Petition for Writ of Certiorari — R. P. R. Construction Co. v. Bushman Construction Co.

Supreme Court brief1966

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Text

| : Ottice-Suprame Osart, U

bh OY ; FI LE D * -

| anemia hae FEB 23 1966

: Sete. | : JOHN F: DAVIS, CLERK |’

| IN THE |

SUPREME COURT |

OF THE UNITED ow

5 J | |

Ocrosgrs Tzem, 1965

- No. 5

oe” 2G"

‘BP.R. Constreuction Company;

ax Anizona CoRPORATION,

Petitioner

WB.

Busuman Construction ComMPAry,

a Missounr Corporation,

Respondent,

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

A e

Hester, Tannen & CLaNaHAN

C. Buaxe Hester & Buu Kant Tom

'1950 Western Federal Savings.

Building a

Denver, Colorado 80202

Attorneys for Petitioner ‘

TS NT

OG. © 2854 LARIMER STREET ° DENVER, COLORADG

——————————————

" SASTWOCD PRINTING G

INDEX fan

—_—_— : PAGE

. Opinion Below . 1, 2, 10, 25, 32

_ Jurisdiction 2

Questions Presented ) 2,3

Statement

‘Reasons for granting the writ

° Conelusicn ........

Appendix A—Opinion of the District Court ............

Appendix B—Opinion of the Court of Appeals ......

Appendix C—Opinion of the Court of Appeals in

_ Companiorw Case

CITATIONS

Cases:

Bullen v. DeBretteville, 239 F. 2d 824 .

Bushman Construction Co. v. Air Force Academy

.Housing, Inc., 327 F.2d 481

Bushman Construction Co. v. Conner, 351 F.2d 681

Caldwell v. Armstrong, 342 F.2d 485

Layne & Bover Corp v. Western Well Works, 261

U8. 387

| Mi v. Bowman, 123 F.2d 445

Utiderwood v. Phillips Petroleum Co., 155 F.2d 372

INDEX—(Continued)

) PAGB

y United States v. Adamant Co., 197 F.2d f 6

Union Trust Co. of Maryland v. Townshend, 101 F.2d

903 yeaa % 6

Wagoner v. Mountain Savings & Loan Ass’n., 311

F.2d-403 iadhcieg

Rules: ;

U. 8. Sup. Ct. Rule 19, 1(b), 28 U.S.C.A. 2

fg!

IN THE

OF THE UNITED STATES

Ocrqszz Tzrm, 1965

No.

—_—.

R.P.R. Construction Company,

an Anizona Corporation,

Petitioner

vs. °

Busuman Construction Company,

4 Missovgr Corporation, ~

Respondent.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

Petitioner prays that a Writ of Certiorari issue to re- a

view the judgment of the United States Court of Appeals

for the Tenth Circuit, éntered in the alwwe-entitled matter

on Ootaber 5, 1965. ~ 7

REFERENCE TO OPINIONS BELOW

_ The opinion of the United States District Court for

the District of Colorado, dated May 5, 1964, printed in

Appendix A hereto (unreported). *

The opinion of the United States Court of Appeals

for the Tenth Circuit, printed in Appendix B hereto, re-

ported as Bushman Construction Company v. Conner, 351

F.2d 681 (1965). 3

/ -

. The opinion of the United States Court of oven

for the Tenth Circuit Printed in Appendix C hereto, in a —

companion case reported as Bushman. Construction Co. v.

Air Force Academy Housing, Inc., 327 F.2d 481 (1964).

JURISDICTION

- eae ; &

The judgment of the United States Court ‘of Appeals

for the Tenth Circuit, sought to be reviewed is dated

October 5, 1965. Petition for rehearing was filed on Octo-

ber. 22, 1965, and was denied November 24, 1965. The juris-

_ diction of this Court is invoked under U.S. Sup. Ct. Rule

19,1(b), 28 U.S.C.A., to wit: ‘‘1.(b) Where a court of ap-

peals has rendered a decision in conflict with the decision

of another court of appeals on the same matter; .... or

has so far departed from the accepted and usual course’ of

judicial proceedings, or so far sanctioned such a departure

by a lower court, as to call for an exercisw of this court’s -

power of supervision.”’

\ QUESTIONS PRESENTED FOR REVIEW

1. A contracts with B. B later enters into «a secret

joint venture agreement with ©, B and C to share the

profits from B’s contract with A, C to finance B and be an

indemnitor on B’s bond to A. C had nothing to do with .

~ the making of B’s contract with A. A’s only knowledge of

C is that C is the indemnitor on B’s bond. A pays B in

full under the contract. Can C be declared to have an equit-

e .

able lien-én the monies piid B by A and enforce the same

against A? 0

2. If a subcontractor is paid the full amount of his

subcontract and issues receipts, lien waivers and releases

therefor, do. such receipts, lien waivers and releases con-

stitute a bar to an action on the same contract by a co-

joint venturer of said’ subcontractor in the absence of any

conspiracy to defraud the co-joint venturer? -

- _ STATEMENT OF THE CASE

) §

This was an action brought by respondent seeking to

recover under an alleged contract between respondent and

petitioner.

3 The lower court and court of appeals found the follow- |

ing: .

Petitioner was awarded a government contract for the

construction of improvements for the United States Air

Force Academy. Petitioner, pursuant to said contract en- -

tered into a subcontract with W. S. Conner for a portion

of the work. Conner, subsequent to the execution of his

subcontract with petitioner, entered into a joint venture

agreement with respondent. Under this agreement respond-

’ ent was to finance Conner for the work under Conner’s

contract with petitioner and was to be an indemnitor on

Conner’s performance and completion bond running to

petitioner; and Conner and respondent wer@ to share the

profits, if any, to be derived from Conner’s contract with

petitioner. Respondent did nothing to negotiate Conner’s

. contract with petitioner. Petitioner was only aware that

\ |

oe esas

respondent was the indemnitor on €onner’s dond. Peti-

tioner at no time was ever furnished a copy of the agree-

ment between Conner and respondent, nor was petitioner

- ever advised of its terms or that. respondent claimed to be

a joint venturer in or a party to Conner’s-contract with

petitioner. (Emphasis supplied.)

Conner after entering into the joint venture agreement

with respondent, directed petitioner, bya ‘‘Direction of

Proceeds’’,"to send payments due Conner, for work under

' his contract with petitioner, to a named bank. Unknown

to petitioner, Conner had given the bank authority to en-

dorse checks for payments and deposit them to the account

of the respondent, so that respondent could be reimbursed

monies advanced Conner to pay Conner’s bills in connec-

tion with the work. Both Conner and respondent were ‘

aware that any assignment of Conner’s contract with pe-

titioner, funds or otherwise, would void saig contract. All

monies due Conner from petitioner for the -work done were

sent to the bank or were paid to.Conner. All monies due

‘Conner sent to the bank were obtained by respondent

through its secret agreement with Conner. (Emphasis sup-

plied. )- ,

During the latter part of the work Conner and: re-

spondent began to disagree and Conner told petitioner. to

send no more monies due Conner to the named bank. Re-

spondent also notified Conner’s suppliers that respondent

was no longer paying Conner’s bills and that they would

have to look to Conger. Petitioner then began to pay Con-

ner’s bills directly. Respondent theri informed petitioner

» that it claimed an interest in the remaining monies to be

paid Conner under petitioner’s contract.

“Conner submitted a voucher to petitioner purporting

to be for Federal and State taxes chargeable against Con-

ner-in@onnection with the work. These taxes, unknown,

_ to petitioner, were nof all chargeable against the work. Pe-

titioner paid the amount of the voucher to Conner and

Conner apparently converted a part of the money to his

own use. Pétitioner paid Conner the entire subcontract:

price and Conner executed receipts, lien-waivers and re-

: leases to petitioner. | .

The lower court and court of appeals held that peti-

tioner, by paying Conner the ,voucher amount for taxes

not chargeable to the work, and for making certain other

payments diréctly to Conner, was liable to respondent for

the amount so paid under an equitable lien theory.

The basis for jurisdiction in the United States District

Court for the District of Colorado was diversity of citizen-

ship and an amount in controversy exceeding Ten Thou-

sand Dollars. The plaintiff, a citizen of Missouri, the two

defendants being citizens of Texas and ‘Arizona.

% *

_ REASONS RELIED ON FOR GRANTING -

' WRIT OF CERTIORARI !

1. There is a necessity for the supervision of this

court bécause’the opinions and judgments of the lower

court and court of appeals present a real and embarrassing

conflict of opinion and authority between the fourth, ninth

and tenth circuit courts of appeal a#a within the federal

courts for the District of Colorado and other Districts.

