Union Indemnity Co. v. Wineman

108 So. 796, 144 Miss. 7, 1926 Miss. LEXIS 335

• Court: Mississippi Supreme Court
• Decided: June 15, 1926
• Docket: No. 25507.
• Status: Published

Opinion

Cook, J.,

delivered the opinion of the court.

The J. B. Arpen Dredging Company and certain individuals suing as a creditor’s committee of the partnership of J. B. Arpen Dredging Company, and A. V. Wine-man, suing as an assignee of the said J. B. Arpen Dredging Company, filed their bill of complaint against the Clark-Dennison Company, the Union Indemnity Company, the .'Edward Bros. Dredging Company, and the Clear Creek drainage district. To this bill the Union Indemnity Company and the drainage district filed demurrers. These demurrers were overruled, and this appeal was granted to settle the principles of the case.

From the charges of the bill of complaint and the exhibits thereto, the following facts appear:

Prior to May 17, 1921, the Clear Creek drainage district was organized for the purpose of constructing a drainage system for the territory within the district. On .September 28, 1921, the Clark-Dennison Company, a partnership1, was awarded a contract by which it agreed to do all work, furnish all tools, labor, etc., necessary for the excavation and construction of the drainage system shown by the plans and specifications at a price of thirteen and ninety-five-hundredths cents per cubic yard of excavation for floating dredge'work and twenty-three and nine-tenths cents per cubic yard for dry land excavation. As provided by the specifications and the form of contract attached thereto, the Clark-Dennison Company as principal, and the Union Indemnity Company as surety, entered into bond in favor of the district in the sum of two hundred three thousand dollars, conditioned that “Clark-Dennison Company shall faithfully perform said work according to the plans, specifications, profiles and estimates of the engineer, and shall complete the work within the time and in the manner specified in said contract. ’ ’

Shortly after the contract was awarded to Clark-Dennison Company, that company sub-let to Edwards Bros. Dredging Company certain of the ditches whigh it had contracted to dig, aggregating one hundred ninety-eight thousand two hundred six cubic yards of dirt. Shortly thereafter there was a contract entered into by and between Clark-Dennison Company, Edwards Bros. Dredging Company, and J. B. Arpen Dredging Company, in which is recited the making'of the contract between Clark-D'ennison Company and the drainage district and the sub-letting of one hundred ninety-eight thousand two hundred six cubic yards of dirt by the Clark-Dennison Company, and wherein it was agreed that the J. B. Arpen Dredging Company would furnish a certain dredging machine known as Cross Walker machine No. 5, to do a large part of the excavation work covered by the plans and specifications, including that theretofore sublet to Edwards Bros. Dredging Company. This tripartite contract made full provisions for all operating expenses, including therein insurance on the said Cross Walker machine, liability insurance, overhead expense of not exceeding five hundred dollars per month, repairs on said ’ machine No. 5', and the sum of seven hundred dollars on cost of making surety bond, and also provided that the J. B. Arpen Dredging Company should have full charge of the operation of all work to be done and performed under the terms of the contract, and should keep an accurate account of the cost of the work to be done and performed under the terms of the contract, and also fur- ' ther provided that any one of the three parties thereto should, at any time during the life of the contract, haye the right to inspect and audit the accounts and costs of operation under the contract, and to submit in writing his or their objections thereto. This contract also contained the following provisions:

“ (5) It is further agreed and understood by all parties hereto that party of the third part for and in consideration of the use of their Cross Walker machine No. 5, now located at Pace, Miss., is to receive the sum of forty-one and two-thirds per cent, of the net profits arising from the work to be performed under the terms and provisions of this contract.

“ (6) It is further agreed and understood that party of the second part for and in consideration of his subcontract with party of the first part for the removal of one hundred ninety-eight thousand two hundred five cubic yards, being included in the yardage to be removed under this contract, is to receive the sum of thirty-three and one-third per cent, of the net profits arising from all the work performed under the terms and provisions of this contract.

