Argonaut Ins. Co. v. ABC Steel Products Co., Inc., 8648

• Decision Date: 30 April 1979
• Docket Number: No. 8648,8648
• Citation: 582 S.W.2d 883
• Parties: ARGONAUT INSURANCE COMPANY, Appellant, v. ABC STEEL PRODUCTS CO., INC., d/b/a ABC Doors, Appellee.
• Court: Texas Court of Appeals

Page 883

582 S.W.2d 883

ARGONAUT INSURANCE COMPANY, Appellant, v. ABC STEEL PRODUCTS CO., INC., d/b/a ABC Doors, Appellee.

No. 8648.

Court of Civil Appeals of Texas, Texarkana.

April 30, 1979.

Rehearing Denied May 29, 1979.

James H. Baumgartner, Jr., Vial, Hamilton, Koch, Tubb, Knox & Stradley, Dallas, for appellant.

David E. Bird, Bedsole & Bird, Dallas, for appellee.

CORNELIUS, Chief Justice.

Argonaut Insurance Company appeals from a judgment rendered against it in favor of ABC Steel Products Co., Inc.

ABC agreed to sell and install steel warehouse doors to C. T. Lambert & Associates, Inc., a general contractor, for use in the construction of a mini-warehouse project in Richardson, Texas. Argonaut, pursuant to Tex.Rev.Civ.Stat.Ann. art. 5472d (Supp.1978-1979), executed a statutory payment bond for Lambert which guaranteed the payment of all claims for labor and materials furnished Lambert in the construction of the project. ABC and Lambert's contract provided for a price of $133.34 per door. The contract further stipulated that Lambert would have a "25% Cash discount for payment by 15th of month after installation (making your net discounted price $100.00 per door incl. applicable taxes)." ABC furnished and installed the doors as it agreed to do in the contract, but Lambert failed to pay for them. ABC then perfected its claim against Argonaut pursuant to the provisions of the payment bond it had made for Lambert. Argonaut tendered ABC the sum of $10,752.92, which represented only the net discounted price of $100.00 per door for the doors installed, plus interest and attorneys' fees accruing to the date of the tender. ABC refused the tender on the ground it was entitled to the full contract price for the doors, rather than the discounted price, and it then filed suit against Argonaut and Lambert. The case first went to trial before the court, but after a day and a half a mistrial was declared. The second trial was to a jury which answered special issues to the effect that:

(1) The agreed price of the doors was $133.34 each unless payment was made on or before the 15th day of the month following installation, in which event the price would be discounted 25% (Special Issue No. 1).

(2) The fair market value of the doors installed at the time of installation was $110.00 per door (Special Issue No. 3).

(3) The 25% Discount did not constitute interest (Special Issue No. 4).

(4) ABC was entitled to the sum of $16,000.00 as reasonable and necessary attorneys' fees (Special Issue No. 2).

The district court disregarded the jury's finding that the fair market value of the doors was $110.00 each and rendered judgment for ABC for $133.34 for each door furnished, plus interest and attorneys' fees as found by the jury. Lambert did not appeal.

Argonaut's principal contention on appeal is that, for the purpose of measuring its liability as surety for Lambert, the value of the doors was the discounted price, and that the offer of that amount to ABC constituted a lawful and sufficient tender which precluded an award for interest accruing after that date or for attorneys' fees incurred by ABC in bringing suit on its claim.

In the absence of contractual provisions to the contrary, a surety's liability is measured by the liability of the principal. O'Neil Engineering Co. v. First National Bank, 222 S.W. 1091 (Tex.Com.App.1920, holding approved); W. T. Rawleigh v. Sherley, 165 S.W.2d 465 (Tex.Civ.App. Dallas 1942, writ dism'd); Girard Fire & Marine Insurance Co. v. Koenigsberg,65 S.W.2d 783 (Tex.Civ.App. Dallas 1933, no writ); 53 Tex.Jur.2d Suretyship, Sec. 25, p. 590; 74 Am.Jur.2d Suretyship, Sec. 25, p. 28; 72 C.J.S. Principal and Surety § 92 p. 572. The surety is bound for the debt, default or obligation of the principal. Arceneaux v. Price, 468 S.W.2d 473 (Tex.Civ.App. Austin 1971, no writ). By the express terms of its contract with ABC, Lambert was obligated to pay the sum of $133.34 per door unless it made payment within fifteen days of installation. When payment was not made within that time, Lambert's obligation became fixed at $133.34 per door. ABC then had a valid claim for that amount, and upon Lambert's failure to pay the same, Argonaut became bound to do so. O'Neil Engineering Co. v. First National Bank, supra; W. T. Rawleigh v. Sherley, supra.

