226 P. 976 | Cal. Ct. App. | 1924
On the thirteenth day of June, 1916, an agreement was entered into between the county of Kern, acting through its board of supervisors, as the party of the first part, and the Coast Construction Company, a partnership consisting of Stephen V. R. Malcolm and others, as party of the second part, for the construction and improvement of 7.56 miles of that certain highway in the county of Kern known as and called the McKittrick-Maricopa road, for the estimated sum of $44,766.15, to which was thereafter added, as extras, the sum of $1,017.42. At the same time, and as a part of the same transaction, there was delivered to the board of supervisors of said county of Kern and made a part of said agreement two certain bonds, executed by the American Surety Company of New York, the cross-complainant and respondent *637 in this action. One of said bonds was for the faithful performance of said contract and executed in the sum of $11,191.54. The second bond was given for the security of materialmen and laborers and was in the sum of $22,383.08.
The agreement was conditioned in the usual form and provided for progress payments in the sum of seventy-five per cent of the estimated value of the work and the retention by the county of Kern of the sum of twenty-five per cent until thirty-five days after the final completion of the work agreed to be performed. The bonds were conditioned as is usual in such cases.
Thereafter, and on or about the thirtieth day of June, 1916, the Coast Construction Company, the contractor in the agreement above mentioned, entered into an agreement with the Empire Securities Company, the appellant in this action, whereby the execution of the contract for the work above provided to be done by the Coast Construction Company was set forth, also the execution of the two bonds given by the American Surety Company of New York. The amount of the contract and other matters were set forth. It was mentioned that the contractor desired to borrow money for the purpose of enabling the contractor to carry out the aforesaid contract and the Securities Company was willing to lend money for that purpose. It was agreed that the Securities Company would advance to the contractor in installments, as requested from time to time, money not in excess of seventy-five per cent of the work done and materials furnished under the aforesaid contract, etc.; it was further provided that an agent of the Securities Company might be at all times upon the work with authority limited to the keeping of the time of employees, the paying of bills for labor and material and seeing that all labor and material previously furnished had been paid for, etc. As security for such advances, the agreement assigned to the Securities Company all the right, title and interest of the contractor in and to the moneys that might become due and payable under the agreement for the improvement of the road above mentioned.
Under this agreement with the contractor the Securities Company loaned the sum of $32,284.65, all of which was *638 entered into and became a part of the general banking account of the Coast Construction Company.
The contractor entered upon the performance of the work early in July, 1916, and proceeded with the same until on or about the eleventh day of December, 1916, when it abandoned the same and discontinued work thereunder. At the time of the abandonment of the work, five units, upon which seventy-five per cent estimates, had been made, were completed. Of these, four estimates in the aggregate of $20,304.94 had been paid. The fifth estimate, approved by the highway commission, but not by the board of supervisors, in the sum of $3,867.25, remained unpaid. It is this sum that is in controversy in this action. The trial court awarded this sum to the American Surety Company, and it is from this part of the judgment or decree of the trial court that the Securities Company appeals.
At the conclusion of the trial it was adjudged that laborers and materialmen had enforceable claims against the Surety Company in the total sum of $15,703.38. It was also found by the trial court that, at the time of the abandonment of the contract the status of the contract and the amount of money still in the county treasury in the county of Kern was as follows:
"Contract price ............................... $44,766.15 Extras .......................................... 1,017.42 -----------
Total ....................................... $45,783.57 Payments to contractor ......................... 20,304.94 -----------
Balance available for completion.............. $25,478.63
The amount last stated was made up as follows:
Retained percentages ................. $ 8,057.39 Fifth estimate, approved by Highway
Commission but not by Supervisors, exclusive of retained percentage of 25 per cent ........................... 3,867.25 Unearned balance of contract price...... 13,553.99 ---------- Unexpended balance............................... $25,478.63 It was further established that the county of Kern had forfeited such *639 contract and had elected to and did complete the work therein provided for, expending in connection therewith, after allowance of certain credits, the sum of..................... $18,660.26 [Tr. 615] Leaving in the hands of the county for such disposition as the court might direct, the sum of............................. $ 6,818.37" As to the payment made by the contractor for labor and material, the trial court found as follows: "Approximately the sum of $20,000 was proven by said contractors to have been expended in connection with said contract, but a substantial part of said last-named amount was expended for purposes other than material and labor. Whether such sum was paid from the fund so furnished by said Empire Securities Company, or from moneys borrowed by said contractors from other sources, because of the mingling of said funds, to the knowledge, and with the consent of said Empire Securities Company, it is impossible to determine."