The principles, involved in this matter are of such great

importance to the public that grave injustice and confusion

will result unless the.matter be settled in conformity with

“4

nic,

‘the existing and pronounced law within the fourth, ninth.

and tenth circuits and the State of Colorado. Layne @

Bowler Corp. v. Western Well Works, 261 U.S. 387.

The tenth Circuit Court of Appeals in Mitchell v.

Bowman, 123 F.2d 445 has held that under Colorado law

a contract which constitutes a promise to pay one for serv-

ices rendered out of a fund created in whole or in part by

the efforts of the promisee creates a ‘‘lien’’ on the fund

when it comes into existence in the harids of one having

notice of the contract and assenting to an assignment

thereof. The same law was announced in Caldwell v. Arm-

strong, 342 ¥'.2d 485 (arising in Wyoming) and in Under-

wood v. Phillips Petroleum Co., 155 F.2d 372 oe in

Oklahoma). (Emphasis supplied.)

The Ninth Cireuit Court of Apoenls in United States -

v. Adamant Co., 197 F.2d 1 and Bullen v. De Bretteville,

239 F.2d 824 has held that one may by manifest intent

and agreement create a security (equitable lien) for the

discharge of his obligations and another discharging such

an obligation, and, if he is not a volunteer, has the right to

look to the fund created for repayment. The manifest in-

tent must, however, be contained in the document of agree-

ment relied upon. And ihe claimed agreement must .be

supported by the relationship of the parties to be bound

and by the circumstances of their dealing subsequent to

their entering into the relationship. (Emphasis supplied.)

The Fourth Cireuit Court of Appeals in Union Trust

Co. of Maryland v. Townshend, 101 F.2d 903, has also held

* that an equitable lien arises when there is an agreement

‘ \that a fund in the possession of another, other than

the debtor, or to come into his possession, shall be charged

| ae

with the payment of a debt, and the person having posses-

ston or to come into possession, agrees to respect the

charge and make payment from the fund when received.

In such case, the court said, the fund, when it arises, is no

longer under the dominion of the debtor, but is subject to

the control of another who has assumed an obligation with

respect thereto; and equity enforces a lien thereon in ap-

plication of the principle that it regards as done that which

should have been done. (Emphasis supplied.)

: The judgment of the tenth circuit court in the present

_ case is in direct conflict with its former pronouncements

‘and those of the fourth and ninth circuits relating to ea

able liens and the basis of recovery by one asserting su

a lien. The judgment grants an equitable lien to respond-

ent on a fund arising out of a contract to which respondent

is not a party, had no part in creating, had no agreement

relating thereto and grants the lien on the basis of a secret

agreement between respondent and a third party with

whom petitioner had contracted, such third party being the

only one whom petitioner was ‘obligated to pay.

If the judgment of the tenth circuit court of appeals

is allowed to stand in the present case under the facts

as found by the cdurt, no person will be free to contract

for personal services without being placed in a position of

being liable to someone with whom they have not contract-

ed and have no agreement or relationship in the event

the party with whom they have contracted enters into a

secret agreement to shargé proceeds of the contract with

that party. :

2. Respondent and Conner were joint venturers. The .

tenth circuit court of appeals and lower court found that 3

the joint venture was formed after the execution of Con-

ner’s contract with petitioner. The tenth circuit court of

appeals and lower court found that petitioner had paid

Conner in full on thacontract and that Conner had exe-

cuted receipts, lien waivers and releases to petitioner un-

der the contract but the court gave no consideration to

these documents in the case at bar. However, the tenth

circuit court of appeals has held in a companion case of

Bushman Construction Co. v. Air Force Academy, Inc.,

327 F.2d 481 that the execution of these lien waivers, cer-

tificates of payment and releases was a matter within the

objectives of the joint venture, and consequently Conner

was empowered to execute such documents and they are

_ binding upon the joint venture and constitute a bar to any

action by réspondent on the contract. The same result with

Maren to releases being a bar to an action was reached in

403 (10th Cir.). (Emphasis supplied.)

The tenth circuit court of appeals and the district

court below, by their rulings in the presenf case, have so

far departed from the accepted and usual course of ju-

- dicial proceedings and the tenth circuit court of appeals

has so far sanctioned such a departure by the district

rt below in ruling that the releases, receipts and lien

waivers did not constitute a bar to the action that the gu-

pervision of this court is needed to prevent manifest Gn-

justice to the public in the future and confusion wit

the jurisdiction of the tenth circuit.

goner v. Mountain Savings & Loan Ass’n., 311 F.2d

CONCLUSION

For the foregoing reasons this petition for Writ of

Certiorari should be granted.

Respectfully submitted,

C. Blake Hiester

® Bill Earl Tom

Counsel for Petitioner

—i10—

APPENDIX A

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF — -

BUSHMAN CONSTRUCTION 7

COMPANY, a Missouri corporation,

Plaintiff,

™ Civil Action No. 6532

W. S. CONNER, an individual doing f Findings of Fact and

business as W. S. CONNER CON- Conclusions of Law

STRUCTION COMPANY; R.P.R. CON-

STRUCTION CO., an Arizona corpora-

tion,

Defendants. 4

This matter came on for trial to the Court on April

13, 1964, and after recess from time to time, the taking of

evidence was concluded and the Court heard final argu-

ment of counsel on May 1, 1964 and took the matter under

advisement. |

The Court does now make the following Findings of

Fact and Conclusions of Law.

FINDINGS OF FACT

From time to time in these findings, Bushman Con-

struction Company will be referred to as ‘‘Bushman’’, W.

S. Conner Construction Company as ‘‘Conner’’ and R. P.R.

Construction Co. as ‘‘R.P.R.”’

This action arises out of the construction of a housing

project at the Air Force Academy near Colorado Springs,

Colorado, in the years 1958 and-1959.

Sometime prior to May, 1958, R.P.R. entered into a

: a :

—

subcontract with the prime contractors to do a portion of

the project work,

_ Conner then negotiated with R,P.R. for a subeontract

to do a portion of that work.

In the latter part of April, 1958, R.P.R. told Conner

-he could have the subcontract. and gave Conner a letter of

intent to that effect. Conner was advised by R.P.R. that

a performance bond would be required.

In May, 1958, Conher contacted Bushman to enlist its

assistance in helping him obtain a performance bond and

financing.

Conner and R.P.R. executed the subcontract (Exhibit

4) on May 22, 1958, and the work was started on that sub-

contract by Smith and Lucas (a subcontractor of Conner ’s)

on May 25, 1958.

On or about June 2, 1958, Bushman, having investi-

gated the Conner job, advised Conner that it would pre-

| pare an agreement whereby Bushman would finance Con-

ner and indemnify the bonding company so that Conner

could furnish the performance bond required by the sub-

contract. |

On June 3, 1958, a representative of Bushman met

with Conner and its attorney, Mr. Purser, in Colorado

Springs, to enter into such an agreement, and after some

negotiations as to the wording of the agreement, an agree-

ment was entered into between Conner and Bushman on

June 3, 1958. (Exhibit \L.) The agreement provided that

Bushman would receive pll payments on the subcontract,

pay all bills, and secure/a performance bond in the name

ie ee

- of Conner, indemnified by Bushman. The agreement fur-

ther provided that Bushman would pay Conner $1,000.00

’ a month as a drawing account, to be charged as a part of

the construction costs, and all profits would be divided

equally between Bushman and Conner.

At the same time, and in order to provide a. means

whereby Bushman would receive the payments on the sub-

contract, Conner executed a document entitled ‘‘ Direction -

of Proceeds’’ (Exhibit 2) in which Conner directed R.P.R. |

to forward all payments under Conner’s subcontract to the .

Mechanics Bank at St. Joseph, Missouri: A copy of the

Direction of Proceeds was sent to R.P.R. with the request

that..it execute the receipt appearing at the bottom of the

__ Direction of Proceeds. The receipt was later executed by

_ R.P.R. Conner advised the Mechanics Bank that it had is-

sued a directive to R.P.R. to send checks for payments due

under the subcontract to that and authorized Mr.

Nash, the Cashier of the bank, in the absence of Conner, to

endorse the checks and deposit them) to the account of

Bushman. -

Sometime between June 15 and July 1, 1958, Mr. Rolfe

and Mr. Logan, both representing Bushman, called on Mr.

