Empire State Surety Co. v. City of Des Moines

152 Iowa 531 | Iowa | 1911

McClain, J.

On August 21, 1907, tbe city of Des Moines entered into a written contract with tbe Marsh Bridge Company for tbe erection of a concrete bridge over thé Des Moines river at Locust street for the contract price of $124,800, to be completed in September of the following year. Dnder this contract, $25,000 in warrants drawn on the special appropriation made from the bridge fund of the current year was to be paid on estimates as the work progressed, and $25,000 more was to be paid by warrants out of the bridge fund of the next year so far as the amount of that fund would permit, and the balance of the contract price was to be paid from the proceeds of a tax levied in. accordance with the provisions of chapter 36 of the Laws of the Thirty-Second General Assembly, in certificates issued in anticipation of the collection of such tax in accordance with that statute. To secure the performance of this contract on the part of the Marsh Bridge Company, it executed its bond to the city of Des Moines “and to all persons who may be injured by any breach of any of the conditions” of the contract in the sum of $30,000; a condition of the bond being that the bridge company should pay “all claims for labor and material furnished for said work and .save said city of Des Moines harmless from . .' . any liens and claims for labor and material under the laws of the state of Iowa.” The Empire State Surety Company became the surety for the Marsh Bridge Company on this bond. Dnder this contract and hond the Marsh Bridge. Company proceeded with the construction of the bridge. Certain modifications of the contract as to the method of construction were made by agreement between the city and the bridge company after the date fixed for the final completion of the work. On January 5, 1909, when, as the trial court found, the piers for the bridge were fully constructed and the bridge had been filled with earth approximately to the level of the street and was passable for teams and for passengers and was in use by the public in that manner, the city council passed a resolution in which it was recited that it was deemed inadvisable to construct the paving and cement walks on the bridge until such time as the filling had become thoroughly settled and compact, and that it was equally inadvisable at that season of the year to finish the cement work incident to balustrades and steps, and that the public convenience required the opening of the bridge without unnecessary delay; and it was therefore provided that certificates for the balance of the total contract price not already paid in warrants be issued for the total amount of $74,800, of which amount $18,000 should be retained by the city until such time as the bridge company should have fully performed its contract and until the final acceptance of the bridge, and that the balance of. said bridge certificates should upon the surrender of partial estimate obligations be delivered to the bridge company as part payment of the contract price. In this resolution it was provided that the bond given by the bridge company on which the Empire State Security Company was surety should remain in full force and effect, and that the resolution should not have any force or effect unless the bridge company should file with the city clerk its own written acceptance of the provisions thereof and also the consent and acceptance of the surety company. The acceptance of the bridge company thus provided for was filed on the 7th of the same month, and on the 18th there was filed with the city clerk the consent of the surety company to the resolution last above referred to; such assent bearing date the 16th and purporting to be signed at the principal office of the company in New York City. On the 13 th of the same month an ordinance was passed for the issuance of certificates bearing date on the 15th; and also on the 13th an ordinance was passed levying and appropriating a special tax as provided by chapter 36, Acts of the Thirty-Second General Assembly, authorizing the city to levy taxes for the purpose of paying for the building of bridges and the issuance of certificates against such levies. Certificates were accordingly issued for $74,800, bearing date on the 15th as provided in the resolution, and on the 19th these certificates with the reservation of $18,000 as above indicated for the completion of the bridge were delivered by the proper officers of the city to certain banks under the direction of the bridge company and receipts for the certificates so delivered bearing the same date were given to the city auditor. The Central State Bank now holds all of these certificates. Soon after the issuance of the certificates, involuntary proceedings in bankruptcy were instituted against the Marsh Bridge Company, and it was declared a bankrupt, B. N. Moss being 'appointed its trustee, and by order of the bankruptcy court assented to by the city and other parties, not including the surety company, the trustee proceeded to carry to completion the contract entered into by the bankrupt with the city, which had already been partially performed.

