Waldon v. Maryland Casualty Co.

116 S.E. 828, 155 Ga. 76, 1923 Ga. LEXIS 13

• Court: Supreme Court of Georgia
• Decided: February 15, 1923
• Docket: Nos. 3240, 3241
• Status: Published

Opinions

Hill, J.

(After stating the foregoing facts.)

We will first consider the assignments of error in the cross-bill of exceptions. The first of these assignments of error is to the overruling of the demurrer filed by the Maryland Casualty Company, on the gound that the petition did not set out a cause of action against that compány. It is insisted that the bond sued on provided that in case of suit service of process should be made on or' before the 18th day of March, 1916, and that the record shows that such service was not had until the 30th day of March, 1916. It appears from the record that the suit was filed before the 18th day of March, 1916, but that service was not perfected on the defendant on or before that date. It appears that on March 24, 1916, the surety company filed a traverse of the return of service which was made upon the attorney of the defendant in error instead of upon its agent residing within the jurisdiction of the court in the City of Atlanta. It also appears that immediately after the traverse of the return of service on March 30, 1916, the plaintiff obtained an order of court making the case returnable to the next succeeding May term of court, and providing for proper service upon the surety company. It also appears from the record that service was perfected on the surety company before the May term of court, by serving its agent residing within the City of Atlanta, in Fulton County, Georgia, and who had a place of business therein, within the time required. The question, therefore, to be determined is whether under these circumstances the service upon the agent of the defendant after the 18th day of March,'1916, but before the next May term of court succeeding such service, is sufficient. Under the Civil Code, § 5551, the filing of the suit in the office of the clerk of the superior court is considered the time of the commencement of the suit. The suit was- filed and process attached before the expiration of the time limit stated in the contract. Under these circumstances the service in the case will be held to relate to the filing of the suit; otherwise the provision of the contract requiring both the suit to be filed and the process to be served before the date named in the contract would be an unreasonable provision, and would put it within the power of the officers, whose duty it is to serve the process in time, and over whom the plaintiff has no control, to prevent a recovery, although the suit might be well brought and in time, but service of the process delayed beyond the time stated in, the bond, by the officers themselves. Therefore we are of the opinion that the trial judge properly retained jurisdiction of the case, holding in effect that everything pertaining to the service of the petition and process on the defendant related to the time of the filing of the suit, which was brought in time, and had process attached. See, in this connection, Nicholas v. British America Assurance Co., 109 Ga. 621, 624 (34 S. E. 1004). In that case no process was attached; and it was said that “where there is no process nor any waiver, there can be no amendment; and where there is an entire absence of process, another original process can not be substituted.” And see Cox v. Strickland, 120 Ga. 104 (7, 8), 113 (47 S. E. 912, 1 Ann. Cas. 870), where it was held: “The filing of the petition is .treated as the commencement of the suit only when followed by due and legal service. But if the plaintiff is active in his efforts to remedy the nonfeasance of officers, and endeavors to have process issued and service made, the jurisdiction of the court continues, to cure the defective process, and to have service perfected, even after the first term.” In rendering the opinion of the court Mr. Justice Lamar said: “In a case against several defendants it is often impossible to serve each in time for the appearance term. The right to amend and to grant continuances reasonably necessary to bring in those who have not been served would seem to be one of the inherent powers of the court which had authority in the first instance to issue the process. . . But where the plaintiff, on discovery of the failure to serve, or of irregularity in process, is active to have the fault cured, the court is not without jurisdiction to make the suit effective.”