Rubenstein, president of R.P.R. During the course of the

conversation Rubenstein was advised that Bushman had

agreed to indemnify Conner’s performance bond and to fi-

nance Conner. Rolfe suggested to Rubenstein that he waive

the performance bond, accept Bushman’s guarantee of per-

formance, and split the bond cost ‘of $12,000.00, thereby

saving R.P.R. $6,000.00. Rubenstein refused, replying that

the saving was not sufficient to justify waiving the surety

bond. Thereupon Bushman supplied a surety bond executed

by Conner as principal and Seaboard Surety as surety, in

}

—

which Conner was named as the sole principal and the sole

contractor with R.P.R. Bushman, by a separate instro-

ment, indemnified the surety against loss. There was. noth-

ing in the bond (Exhibit 23) or the indemnity agreement

(Exhibit 21) in any way indicating that Bushman was a

party to the subcontract or had or claimed to have any

contractual relations with R.P.R.

‘Neither at the time of the foregoing conversation, nor

at any other time prior to the institution of this action,

was R.P.R. furnished with a copy of the agreement be-

tween Conner and Bushman. Nor was R.P.R. at any time —

+ prior to the institution of this action advised of the terms

of the Conner-Bushman agreement, other than that Bush- -

man had agreed to indemnify Conner’s performance bond

and finance Conner.

At no time prior to the institution of this suit was

R.P.R. advised that Bushman claimed to be a joint ven-

turer in or a party to the Conner subcontract.

Until August, 1959, R.P.R. complied with the Direction

of Proceeds by sending checks, for payments on the sub-

contract to the Mechanics Bank, payable to W. S. Conner,

with the exception four checks totalling $17,673.51,

which were delivered to Conner directly and were not sent

to the Mechanics Bank. These four checks were issued in

October and November, 1958, and March and May of 1959

(see Exhibit 25E) and will be the subject of later findings.

In accordance with the Conner-Bushman agreement,

Bushman from time to time disbursed funds for the pay-

ment of Conner’s payrolls and bills. The funds disbursed

consisted in part of money received from R.P.R.’s pay-

1 ~_ “4—

ments to Conner and in part of ‘money advanced by

Bushman.

In the period of Apri? through July, 1959, Bushman

had disbursed for) costs on the subcontract substantially

more than it had received. As a result, during the latter

part of this period, Mr. Rolfe, of Bushman, talked to Con-

ner and also to Rubenstein by telephone on several océa-

sions, inquiring about payments on the subcontract. .

Matters came to a head in the latter part pf July and

the early part of August, 1959. During that period the fol-

lowing events took place:

' (a) Rolfe informed Conner’s incites that

Bushman would not; ‘pay any more bills until it re-

ceived further payments on the subcontract.

(b) Thereafter and in early August, 1959, Con-

ner notified Bushman that he would send no more bills

to Bushman but that he and R.P.R. would pay ‘the

bills. At that time Conner was concerned that the non-

_payment of bills would affect his abiilty to proceed’

“with the work.

ing August 8 and the taxes incident thereto, and there-

aher disbursed no other funds except for a premium on

a lia urance policy which was paid in Decem-

ber, 1959, Bushman also notified Conner’s suppliers

that Bu was no longer paying bills for Conner

and they would have to look to Conner for their money.

At this time Bushman had disbursed for expenses

properly chargeable to the Conner subcontract ap-

proximately $500,000.00 more than it had received’

from the payments sent to the Mechanics Bank: (Bush-

—1l— e

man’s total disbursements properly chargeable to the

Conner subcontract exceeded Bushman’s receipts® by |

$517,272.49.)

(d) Beginning in early August, 1959, payments

made by R.P.R. on the Conner ap aga were made

by checks payable jointly to W.’S. Conner and his

suppliers, or by checkss made payable to ‘‘W. S. Con?

ner—Capehart Job’’. These latter checks were de-

_ posited in a checking account in the First National

Bank of Colorado Springs denominated ‘‘W. S. Con- _

ner—Capehart Job’’. From this account funds were

disbursed for expenses properly chargeable to the sub-

contract by checks drawn upon that acount and signed

by Conner or his employee Geary and a Mr. Rigg, a

_ representative of R.P.R., with the exception of one

check for $72,657.35, which will be the subject of

later a . .

(e) Prior to the foregoing arrangement wa on

August, 3, 1959, Bushman’s attorney, Mr. DeMuth,

made telephone inquiry of Rubenstein about payments

on the Conner subcontract, stating Bushman had paid

‘out substantially more than had been paid on the sub-

contract and he was concerned about R.P.R.’s failure

to make the progress: payments on the subcontract.

Rubenstein informed him that the funds were being

held in escrow and that he would send a 000.00

when these funds wefe released.

On August 6, 1959, R.P.R. ail its check, drawn:

on the First Nationa! Bank of Phoenix, to Conner in .

the amount of $150,000.00, and in accordance with the®

Direction of Proceeds, sent the check to the Mechanics

Bank at St. Joseph, Missouri. The Mechanics Bank, in

ss 4

f oun, 16 ann

accordance with Conner’s previous authorization (see

Exhibit 3) endorsed Conner’s name to the.check, de- —

posited it in the Bushman account and sent the check —

through regular channels for collection. On August

10th, Conner wired the First National Bank of Phoe-

nix that the authority of anyone other than himself to

endorse checks had been revoked, and instructed the

bank to honor no endorsement on any .checks other

than his personal signature. (Exhibit 29.) Thereupon

the Phoenix bank returned the check unpaid, marked

‘Personal endorsement of payee required as per

payee’s instr.’’ (Exhibit 9). Thereafter the Mechanics

Bank returned the check to the Phoenix Bank for col-

lection or protest for non-payment. When the check

was presented to the Phoenix bank for collection on

August 24, 1959, it refused payment because R.P.R. in

the ‘meantime had stopped payment, and it returned

- the check to the Mechanics Bank for. that reason.

The foregoing facts led to the institution of this action

in early September, 1959. The complaint was served on

Mr. Rubenstein on September 9, 1959. At that time, al-

though the Conner subcontract work had been largely com-

pleted, there remained a very substantial amounteyet to

be paid for expenses chargeable to Conner for work then

done and to be done to complete the Conner subcontract.

Th total contract price under the Conner subcontract

. was $2,184,600.00. R.P. R. paid to Conner and to Conner

and its suppliers a total of $2,196,862.83. (See Exhibits

27 and 27-A.) These funds, with two exceptions hereinafter

mentioned} | were applied to the payment of bills and ex-

penses properly chargeable to the Conner subcontract in

one of three _—

;

Py « ‘

> Py

. to ;

“ee

’ . e .

° . .

’ | ;

(a) By checks drawn by R.P.R. payable to. Con-

ner, sent to the Mechanics Bank, deposited to Bush-

man’s account and disbursed by Bushman-for expenses

properly chargeable to the Conner subcontract;

(b) By checks drawn by R.P.R. payable to ““W.

S. Conner—Capehart Job’’, deposited in the ‘‘W. 8.

Conner—Capehart Job’’ bank account and disbursed

.. therefrom by checks for expenses properly chargeable

to the Conner subcontract;

able jointly ‘to W. 8. Conner and his creditors for _ex-

penses properly chargeable to’the Conner subcontract.

‘The first exception to the foregoing findings are four

checks drawn by R.P.R. payable to W. S. Conner, which

were not sent to the Mechanics Bank but were delivered by

R.P.R. to Conner. These checks are as follows:

Check No. 711 dated October 97, 1958, for $ 822.35

Check No. 776 dated November 21, 1958, for 1,344.80

Check No. 989 dated March 13, 1959, for 6,434.18

Check No. 1133 dated May 28, 1959, for 9,072.13

Total $17,673.51

(See Exhibit 25-E.)

There is no evidence that the proceeds of these checks

were used to pay expenses properly chargeable to the

Conner subcontract ard the Court finds that the Proceeds

were not used to pay such expenses,

The* other exception pertains to check number 1615

(Exhibit 27-A) dated October 21, 1959, for $72,657.35,

which is shown on Exhibit 27 as having been disbursed for

the following purposes:

ons 18 as

Director of Internal Revenue $44,390.44 -

State of Colorado Tax Division * 97,990.87

State Compensation Insurance Fund 20,276.04

Total $72,657.35

As to this check the Court finds that on October 21,

1959, after the subcontract had been completed, Conner

wrote to R.P.R. (Exhibit SS-1), attaching a list of the

final bills yet to be paid. This list included an item of

$72,657.35 to pay F.LC.A., federal and state withholding

taxes, federal excise taxes, state unemployment taxes and

‘premiums’ on compensation insurance. (See Exhibit SS-3).

Thereupon R.P.R. drew the check No, 1615 payable to

‘“W. 8. “Conner—Capehart. Job’’ anf delivered it to Con-

Although this check was made payable to ‘*W. S. Con-

ner—Capehart Job’’, it was never deposited in the W. S.