“ (7) It is further agreed and understood that party of the first part, for and in consideration of the yardage to be moved under the terms and provisions of this contract and the further consideration of their having made bond in said work and having the original contract to do-said work, is to receive twenty-five per cent, of the net profits arising from the work to be performed under the terms and provisions of this contract. ’ ’

“ (12) It is further agreed and understood by all parties hereto that all money received from the operation of) the work under this contract from the Clear Creek drainage district is to be placed in a joint account in the Bolivar County Bank of Rosedale, Miss., and to be known and styled as ‘J. B. Arpen account machine No. 5,’ out of which account the operating expense for the month is to be paid, and ninety per cent, of the nettage remaining in said joint account is to be distributed monthly according to paragraphs 5', 6, and 7 of this contract, and the remaining ten per cent, is to he held as a surplus until completion of said work.

“(13) It is further agreed and understood by all parties hereto that after completion of said work according to the engineer’s plans and specifications and party of the first part’s contract with the Clear Creek drainage district, the twenty per cent, retention money withheld by the district each month from the monthly estimates of machine No. '5, known and styled as retain percentage, as well as any surplus remaining in the joint amount, is to be distributed according to paragraphs 5, 6, and 7 of this contract.”

It was also provided that:

The “work to be performed under the terms of this contract shall bear its pro rata part of the bond discount occasioned by party of the first part’s contract to purchase from the Clear Creek drainage district bonds of said district at par and accrued interest, .said discount amounting to fifteen points on each bond, the bond issue being- two hundred forty thousand dollars. When the said discount is reduced to price per cubic yard each yard of dirt moved in the district should bear amounts to two and fifty-three-hundredths cents per cubic yard. The sum is to be included as operating expense under this contract, and is to be deducted as cost of operation. ’ ’

The bill of complaint set forth the foregoing facts and contracts, and charged that under the provisions of the Mississippi statutes then in force the bond executed by the Clark-Dennison Company with the appellant Union. Indemnity Company, as surety, partook of a dual nature in the obligations and liabilities, in that:

“(a) It guaranteed the performance of the original contract on the part of the appellant, the Clark-Dennison Company; and -(b) with the additional obligation that the contractor should promptly make payments to all persons supplying labor or materials for the work.”

The bill further alleged that the appellee J. B. Arpen Dredging Company entered upon the work required of it by the terms of this tripartite contract and performed its part thereof, doing all the excavation work required of it in the manner thereby required, and that it furnished the labor and material to da said work, and excavated and moved a total of five hundred twelve thousand seven hundred sixty cubic yards of earth, for which it was paid, except the sum of thirteen thousand five hundred seventy-seven dollars and sixteen cents, which amount is alleged to be still owing for said work done and labor and material furnished.

The bill further alleged that, by the terms of a written contract dated February 19, 1:920, and a deed of trust dated February 28, 1920, all of the balance, except about five hundred dollars owing to appellee J. B. Arpen Dredging Company, belongs in equity to the appellee A. Y. Wineman; that the appellee Arpen Dredging Company had placed itself on the hands of a creditor’s committee; and that it still owed the appellee, A. Y. Wineman, about twenty thousand dollars for money advanced to it in financing the work under the contract.

It was further charged that, while the bond signed by the appellant Union Indemnity Company did not carry therein an obligation to pay all sums owing to any and all persons for labor and material furnished in and about the construction work let under the contract, for the performance of which the bond was indemnity, still, inasmuch as the statute then controlling, to-wit, chapter 217, Laws of 1918', required such obligation of any surety making such bond, the law and equity will treat that obligation as written into the face of the bond.

The bill of complaint was amended so as to charge that the appellant drainage district negligently failed to require of the appellant contractor, Clark-Dennison Company, and its surety, the Union Indemnity Company, a bond in the form and with the conditions required by the statute, with the obligations to pay all persons supplying labor or materials for the work called for by the contract, and that the Clark-Dennison Company had abandoned the contract before the completion thereof.

The prayer of the bill as amended was for a decree against the Union Indemnity Company on its bond for all sums owing appellees, or either of them, and that, if necessary, the bond be reformed so as to make it comply with the requirements of the statute, in making it liable to persons furnishing labor and materials that went into the work, and also for a decree against the appellant drainage district for the amount sued for, as damage on account of the district negligently failing to require the contractor, Clark-Dennison Company, and the surety, to execute a bond in the form and with the conditions required by law.

