Hartford Accident & Indemnity Co. v. Natchez Inv. Co.

132 So. 535, 161 Miss. 198, 1931 Miss. LEXIS 233

• Court: Mississippi Supreme Court
• Decided: February 23, 1931
• Docket: No. 28877.
• Status: Published

Opinions

This is the second appeal of this cause, the decision in the first appeal being reported in 155 Miss. 31, 119 So. 366, on which appeal a statement of the case as it had then developed was made. The constitutionality of chapter 128, Laws of 1918, was upheld, and the contract between the Hartford Accident Indemnity Company and the Natchez Investment Company, Inc., was construed and the bond held to be a bond in accordance with the provisions of section 3, chapter 128, Laws of 1918.

On a remand of the cause to the court below the various materialmen who had furnished material for the building, and others who had advanced money to the Natchez Investment Company, or to the contractor upon a note given by that company, propounded claims against the appellant, Hartford Accident Indemnity Company, setting forth their claims and praying judgment for the amount thereof against the Hartford Accident Indemnity Company and contractors, and also for interest upon the said claims and for attorneys' fees incurred in propounding and litigating their claims. A cross-bill was filed against Hartford Accident Indemnity Company and the contractors, the suit having been filed as a concursus proceeding by the Natchez Investment Company, Inc., for the benefit of all such persons, and such persons being made defendants to that bill.

Among the provisions of the contract between the contractors and the Natchez Investment Company, Inc., for the building of the hotel, was a provision stating that the owners should make payments on account of the contract, as provided therein, on or about the 1st and 15th day of each month, the value, based on the contract price, of labor and materials incorporated in the work and of materials suitably stored at the site thereof up to the 1st and 15th day of each month, as estimated by the architects, less the aggregate of previous payments. It was also provided in the contract that the contractor should furnish and pay for all materials and labor used in the construction of the building.

On the hearing in the court below agreed statements of facts were entered into between the Hartford Accident Indemnity Company and the several materialmen whose claims were propounded in the said proceeding. These agreements are practically and substantially alike, and, in effect, agree that on the 18th day of October, 1926, the Natchez Investment Company, Inc., entered into contract with J.V. and R.T. Burkes of New Orleans, Louisiana, for the construction of a hotel according to plans and specifications known as project No. 640 of Weiss, Dreyfous Seiferth, Inc., and that the Burkes entered upon the construction of the hotel. That the materials claimed by the several claimants were actually furnished to the Burkes, the contractors, and that the amount of them was correct, and that the prices were fair and reasonable, and the balance due, shown in the claim, was unpaid by J.V. and R.T. Burkes, and that they went into the hotel building. The agreements reserved the question as to whether an attorney's fee was due and payable to the claimants, and also whether interest was due and payable; also agreed that demand had been made upon the Natchez Investment Company for the payment of the said sums of money.

The bond of the appellant contained, among other things, the following clauses:

"1. The obligee shall, at the times and in the manner specified in the contract, fully comply with all the terms thereof, and if the obligee default in the performance of any matter or thing agreed or required in this bond, or in the contract, the surety shall thereupon be relieved of all liability hereunder.

"3. If at any time there come to the notice or knowledge of the obligee information that any claim for labor performed or for materials furnished the principal in or upon the work specified in the contract remains unpaid, or that any lien or notice of lien for such work or materials has been filed or served, the obligee shall withhold from the principal payment of any moneys due or to become due to the principal under the contract until the payment of such claim or discharge of such lien or notice of lien, and will so notify the surety, giving a statement of the particular facts and amount of each such claim lien or notice of lien.

"4. If any changes or alterations by the principal or obligee shall be made in the plans or specifications for the work described in the contract, the obligee shall immediately notify the surety thereof, giving a description and stating the amount of money involved by such changes or alterations. Provided, however, that should the cost of such changes or alterations in the aggregate amount to a sum equal to ten per cent of the penal sum of this bond, no further changes or alterations shall be made by the principal or obligee until the consent of the surety shall first be obtained thereto.

"8. None of the conditions or provisions contained in this bond shall be deemed waived or altered by the surety unless the written consent to such waiver or alteration be duly executed by its authorized officers and its seal be duly affixed thereto; nor shall the obligee consent to an assignment of the contract or any part thereof without the express consent of the surety duly executed and attested as aforesaid; nor shall this bond or any rights thereunder be assignable except with the consent of the surety duly executed and attested as aforesaid."

It was also provided in paragraph 7 of the bond that the surety shall not be liable unless the contract was paid in cash; and, under paragraph 11, the obligation of the surety should be construed strictly as one of suretyship only, and should not be for the benefit of any person other than the named obligee.

