JOHN B. HUNTER vs. CITY OF BOSTON & others.

LORING, J. The plaintiff furnished material in the construction of a bath house which one Mack (doing business under the firm name of Mack and Moore) agreed to build for the city of Boston. Mack was adjudicated a bankrupt on June 6, 1911, and atthat time owed the plaintiff $560.75. Subsequently this bill in equity was brought by the plaintiff to procure payment out of $13,351.98 retained by the city when it made to Mack monthly payments on account, and also from a surety company who gave a bond to the city conditioned that Mack should "faithfully furnish and do everything" required of him by the contract between him and the city. The plaintiff's claim is that both the money retained and the bond given were obtained by the officers of the city in compliance with St. 1909, c. 514, § 23. [Note p536-1] All other persons

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who had performed labor and furnished materials in the construction of the bath house were made parties defendant to the bill. In its answer the city alleged "that since the acceptance of said building as completed it has appeared that there were certain latent defects in the construction of said building due to the failure of Mack and Moore to construct said building in accordance with the plans and specifications; that as a result thereof the defendant has suffered great damage and claims the right to recoup therefor out of the funds in its hands as heretofore alleged." The case was sent to a master [Note p537-1] under a rule directing him "to hear the parties and their evidence, find the facts and report his findings to the court together with such facts and questions of law as either party may request."

In spite of the terms of this order of reference (directing the master to find the facts which were put in issue by the pleadings) the master failed to pass upon the issue raised by the allegation of the city that it had been damaged by a failure on the part of Mack to perform his contract. We assume that the reason for this was a ruling which the master undertook to make (although he had no authority to make it under the order of reference in this case; see Clark v. Seagraves, 186 Mass. 430), to the effect that the city of Boston had no right in this suit to recoup the damages suffered by it in the premises. On the coming in of the master's report the city filed a cross bill based upon these same damages, and on its motion the case "was recommitted to the master to find the damages suffered by the city. In a supplementary report the master found that the damages suffered by the city by reason of the failure of Mack to comply with the terms of his contract amounted to $4,750. A final decree [Note p537-2] was entered on the master's report, establishing the sums (amounting to $17,410.76) due from Mack to the several persons who had furnished material or performed labor in the construction of the bath house, and directing the city forthwith to pay over to these

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debtors of Mack their proportionate share of the $13,351.98 retained by the city; it also directed the surety company to pay to Mack's creditors the balance of the several sums due them, it declared that the city had no right to recoup its damages in this suit, or in the cross bill, and it directed the surety company to pay to the plaintiff its costs of suit.

From this decree appeals were taken by the surety company and by the city of Boston.

1. We are of opinion that the bond given by the surety company was not given in compliance with St. 1909, c. 514, § 23, and that the surety company cannot be made liable to the plaintiff and the other materialmen.

The main argument on which the plaintiff bases his contention that the bond was given in compliance with the statute is that, by the terms of the contract between the city and Mack, Mack agreed, in case it was ascertained on the final settlement that he was indebted to the city, to pay to the city, within one month after the determination of the amount of it, the balance found to be due. But the terms of the bond are that Mack should "faithfully furnish and do everything therein required of" him. This would seem to mean "faithfully furnish the material and do the work required of him by the contract." This interpretation of the condition of the bond is reinforced by the terms of Mack's proposal to the city, which is a part of the contract between him and the city. It is there stated that the city is to pay Mack $64,650, as full payment for doing and completing the work, "including everything furnished or done, and every injury or loss sustained, by the contractor in carrying on the work." The terms and conditions of the bond correspond to the terms of the proposal, which do not include payment of money by Mack to the city.