Argonaut advances several reasons to support its argument that the legal principals just enunciated should not govern this case. One is that under Article XVI, Sec. 37 of the Texas Constitution, which provides that mechanics, artisans and material men shall have liens for ". . . the value of their labor . . . or material . . .", the reasonable or fair market value of the materials determines the extent of the supplier's lien rather than the contract price. One answer to that contention is that no lien is involved here. ABC is not seeking to perfect or enforce a lien against Lambert or against the owner of the improvements. It is seeking to recover from Lambert's surety the contract price of the materials it furnished. As Lambert was obliged to pay ABC $133.34 per door, and Argonaut was liable for the debt of its principal, it was obligated to pay that price for the doors. The payment bond is intended as protection for the material men in lieu of a lien. Trinity Universal Insurance Company v. Barlite, Inc., 435 S.W.2d 849 (Tex.1968). We further observe that ABC, as a subcontractor, was not entitled to a constitutional lien under the provisions of Article XVI, Sec. 37. Da-Col Paint Mfg. Company v. American Indemnity Company, 517 S.W.2d 270 (Tex.1974); Trinity Universal Insurance Company v. Barlite, Inc., supra; First National Bank v. Lyon-Gray Lumber Co., 194 S.W. 1146 (Tex.Civ.App. Texarkana 1917), Aff'd, 110 Tex. 162, 217 S.W. 133, Aff'd sub nom. Lecountour Bros. Stair Mfg. Co. v. Lyon-Gray Lumber Co., 110 Tex. 177, 217 S.W. 136 (1919). Argonaut also argues that the language of the statute and the language of its bond, both of which make the surety's liability conditional upon the failure of the principal to promptly pay the material men, should be interpreted to mean that the surety is liable only for the "prompt payment price", which in this case would be what the principal would have owed for the doors had he paid for them within fifteen days, i. e., the discounted price. We disagree. That language simply renders the surety liable if the principal fails to promptly pay. It does not restrict the surety's liability to a discounted price for which the principal could have qualified, but did not.

It is also contended that the "relation back doctrine" which applies in Texas to mechanic's liens, and the provisions of the lien statutes to the effect that an indebtedness shall be considered to have accrued on the 10th of the month following the furnishing of the materials, require that Argonaut's liability be limited to the cost of the doors if paid for by the 10th of the month after installation. We cannot accept that proposition. The relation back doctrine merely determines the priority of the liens which may be filed. University Savings & Loan Association v. Security Lumber Co., 423 S.W.2d 287 (Tex.1967). And the accrual dates included in the lien statutes are simply for the purpose of setting the dates from which the lien notices and filing requirements shall run.

Under its payment bond Argonaut was obligated to pay what its principal owed for the materials furnished. As Lambert did not entitle itself to the discount for prompt payment, it became liable for the full contract price. Upon Lambert's failure to pay that price, Argonaut was bound to do so, and consequently its tender of an amount less than what was due was ineffectual. 55 Tex.Jur.2d Tender, Sec. 9, p. 220 and cases cited.

The appeal also asserts that the district court improperly disregarded the jury answer which found that the fair market value of the doors was $110.00 each. The construction contract between the landowner and Lambert provided for a "turn-key" price of $201,000.00. In another section the contract provided that any extras or additional work could "be figured on a unit cost" as set forth in a schedule. Included in the schedule was "8 o X 8 o doors

, @ $110.00 each."

The trial judge correctly disregarded the jury's finding. Regardless of the unit price stipulated by the owner and the general contractor, the price which the general contractor agreed to pay ABC was $133.34 per door unless the discount was earned. Any other price or value was immaterial in determining the surety's liability for the debt of its principal.

The point is raised that there is no evidence or insufficient evidence to support the jury's finding that the 25% Discount did not constitute interest. First, it should be noted that this issue was one on which Argonaut had the burden. Therefore, it cannot successfully attack the jury's finding by showing that it is not supported by sufficient evidence. It must demonstrate that the 25% Discount, as a matter of law, constituted interest.

Tex.Rev.Civ.Stat.Ann. art. 5069-1.01 provides that interest is the compensation allowed by law for the use or forbearance or detention of money. However, a seller of products may lawfully exact one price for his goods if they are paid for in cash or payment is made promptly, and he may demand a larger price if the sale is for credit or the cash payment is delayed, and the difference is not interest. Anguiano v. Jim Walter Homes, Inc., 561 S.W.2d 249 (Tex.Civ.App. San Antonio 1978, ref. n. r. e.); Avant v. Gulf Coast Investment Corporation, 457 S.W.2d 134 (Tex.Civ.App. Dallas 1970, no writ); National Bond & Investment Co. v. Atkinson, 254 S.W.2d 885 (Tex.Civ.App. Amarillo 1952, writ dism'd); Rattan v. Commercial Credit Co., 131 S.W.2d 399 (Tex.Civ.App. Dallas 1939, writ ref'd); 58 Tex.Jur.2d Usury, Sec. 12, p. 79. If the sale is a true credit sale, the difference in the sales price is usually termed a "time price differential."...