' Conner—Capehart Job bank account, nor were the proceeds

of that check used for the purposes set out in Exhibit 27

and Exhibit SS-3. This check for $72,657.35 was endorsed

by Conner and presented to the First National Bank in

Colorado Springs, and at his request the bank sent the

check through channels for collection. When the proceeds

were received by the bank, the bank issued its Cashier’s

check to ‘“W. S. Conner, Capehart Job” for that amount...

Conner then surrendered that Cashier’s check to the bank

and obtained in lieu thereof the following Cashier’s checks,

all dated October 28, 1959:

No. 47947 payable to State of Colorado

‘Department of Revenue $ 597.18

No. 47948 payable to Department of

Employment, State of Colorado 2,092.40

“®

No. 47949 payable to Diréctor of

Internal Revenue 13,825.28

No. 47950 payable to W. 8. Conner 6,142.49

“ No. 47951 payable to W. S. Conner | 10,000.00

No. 47952 payable to W. S. Conner ~ 10,000.00

No. 47953 payable to W. S. Conner 10,000.00

No. 47954 payable to W.S. Conner 10,000.00

No. 47955 payable to W. S. Conner 10,000.00 .

‘Total $72,657.35

The payees named in Cashier’s checks 47947 and 47949

received the proceeds of these checks for experises proper-

ly chargeable to the subcontract. Cashier’s check No. 47948,

payable to the Department of Employment, State of Colo-

rado, was endorsed and cashed by Conner and he and not

the payee received, the proceeds of that Cashier’s check.

He also received the proceeds of the remaining Gashier’s

checks. In short, the Court finds that the disposition of the

,, Proceeds of the check for $72,657.35 was as follows:

State of Colorado Department of Revenue $ 597.18

Director of Internal Revenue 13,825.28

W.S. Conner . 58,234.89

The Court finds that the latter sum of $58,234.89 was

not applied to the payment of expenses—properly one

able to the Conner subcontract. ;

‘The Court further finds that Conner breached his

‘agreement with Bushman in accepting’ and receiving from

R.P.R. checks numbered 711, 776, 989 and .1133 totalling

= $17,673.51, instead of having said checks forwarded to the -

Mechanics “Bank in_adcordance with the Conner-Bushman

- agreement. The Court having previously found that the

‘Proceeds of these checks were not applied to expenses is

—_ 90 — :

' properly chargeable to the Conner subcontract, the plain-

tiff Bushman has been damaged by such breach in the

amount of $17,673.51. ia

ii + |

The Court further finds that after Bushman had ad-

vised Conner that it would pay no further bills, and Con-

ner thereafter made arrangements with R.P.R. to pay the

bills themselves, Conner was under a duty to Bushman to

see to it that all future payments made on his subcon-

tract with R.P.R. were applied to the payment of expenses

properly chargeable to that subcontract or to pay said:

- funds to Bushman. Conner breached this duty when he

failed to either apply to expenses properly chargeable to

the project or deliver to Bushman: $58,234.89 which he

personally received fom the proceeds of the check for $72,-

657.35. By reason of Conner’s breach of duty to Bushman

in this respect, Bushman has been damaged in the amount

of $58,234.89.

The Court further finds that under the facts as found,

R.P.R. was under a duty to Bushman to either send the

' checks for payments due to the Conner subcontract to the

Mechanics Bank or to see to it that the payments so made

on the Conner subcontract were applied to expenses prop-

erly chargeable to that contract.

R.P.R. breached this duty in fhiling to ‘aad to the

Mechanics Bank checks numbered 711, 776, 989 and 1133,

totalling $17,673.51, or in seeing to it that the proceeds

of these checks were applied to expenses properly charge-

able to the Conner subcontract. By virtue of this breach of

duty, Bushman has been d in the amount of

$17,673.51. e

B.P.R. also breached the duty which it owed to Bush-

a eon

man in failing to see to it that the proceeds of check 1615

for $72,657.35 were applied to expenses properly charge-

able to the Conner subcontract, or in the alternative, send-

ing said check to the Mechanics Bank. As a result of the

breach of this duty, Bushman has been damaged in lies

amount of $58,234.89.

Bushman was entitled to receive the proceeds of checks

numbered 711, 776, 989 and 1183 and $58,234.89 of the pro-

ceeds of check 1615, on or about the dates that said checks

were issued, and having failed to receive the proceeds or

partial proceeds of said checks at those times, Bushman is

entitled to recover interest at the rate of 6% per annum

computed from the date of said checks to this date, which

amount is the sum of $11,772.83.

The Court finds that R.P.R. did not at any time or

in any manner whatsoever conspire with Conner to de-

fraud Bushman, nor did R.P.R. at any time act or fail to

act with any purpose or intent to defraud Bushman or in ©

furtherance of a conspiracy to defraud Bushman.

The Court further finds that the delivery by BPR.

of checks 711, 776, 989 and 1133 to Conner, contrary to the

Direction of Proceeds, was not done with any purpose or

intent to defraud Bushman or in furtherance of any con-

spiracy between Conner and R.P.R. to defraud Bushman.

The Court further finds that the issuance and delivery

of check 1615: by ‘RP.R. to Conner was done in reliance

upon Conner’s reperesentation that the funds would ‘be

used by Conner for the purposes set forth in Conner’s

written request for, issuance of that check and Conner’s

representation that the items listed in the request were

expenses properly chargeable to the subcontract (see Ex-

hibit SS-1-3) ; and that check 1615 was not issued and de-

livered to Conner with any intent and purpose by R.P.R.

to defraud Bushman or in furtherance of any conspiracy

between R.P.R. and Conner to defraud Bushman.

Conner counterclaimed against Bushman for $18,000.00

which is claimed: by Conner under the provisions of the

Conner-Bushman agreement providing for the payment

of $1,000.00 per month by Bushman to Conner, to be

charged as a part of the costs of:construction.

As to this counterclaim, the Court finds that Bushman

paid to Conner $3,000.00 in accordance with the drawing

account agreement and that all further payments under

this provision of the contract were waived by Conner, and

entitled to no recovery on his counter claim against

Bushman.

& CONCLUSIONS OF LAW

1. Conner was under a duty to Bushman not to ac-

cept, receive or cash checks numbered 711, 776, 989 and

1133 totalling $17,673.51. By accepting and cashing those

checks and retaining the proceeds therefrom, Conner

breached his duty to Bushman to Bushman’s damage ni

the amount of $17,673.01.

2. Conner~was under a duty to pay to Bushman

$58,234.89 of the proceeds of check No. 1615 for $72,657.35;

that Conner breached this duty by receiving and retaining

$58,234.89 of the proceeds of said check, to Bushman’s

damage in that amount. ae

3. R.P.R. was under a duty to Bushman to either

—~

send all payments due on the Conner subcontract to: the

‘Mechanics Bank or see to it that all payments made on the

Conner subcontract were applied to the payment of ex-

penses properly chargeable to that subcontract. R.P.R.

_ breached this duty when it delivered to Conner checks

numbered 711, 776, 989 and 1133, totalling $17,673.51, and

check numbered 1615 in the amount of $72,657.35, and

failed to see to it that the proceeds of said checks were

applied to expenses properly chargeable to the Conner

subcontract. As the result of a breach of this duty, Bush-

man has been damaged in the amount of $75,908.40.

4. Under the provisions of Colorddo Revised Statutes

1953, Section 73-1-1 and 73-1-2, Bushthan is entitled to re-

cover interest in the amount of $11,772.83.

5. Bushman Construction Company is entitled to

judgment against W. S. Conner, an individual doing busi-

ness as W. S. Conner Construction Company, in the amount

of $87,681.23.

6.. Bushman Construction Company is entitled to

judgment against R.P.R. Construction Company in the

amount of $87,681.23.

7. The total. recovery by Bushman on either or both

of these judgments is limited to the sum of $87,681.23.

IT IS THEREFORE ORDERED that the Clerk of

this Court forthwith enter judgment in favor of Bushman

Construction Company and against W. S. Conner, an in-

dividual doing business as W. S. Conner Construction

Company, in the amount of $87,681.23, and in favor of

Bushman Construction Company and against R.P.R. Con-

. 9A

struction Co. in the amount of $87,681.23, provided, how-

ever, that the total recovery on either or both of these

judgments shall be and is hereby limited to ‘the sum of? -

$87,681.23,

DATED at Denver, Colorado, this 5th aa of May,

1964. ,

By the Court: Hatfield Chilson, Judge United States

Ps Court.

APPENDIX B

UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

‘September Term—1965

BUSHMAN CONSTRUCTION .