The provision made in the contract between Mack and the city for the retention of a portion of the monthly amount then apparently due to Mack, provides in terms that such sums should be deducted and retained (inter alia) "to settle claims for materials or labor furnished for carrying on the contract, notice of which claims, signed and sworn to by the claimants severally, shall have been filed" in the office of the defendant city or with its officers as specified in the contract. It is plain that this

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provision was made to comply with St. 1909, c. 514, § 23. In this respect the case is like Nash v. Commonwealth, 174 Mass. 335, and Burr v. Massachusetts School for Feeble-Minded, 197 Mass. 357. The statute provides that sufficient security for those furnishing material or performing labor shall be obtained either "by bond or otherwise," not by both. In the case at bar the requirement of St. 1909, c. 514, § 23, having been complied with "otherwise" than by bond, it cannot be held that the bond was given to comply with the statute.

It follows that so much of the decree as holds the defendant surety company liable and directs it to pay the costs to the plaintiff, was wrong.

2. We are also of opinion that so much of the decree was wrong as forbids the city of Boston to recoup its damages.

It is plain as matter of law and under the terms of the contract, that the monthly payments were mere payments on account subject to revision on the final settlement between the parties to the contract. The material portions of the contract are contained in articles 6 and 7, set forth in full below in a note. [Note p539]

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When the fact became known that Mack never fulfilled his contract with the defendant city, it appeared that the $13,351.98 never became due from the city to Mack. In other words it then appeared that the city never had retained in its hands the sum of $13,351.98 as Mack's money. But that the amount of Mack's money retained by the city was $13,351.98, less the damages, amounting to $4,750, suffered by the city from Mack's failure to comply with the terms of the contract; that is to say, the money of Mack's in the city's hands which is available for the payment of unpaid bills due from Mack to the plaintiff and other materialmen, is $8,601.98, and not $13,351.98. See in this connection American Bridge Co. v. Boston, 202 Mass. 374.

3. It has been suggested by the plaintiff since the argument that he and the other materialmen are entitled to a recovery against the surety company on the ground that the city of Boston

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can collect the damages due it from Mack out of either one of two funds, namely, out of the surety company or out of the $13,351.98, which it now has in its hands, and that the plaintiff and the other materialmen, having a right to resort only to one of these funds (namely, the fund of $13,351.98), are entitled under the doctrine of marshalling assets, to have the city collect its damages from the surety company and thus leave the whole of the $13,351.98 fund for them. But the answer to this suggestion is that there are not two funds to which the city can resort. There is nothing due from the surety company to the city of Boston. The condition of the bond given by the surety company was that Mack should "faithfully furnish and do everything therein required of" him by the contract between him and the city. Mack performed in substance that condition when he fulfilled the terms of the contract, with the exception of certain items amounting to $4,750, and for the payment of that he left more than $4,750 in the hands of the city. If that were not so the plaintiff in this contention would be met with the difficulty that the surety company, being a surety on paying the city's damages of $4,750, would be entitled to be subrogated to the city's rights against Mack. This whole contention is based upon the erroneous assumption that the $13,351.98 was retained solely for the indemnification of the materialmen. But that assumption is without foundation.

The form of the bill in this case is not to be taken as a precedent. The proper procedure in a case like the case at bar is for one of the materialmen to bring a bill in behalf of himself and all the others, and not for him to bring a bill in his own behalf making the other materialmen parties defendant.

It follows that, so far as the decree establishes the debts due to the plaintiff and to the other materialmen, it should be affirmed, but that it should be reversed (1) so far as it forbids the city's recouping the damages suffered by it, (2) so far as it fixes the amount which the city is to pay over to the plaintiff and to the other materialmen, and (3) so far as it holds the defendant surety company liable in this suit and directs the surety company to pay to the plaintiff its costs.

The decree appealed from must be modified by providing that the city shall forthwith pay over to the plaintiff and to the other

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materialmen their proportion of $8,601.98, and by directing that the bill should be dismissed as against the defendant surety company and that the plaintiff should pay the surety company its costs. So modified, it is affirmed.

So ordered.

G. A. Flynn, for the defendant city.

L. A. Ford, (G. G. Bacon with him,) for the defendant Massachusetts Bonding and Insurance Company.

F. M. Carroll, for the plaintiff and certain defendants having similar claims.

E. A. Whitman, for the defendant G. W. and E. Smith Iron Company.