Clement v. City of Philadelphia , 137 Pa. 328 ( 1891 )

Opinion,

Mr. Justice McCollum:

Clement, while indebted to the city, entered into a contract with it to complete the repairs to South street bridge, and he performed the work according to his agreement. A portion of the contract price was applied with his consent to the payment of his debt to the city. Josephs, who was his surety on the bond accompanying the contract, brings this action to recover the amount so applied, alleging that he has an equitable claim to it superior to the city’s right of appropriation or set-off. When he became surety and before any work was done under the contract, he received from Clement a letter of attorney, which he filed with the city controller. By it he was authorized to receive all warrants which might be coming to Clement under his contract with the city. It constituted Josephs the attorney in fact of Clement for this purpose, and this was the scope of the power conferred by it.

It now appears that there was an agreement between Clement and Josephs by which the latter was to advance to the former, from time to time, the funds necessary to pay for the work and materials needed to complete his contract with the city, and as compensation therefor was to receive “half the net profits of the said Clement on the said contract.” As security for his advances, Josephs was to “ receive all warrants for moneys to become due to the said Clement from the city, for or on account of the said work,” and from the moneys arising from said warrants he was authorized to retain the amount of his advances and compensation. The city was not advised of this agreement, nor of the loan made in pursuance of it. It knew that Josephs had signed the bond of Clement and that he held the power of attorney mentioned, but it had no reason to suppose that he was interested in the contract or the moneys arising therefrom. It owed him no duty to give notice that Clement was its debt- or, or to relinquish its right of set-off.

The money furnished by Josephs to Clement in pursuance of their agreement was a loan under the act of April 6, 1870, P. L. 56, to be compensated by a share of the profits on the bridge contract, in lieu of interest on the sums advanced, and the rights of the city under its contract with Clement were not impaired by it. The city could require Clement to complete the work according to his agreement, and, in an action for the price of it, set off its judgment against him: Metzgar v. Metzgar, 1 R. 227; Jacoby v. Guier, 6 S. & R. 448; Filbert v. Hawk, 8 W. 443; Lloyd’s App., 95 Pa. 518. The claim against the city is founded on Clement’s performance of his contract, and the fact that he borrowed money to pay for labor and materials to complete it, cannot enlarge the claim nor destroy the defences to it. It was Clement’s money, and the sum which he could recover in a suit on his contract, which Josephs was authorized to receive from the city, and this was the only right against the city which the power of attorney and the agreement to secure his advances and compensation gave him. ■

In Philadelphia v. Lockhardt, 73 Pa. 211, the contractor had assigned all moneys due and to become due under his contract with the city, to Pyle & Hansell, who, on the faith of the assignment furnished the lumber for the building, accepted orders from and acted as trustees for all the mechanics and material-men, and virtually assumed and discharged all the obligations of their assignor under the contract. The city, with full knowledge of these facts and after repeated recognition of the right of the assignees to receive the moneys arising from .the contract, paid a portion of them to the contractor, and attempted to justify the payment on the ground that the assignment was invalid. In this contention it was defeated. There was no question of set-off involved in the suit, and no demand for more than the contractor could recover, if the assignment had not been made. It is not decisive of or analogous to our case.

Ramsey’s App., 2 W. 228, is not an authority against the claim of the city to set off in this action its judgment against Clement. In that case the Agricultural Bank had a judgment against Ramsey, one half of which it assigned to the Bank of the United States. After this assignment, Ramsey obtained judgments against the Agricultural Bank equal to that it had-held against him. It was ruled that he could not set off his judgments against the moiety of the judgment assigned to the Bank of the United States, as its equity was equal, and prior, in point of time, to his. Mr. Justice Kennedy, in his opinion in Filbert v. Hawk, supra, referred to Ramsey’s Appeal, and said of it: “The case is imperfectly stated, as reported, in not showing that the assignment to the Bank of the United States was prior in point of time to Ramsey’s obtaining his judgments against the Agricultural Bank. But it is clear, from the reasoning of the Chief Justice, in delivering the opinion of the court, that the fact was so, for without that, the equity of the Bank of the United States could not have been equal to Ramsey’s.”

The judgment is affirmed.