The contention in the Ballard case is briefly that the levy of the special tax and certificates issued in pursuance thereof were invalid, and their enforcement should be enjoined for the reason that the city was without'jurisdiction or authority to act prior to the completion of the bridge in view of the provision of the statute authorizing such levy of tax and issuance of certificates (32 Gr. A., chapter 36, already referred to), in which it is recited that when the whole or any part of the cost of building any bridge such as is referred to in the act “shall be levied upon all property within said city, it shall have the power after the completion of the work by ordinance or resolution to levy at any one time the whole or‘any part of the cost of such improvement upon all of the taxable property within such city,” designating the percentage to be paid .each year and the number of years given for the maturity of each installment, and that certificates under such levy shall be issued payable out of said tax as collected. The contention of the surety company is that for the same reasons the levy and certificates were wholly invalid, and that the city is now bound to make a valid levy and issue valid certificates .wbicb shall be applied to the payment of claims for labor and material for the payment of which the surety company is obligated under its bond. The surety company also contends that the issuance of the bridge certificates before the completion of the bridge enhanced its liability and resulted in its discharge from all liability on said bond. The trustee of the bridge company joins in the contention that the levy and certificates were invalid, and ■that a new levy should be made and new certificates issued. These contentions may be properly disposed of in ope division of this opinion.

,. municipal specfaiAtaxcsS:: equitable relief. I. Much is said in argument on the questions whether the language of the statute as to the time when the levy may be made and the certificates issued is mandatory or directory only, and as to whether the city council was so far without jurisdiction as acti0I1 in making the levy and ordering the issuance of certificates was void. We are not impressed with the necessity of an elaborate discussion of these questions. It may well be that Ballard, although in fact the local agent of the surety company through whom negotiations for procuring the bond and for securing its assent to the making of the levy and the issuance of the certificates were conducted, is not estopped as a taxjiayer from insisting in behalf of himself and other taxpayers that the action of the council was unauthorized; but certainly no taxpayer is entitled to equitable relief against the enforcement of the levy and the certificates when the result of such relief would be of no possible benefit to the city or the taxpayers of the city. It is conceded that the bridge has been fully constructed and the city is liable for the entire amount of the contract price, and that, if the making of the levy and issue of the certificates in question were invalid the city still would have authority, and it would be its duty to make another levy and issue other certificates for the portion of the contract price not otherwise paid. Certainly it is not necessary for a court of equity in the protection of the taxpayers to require the useless formality of a relevy of the same tax and a reissue of similar certificates. If, on the one hand, the city did by such a proceeding escape the payment of some amount of'interest on the certificates, it would, on the other hand, incur liability for interest on the debt by reason of having failed to make payment in accordance with the provisions of the contract. A court of equity ought not to require the doing of things themselves useless and of no- benefit to the parties asking relief.

The same considerations are applicable to the surety company. The amount of its liability would not be lessened by the cancellation of the levy and certificates already authorized. New certificates hereafter issued would be applicable to the same purpose and would satisfy the same claims as the certificates already issued, and we fail to understand how the surety company would be in any better position.

The theory of the surety company and the trustee in bankruptcy of the bridge company seems to be that in some way the claims held by the banks in satisfaction of which certificates were accepted, which are now held by the Central State Bank, have been so far extinguished that, if those certificates were to be declared invalid and new certificates issued, such new certificates might be applied to the payment of other claims. No such case is made out. If the certificates were absolutely invalid when they were issued, then the claims to the payment of which they were applied still exist, and are enforceable, and we are unable to see how anyone would be better off should the court require the apparently useless formality of the reissuance of certificates on. a new levy to be made under the same statute and for the same identical purpose.

