209 N.W. 911 | Minn. | 1926
On November 27, 1923, the defendant Federal Construction Company entered into a contract with the city of St. Paul for the erection of the Gorman Schoolhouse. The contract price was $38,977. The usual public contractor's bond was given, the plaintiff becoming surety thereon.
Sometime in the summer of 1923 the construction company began to borrow money from the defendant bank, giving assignments of moneys due under other contracts it had with the city. Early in the fall the company informed the bank that it expected to get the job of erecting the Gorman Schoolhouse and if it did it would need money to take care of bills for labor and materials while waiting for the payment of the architect's estimates, and asked the bank to advance the money. The bank agreed to make advances up to $15,000 upon assignments of moneys due from the city under the contract.
The bank made loans to the construction company in December, 1923, and January and February, 1924, aggregating $32,000. When the loans were made, assignments were given as agreed. The assignments were filed with the city comptroller. Prior to the commencement of this action, the city paid $6,174.25 to the construction company and $24,196.42 to the bank. Payment of the remainder of the contract price was withheld for the reason that claims for labor and material aggregating $17,669.61 were filed with the city comptroller. These claims having been paid by the plaintiff, it brought this action to recover the amount retained by the city. The bank answered, setting up the assignments it had obtained and the loans it had made, and alleged that the balance due from the company was $7,812.58, for which amount with interest it demanded judgment. It also prayed that the judgment should determine that the bank's claim upon the money retained by the city was superior to the claim of the plaintiff. This the court denied and the bank appealed from the judgment in plaintiff's favor. *204
The real controversy the court was called upon to determine was whether plaintiff or the bank had the better right to the money retained by the city.
The court found that the money the bank advanced was used by the construction company "in the general conduct of its business." The evidence supports the finding and for reasons to be stated presently it is determinative of the case. The court did not determine what portion of the amount advanced was used to pay bills for labor and materials furnished for the erection of the Gorman Schoolhouse, but that is not material in view of the finding mentioned.
There is no substantial controversy as to the facts, but counsel differ about the legal principles to be deduced from our former decisions. A brief review of the cases may help to clear up the differences of opinion.
In National Surety Co. v. Berggren,
In New Amst. Cas. Co. v. Wurtz,
In Ganley v. City of Pipestone,
In Barrett Bros. Co. v. County of St. Louis,
In Standard Oil Co. v. Remer,
Counsel for the bank cite Standard Oil Co. v. Day,
In the case at bar the contractor could use the money advanced by the bank as it saw fit. The proof is that only about $15,000 of the borrowed money was applied to the payment of bills for labor and materials used in the construction of the Gorman Schoolhouse, as against more than $24,000 received by the bank on the assignments. The equities in favor of the banks concerned in the Wurtz, Ganley and Remer cases are absent. Following these cases, it must be held that the surety's right of subrogation is superior to the claim of the bank and that the conclusion reached by the trial court was correct.
Judgment affirmed.