COMPANY, a Missouri Corporation,

Appellant,

7 A co. ia “individual, do

come, Ss. a cone

STRUCTION COMPANY;

CONSTRUCTION COMPANY. an ATE

zona corporation,

Appellees. J —

RPR. CONSTRUCTION COMPANY, an >

. Arizona corporation,

BUSHMAN CONCTRUCTION COM-

PANY, A

s Cross-Appellant, |

Missouri a er HERO

Laurence W. DeMuth, Jr., of the. Firm of Akolt, Shepherd

& Dick, Denver, Colorado, and Richard U. Simon, of the

Firm of Simon & Simon, Fort Worth, Texas, (Stuart 8S.

Gunckel of the Firm of Akolt, Shepherd & Dick, Denver,

Colorado, with them on the brief), for Bushman Construc-

tion Co., appellant and cross-appellee.

C. Blake Hiester and Bill Earl Tom, of the Firm of Hies-

ter, Tanner and Clanahan, Denver, Colorado, for R.P.R.

Construction Co., appellee and cross-appellant.

Before MURRAH, Chief Judge, and PICKETT and

SETH, Circuit Judges.

PICKETT, Circuit Judge.

a's

| 6

Bushman Construction Company brought this action

against W. S. Conner and R.P.R. Construction Company’,

to recover’money alleged to be due in connection with the

performance of a subcontract on a military. housing project

at the United States Air Force Academy near Colorado

Springs, Colorado. On a former appeak we reversed a

summary judgment-in favor of R.P.R. and remanded. the

ease for trial. Bushman Construction Co. v. Conner, 307

F.2d 8887. Upon trial Bushman recovered judgment in the -

sum of $87,681.23, and appeals on the ground that the

award is inadequate. R.P.R. cross-appeals, contending

that as a matter of law, it was under, no obligation to

Bushman. Briefly stated, the pertinent facts are: In April

of 1958, R.P.R. negotiated with Conner for a subcontract

to perform a substantial portion of its contract for con-

“ struction to the aforesaid housing unit. On April 25, R.P.R.

delivered to Conner a letter of intent té award to Conner.

a subcontract whereby it agreed to pay to Conner the sum

of $2,184,600.00 for the work to be performed. Conner was

‘in need of financial assistance and discussed the matter

with Bushman. Bushman agreed to furnish the perform-_

ance bond and the necessary finances to complete the sub-

contract. On May 22, 1958, the subcontract was executed

by R.P.R. and Conner. aay in June, Bushman sent a rep-

resentative to Colorado /Springs to investigate the work

to be done. The representative reported to Bushman that

the contract was satisfactory and recommended that

‘Bushman enter into an agreement with Conner to partici-

pate in its performance. On June 2, 1958, Bushman and =

The, parties will be referred to as “Bushman “Conner”, and

2The same subject matter was later before’ the court in a com-

ion case wherein Bushman unsuccessfully sought to establish a

‘under the general lien statutes of Colorado. Bushman Construc-

tion Co. v. Air Force Academy Housing, en er

‘>

wits; J

Conner entered into a contract which, throughout these pro-

’. ceedings, has been recognized by the parties"as creating

a joint adventure. The contract provided that Bushman ©

was to furnish the, required bonds, pay all bills necessary -

to complete the contract, and allow Conner to draw $1,000 %

per month. All payments due, from R.P.R. were to be made -

to the Mechanics Bank at St. Joseph, Missouri, where _they .

were to be credited to Bushman’s account, After the job |

was completed and accepted, Bushman was required to

: pay Conner 50% of the funds remaining in its possession.

On the same day, Conner executed and delivered an instru-

ment directing R.P.R. to forward all proceeds due under -

the Conner subcontract to the St. Joseph bank®. R.P.R.

acknowledged receipt of the latter instrument and made.

' payments accordingly for more than one year. Within a

week or ten days after the Bushman-Conner arran ent,

a representative of Bushman called on R.P.R.’s president

and advised him of the contract and that he’was there to’

assist in any way that he could. The president replied that

‘“‘he was glad to see us on the job in connection with

Conner.’’ ;

As the Work progressed on the subcontract, R.P.R. for"

* warded to the St. Joseph bank all progress payments. In

June of 1959 these payments totaled over $1,400,000.00. At

_ that time Bushman had paid out approximately $1, 900 “sae

000.00, and refused to make« any further advances until -

additional funds due on the subcontract were paid. After

' conferences with representatives of Bushman, R.P.R. -

agreed to forward $150,000.00, and to~later deliver addi-

tional sums which were being held in-escrow. On August

6, 1959, R.P. RB." 's check for $150,000.00, drawn ¢ on the First,

8These instruments set forth in Footnote , 8 Bushman Con-

struction Company v. Con ™ ‘F.2d 688, 890.

wr ae Sa. ; 0

ition

National Bank of Phoénix, Arizona, sent, to the St.

‘Joseph bank. Conner’s name it a on the check

- in the usuakmanner and the amount deposited to Bush-

man’s account. In the meantime, Conner notified the Phoe-

“nix bank that authority to endorse the check had been re-

voked. R.P.R. then stopped payment on the check and it

was never paid. When no more proceeds were forthcoming, -.

/ Bushman notified creditors and suppliers that they would

. have to look to Conner for their money. At that time most

of-the work on the subcontract had been completed, but-

there remained accounts upon which there was due a sub- -

statial amount ¢chargeabl¢ against the subcontract a

" work completed and to be completed.

‘ Following the discontinuance of the Bushman-Conner-

arrangement, R.P.R. disbursed funds due on the subcon-

tract jointly to Conner and creditors for settlement of ex-

penses properly chargeable to the Conner subcontract, or

to a bank account.over which R.P.R. had control.* In addi-

tion, there were payments made to Conner directly which

were not applied to expenditures chargeable against the

subcontract. These payments, together with interest, to-

taled $87,681.23. The trial court held that ‘‘R,P.R. was un-

der a duty to Bushman to either send the checks for pay- ~

e ments due on the Conner subconiract to the Mechanics

_Bank, or see to it that the payments, so made on the Con-

ner subcontract were applied to expenses properly charge-

able to that subcontract’’, and that Bushman was entitled

to recover all sums not o applied. #

4R.P.R.’s president” testified- that this procedure was adopted to

certain “that all funds that yg eB on the job were to go

to suppliers, laborers,,equipment rental, and so forth. We took

* whatever precautions We could at that time to make sure that the

money would go to people who had furnished materials, et cetera, to

Although it is conceded that R.P.R. knew that Bush-

man had agreed to indemnify the surety on Conner’s bond,

and was involved in the subcontract, the trial court found

that R.P.R. was not furnished with a.copy of the agree-

ment between Conner and Bushman;-and that ‘‘at no time

prior to the institution of this suit was R.P.R. advised |

- that Bushman claimed to be a joint venturer in or a party

to the Conner subcontract.’’ This finding is supported by

~. the record. The court also found that R.P.R. did not con- -

| spire with Conner to defraud Bushman, and that the deliv-

s ery of checks to Conner contrary to the instrument direct-

ing the payment of the proceeds to the St. Joseph bank was

not for the purpose of defrauding Bushman or to further a

. ° eonspiracy between Conner and R.P.R. to deprive Bushman

of the benefits of the Conner subcontract. This, finding is

* also supported by the record. In the former appeal we held

that these were factual questions to be determined by a

. trial. With these facts established there remains the ques-

tion of whether R.P.R. has any further duty to Bushman.

As we interpret the trial court’s conclusion, Bushman had

a lien.on the funds in possession of R.P.R., and that R.P.R.

an experienced contractor, had sufficient notice of the lien

to be bound by it. Under the circumstances, unless clearly

erroneous, the determinations by the trial court of applic-

. able Colorado law will’be upheld. First National Bank &

Trust Co. of Oklahoma City, Okla. v. Foster, 10 Cir., 346

F.2d 49, and cases cited.’ ;

The evidence establishes without dispute that for over

one year R.P.R. sent all of the Conner checks to the Me-

—, echanics Bank at St. Joseph, Missouri, where they were en-

dorsed and the money deposited to Bushman’s account.

Although R.P.R. dif not know the details of the contractual

relationship between Bushman and Conner, it did know

— 30—

that during this time Bushman used these funds to pay

for labor and material furnished to the Conner subcontract,

and knew that the ‘‘ Direction of Proceeds’’ instrument was —

for Bushman’s protection. It knew that Bushman had paid

out, for the benefit of the Conner sudcontract, about $500,-

000.00 more than it had received. R.P.R. knew from confer-

ences with Bushman’s representatives that these advances

were chargeable to progress payments due. These confer-

- ences and requests for additional payments resulted in the

- delivery of a $150,000.00 check, which was never paid. °

The trial court’s theory of liability is based upon the

rule announced in School Dist. No. 3 v. Central Savings

Bank & Trust Co., 113 Colo. 487, 159 P.2d 361, and Mitchell

v. Bowman, 10 Cir., 123 F.2d 445. See also, Clatworthy v.