2. Same: surety-ship: estoppel. The surety company is plainly in no situation to complain of the issuance of the certificates, although they were in fact authorized and issued before the completion °f tfie work. The city made a condition of issliance that the surety company should assent thereto. Such assent was in fact given by an instrument signed and filed with the city prior to the time when the certificates passed beyond the control of the city officers. The surety company was fully advised at its principal office of the purpose for which a written assent was required. The resolution of the city, the consent of the surety company, and the delivery of the certificates were all parts of one transaction, and it is not for the surety company to now insist that the resolution directing the levy of the tax and the issuance of the certificates was formally passed before the consent was actually filed, or that the certificates ¿dually bore date on the 15th of January, whereas the consent was not in fact signed until the 16th nor filed until the 18th. Until the delivery of the certificates on the 19th, the transaction was incomplete, and before its completion by such delivery the city was not bound. A rescission of its resolution before the certificates were delivered would have left it in the same position as it occupied before the resolution was passed. Having authorized and consented to the delivery of the certificates on the 19th, the surety company is plainly estopped from now contending that the action thus authorized and consented to was invalid. The same considerations dispose of the contention for the surety company that it was released by the modification of the contract involved in the resolution of the city authorizing the issuance of the certificates before the completion of the bridge. Such modification became effectual only on the assent of the surety company thereto; and, after consenting to the modification, it can not now contend that a release resulted which it was the plain and avowed purpose of the city to avoid by requiring such an assent.

3. Same: estoppel-. beneficial acts. The trustee of the bridge company is in no better situation to insist on the invalidity of the certificates issued. Such issuance was procured by the bridge company for its 'benefit. It accepted the certificates ag jggue¿ an¿ consented to their delivery to its creditors before the bankruptcy proceedings were commenced. Surely its trustee can not now insist on the invalidity of the action of the city procured and taken advantage of by the bridge company.

We reach these conclusions without finding it necessary to hold that the certificates were negotiable and the Central State Bank a purchaser thereof for value. The suggestions already made sufficiently dispose of the contention that the resolution of the city council passed January 13th levying the special tax out of which the certificates were to be paid was invalid because it had not been on file with the city clerk for one week before its adoption, and because it was by special provisión attached thereto made to take effect at once as being “for the immediate preservation of the public, peace, health and safety.” See 32d General Assembly chapter 48, section 20. None of the parties to this controversy are in a situation to take advantage of any irregularity in the passage of this ordinance. As already indicated, the adoption of the ordinance was a part of the plan to which the bridge company and the surety company assented, and plainly a taxpayer is not in any situation to be entitled to relief on account of such mere-technical defect.

4 Sameestoppel. II. The surety company can not complain of the extension of time for the completion of the bridge, for, as already indicated, such extension was formally assented to by it; but it does insist that payment was made by the city to the bridge company otherwise than as provided by the contract, in that ‘the second payment from the bridge fund was made prior to the completion of the work and out of the fund for a different current year than that referred to in the contract.

s Same- dissurefy: premature payments. The contract executed in August, 1907, provided for the completion of the bridge in September, 1908, and for payment to be made in: “$25,000 in warrants drawn on the sPecial appropriation made for the bridge fund for the current year for the construction Q£ ^¿gg &]1(£ warraiLts for SUeh additional amount not to exceed $25,000 as may be available for that purpose in the bridge fund of the then current year at the time of the completion of said work” — the balance of the contract price to be paid from the proceeds of a tax,- etc., as already stated. Then follows this provision: “Payment of the amount above provided to be made in warrants may be made before the final completion of the work as' partial estimates in accordance with the provisions of the specification and contract; but such partial estimates shall not exceed during the current year the sum of $25,000 and thereafter shall' not exceed the amount available in the bridge fund of the then current year for the payment of the cost of construction of the said bridge.” If the work had been completed by the time specified in the contract, there would have been no ambiguity in these provisions, and the payments by warrants issued would have been regular. As a matter of fact, the sum of $25,-000 in warrants was paid to the bridge company on estimates prior to March 31, 1908, and substantially that amount was paid in warrants between April 1st of that year and the time of the issuance of the certificates in January of the next year. It is contended for the surety company that payments in warrants after April 1st were premature because the contract only authorized the second payment of $25,000 in warrants to be made by warrants on the bridge fund of the current year in which the bridge was in fact completed. We do not so interpret the contract. The current year referred to in the contract for the payment of the second $25,000 in warrants was the year in which the contract was to he completed; that is, the next year after that in which the contract was made. There is nothing to indicate that the second payment of $25,000 was to be postponed until the completion of the bridge, for it was expressly specified that payments to be made in warrants might be made before the final completion of the work as partial estimates. The city might properly have issued the full amount of warrants prior to September, 1908, and before it was known whether the bridge would be completed in accordance with the contract or not, and the fact that it should subsequently appear that' the work was not completed in September would not have affected the validity of the warrants thus issued. Without regard to the particulars as to when the warrants issued after April 1st on the bridge fund of the current year were in fact issued, it is plain that under the provisions of the contract they were authorized and the surety company has no ground of complaint as to premature payment to the bridge company.