The contract between J.V. and R.T. Burkes, the principal in the bond, and the Natchez Investment Company, Inc., was for the price of three hundred sixteen thousand eight hundred twenty-two dollars, exclusive of extras, and provided that payment was to be made in current funds. The Natchez Investment Company, Inc., floated a bond issue with which to erect the building, but the proceeds thereof had to be supplemented by individual funds of the company. The bond issue netted about two hundred eighty thousand dollars. After the work started, and the contractors became entitled to their first estimate, instead of being paid in cash or in current funds, the contractors were given notes aggregating thirty-eight thousand dollars. These notes were assigned to banks and money procured from the banks by J.V. and R.T. Burkes, and the funds so obtained were used in paying for labor and material that went into the building. The notes so given were extended to them as of payment. It appears that J.V. and R.T. Burkes owed the bank, to which the thirty-eight thousand dollars worth of notes was disbursed, sums of money and procured an additional credit with the bank in the sum of fifteen thousand dollars. It was understood between the Natchez Investment Company, Inc., and the contractors, J.V. and R.T. Burkes, that the giving of the notes did not extinguish the lien that the contractors had upon the building, and this seems to have also been understood by the bank to which the notes were assigned. The appellant, Hartford Accident Indemnity Company, was not consulted about this transaction and its consent thereto was not obtained. An arrangement was also made by the Natchez Investment Company, Inc., and by the Burkes with certain other materialmen, who had sold material to the Burkes to go into the hotel building, to accept the notes of the Natchez Investment Company for the amount of their claims, with an understanding that their lien would not be released against the hotel property by taking the notes of the Natchez Investment Company, the owner thereof. This arrangement was not consummated with any of the parties furnishing material, except the Williamson-Greer Company, whose claim was for twelve thousand eight hundred fifteen dollars and ten cents. This note was due one year after date and was dated July 1, 1927, and bore interest at six per cent per annum, and provided for attorneys' fees and costs incurred in collecting the same, and recited that it was secured by a lien allowed by law to the payee as to the furnishing of material, labor, and supplies in the construction of the Eola Hotel of Natchez, Mississippi. This note was made payable direct to Williamson-Greer Company by the Natchez Investment Company, Inc., and J.V. and R.T. Burkes gave credit to the Natchez Investment Company, Inc., for the amount of this note on the contract price. The notes given to J.V. and R.T. Burkes were dated November 10, 1926. One was for twenty-eight thousand eight hundred twenty-three dollars, due February 8, 1927, or ninety days after date, and bore interest at the rate of eight per cent from maturity until paid, and provided for ten per cent additional if placed with an attorney for collection. This note contained no recital of the reserving of the lien upon the hotel property for its payment, and was a negotiable instrument. The other two notes were for five thousand dollars each, dated November 10, 1926, and due ninety days after date, and bore interest at the rate of eight per cent, waived protest and notice of nonpayment, and also provided that the note might be extended without notice and without affecting the liability of any parties thereto, and if the makers should fail in business or become bankrupt, or have filed against them, or any of them, proceedings in involuntary bankruptcy or for the appointment of a receiver, this note and all other debts and obligations of the maker, direct or contingent, should immediately become due and payable; and that at the maturity of the note, or when otherwise due, as provided, any and all money, stocks, bonds, or other securities or property of any nature whatsoever on deposit with or held by, or in the possession of, said bank, as collateral or otherwise, to the credit or for account of the makers, indorsers, or other parties hereto, or any of them, should be and stand applied forthwith to the payment of this note, or any other indebtedness due said bank by said parties or any of them; and if this note be not paid when due, and it should be placed in the hands of an attorney, that a ten per cent attorneys' fee should be paid. These notes seem to have been made upon a blank form of the New Orleans Bank Trust Company of New Orleans, Louisiana, to which the notes were assigned by J.V. and R.T. Burkes.

On the hearing the chancellor rendered a decree against J.V. and R.T. Burkes and T.J. Bartlette, trustee in bankruptcy, for J.V. and R.T. Burkes, and Hartford Accident Indemnity Company. That said bond is a bond guaranteeing the faithful performance of the contract for the erection and construction of the Eola Hotel building in Natchez, Mississippi, and the surety on the bond is liable for the payment of the respective sums set forth, and decreed to be due and owing the creditors, or claimants, set forth in the judgment adjudging the said Hartford Accident and Indemnity Company and J.V. Burkes and R.T. Burkes, jointly liable to the said creditors in the amounts due to each in the sum set forth in the decree, and adjudging interest on the said sums due on the date they were due and at six per cent from the date of judgment until paid. It also adjudged a fee to the attorneys representing the Natchez Investment Company, Inc., in the concursus proceedings in the sum of five thousand dollars. It refused to allow attorneys' fees to the materialmen who were brought into court and had filed cross-bills seeking to preserve their right for material, but fixed what would be a reasonable fee and made a finding of fact of what would be reasonable in each case, should the liability be adjudicated in favor of the said claimants by the judgment of this court, setting out specifically the amount each claimed. It reserved in the decree the future determination of the claim propounded by N.O. Nelson Manufacturing Company, as assignee of A.W. Moore, doing business as the Acme Engineering Company, who had obtained leave of the court to intervene in the cause as defendant and cross-complainant. It also reserved for future adjudication the claim of New Orleans Bank Trust Company, which had brought a proceeding in the circuit court to establish a mechanics' lien on the Eola Hotel, and which cause had been transferred to the chancery court.