The trial court also found that the Securities Company, at the time of the assignment of $3,867.25 was made to it by the Coast Construction Company, advanced nothing of value and did not pay out any money represented or covered by said assignment towards the discharge of the claims of the materialmen for the payment of labor on account of the improvement of said highway; that the only promise made by the Empire Securities Company was that, if a representative of the Coast Construction Company would go to Bakersfield and there assign to the Empire Securities Company said claim or estimate in the sum of $3,867.25, the Empire Securities Company would then consider the making of a further advance. This advance was desired to meet a pay-roll of the Construction Company then due. This advance was never made. The court further found that the Securities Company desired the assignment for the intent and purpose of appropriating to its own use the amount of money represented thereby and not for the purpose of applying the sum towards the payment of labor performed upon or materials used in construction *640 work on the highway referred to. These findings are challenged as well as one involving the good faith of the Securities Company. This latter, however, for the reasons hereinafter stated, we do not deem material. The testimony shows without conflict that the Coast Construction Company had at least four contracts for work and improvement during the pendency of the agreement involved in this action in which the Securities Company, the appellant in this action, was doing the financing; that all the money received from the Securities Company went into and became a part of the general banking account of the Coast Construction Company and the funds thereof so intermingled that their identity became lost. The testimony also shows that while the Empire Securities Company had a representative on the scene of the work no special effort was made to ascertain if the funds were being properly applied by the Coast Construction Company. The witness who had charge of the financial affairs of the Empire Securities Company during the period in question, testified as follows: "I made no special effort to know that the money paid to them was paid to any particular creditor, or materialman of any kind." Also, that he knew that the Construction Company was keeping its accounts at the Merchants National Bank. In relation to the assignment of the fifth estimate hereinbefore referred to, this witness also testified in substance as follows: That he knew Mr. Farish, one of the partners composing the Coast Construction Company; that on or about the twenty-first or twenty-second day of November, 1916, he had a conversation with Mr. Farish in relation to money needed to meet the payroll then owing by the company; that he paid Mr. Farish the sum of $12.65 to meet the traveling expenses of Mr. Farish in going and returning from Bakersfield; that if Mr. Farish would go to Bakersfield and make an assignment of the fifth estimate to the Securities Company that the Securities Company would then consider the question of further advances. No further advances, however, were made. It appears that Mr. Farish went to Bakersfield, indorsed an assignment on a warrant, returned to Los Angeles and reported his action to this witness. The warrant, however, does not appear to have been delivered to *641 the Securities Company, nor does it appear just what was done with the warrant thereafter. This witness also stated that Farish reported to him that the affairs of the Coast Construction Company were in bad shape and that another member of the Coast Construction Company had deliberately and willfully deceived him (Mr. Farish) as to the condition of the company.
It is by virtue of this assignment of the fifth estimate that the Securities Company claims to be entitled to the sum of $3,867.25, as hereinbefore stated. To support its contention the appellant relies upon the cases of Los Angeles Rock andGravel Co. v. Coast Construction Co.,
[3] In so far as the assigned warrant is concerned which is involved in this case, the Securities Company stands in the position of a general creditor. No money was advanced on account thereof, as heretofore stated, and as also shown all moneys advanced by the Securities Company went into the general banking account of the Coast Construction Company upon which checks were drawn in prosecution of at least four distinct and separate contracts for that many different specified improvements. In this particular the language of the court inTitle Guaranty Surety Co. v. Dutcher, 203 Fed. 167, quoting from page 169, is directly applicable: "All the money borrowed by the contractor went into his general bank account with other of his money. During the time involved he had four separate contracts with the city. No account was kept of the particular work upon which disbursements were made, and it is not shown how much, if any, of the money borrowed, or other money of his, was paid upon the contract in question." Under such circumstances it was held that the rights of the surety were paramount. A large number of cases were also cited by the court in the above-mentioned decision. To the same effect is the case of First Nat. Bank of Seattle v. City Trust etc., 114 Fed. 529 [52 C.C.A. 313]. In that case the rights of the surety on account of moneys advanced by it to discharge claims for unpaid labor and material were held paramount to that of the bank which founded its claims upon money loaned to the contractor, which likewise went into the contractor's general banking account.
In In re McGarry Son, 240 Fed. 400 [153 C.C.A. 326], it is held: "That the surety, on payment of labor and material claims, was subrogated and that its equity attached as of the date of the bond, and that a mere volunteer's rights would be subject to those of the surety who pays the labor and material bills." (Citing Prairie State Bank v. United States,
In the case of Wasco County v. New England Equitable Ins.Co.,
The federal cases, heretofore cited, are supported by the decision in the case of Prairie State Bank v. United States,supra. Whether the law required the retention of twenty-five per cent is wholly immaterial as the contract of which all parties had notice so specified. An almost identical question was before this court in the case of Maryland Casualty Company
v. Shafer,
To summarize this case, we have these facts: The contractor was carrying on four contracts; all its money was placed into and withdrawn from a general banking account; the money was not traced; the appellant claims the thirty-eight hundred odd dollars on account of an assignment indorsed upon the fifth estimate upon which no money was advanced by the assignee but which it was understood, as shown by the testimony which we have quoted, the matter of advancing money would be taken up and further considered; the contractor defaulted in his work; at the time of the default the county had in its possession something over $8,000 in retained percentages, as well as other sums of money due and to become due the contractor; the surety advanced over $15,000 to pay the claims of materialmen and laborers on account of the contract.
In view of this summary and of all that we have hereinbefore stated, we think that the judgment of the trial court should be affirmed, and it is so ordered.
Hart, J., and Finch, P. J., concurred.
A petition by appellant to have the cause heard in the supreme court, after judgment in the district court of appeal, was denied by the supreme court on June 16, 1924.
*646All the Justices concurred.