But there is another consideration which effectually disposes of the surety company’s complaint in regard to the modification of the contract and the extension of time by the city. Tl}e judgments against the surety company were in favor of material-men for whose benefit the bond was specifically, executed. It is conceded by the surety company that under the bond it became directly bound for the debts of the bridge company to materialmen, and that suits were properly instituted against it by the various claimants whose proper demands had not been met by the contractor. Therefore no action of the city taken after the accruing of claims by subcontractors or materialmen or without their knowledge would release the surety company from its liability to them. Hipwell v. National Surety Co., 130 Iowa, 656, 670; Read v. American Surety Co., 117 Iowa, 10; Whitehouse v. American Surety Co., 117 Iowa, 328. The city has not secured any judgment against the surety company, and therefore the company is not in a situation to take advantage in any respect of its claim that there was an unauthorized modification of or premature payment under the contract by the city.

III. The Jewett Lumber Company on January 23, 1909, filed its claim with the city for $2,077.25 for material furnished to the Marsh Bridge Company and used in the construction of the bridge. The lower court with reference to this claim found as a matter of fact that the last item of the account was furnished December 30, 1908, and ordered the amount of said claim with interest to be paid by the city out of the $18,000 in bridge certificates retained to be delivered to the bridge company only on the completion of the bridge, and decreed that by way of supplemental relief the Jewett Lumber Company have judgment against- the surety company for the amount of its said claim. The complaint of the surety company with reference to this specific judgment is answered by what has already been said to. the effect that, irrespective of any claim which materialmen may secure against the fund due to the contractor remaining in the control of the city, the surety company is directly liable to the materialmen under its bond. But the trustee in bankruptcy of the bridge company complains of this judgment for two reasons: First, that the statement of the claim that was furnished to the city did not show that the last item of the .account for material furnished was within thirty days of the date of filing its claim, as required by Code, section 3102, as a condition to the establishment of a claim by a material-man .against a public corporation in the construction of a public bridge or other improvement; and, second, that the court should have declared the obligation of the surety company to this materialman under its bond to be the primary liability with the right to the materialman if any he had to resort to the city for payment out of the $18,000 in reserve certificates only in the event that the claim was not paid by tbe surety company.

7" LiENstKsSfficiency of statement: As to the question of fact, it appears that tbe statement filed with tbe city was ambiguous with reference to tbe dates on wbicb several of the last items of material included therein were furnished and tbe sworn claim itself to wbicb a copy of tbe x d account w-as attached indicated only in a general way that tbe materials referred to therein were furnished between October 30, 1908, and January 19, 1909. The evidence was, however, without controversy that several of tbe last items were in fact furnished within thirty days of tbe filing of the- statement. Tbe sufficiency of tbe statement .as entitling tbe lumber company to a claim against tbe city for tbe full amount of its account payable out of tbe funds remaining undisbursed was in no way questioned save by an objection to tbe evidence offered showing tbe actual dates on wbicb tbe last items were furnished; this objection being made on tbe ground that tbe statement as filed was conclusive. We have held in previous cases that such a statement is not conclusive, and that parol evidence is admissible to show tbe actual facts. Bangs v. Berg, 82 Iowa, 350; Johnson v. Otto, 105 Iowa, 605. If, in reliance on tbe apparent insufficiency of tbe statement, any party in interest bad. been put in a worse position, no doubt tbe claimant would be precluded from showing tbe facts as against tbe statement of bis claim; but tbe only controversy in this respect is between tbe trustee of tbe bridge company and tbe claimant, and it does not appear in any way that tbe trustee will be prejudiced by allowing tbe lumber company to establish its claim against tbe city.