Ferguso:;, 72 Colo. 259, 210 P. 693; American Agency &

Investment Co. v. Gregg, 90 Colo. 142, 2 P.2d 1101. These

cases establish a right in the nature of a lien in favor of

one who assists in bringing a fund into existence. Undoubt-

edly Bushman’s contribution to the Conner subcontract

was to a large extent responsible for the creation of the

fund held by R.P.R. For more than one year all the pro-

ceeds from the Conner subcontract went to Bushman, who

was required to use any funds received by him to discharge

claims against that contract. When a dispute arose be-

tween Bushman and Conner, R.P.R. assimed the responsi-

bility of using the remaining amounts due on the subcon-

tract to discharge claims against that contract. When

R.P.R. paid claims properly chargeable against the sub-

contract, it discharged obligations for which Bushman was

liable, consequently it was not injured by R.P.R.’s failure

to deliver the funds to it. No contention is made that there

was any money in the possession of R.P.R. after these

payments were ‘made.

—1—

‘The claim that B.P-R. is liable on the $150,000.00 check

which it issued to Conner and which was endorsed to Bush-

_- man, is without merit. All of the funds which R.P.R. had, .

including the $150, 000. 00 were held to discharge obligations

of the Conner subcontract, and were so used. If the money

represented by the check had heen received by Bushman,

it would have been used for the same purpose.

‘AFFIRMED.’

one Son ao) | is <

| ition. |

APPENDIX C E_C.

UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

No. 7263—December Term—1963

BUSHMAN CONSTRUCTION COMPANY,

Appellant,

Vv t

AIR FORCE ACADEMY HOUSING INCORPORATED, AIR FORCE |

ACADEMY HOUSING INCORPORATED NUMBER TWO, AIR

‘ORCE ACADEMY HOUSING INCORPORATED NUMBER

“HREE, AIR FORCE ACADEMY HOUSING INCORPORATED ©

NUMBER FOUR, AIR FORCE ACADEMY HOUSING INCORPOR-

ATED NUMBE FIVE, AIR FORCE ACADEMY HOUSING INCOR-

PORATED NUMBER S AIR FORCE ACADEMY HOUSING

INCORPORATED NUMB SEVEN, AIR FORCE ACADEMY

MARYLAND CASUALTY COMPANY, THE STATE 3

RETIREMENT BOARD OF OHIO, DEL E. WEBB CONSTRUC-

TION CO., R.P.R. CONSTRUCTION CO., RUBENSTEIN CON-

STRUCTION CO., STATE TREASURER OF COLORADO, and THE

COLORADO PUBLIC EMPLOYEES’ RETIREMENT ASSOCIA-

_ TION,

Appellees.

‘Appeal From The United States District Court

For The District of Colorad> :

Laurence W. DeMuth, J rf Denver, Colo. (Akolt, Shepherd~

& Dick, Denver, Colorado and Carl F. Eiberger, Denver,

Colorado, were with him on the Brief), for Appellant.

C. Blake Hiester and Bill Earl Tom, Denver, Colo. (Heis-

ter, Tanner & Clanahan, Denver, Colod., were with them on

the Brief), for Appellees, The Maryland Casualty Com-

pany, Del E. Webb Construction Co., R.P.R. Construction

©o:, and Rubenstein Construction Co. t

Before LEWIS, HILL and SETH, Circuit Judges.

SETH, Cirenit Judge.

re]

_ This is a companion case to Bushman Construction Co.

v. Commer, 307 F.2d 888 (10th Cir.), and now pending in

the United States District Court for the: District of Colo-

rado. | rae

The trial court granted motions to dismiss and mo-

tions for summary judgment on behalf of the various de-

fendants. Bushman Construction Company, the plaintiff

below, is appealing such orders.

The present diversity action is based primarily on

the general lien statutes of Colorado, Colo. Rév. Stat.

1953 Ann., §§ 86-3-1 to -24, and also contains a separate

in personam cause of action. Plaintiff-appellant aserts

two liens: One for $720,819.95 by reason of the perform-

ance of a subcontract known as Subcontract 581, and the

other by virtue of the assignment of a lien from The

Harrison Engineering & Construction Corporation for

, $25,125.00. Both of the liens are claimed against certain

property in the Armed Forces Housing (Capehart) project

at the Air Force Academy in El Paso County, Colorado.

Defendants, Del E. Webb Construction Co. (Webb) and

Rubenstein Construction Co. (Rubenstein), were prime

contractors on this project, and The Maryland Casualty

Company was the surety on the prime contractors’ bond.

R.P.R. Construction Co. (R.P.R.), a first tier subcontrac-

tor under Webb and Rubenstein, in turn subcontracted a

part of its work to the plaintiff-appellant and its alleged

joint venturer, W. S. Conner, by the execution of Subcon-

tract 581. The appellee’ housing corporations of Delaware

are the owners’ of the leasehold estates and the improve-

ments which were constructed. The State Lreasurer of

Colorado and The Colorado Public Employees’ Retirement

Association are joined as defendants by reason of the fact

— 34—

that they are the present owners of the mortgages on the

subject leaseholds.

The complaint alleges that the appellant and Conner,

s joint venturers, undertook to perform Subcontract 581.

Appellant claims that it furnished services, material and

labor which contributed to the completion of the work

and that appellant received $1,463,780.05 gf the contract

price of $2,184,600.00. Appellant seeks the difference, $720,-

819.95, by way of foreclosing a statutory lien. W. S. Con-

‘ ner is not named-in the complaint as a party and was not

initially joined or served.

As to the assigned lien, the complaint recites the as-

signment of a $25,125.00 lien claim to the appellant from

. The Harrison Engineering & Construction Corporation

and prays for judgment in this amount, together with a

decree foreclosing the lien. This lien arose from the per-

formance of Subcontract 581, but was assigned to appellant

individually.

The complaint: also seeks a judgment against appellee,

The Maryland Casualty Company, for each amount on

bonds it executed as surety for the prime contractors.

.On December 20, 1960, the motion of The Maryland

Casualty Company to dismiss was granted on the ground

that Conner, appellant’s joint venturer, was an indispens-')'* ”

able party to the action and had not been served with pro-

cess. This order of dismissal was later.applied by a sub-

sequent order to all matters contained in the complaint,

| On December 20, 0 the housing corporations’ mo-

tion to dismiss was also granted on the ground that Conner

—35 —

was an indispensable party to the claim under Subcontract

581. The court on the same day denied the motion to dis-

miss as to the claim of the appellant as assignee of the

Harrison claim.

Webb’s motion for summary judgment on the ground

that payment had been made, that there was no privity be-

tween Webb and /ap nt, and that Conner was an indis-

) Bexsable party was granted on December 28, 1960,

Thereafter appellant/ moved for an order vacating or

modifying the order of dismissal entered on December

20, “1960, to allow the appellant time to serve Conner. At

‘the same time, approximately, appellant filed a motion

seeking authority to serve Conner and other gear out-

side the District pursuant to 28 U.S.C. § 1655, ’ this

motion was granted. On February 6, 1961, the court de-

' nied the appellant’s motion to modify the order of dis-

missal of December 20, 1960. On March 16, 1961, Conner

filed his answer, pleading the merits of the case. He denied

all the allegations of the complaint and expressly denied

there was ever a joint venture.

On April 11, 1961, Webb, Maryland, and the housing

corporations filed a joint motion for summary judgment as

to the assigned Harrison lien. This joint motion was

granted on September 25, 1962, on the ground that under |

_* Colorado law, rental of equipment could not be the basis

for a lien. !

The motion for summary judgment filed by Ruben-

stein and R.P.R. relating to all of appellant’s claims was

granted September 25, 1962. As to Subcontract 581, the

grounds for dismissal were payment and lack of privity of

— 36— |

contract between the appellant and these appellees as not-

ed in the December 28, 1960, order. As to the assigned

claim, the ground for granting.the summary judgments was

that the work was not lienable and there was no privity.

Summary tedtensat in the September: 25, 1962, order

was also granted to the State Treasurer of Colorado and

The Colorado Public Employees’ Retirement Association,

the housing corporations, and Webb on the same grounds.

An order for final judgment was entered on October 25,

1962.