It. H. Williams, trustee in bankruptcy of Edwards Bros. Dredging Company, filed a bill of intervention in the above proceeding, reiterating and adopting, the allegations of the original bill of complaint, and claiming that, under the tripartite agreement hereinbefore referred to, they became “ entitled to thirty-three and one-third per cent, of the nettag’e reflected by and arising therefrom under the work there contracted to be done, ’ ’ and alleging that the Edwards Bros. Dredging Company had fulfilled their part of that contract, including specifically the supervision of construction work and furnishing material and labor, which they did in accordance with the terms and stipulations of that agreement, and asserting the right to recover therefor the sum of about eleven thousand dollars, the exact amount to 'be determined upon an accounting to be had for that purpose. The Clark-Hünt Contracting Company, the successors of the Clark-Dennison Company, filed an answer to the original bill and bill of intervention, while the drainage district and the Union Indemnity Company filed demurrers, and from the order overruling these demurrers this appeal was prosecuted.

There are many interesting questions raised and ably argued by counsel for the respective parties, but we think the rights of the appellees are básed solely upon the tripartite contract hereinbefore set forth, and that a determination of the effect of the provisions of this contract will dispose of this cause.

At the time this tripartite contract was entered into, the Clark-Dennison Company was obligated to excavate within the Clear Creek drainage district one million fourteen thousand one hundred fifty cubic yards of earth, and the Edwards Bros. Dredging Company one hundred ninety-eight thousand two hundred six cubic yards. The appellee J. B. Arpen Dredging Company owned a dredging machine, and it was conceived to be to the interest of all parties to have this machine do a large part of this excavation. Thereupon this contract was entered into, whereby it was agreed that Clark-Dennison Company and Edwards Bros. Dredging Company would turn over to J. B. Arpen Dredging Company the excavating to the amount of seven hundred twenty-three thousand cubic yards, and the Clark-Dennison Company would advance the money necessary to put this machine in first-class condition and to install it on the work. It was agreed that the J. B. Arpen Dredging Company was to have full charge of the work and keep' a proper and accurate account of operating expenses. As a part of the operating expenses it was allowed to charge one-third of five hundred dollars as overhead expenses, cost plus ten per cent, for all repairs to the machine, the cost of insurance on the machine, liability insurance, and seven hundred dollars for the cost of making surety bond by Clark-Dennison Company.

It was further agreed that all money received for excavation under this contract was to be placed in a joint account in the Bolivar County Bank, out of which all the operating expenses should first be paid each month. At the end of each month, after the payment of all operating expenses, ninety per cent, of the nettage remaining in this joint account was to be distributed between the three contracting parties in the proportion named in the con tract, that is to say, forty-one and two-thirds per cent, to the appellee J. B. Arpen Dredging Company, thirty-three and one-third per cent, to the Edwards Bros. Dredging Company, and twenty-five per cent, to the Clark-Dennison Company. After the completion of the work, the ten per cent, remaining in this joint account, as well as the twenty per cent, retained percentage of this work, was to be distributed to the respective contracting parties in the same proportion. It is not averred or contended that all laborers’ claims and other operating expenses of every character have not been paid, or that they were not all paid out of this joint account, so there is nothing remaining as a basis of appellee’s claim except compensation for the use of their dredging machine and expected profits. In fact, the contract stipulates that the forty-one and two-thirds per cent, of the net profits of the venture was to be paid to the appellee for the use of its machine, or, in other words, for the use of equipment or plant appropriate for the work. It is not averred or contended that there were any net profits from this joint adventure, or that this joint account was not entirely distributed in accordance with the terms of the contract. The appellee J. B. Arpen Dredging ’Company put its machine into this joint venture, and by contract expressly stipulated that it shtiuld receive as compensation for the use of this machine and for services rendered a fixed proportion of the net profits of the venture. Its rights are measured by the terms of this contract, and upon the averments of this bill we do not think it is entitled to recover anything against either the surety company or the drainage district. The decree of the court below will therefore be reversed and the cause remanded.

Reversed and remanded.