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Prairie State National Bank v. United States

164 U. S. 227
Decided Supreme Court of the United States
Disposition
Decided
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Court
Court of Claims
Decided
Posture
The Secretary of the Treasury referred conflicting claims to the Court of Claims under Revised Statutes § 1063; the court ruled against the bank and in favor of the surety.
Plaintiff/Claimants (3)
The Prairie State National Bank, of Chicago, Ill.
v.
Defendant (1)
The United States
Other parties: Surety of the defaulting contractor — Interpleader/Claimant

Overview

The judgment of the Court of Claims is affirmed.

Case summary

This case concerns the distribution of funds held by the Treasury, specifically the 10 percent reserved from payments on a government construction contract. The contractor defaulted, and the surety completed the work. The bank, which had loaned money to the contractor based on an assignment of the reserved funds, claimed a right to those payments. The Supreme Court affirmed the Court of Claims, holding that the assignment was void under Revised Statutes § 3477 and that the surety, having completed the contract, had a superior right to the reserved funds.

Abstract

The case involves a government construction contract where the contractor defaulted, the surety completed the work, and a bank claimed rights to 10 percent reserved funds based on a loan secured by assignment of those funds. The Supreme Court held the assignment void under federal law, affirming the surety's superior right to the reserved funds as the party that completed performance. The judgment of the Court of Claims was affirmed.

Procedural posture

Posture at trial
The Secretary of the Treasury referred conflicting claims to the Court of Claims under Revised Statutes § 1063; the court ruled against the bank and in favor of the surety.
Posture on appeal
Cross-appeals by both parties from the Court of Claims.

Legal categories

Business

Case record

Full case name
The Prairie State National Bank, of Chicago, Ill. v. The United States
Docket number
164 U. S. 227
Court
Supreme Court of the United States
Trial court
Court of Claims
Decided
Opinion type
published
Precedential status
binding

Issues & holdings

1
Issues raised
1
affirmed
2
Holdings
Standard of review

de novo

Disposition rationale

The court held that the bank acquired no equitable lien and that the assignment was void under federal statute.

Holdings of the court

Validity of assignment of contract proceeds
The power of attorney given by the builder to the bank is void under Revised Statutes § 3477.
Statutory provisions prohibiting the assignment of claims against the Government are absolute and cannot be waived by government officers.
non-binding
Rights of a surety completing a contract
A surety who completes a contract upon the default of the principal is entitled to the reserved payments.
The surety's right to the reserved fund arises from the contract of suretyship and the completion of the work, which takes precedence over any equitable claim of a lender.
non-binding

Timeline

No timeline recorded.

Facts & evidence

Key facts

5 facts
  1. A contractor entered into a contract with the United States for the construction of a custom-house at Galveston.
  2. The contract provided for a 10 percent reservation from monthly payments.
  3. The contractor defaulted, and the surety completed the building.
  4. The bank advanced funds to the contractor based on an agreement that it would receive the 10 percent reserved payments.
  5. The bank held a power of attorney from the contractor to receive the 'last estimate' from the United States.

Authorities

Legal principles applied

  • strict construction of anti-assignment statutes
  • surety's right of subrogation
Index terms20
Summary terms
Legal mechanisms
Legal concepts
Legal issues
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Parties
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Other recorded fields

Legal actions

Action type
affirmed
Target
trial court judgment
Context
The Supreme Court affirmed the decision of the Court of Claims, holding that the bank's claim was invalid and the surety was entitled to the funds.