8. Same: subcontractors : enforcement of claims. As a matter of law, tbe lumber company was entitled to payment out of the $18,000 in bridge certificates reserved by the city and this is its primary right. The court did not err therefore in decreeing such payment and rendering a conditional judgment only as against the surety company.

The claim of the Carver Hardware Company for $113.75 with interest is in the same condition as that of the Jewett Lumber Company, save that there is no controversy as to the filing of its statement with the city within thirty days after the furnishing of the last item as showp ■by such statement. The decree of the lower court in making this claim payable primarily out of the $18,000 reserved by the city in certificates with a supplemental and conditional judgment against the surety company in case the claim is not thus satisfied was correct.

9. Same: effect of filing claims in bankruptcy. The fact that these two claims were also filed in the bankruptcy court against the estate of the bridge company and there allowed seems to us to be wholly immaterial. The fact that the trustee in bankruptcy must pay these claims out of any assets of the estate in his hands in the event they are not paid by the city can not affect the validity of the judgment in this respect either as against the city or the surety company. The city makes no complaint of the order of the court requiring payment to be made out of the reserve fund.

IV. Some claimants have appealed from the provisions of the decree denying them judgments against the city payable out of the reserve fund of $18,000 in certificates. Ás all these claimants were given judgment against the surety company, their rights against the city may not be very material. Their contentions can be disposed of without great elaboration.

io. Same-SI?eria°fmen: revivor. The "Wheeler Lumber, Bridge & Supply Company presented its claim to the city for $9,713.85, but the court refused to enter judgment in its favor against the city on the ground that the claim was not filed within thirty days after the furnishing of the last item of materials, as required by Code, section 3102, order to entitle a subcontractor or materialman to payment by the city out of funds not already paid the contractor in accordance with the terms of the contract. Counsel for the Wheeler Company concede that the claim was not filed within thirty days after the furnishing of the last item of material to the Marsh Bridge Company, but they contend, first, that the relation of the materialman to the contract was preserved by subsequently furnishing other material of like character to the trustee in bankruptcy, who proceeded to complete the contract in behalf of the bridge company; and, second, that the Wheeler Company had no reason to suppose that it would not continue to furnish material to the bridge company until more than thirty days after the last item of materials was actually furnished by it, and therefore was not in default as to the filing of its claim within due time. The statute above referred to is not a portion of -the mechanic’s lien law, and does not create any lien as against a public corporation constructing a work of public improvement in favor of a subcontractor or materialman. It merely provides a method by which the subcontractor or material-man may acquire a right to be paid by the public corporation out of such portion of the contract price as has not been paid to the contractor in accordance with the terms of the' contract. The public corporation is under no obligation to protect the subcontractor or materialman in such cases until such a statement as is required by the statute is filed within the time specified. Green Bay Lumber Co. v. Independent School District, 125 Iowa, 227; Whitehouse v. American Surety Co., 117 Iowa, 328. It is not contended that the Wheeler Company had any continuing contract with the bridge company under which it was obligated and entitled to furnish material in the construetion of the bridge. Its claim .against the city could be predicated only on material already furnished at the time its statement was filed; and, as this filing was more than thirty days after the furnishing of the last of the material for which claim was made in such statement, no obligation to it on the part of the city has ever arisen.