Exceptions to the auditor’s report were overruled in so far as he ruled that the Maryland Casualty Co. had not been released and discharged from liability by réason of the failure of the petitioner to retain in his hands 15 per cent, of the contract price; and that the contract and bond did not require petitioner to retain in his hands 15 per cent, of the contract price, but required the owner simply not to pay to the contractor in excess of 85 per cent, of the value of labor and material put into the building. The grounds of exception by the surety company are, among others, that the contract and bond sued upon required the plaintiff to retain in his hands 15 per cent, of the contract price; and that, the auditor having found as a matter of fact that petitioner had failed to retain in his hands 15 per cent, of the contract price, the law and the evidence demanded a ruling that the surety company had been discharged by reason of such failure on the part of petitioner to comply with the contract and bond. We are of the opinion that these exceptions are without merit. We think that the meaning of the contract in this respect is, that the plaintiff was not required to retain 15 per cent, of the contract price for the protection of the surety, but that the requirement for the payment of 85 per cent, was for labor and material, and under the language of the contract the owner of the building was not required to retain the 15 per cent, of the contract price; and we are therefore of the opinion that the contract does not require that lo per cent, of the contract price of the building should be retained until the building was completed. The contract expressly provides that “ 85 per cent, of all labor and material in the building shall be paid at the end of each week after the job is started;” and we are of the opinion that the surety company was not released from the obligation of its bond because the plaintiff failed to retain 15 per cent, of the contract price. That language in the contract, without- more, would not require the plaintiff to retain 15 per cent, of the contract price until the building was completed. Under that language more than 85 per cent, of the contract price might be paid before the building was completed, if the contractor had expended more than the contract price called for in labor and material. See Howard County v. Baker, 119 Mo. 397 (24 S. W. 200); Southern Real Estate &c. Co. v. Bankers Surety Co., 276 Mo. 183 (207 S. W. 506, 510); Welsh v. Warren (Tex. Civ. App.), 159 S. W. 106. The language of the contract immediately following that above quoted, viz., “and the remaining 15 per cent, to be paid when the job is completed according to agreement,” does not change the case, and require the plaintiff to retain 15 per cent, of the contract price. Evidently the contract entered into between the plaintiff and the defendant was on the assumption that the labor and material which were to go into the building of the house would cost less than the contract price, and that 15 per cent, of the value of labor and material would pay for all those things necessary to complete the building, and that there would be some money left in the hands of the owner for the contractor. But there is no express provision made in the contract itself for the retention of this overplus, if any. It is evident that the parties to the contract thought that there might be a surplus, but there is no express provision or agreement or necessary implication to warrant us in holding that the plaintiff should retain in his hands 15 per cent, of the contract price of the building. Having held, as above, that the contract did not require the plaintiff to retain in his hands 15 per cent, of the contract price, we are of the' opinion that his failure to do so would not prevent his recovery simply because he had retained less than 10 per cent, of the contract price; and therefore the court below did not err in overruling the exceptions to the auditor’s report in this respect.

There are only two questions of law involved .in the main bill of exceptions, to wit: First. Was the Maryland Casualty Co., the surety on the contractors’ bond, released by the failure to give proper notice under the bond? Second. Was the plaintiff required to show that he actually paid out the money sought to be recovered, prior to bringing the action? Exceptions of law were filed to the auditor’s report, because the auditor found as a matter of law that the conduct of the plaintiff in failing to notify the surety company of the pending suits to foreclose liens on the property, and in failing to defend said suits, did not change the nature and terms of the contract, and did not injure the defendant and did not increase its risk as surety and expose it to greater liability, and thereby discharge it as surety on the bond. These exceptions to the auditor’s ■ report were sustained by the trial judge, in so far as the auditor ruled that the surety company had not been released and discharged by the failure of the petitioner to give the notice required by the bond; and in so far as he ruled that the notice actually given did comply with the provisions of the bond. The first paragraph of the bond sued on provides: “that, in the event of any default on the part of the principal, a written statement of the particular facts showing such default and the date thereof shall be delivered to the surety by registered mail,” etc. There is no contention here but that the plaintiff did notify the surety company that the contractor had failed to comply with his contract in not completing the house according to the plans and specifications. In fact the record discloses that, in reply to such notice given, the surety company acknowledged receipt of it and authorized the plaintiff to have the contract completed, thus waiving the right, which it had under the contract, to complete the building. But it is insisted that the plaintiff should have gone further and'notified the defendant of the filing of the liens in the municipal and city courts of Atlanta, and of the foreclosure suits in such courts, and of the further fact that judgments were taken in some if not all of such foreclosure suits. It is argued, that under the above clause of the contract the plaintiff was required to do so; that inasmuch as such notice was not given, the surety was deprived of any opportunity of defending the suits, and that consequently judgments were taken in all of those cases without any notice to the surety company whatever; and therefore that, under the provisions of the bond above quoted, notice of such facts to the defendant was required, and the plaintiff having failed to give such ‘ notice, the surety company was released and discharged from any obligation it might otherwise owe to the plaintiff under the surety bond. The court below held, in accordance with this view, that the surety company had been discharged by the failure of the plaintiff to give the notice required by the bond. We are of the opinion that the court erred in so holding. The language of the bond in this regard is clear and unequivocal, and it clearly does not contemplate that there shall be any notice given by the obligee in the bond in addition to the notice that is expressly required to be given, viz., that there has been default on the part of the principal and the particular facts showing such default, etc. Nor is there anything in the language of the bond to indicate any intention on the part of the surety to require additional information as to damages arising from foreclosure of laborer’s liens, etc., against the owner’s property. Notice of default of the contractor was given, and when that was done the obligee had done all that was required of him under the terms of the bond. This was sufficient to put the surety company on notice to look out and to protect its own interest, and to determine what damages had arisen from the default on the part of the contractor. It would have been an easy matter for the bond to have expressed the necessity for such additional notice, but it did not do so; and we are clearly of the opinion that the plaintiff gave the surety company all the notice that he was required to give under the terms of the bond. It would be a strained construction to hold that the language of the bond contemplated that additional notice of damages should be given, so as to include damages arising out of claims of every lienor who had such claim and who was proceeding to foreclose the lien. The language of the bond clearly refers only to notice of the failure of the contractor to complete the building in accordance with the plans and specifications. This view is strengthened by the clause of the bond immediately following the above, which provides that “the surety shall have the right, within thirty days after the receipt of such statement, to proceed or procure others to proceed with the performance of the contract.”