. \ L

The Claim Under Subcontract 581

‘‘Under this subcontract to W..S. Conner, which the

complaint alleges was performed by a joint venture of

appellant and Conner, the claim is made that there is an

unpaid balance of $720,819.95. The complaint, seeks per-

sonal judgments against the appellees and also asserts a

lien against the property on which the improvements

were constructed.

To dispose of the motions, the trial court properly

considered the complaint, depositions, motions, exhibits,

andl admissions all together. In doing this, the allegations ~

in the pleadings may be evaluated in the light of the

depositions and the’ additional factual material before

the court and a determination made whether material

isues of fact actually exits. After this has been done,

should no material fact ‘‘dispositive_of right or duty re-

main in the case,’’ summary judgment is proper. See

nine Ashton aah

“Bushman. Construction Co. ¢. ap one 307 F.2d. 888 (10th

Cir.), and cases therein aaa

The record before us contains nine final payment and

waiver of lien certificates signed by W. S. Conner. The

record further shows that the entire amount due on Sub-

‘contract 581 was paid by R.P.R. to Conner or on his ac-

counts. The complaint and the claim of lien assert there

was a joint venture between appellant and Conner in the |

performance of ‘Subcontract 581. Appellant in its com-

plaint is asserting the joint venture did not receive the

full paymeft. The record shows that W. S. Conner was

in charge of the performance of the work under the sub-

contract. Appellant entered the picture primarily in the

role of financier and to provide a performance bond. The

record shows no dispute between the joint venture and

R.P.R. as to the performance of the work. There is no

substantial question of fact remaining on the question of

payment and waiver of liens. There is a legal question

’ as to whether a pase as one of the joint venturers could

execute releases’ and payment certificates binding on the

joint venture. 4

The authorities universally hold that the action of

e joint venturer which relates to the object for which

the venture was formed is binding on the other parties.

In the companion case, Bushman Construction Co. v. Con-

ner, supra, it was stated by this court that there was this

joint venture between Bushman and Conner. The court

then stated, ‘‘as a general proposition, the substantive law

of partnerships is applicable to joint adventures,” citing

. Taylor v. Brindley, 164 F.2d 235 (10th Cir.). The court

then continued: ‘‘The application of partnership law in- |

}

ae pee

vokes agency rules since a partner is the agent for the

’other partners.’? In the cited decision, the court indi-

cated that the Colorado Supreme Court had not passed on

the specific question but that it was felt likely it would

follow the principles indicated above. In the case at bar,

the execution of waivers of lien and certificates of pay-

ment was a matter within the objectives of the joint ven-

ture, and consequently Conner was empowered to execute’

such documents and they are binding upon the joint

venture. ~

The Colorado Supreme Court has held in 'Bishop v.

Moore, 137 Colo. 263, 323 P.2d 897, that an indebtedness

in favor of the claimant must exist before a valid lien

claim may be made. Thus the execution of the waiver of

lien and payment certificates defeats appellant’s cause

‘of action both as to the asserted lien under this Sub-

“contract 581, and as to the personal judgments fought

% ~

thereon against all appellees. The trial court properly -

granted the motions for summary judgment. In these cir-

-enmstances, summary judgment was an appropriate rem-

edy. Wagoner v. Mountam Savings é Loan Ass’ n, 311 F.2d

403 (10th Cir.).”? 3 |

The ebiietinns 3 in n its brief seeks to place the appellee,

The Maryland Casualty Company, i in a different. ‘position.

This appellee, as above mentioned, was the surety on the

performance bonds of the prime contractors. The appellant

sought judgment against this appeiiee on these bonds.

The trial court granted motions by this appellee to dis-

miss on the ground that Conner was an indispensable

party and had not been sérved. However since appellant’s

claim for personal judgment and also claim of lien against’

the{prime contractors and their subcontractor R.P.R. Con-

wiiitansiobbrrininans wicrrnia

; | — 39 —

struction Company must fail by reason of the fact that

certificates duly issued, it necessarily follows that the

personal judgment on this subcontract - ‘sought against

The Maryland Casualty Company: pn the same facts must

likewise fail. The obligation on the part of the principal.

has been met, ‘and no cause of action can be asserted —

against the surety. Thus The Maryland Casualty Company

was properly disthissed ‘from. the . action, although | the

grounds for dismissal should have been those indicated -

above. Our consideration of this dismissal relates only to

the cause. of action based on Subcontract 581.

The in personam cause here alleged. sailed R.P.R. is

one which asserts in effect that payment was not made un-

>. der Subcontract 581. This contention fails, as discussed

above, because-the ‘record shows that all payments were .

‘made to one of the joint venturers. Thus R.P.R. has' per-

forméd under Subcontract 581 to. the extent of making the:

payment to Conner or on his accounts, and that is the only

question to be disposed of. The question whether or not °

R.P.R. should have paid these sums to another of the joint

venturers, and the effect of a document | concerning the ap-

plication of payments, is not here concerned. This-is an

issue in the companion case pending in: the District Court,

' and this opinion is not intended to affect such’ issue in

any way. | ; ———, i

- :

‘ The Assigned Lien

The principal question concerning thé’ lien ‘mala

to appellant by The Harrison Engineering & Construction

read

Corporation is whether a person renting equipment to a

contractor can, claim a lien under Colorado statutes’.

The equipment rented consisted of a water truck,

dozer, motor grader, two pickup trucks, and two air com-

pressors. It was rented to the joint venture of the appel-

lant and Conner to be used in the performance of Subcon-

tract 581. The record contains a deposition by an eniployee

of appellant stating that the officers and directors of ap-

Jant and of The Harrison Engineering & Construction

Qorporation are the same, and that the stockholders are

‘also the same ‘with the same proportional stock interests in

each. The claim of lien was for the invoice! amounts of

rental plus invoiced charges for hauling the equipment.

There do not appear to be any reported Colorado

cases on the poinf\The parties rely upon several deci-~

wa i ho de-

~"* gigns, plans, plats, Sain specifications, dra estimates of

surveys oF Superintentenee, or who have rend other anianatonal

service, or bestow labor in whole or ig pest, describing

owner, or of any other person acting by his authority or under him,

as agent, contractor, or otherwise; for the work or thbor done or

rendered or materials oer Wg om supenivdy,

whether done or furnished or rendered at a, we .F e owner

6 Se Ee Se Ce See See SEE; ORS Vary Sot

tractor, architect, engineer, subcontractor, builder, agent or other

person having charge of the construction, alteration, addition to, or

sepalt, either in whole oc in pest, of any building of other improve.

ment, as aforesaid, shall be- to be the agent of the owner for

the purposes of this ws

so” Fo — 4] —

sions in Colorado on related points and containing gen-

eral language. It is necessary under these circumstances

to considér these cases in some detail to°determine what

the Colorado courts have indicated the answer would be.

The first to be considered is the early case of Rara

Avis Gold & Silver Mining Co. v. Bouscher, 9° Colo. 385,

‘12 Pac. 433 (1886). In this case the plaintiff asserted a

mechanic’s lien for his services as foreman, superin-

tendent, mechanic, and as defendant’s agent in disbursing

its money and in keepig its accounts. The general Colorado

lien statute then provided: ‘‘All artizans, mechanics, and

others who shall perform work or labor... . for the con-

struction ox repair of any building, or other superstruc-

ture, shall have, and may claim and hold, a lien... . .”’ The

court held that the plaintiff’s services in planning ‘and

superintending development work and the erection of the

mill were labor upon the property within the meaning of

the statute. The cor shear that liens are allowed for

many kinds of labor that te authorities term ‘‘inciden-

tal,’’ such incidental labor must be directly done for, and

connected with, or actually incorporated into, the building

or improvement. It is also said that protection cannot be

extended to those services indirectly and remotely associat- .

ed with the construction work. Also the cook who prepares

theefood for the employees, the blacksmith who shoes the

horses or repairs the implements in use, and all similar

contributors to the enterprise are not among the favored

workmen. ane al

_ . The second Colorado case is Lindemann v. Belden.

Consol. Mining & Milling Co., 16 Colo._App. 342, 65 Pac.

' 403 (1901). The court there held that.a geologist and

mining expert.who had contracted to explore certain mines

anne

]

\and surrounding country was not entitled to assert a lit

fdr such services. The court said that a mechanic’s lien -

statute should be liberally constriiéd as to the remedial

portion of it, but must be strictly construed in determin-

ing the questidn as to whether the right to a lien exists.

Also it noted that the principle. of such -statutes is to

give security to materialmen and mechanics in or on values

that they have directly contributed to create. The court —

said further that it would be judicial legislation for courts

to extend their provisions so as to include demands not

fairly covered by the statutory language used, and that

protection should.not be extended to s@pvices indirectly

and remotely associated with the construction work.