The fact that the material was subsequently furnished to the trustee of the bridge company in the completion of the bridge can have no bearing on the case. No claim therefor was made or could have been made in the statement filed, and no claim therefor was ever made in any subsequent statement. Indeed, the material furnished to the trustee in bankruptcy has not been a subject of controversy in this action as between the AVheeler Company and the city, or between the Wheeler Company and the surety company.

As no obligation on the part of the city to the Wheeler Company ever arose or existed, the Wheeler Company can not complain of the action of the city in making payments to the bridge company prematurely or otherwise than as provided in the contract. The court did not err in refusing to render a judgment in favor of the Wheeler Company as against the city.

articles not incorporated in structure: tools, etc. The Brown-IIurley Company filed a claim against the city for $748.90 for material furnished the bridge company, including lanterns, sledges, handles, chisels, axes, bolts, washers, etc., used by the bridge company in carrying on its work, but not actu- ^ . ally used in the completed bridge or m the falsework thereunto pertaining; and the trial court refused to render a judgment against the city for these items of the claim on the ground that they did not come within the provision of Code, section 3102. That section authorizes claims to be filed against public corporations by subcontractors or materialmen who shall perform labor upon or furnish materials for the- construction of any public bridge, etc. We think it is well settled that a materialman does not acquire a mechanic’s lien for material of this character furnished to a contractor in connection with the construction of a building or other improvement upon land. Standard Oil Co. v. Lane, 75 Wis. 636 (41 N. W. 641, 7 L. R. A. 191); Lowe v. Abrahamson, 18 N. D. 182 (119 N. W. 211, 19 L. R. A. (N. S.) 1039); Mohr v. Clark, 3 Wash. T. 440 (19 Pac. 28); Richmond, etc., Construction Co. v. Richmond R. Co., 31 U. S. App. 701 (68 Fed. 105, 15 C. C. A. 289, 34 L. R. A. 625) ; Penna. R. Co. v. Leuffer, 81 Pa. 168 (24 Am. Rep. 189).

With much less reason can it be claimed that one who furnishes the tools with which a contractor erects a public improvement is entitled to a lien against the public corporation for which the improvement is erected under the statute providing for such a claim for furnishing “the material for the construction” of the improvement. Certainly the city could not under any circumstances be subjected to the payment out of the contract price or otherwise for the working equipment procured by the contractor and used by him in carrying on- the work. It can not be assumed that the contract price for the work covered as a part of the cost the purchase of the working equipment which might have been previously used or might be subsequently employed by the contractor in carrying on other work of like character. The trial court did not err, therefore, in refusing to render a judgment against the city in favor of the Brown-Hurley Company for these items. The • Globe Machinery & Supply Company presented a claim against the city for labor and material furnished the bridge company in the form of equipment or repairs, and used by the said bridge company in the performance of its contract. What has already been said as to the claim of the Brown-Hurley Company is 'sufficient to show that the Globe Company was not entitled to a judgment against the city, and that the court did not err in refusing to render such judgment.