The auditor ruled that plaintiff was not required, under the terms of the contract as evidenced by the bond, to show that he had actually paid out the sums of money which he is seeking to recover, prior to the beginning of the present action. The exception to this ruling of the auditor was sustained by the trial court, and the plaintiff excepted on the ground that it was not incumbent upon him to actually pay out the sums, the recovery of which, is sought, prior to the bringing of the action, and therefore the plaintiff insists that the report of the auditor should have been sustained and a decree entered accordingly; and we are of the opinion that this is the correct view. It must be remembered that this is a suit in equity, where the plaintiff seeks to bring the defendant surety company and all the other lienors and defendants into court, without waiting the final judgment upon all of the materialmen’s and laborers’ liens which had been filed against the property of the plaintiff.

In the case of Massachusetts Bonding & Ins. Co. v. Realty Trust Co., 137 Ga. 693 (73 S. E. 1053), s. c. 139 Ga. 180 (77 S. E. 86), s. c. 142 Ga. 499 (83 S. E. 210), it was held that the surety company and the lienors could be brought into one equitable action in order to settle all the rights involved, without first paying off liens then outstanding and then bringing suit against the surety company. The defendant, however, insists that there is a distinction between that and the present case; and it is argued that there the bond guaranteed faithful performance, while in the present case the condition of the bond is “that if the principal shall indemnify the obligee against any loss or damage arising by reason of the failure of the principal to faithfully perform said contract, then this obligation shall be void, otherwise of full force and effect.” The defendant insists that the bond in the present case does not guarantee faithful performance, but is an obligation to compensate the obligee for any loss or damage which he may sustain after the money is actually paid out by him; and the defendant relies on the case of McGarry v. Seiz, 129 Ga. 296 (58 S. E. 856), s. c. 136 Ga. 849 (72 S. E. 243), as supporting this contention.. In the Seiz case the bond provided: “ The surety shall not be liable under this bond to any except the obligee; but it is agreed that the obligee, in estimating his damage, may include the claims of mechanics and materialmen, arising out of the performance of the contract, and paid by him, only when the same, by the statutes of the State where the contract is to be performed, are valid liens against the property.” That case is clearly distinguishable from the present case, because in the Seiz case it is expressly provided in the bond that certain claims may be included only when they have been paid; but the ruling in that case is not applicable in a ease where the language of the contract is that the principal and surety shall “indemnify” the obligee against “loss or damage directly arising by reason of the failure of the principal to faithfully perform his contract.” It is true that -the word “ indemnify ” as used in the bond may extend to a case of making good loss or damage after it has actually occurred, and that the obligee should be compensated for loss or damage after he had actually paid the money for such loss; but we are of the opinion that such was not in contemplation of the parties to the present contract. The word “indemnify” also means to save harmless; to secure against loss or damage, etc. Webster’s New International Dictionary. And according to the same authority the word “indemnity” means “protection or exemption from loss or damage past or to come” etc. So, giving to the bond the construction which we do, we think it was the purpose of the parties to it to give the obligee protection against loss or damage, and when lienors had filed their claims in other courts, some of whom had obtained judgments, and the contractors had defaulted in their contract, that the plaintiff could bring them all into a court of equity and have all matters settled there by a proper decree of the court.

Judgment reversed on the main hill of exceptions, and affirmed on the cross-hill.

All the Justices concur, except