‘Later in Chicago Lumber Co. eo Newcomb, 19 Colo.

App. 265, 74 Pac. 786 (1903), the court considered claimed -

bor and materials supplied to a contractor.

ry question there appeared to be the con-

ity of the statute; but the court also discussed

is a cooperative venture, and the- accomplish-

the work requires the purchase of material and the

er receives the benefits. Also the court noted that

‘ the underlying doctrine is that the party who has enhanced

the value of property by incorporating therein his labor

or materials shall have a preferred claim on the property

for the value of his labor or materials. The court then

said that’according to the statute, the liens were not to

benefit just mechanics, but ‘‘otherst? as well. The Colorado

courf there stated that the Colorado act. was evidently

modeled on California’s.

There followed Farmers I a Co. v. . 55

erally and observed that the construction of a

nt of mechanical and other labor, of all of which,

NED EaS eases Se a eT

\ i — 43 "

, ms .

Colo. 440, 135 Pac. 766 (1913), which concerned a lien

on a ditch and reservoir claimed on account of materials

furnished to Harris, a subcontractor. Hokasona contract- .

ed to build up the banks of the ditch and to enlarge the

dam of the reservoir ; Hokasona sybcontracted this work to

Harris. Harris was not to supply materials and was to be

paid according to the amount and type of earth moved.

Harris purchased lumber and hardware items from the

plaintiff which were used to erect sheds and bunkhouses.

The court held that these materials, in these’ circumstances;

did not establish a lien under the Colorado statute. The

court went on to say that under. such statute, in order

for one to have a lien, the material must be used in: the

construction of the structure so as to become a part of

it when completed. It said also that the fundamental

principle upon which mechanics’ liens are based is that

labor and material have gone into the property of another

and made it more valuable, so that’ when the owner is

called upon to protect his property from a lien by paying

for the labor or material, he is but paying for something

that he has received. The ‘court stated that it would be vio-

lative of the fundamental principle and would be extend-

ing the provisions of the statute to hold that a lien exists

for materials there furnished. The court noted that the

- materials were used about the job as an aid to him as tools

and appliances are aids, and were not intended: to-go into ~

. the structure or to be directly consumed in its better-

ment, but are to be taken away when the work is ‘completed,

as the tools and appliances are taken away. It held that

before a lien may be claimed, it is necessary that’ the

material furnished be actually used and wrought into the

structure to become a part thereof, or if not, it be di-

"rectly consumed in -its betterment, and be of the kind ;

pt eo

ie P

called for in the-contract between the contractor and sub-

contractor before a lien will lie therefor.

The Colorado Supreme Court in Great Western Sugar

Co. v. Gilcrest Lumber Co., 25 Colo. App. 1, 136 Pac. 553°

_ (1913), had before it an interpretation of the lien stat-

ute in relation to the allowable amount of a lien and the

necessity of notice. The court considered liens generally

and said that the theory of the Colorado statute was that

liens were allowed because of the enhanced value of the

property caused by the labor and material’so contributed

to it by the consent of the owner through his contractor.

In Brannan Sand & Gravel Co. v. Santa Fe Land &

. Improvement Co., 138 Colo. 314, 332 P.2d 892 (1958), a

claim of lien was made by a subcontractor for paving a..

here involved said:

“The above basic provision of the sahil has

been retained virtually intact as it appears in Mills

Annotated Statutes (1891) vol. 2, sec. 2867, down to .

the present. In the express words of the statute, con-

taining, as we believe, no ambiguity, there are two

limitations on the lien involved. -First, it is granted

only upon the property upon which the labor, services

and material are bestowed or rendered; second, only

-to thé extent of the Value of the aes services and

. ‘material rendered upon the property.”’

The Brannan case just quoted from is not one involv-:

ing the rental of equipment, but the specific limitation

‘laid down by the court that the lien is only for the value .

of the labor, services, and materials rendered on the prop-

erty is significant. This, considered with the Farmers

° —6 —

) ' e

‘Irrigation case. which comeetnad. materials, clearly held

that materials furnished must be wrought into ‘the struc- -

' ture to become a part of it when completed, in order to

claim a lien. It also stated that a contractor’s “aids”?

as his tools and appliances not intended to go into the

structure or be consumed,\but to be taken away when the

job is done, are not within the statute. These cases, with

" <*the indications in the others ‘cited, lead us to the conclusion

that under Colorado law, rental fees for equipment pro-

vided to a contractor cannot serve as a basis for a lien.

This seems to be in accord with the majority of courts

which have considered the matter; however, comparisons

are difficult because of variations in the statutes. A few

of the cases are Potter Mfg. Co. v. A. B. Meyer & Co.,

171 Ind. 513, 86 N.E. 837% Reis Bickel Co. v. National

Surety Co., 156 Ky. 695, 161 S.W. 1113; Steele & Lebby

v. Flynn-Sullivan Co., 245 Ky. 772,-54 S.W.2d 3257-Hall »v. :

Cowen, 51 Wash. 295, 98 Pac. 670; National Surety Corp.

v. Highland Park Country Club, 240 La. 747, 125 So.2d 151; :

Sundberg v. Boeing Airplane Co., 52 Wash.2d 734, 328 P.2d

692; Lohman v. Peterson, 87 Wis. 227, 58 N.W. 407; Bunt-

ing Hardware Co. v. Baker, 116 Kan. 688, 229 Pac. 72;

Thomas v. Commonwealth, 215 Mass: 369, 102 N.E. 428.

In Chicago Lumber Co. v. Newcomb, 19 Colo. App. 265, .

74 Pac. 786, as mentioned above, the court stated that

‘ Colorado’s lien law was modeled after the California act.

The New Mexico Supreme Court in the recent case of

- Lembke Construction Co. v. J. D. Coggins Co., 72 N.M. 259,

382 P.2d 983, stated that its act was also taken from Cali-

fornia, although perhaps not at the same time as was

Colorado’s, and expressly held that a lien could not be

claimed for the rental of equipment. The New Mexico

court there discusses the California authorities and others..

} mie et

The Colorado court in the recent case of Kalamath Invest-

ment Co. v. Asphalt Paving Co., —— Colo. —, 384 P.2d

938, held that a claimant at all times has the burden of

proving its right to lien.

“We recognize that construction work today utilizes

vastly more equipment than when the Colorado lien law |

was enacted. It is also common knowledge that today

machinery and equipment are often rented by_contractors

from other persons. However, there are factors which are

for the consideration-of those in the-legislative branch.

We must take the law and decisions of Colorado as we find

them, and as they have been applied to similar situations.

We therefore hold that the trial court was correct

in its view that the assigned claim could not serve as‘a .

basis for a lien, and there was no privity to support an

in personam ~action against appellees other The

Maryland Casualty Company. We. affirm summary

judgments and the granting of motions of all parties ex-

cept The Maryland Casualty Company.

The Maryland Casualty Company is in a different: po-

sition as to the in personam judgment sought against it

under the assigned claim. As to this matter, the com-

plaint seeks the judgment independently of any claim of

lien and upon a performance bond executed by this appellee

as surety for the prime contractor. The record does not

contain a copy of the bond and its gonditions are not

otherwise stated. The determination of this claim on mo-

- tion was not proper. The standards or requirements dis-

cussed above which are necessary {o establish a lien do

not prevail in actions on bonds, as the wording of the

particular bond must of course ‘determine its conditions.

al eh iat dN PP enh et a0 ate ie sbi har

4s > we 47

It may be broader or more restrictive than the lien

statutes which may be concerned in the same action.

These differences are demonstrated in actions under the

Miller Act. We are aware of: the effect of the companion

case which is now pending in the District Court. The

record here shows also that the assignor of this claim,

The Harrison Engineering & Construction Corporation, has

the same officers, directors and stockholders as does ap- -

-pellant. It also shows that the claim is for equipment

furnished the joint venture in which appellant was a mem-

ber: Nevertheless, there remains the question as to the

xistence of the bonds alleged, their conditions, and re-

lated questions of fact. This claim-is advanced by ap-

pellant individually and not on aie of the joint ven-

ture; thus the matter of indispensable parties is not

involved. The trial court was in error in granting the

motion of The Maryjand Casualty Company to dismiss.

ert aenat a to the granting of the motion to dia-

miss of The Marfland Casualty Company insofar as { re-

lates to the claim assigned from The Harrison Engineering

& Construction Corpgiitic.

AFFIRMED as to all other motions granted and dis-

‘positions made by the ‘trial court, including the granting

Of the motion to dismiss of The Maryland Casualty Com-

pany insofar as it relates,to the claim asserted under Sub-

contract 581. =

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.