I2. Bankruptcy: inblnIoivent’s sureties. V. The final contention for the surety company is that the aggregate of the judgments rendered against 'it exceeds by more than $2,000 the amount of its liability as fixecl ^7 tte bon(i’ and tliat irL “ü eYent tile judgment rendered in the decree against the surety company and in favor of the trustee of the bridge company of $3,977.33 is wholly unauthorized, because the trustee, standing in the shoes of the bridge company, can not have any redress on the bond against the surety. The ground for such judgment in the lower court was that the trustee elected to complete the bridge in order to become entitled to the certificates reserved by the city in a total amount of $18,000 which were to be delivered to the bridge company only on final completion of the bridge and satisfaction of all claims of subcontractors and materialmen who might have perfected their right to share in this fund by filing proper claims against the city. It appears that the cost of completing the bridge exceeded the amount of the reserve fund available in the hands of the city after the satisfaction out of the reserve certificates of the claims of the Jewett Lumber Company and the Carver Hardware Company. Unfortunately counsel for the trustee has given no direct attention in argument to this contention of the surety company, but we are unable to understand on what' theory the surety company can be held liable to the trustee. The bankrupt estate of the bridge company' will be applied by the bankruptcy court to the satisfaction of all proper claims filed before it, not only claims of subcontractors and materialmen with reference to this bridge, but the claims of other creditors of the bridge company. If this estate satisfies the claims of subcontractors and materialmen with reference to this bridge, so far as such claims are filed in the bankruptcy court, there will be no liability to such subcontractors or materialmen on the part of the surety company; and this will be true whether such claims are satisfied out of the reserve fund held 'by the city and constituting a part of the assets of the bridge company or otherwise. The theory of the trustee seems to be that there is some primary liability on the part of the surety company with reference to the claims of subcontractors and ■ materialmen, and that, when these are satisfied, the surety company would then become a creditor of the estate of the bridge company. In the nature of‘things this can not be so. It is, of course, true that so far as the surety company does in fact satisfy claims of subcontractors and materialmen in connection with the performance of the contract by the contractors it becomes a creditor of the bankrupt estate, but until it has in fact satisfied such claims those claims are primarily payable by the contractor or out of his estate. We fail to understand any theory of subrogation which would require • the circuitous process of primary enforcement against the surety company with subrogation against the principal debtor. Subcontractors and materialmen might perhaps have brought about the occasion for subrogation by enforcing their claims directly against the surety company under its bond, but surely the trustee in bankruptcy of the bridge company can not bring about such a situation. We reach the conclusion on this branch of the case that the trustee of the bridge company did not show himself entitled as trustee to any judgment against the surety company, and that such judgment in his favor in the amount of $3,977.33 is erroneous. Deducting this amount from the total amount of judgments rendered against the surety company, we find that it has not been held liable in this decree for more than the obligation of its bond. •

With the modification indicated in the last division of this opinion, we find the decree of the lower court to be correct and in all other respects than that pointed out it is affirmed. Modified and affirmed.

Tuesday, October 24, 1911.

SUPPLEMENTAL OPINION.

McClain, J.

In a petition for rehearing in behalf of the Brown-Hurley Hardware Company and the Globe Machinery & Supply Company, our attention is called to the fact that on the cross-appeals of these two companies we have failed to notice the contention that the trial court erred in not rendering judgment against the Empire State Surety Company on its bond in the full amount claimed by them, respectively.

