B. F. & C. M. Davis Co. v. W. E. Callaghan Const. Co.

• Citation: 298 S.W. 273
• Decision Date: 05 October 1927
• Docket Number: (No. 760-4725.)
• Parties: B. F. & C. M. DAVIS CO. et al. v. W. E. CALLAGHAN CONST. CO.
• Court: Supreme Court of Texas

Page 273

298 S.W. 273

B. F. & C. M. DAVIS CO. et al. v. W. E. CALLAGHAN CONST. CO.

(No. 760-4725.)

Commission of Appeals of Texas, Section B.

October 5, 1927.

Error to Court of Civil Appeals of Fourth Supreme Judicial District.

Suit by the W. E. Callaghan Construction Company against the Southern Surety Company and others, in which the B. F. & C. M. Davis Company filed a cross-action, and in which numerous interventions were filed. Judgment for defendant Surety Company and Davis Company was affirmed in part and in part reversed and rendered by Court of Civil Appeals (283 S. W. 1098), and the Davis Company and others bring error. Reversed and remanded.

John T. Suggs, of Denison, for plaintiff in error Southern Surety Co.

Capps, Cantey, Hanger & Short, of Fort Worth, for plaintiff in error Maryland Casualty Co.

Thompson, Knight, Baker & Harris, of Dallas, for plaintiff in error B. F. & C. M. Davis Co. and others.

Crane & Crane, of Dallas, for other plaintiffs in error.

Huvelle & Atwell, Church, Read & Bane, M. M. Plowman, Geo. K. Holland, Leake, Henry, Wozencraft & Frank, Bell, Worsham, Rollins, Burford & Ryburn, Coke & Coke, and Thos. G. Murname, all of Dallas, Bullington, Boone & Humphrey, John B. King and Raymond M. Myers, all of Wichita Falls, Bryan, Stone, Wade & Agerton and A. M. Scott, all of Fort Worth, and J. O. Hughes, of Seymour, for defendant in error.

POWELL, P. J.

The nature and result of this case have been accurately stated by the Court of Civil Appeals. See 283 S. W. 1098. We shall not restate the case here, except so far as may be necessary to an understanding of the issues raised in the various applications, all three of which were granted by the Supreme Court. The Wichita county water improvement district No. 1 entered into a contract with the Callaghan Construction Company to erect dams and a general irrigation plant. The construction company, with the consent of the improvement district, sublet much of its work to the Davis Company. The Southern Surety Company made a bond, payable to the Callaghan Company and the improvement district. The relevant portion of said bond reads as follows:

"Now, the condition of this bond and undertaking is such that if the said B. F. & C. M. Davis Company, Inc., shall fully and faithfully perform its said agreement, of date the 3d day of December, 1921, and said original contract executed by W. E. Callaghan Construction Company with said Wichita county water improvement district No. 1, in so far as they relate to the items mentioned in Schedules 1, 2, and 3 of Exhibit A, attached to each of said contracts, to which exhibit reference is here made for a more particular description of said items; and if the said B. F. & C. M. Davis Co., Inc., shall pay all sums of money due, and to become due, for supplies, teams, equipment, material, and labor used, or contracted to be used, in the performance of said contract, as well as any and all other expense incurred in the performance or attempted performance thereof, then this bond, or undertaking, shall become null and void; otherwise, it shall remain in full force and effect."

In the case at bar, judgment was rendered by the district court in favor of more than 30 intervening creditors of the Davis Company. The surety company appealed from said judgment. The Court of Civil Appeals affirmed all of the judgments in favor of the intervenors, as against the surety company, except as follows:

"We do not think the claim of the General Electric Company for $276.98 against the surety company can be sustained. There is nothing in the bond binding the surety company to pay for a telephone line erected by such General Electric Company, which was not and could not be used in the construction of the dams. Neither is there any provision in the bond fixing liability on the surety company for the sum of $1,590.88 contracted by the Davis Company to be paid to the Maryland Casualty Company. It is true, as found by the trial court, that it was provided in the contract between the Davis Company and the construction company that the former should carry all necessary insurance, but no such matter appears in the bond nor can the language of the bond be so stretched as to include the insurance fees."

As to the creditors just mentioned, the Court of Civil Appeals rendered judgment in favor of the surety company.

The General Electric Company has filed no application. Therefore the judgment of the Court of Civil Appeals as to it has become final. Its claim is not before our court for consideration.

