 441, 34 L. Ed. 1069.
“Under the Bankruptcy Law a creditor, to be 'secured,’ must either hold security against the property of the bankrupt, or be secured by the individual obligation of another who holds such security.” Gorman v. Wright, 136 Fed. 165, 69 C. C. A. 76.
It will be remembered that A. A. Clark Company had assigned all amounts coming to it from the school district to appellant bank shortly before entering into the contract with the school district, and had carried that assignment into effect by delivering the warrants to the bank. It will thus be seen that at the time of the adjudication in bankruptcy the Clark Company did not own or have any interest in the fund owing by the school district. The defendants Ellison and
Complaint is also made by the appellant of the rulings of the district court in refusing to allow interest at the legal rate on the amount due from the school district. ‘ That assignment will be determined in considering the appeal of the school district.
Passing now to a consideration of the contention of the school district that the court erred in allowing interest at the rate of five per cent._on.the amount due from the school district after deducting the sums expended by it in completing the building: It appears that at the conditional acceptance of the building at the meeting between the representative of the Clark Company and the members of the school board in January, 1914, the real amount remaining unpaid on the contract was $9,060; that the school district had on hand only the sum of $1,560 to meet this indebtedness; that it was agreed between the parties that a warrant should be given for that amount
The provisions of Comp. Laws Utah 1907, section 1241, respecting the rate of interest are as follows:
‘ ‘ The legal rate of interest upon the loan or forbearance of any money, goods, or things in action shall be eight per cent, per annum. But nothing herein contained shall be so construed so as to in any way affect any contract or obligation made,before the taking effect of this title.”
It follows that the court erred in its refusal to compel the school district to pay interest at the legal rate on the amount less the set-off from the date due until paid.
For the reasons stated, the judgment is reversed, and the cause is remanded to the district court of Salt Lake county, with directions to that court to correct its findings and conclusions and enter judgment in accordance with the views herein expressed.
Neither party will recover costs on this appeal.