i3. Public imcontractor’s bond: liability of surety. As to the Brown-Hurley Company, the record shows that, while the entire amount of its claim was $748.90, $257.66 of that amount was for material and supplies furnished to the Marsh Bridge -Company and actually used in the completed bridge or the J \ ° falsework thereunto pertaining, while the balance of the claim was for labor and material furnished to said contracting company in the form of equipment or repairs thereto used in the performance of the contract, but not going into the completed bridge or the falsework. The entire claim of the Globe Machinery & Supply Company was for material furnished in the form of equipment or repairs thereto. The court rendered judgment in favor of the Brown-Hurley Company against the Empire State Surety Company on its bond for $265.39, being the amount of the items for material -and supplies which went into the completed bridge or into the falsework with a small addition of interest, and disallowed, as against the surety company, the balance of its claim and the entire claim of the Globe Machinery & Supply Company. In the contract between the Marsh Bridge Company and the city of Des Moines for the construction of the bridge, the former agreed to pay all just claims against it for material furnished in the performance of the contract, and in the bond of the Empire State Surety Company furnished by the bridge company to the city in accordance with the terms of the contract the Empire State Surety Company became bound to pay all claims for labor and material furnished for said wort. The contention is that the claims disallowed were for material furnished the bridge company, which was so furnished to enable that company to perform its contract. The lower court, however, drew a distinction between material which went into the completed bridge or into the falsework which was erected in the construction of such bridge and destroyed on its completion and the material and supplies which became a part of the machinery and equipment used by the bridge company in the construction of the bridge. This distinction was, we think, well taken. It is recognized in cases relating to mechanics’ liens and contractors’ bonds. While material furnished and consumed in prosecuting the work is included, such as powder for blasting and lumber employed in constructing falsework or scaffolding (Schaghticoke Powder Co. v. Greenwich, etc., R. Co., 183 N. Y. 306 (76 N. E. 153, 2 L. R. A. (N. S.). 288, 111 Am. St. Rep. 751); Hercules Powder Co. v. Knoxville, L. & J. R. Co., 113 Tenn. 382 (83 S. W. 354, 67 L. R. A. 487, 106 Am. St. Rep. 836) ; Giant Powder Co. v. Oregon P. R. Co. (C. C.), 42 Fed. 474 (8 L. R. A. 700) ; Rapauno Chemical Co. v. Greenfield & N. R. Co., 59 Mo. App. 6), machinery, tools and equipment, constituting the plant, and material furnished for additions to and repair thereof, are not included (American Surety Co. v. Lawrenceville Cement Co. (C. C.), 110 Fed. 717; Basshor v. Baltimore & O. R. Co., 65 Md. 99 (3 Atl. 285); United States v. City Trust, etc., Co., 23 App. D. C. 155). There is conflict in the authorities as to coal and lubricating oil consumed in the operation of the machinery. United States v. City Trust, etc., Co., 21 App. D. C. 369; (Id., 23 App. D. C. 153) ; Zipp v. Deposit Co., 73 App. Div. 20 (76 N. Y. Supp. 386); Beals v. Fidelity & Deposit Co., 76 App. Div. 526 (78 N. Y. Supp. 584); City Trust, etc., Co. v. United States, 147 Fed. 155 (77 C. C. A. 397). There is nothing in the contract nor in the bond to indicate that the surety company was to become bound for indebtedness contracted by the bridge company in procuring the necessary machinery and equipment for carrying out its contract, nor for repairs necessary to maintain such machinery and equipment. The contract was primarily between the bridge company and the city of Des Moines, and in such contract the bridge company obligated itself to protect subcontractors and materialmen, but we can not interpret the contract as having any relation to obligations entered into by the bridge company in connection with its machinery and equipment. We reach the conclusion, therefore, that the lower court did not err in refusing to enter judgment against the surety company for that portion of the Brown-Hurley Company’s claim and the amount of the claim of the Globe Company which were for additions to and repairs on such machinery and equipment.

It is said in argument that the claims now under consideration nre of the same character as the claim of the Wheeler Lumber, Bridge & Supply Company for which judgment was rendered against the surety company; but this contention is not supported by the record. The stipulation as to the claim of the Wheeler Company recites that it furnished the bridge company with lumber and piling which was used for falsework in the construction of the bridge under the contract and specifications therefor, and there is nothing in the stipulation to indicate that any of the material furnished by the Wheeler Company was for machinery or equipment or for the repairs thereto. The claims are distinguished, therefore, by the considerations already pointed out.

There is also a petition for rehearing on behalf of Moss as trustee for the bridge company, ip which it is contended that in allowing the claims of the Garver Hardware Company and the Jewett Lumber Company against the city and directing them to be paid out of the reserve fund of $18,000 retained by the city, an injustice had been done to the general creditors of the bankrupt estate. Without further elaboration on this question, we are satisfied to adhere to the general "position indicated in the original opinion to the effect that the trustee in bankruptcy is in no situation to claim any preference to this $18,000 reserve fund. He is entitled only to so much of it as is not properly exhausted in the payment of claims which had accrued before the 'bankruptcy. He did not acquire a right to this reserve fund as a purchaser without notice of claims against it, nor was he entitled to any preference. Counsel for the trustee rearg&e some of the questions which were briefly disposed of in the original opinion. We think a further elaboration of our views to be unnecessary, and are content to adhere to the conclusions already reached.

Both petitions for rehearing are overruled.

Case Details

Case Name: Empire State Surety Co. v. City of Des Moines

Court Name: Supreme Court of Iowa

Date Published: Jun 6, 1911

Citation: 152 Iowa 531

Court Abbreviation: Iowa