On the other hand, counsel for the Maryland Casualty Company did file an application. In that application, it is seriously contended that the bond does cover this item of expense. With this view we agree. The contract, the performance of which the bond guaranteed, expressly required the Davis Company to carry compensation insurance. This expense was one expressly authorized in the contract as one to be incurred in the performance thereof. Since the surety company agreed to pay any expense "incurred in the performance" of the contract, not otherwise expressly provided for, we think the bond does cover this compensation premium. We are at variance with the Court of Civil Appeals in its view that the language of the bond cannot be stretched so as to include these insurance premiums. We are clear that this item of expense is expressly covered by the bond itself. Therefore, we recommend that, as to the Maryland Casualty Company, the judgment of the Court of Civil Appeals be reversed and that of the district court affirmed.

The Southern Surety Company was dissatisfied with the judgment of the Court of Civil Appeals, and it filed an application for writ of error, which was granted. This application attacks the awards in favor of several of the interveners, which assignments we will reach in due course. The surety company's application involves that portion of its bond expressly agreeing to pay all sums of money due or to become due "for supplies, teams, equipment, material and labor used, or contracted to be used, in the performance of said contract."

In the case of U. S. F. & G. Co. v. Henderson County, 253 S. W. 835, the Court of Civil Appeals laid down the correct rule governing a bond of this kind, and its judgment was affirmed by the Supreme Court, upon recommendation of our section of the Commission of Appeals. See 276 S. W. 203. In each of the opinions in that case, there was quoted with approval a portion of the opinion of the United States Supreme Court in the case of Brogan v. National Surety Co., 246 U. S. 257 38 S. Ct. 250, 62 L. Ed. 703, L. R. A. 1918D, 776. That quotation is as follows:

"The Circuit Court of Appeals deemed immaterial the special circumstances under which the supplies were furnished and the findings of fact by the trial court that they were necessary to and wholly consumed in the prosecution of the work provided for in the contract and bond. In our opinion these facts are not only material, but decisive. They establish the conditions essential to liability on the bond. The bare fact that the supplies were furnished to the contractor and were consumed by workmen in its employ would have been immaterial. A boarding house might be conducted by the contractor (like some company stores concerning which states have legislated Keokee [Consol.] Coke Co. v. Taylor, 234 U. S. 224, 34 S. Ct. 856, 58 L. Ed. 1288) as an independent enterprise, undertaken solely in order to utilize the opportunity for separate and additional profit afforded by the congregation of many laborers in the particular locality where the public work is being performed. The laborers might resort to such a boarding house in the exercise of individual choice in the selection of an eating place. Under such circumstances the furnishing of supplies would clearly be a matter independent of the work provided for in the contract and would not entitle him who had furnished the groceries used in the boarding house to recover on the bond. But here, according to the undisputed facts and the findings of the trial court, the furnishing of board by the contractor was an integral part of the work and necessarily involved in it. Like the supplying of coal to operate engines on the dredges, it was indispensable to the prosecution of the work, and it was used exclusively in the performance of the work. Groceries furnished to a contractor under such circumstances and consumed by the laborers, are materials supplied and used in the prosecution of the public work. The judgment of the Circuit Court of Appeals is therefore reversed and that of the district court affirmed."

The Court of Civil Appeals, in the Henderson County Case, supra, laid down a correct rule of law as follows:

"It would appear from the statements made by the parties to this appeal that the lumber furnished by the Hawn Lumber Company and the Williford Lumber Company became a part of the permanent equipment of the contractors, or was used only incidentally in building the road. There is no showing that it was entirely destroyed nor that it became a part of the permanent structure. For all we know, the contractors may have carried it away, or sold it or applied it to other uses. These appellees rested under the burden of showing that the lumber was material used in the construction of the road; that is, that it was entirely consumed in such work. The showing made does not meet that burden, and therefore the trial court correctly denied them a recovery. This conclusion is fully sustained by the following authorities: Southern Surety Co. v. National Lbr. Co., 73 Ind. App. 592, 122 N. E. 686; City Retail Lbr. Co. v. Title Guaranty & Surety Co., 72 Wash. 300, 130 P. 345; Hess & Skinner v. Turney (Tex. Civ. App.) 207 S. W. 171; Beals v. Fidelity & Deposit Co., 76 App. Div. 526, 78 N. Y. S. 584, affirmed 178 N. Y. 581, 70 N. E. 1095; K. C., to Use of K. C. Hydraulic Press Brick Co. v. Youmans, 213 Mo....