We are of the opinion that the provisions of the contract for the construction of the hotel and the bond constitute a bond under section 3 of chapter 128, Laws of 1918, and that the bond inures for the benefit of the materialmen who furnished the material that went into the hotel, and that the operation of this law had the effect of writing into the bond provision for the payment of claims of persons furnishing labor or material under the said contract, as though it had been actually written therein, and that none of the provisions of the bond had the effect of writing out of the contract these provisions and could not have that effect. In other words, it is not competent, where the bond is given, as provided by the act, to dispense with these stipulations. All stipulations contrary to the statutory provisions must be disregarded so far as persons furnishing labor or material are concerned.

We are further of the opinion that the bond did not protect the note given by the Natchez Investment, Inc., to the Williamson-Greer Company. Between the Natchez Investment Company, Inc., and the appellant, the Hartford Accident Indemnity Company, the provisions that payments should be made, as provided in the contract, in cash or current funds, where made, and the statute did not prevent their insertion in the contract. When the Natchez Investment Company, Inc., gave these notes instead of paying cash, and contracted to reserve the lien on the hotel for the benefit of the holders of the notes, it waived its right as against the surety company as to the claims flowing from the notes. By that contract between J.V. and R.T. Burkes and the Natchez Investment Company, Inc., the Burkes, and the assignees of the Burkes, had a negotiable instrument of value against the Natchez Investment Company, Inc., and a right to resort to the hotel building for the satisfaction of that claim, but it had no right, after making this novation, which was done without the consent of the Hartford Accident Indemnity Company, to charge the indemnity company with the loss occasioned by the failure or bankruptcy of the Natchez Investment Company, and the bankruptcy of J.V. and R.T. Burkes. The parties accepting these notes must look to the security which they accepted in lieu of their rights under the bond against the Hartford Accident Indemnity Company. Parties taking and accepting the notes of the Natchez Investment Company under such circumstances have no greater rights than their assignors had, and they only succeed to whatever rights the contractor would have against the Natchez Investment Company, Inc., and the hotel, had the notes not been transferred or assigned.

We are of the opinion that the court was correct in allowing five thousand dollars fees to the attorneys instituting the concursus proceeding, and that the court was also correct in denying attorneys' fees to the attorneys representing claimants or materialmen who were brought in or appeared in the suit to propound their claims under the proceedings. The contract and the statute do not contemplate payment of all attorneys who may be employed, but only a reasonable attorney's fee to the attorneys representing the proceedings known as concursus proceedings. The court was also correct in allowing interest on the claim of the several claimants; such claims bore interest from the date when they were due unless there is a contract to the contrary. This rule generally prevails as to contracts, and no reason is shown as to why it should not be applied in the present case.

It follows from these views that the judgment of the court below is affirmed as to the claims of all persons, except that allowed to Walter Williamson and A.A. Greer, doing business as Williamson-Greer Company, for fourteen thousand eight hundred thirty-three dollars and forty-two cents which is reversed and the judgment disallowed; and the petition dismissed as to all parties, except the Natchez Investment Company, Inc. Affirmed as to O.L. Bunn; the Coburn Trolley Track Manufacturing Company; Gibbens Gordon, Inc.; Hockaday, Inc.; the R.C. Lieb Company; Natchez Drug Company; National Show Case Company; Swartz Stewart; Walter C. Schultz; Southern Cement Company; Truscon Steel Company; White Stone Company, Inc.; Woodward, Wight Co., Limited; R. Lee Parker, Jr.; R. Scudamore, Jr.; R. Lee Parker, Jr., and R. Hicks Parker, doing business as Natchez Brick Company; C.R. Burkett, doing business as Burkett Sheet Metal Works; W.A. Jacobie; St. Bernard Cypress Company; Geisenberger Bros. Drug Company; M.P. Phelan; Enochs Lumber Manufacturing Company; Southern G.F. Company; Feltus Bros. Hardware Company; Chamberlain Metal Weather Strip Company; Ingalls Iron Works; Capitol Paint Glass Company; Mosler Safe Lock Company. Affirmed as to attorneys' fees allowed in concursus proceedings, and reversed as to Williamson-Greer Co.

Affirmed, except as to Williamson-Greer Company.