Hazleton Co. v. Union Imp. Co.

Opinion, Mr. Justice Williams: No question of jurisdiction is raised in this case. The inquiry to be made on this appeal is not, therefore, whether the plaintiff has an adequate remedy at law, but whether it shows a good cause of. action against the Union Improvement Co. Its demand is upon a draft or order drawn by A. H. Church in its favor upon the improvement company, for one thousand six hundred dollars. Church had taken a contract from the company to construct for it a drainage canal. He was to be paid monthly for his work upon estimates made by the engineer of the company. Ten per cent of the amount appearing to be due by the estimate was to be retained out of each payment until the contract was performed and the canal accepted. If the work was not pushed with sufficient vigor, the company reserved the right to employ such additional force of laborers as might be necessary, and charge the cost of the same to the account of Church, or to declare the contract void, and proceed to contract with other parties for the completion of the canal, “ and any and all retained percentages ” were in that case forfeited and became the property of the company. The contract was made on the first day of August, 1887, and the work was to be finished on or before the first day of January, 1888. The order was not drawn until the fourteenth of September, 1888, and was made payable “out of my final estimate.” At that time the job was not half done, although the time within which it was to have been completed was past, and the treasurer of the company, to whom the order was presented, wisely refused to accept it. About one month later, Church became so badly embarrassed that he was unable to go on further. He was largely indebted, among others, to Monroe & Co. and to his employees. To secure the payment of the latter, to complete the contract, and to protect Monroe & Co. so far as possible, he assigned his contract and all unpaid percentages in the hands of the company to W. M. Monroe & Co. On the twenty-ninth of. October, 1888, a written contract was entered into between [582] the company and Monroe for the completion of the canal, by which it was, inter alia, provided that Monroe should do the work necessary to be done, and receive “ the same sums that would be paid under the contract to A. H. Church had he continued to prosecute the work in person; ” and that he should pay the wages due from Church, and indemnify the company against “ all suits, claims, demands, or liabilities to any person or persons arising under said Church, in respect to the said contract of August 1, 1887, or the money due under it.” Monroe et al. proceeded promptly and successfully with the construction of the canal, .doing work amounting, according to the engineer’s estimates, to more than seventy thousand dollars. The work has been accepted and paid for, except that the sum of one thousand six hundred dollars and interest is retained, upon the claim of the plaintiff that it must be paid upon the order of Church, given in September, 1888, while he was still at work under his control. Does the plaintiff show a right to demand this money ? As this order was never accepted, the company is not liable for it upon any undertaking of its own'. If any liability exists, it.must rest on the act of Church in drawing and delivering- the order. But he could impose no duty to pay to the holder on one who was under no duty to pay him. If there was a debt due him, or a fund belonging to him, in the hands of the company, he could draw upon that fund and clothe the payee with a right to demand payment; but if he had no right to payment he could confer none. As we understand the facts, the improvement company did not owe Church when the order was drawn. It held some of the accrued percentages in its hands, under the terms of the contract. Whether these would ever be demand-able by Church depended on whether he should be able to complete the work he had undertaken, and he drew the order with this contingency in mind. It was payable, not out of accrued percentages, but “ out of my final estimate,” when the contract should be performed. Unless the work was done by him he would be entitled to no “ final estimate; ” the percentages would belong to the improvement company, and the fund on which the order was drawn would have no existence. What was the fact ? Church failed. He transferred his contract to another. The improvement company made a new contract with [583] Monroe & Co., by whom the work was done, aud to whom, by • the express agreement of the company, the accrued percentages became payable. Church had no final estimate, and no right to one; and the fund on which he drew never came into existence. But it is urged that when the order was drawn there was an amount of percentages in the hands of the company sufficient to pay it, and that the order operated as an assignment of so much of this fund to the holder. But Church could not assign a fund on which he had no legal hold. His interest in the percentages was a conditional one. The fund was in pledge for his performance of his contract; and if the order be treated as an equitable assignment, the assignee must take his title as his assignor held it, subject to the pledge. When Church failed and was compelled to give up his contract, his rights under it were by his own acts extinguished. True, he assigned his contract, but that gave his assignee no right to proceed. The improvement company afterwards contracted with Monroe & Co., to whom he had assigned, but, as is expressly stated in the contract, this was done because the company believed Monroe & Co. could complete the work “ at less cost and expense ” than it could, and might be thereby able to “ derive some benefit from it” in reimbursing themselves for advances made to Church. The fund now in controversy was not produced by Church. It is not due under his contract; and his order gives to the holder no interest in it, whether the retained percentages in the hands of the company when he failed enter into it or not. Nor does the agreement of Monroe & Co. to indemnify the improvement company against claims and demands arising under the contract with Church affect the question. If the company is not legally liable to the plaintiff on the order, the obligation of the contract to indemnify does not extend beyond the costs of a defence. Monroe & Co. did not undertake to pay whatever claims might be presented against Church without regard to their validity, but to indemnify the company against them. This agreement requires payment of those that may be legally enforced against the company, and a defence against such as are unfounded. The real question in this case is, as we have said, whether the plaintiff has a valid claim against the improvement company [584] on the order of Church. There are no equitable considerations disclosed that change the character of this question, or that prevent Monroe & Co. from insisting on their clear legal rights. The learned judge was right, therefore, in his conclusions, and The decree dismissing the plaintiff’s bill is affirmed ; the costs of this appeal to be paid by the appellant.