Carter County v. Oliver-Hill Const. Co.

• Decision Date: 14 February 1921
• Citation: 228 S.W. 720,143 Tenn. 649
• Parties: CARTER COUNTY ET AL. v. OLIVER-HILL CONST. CO. ET AL.
• Court: Tennessee Supreme Court

228 S.W. 720

143 Tenn. 649

CARTER COUNTY ET AL. v. OLIVER-HILL CONST. CO. ET AL.

Supreme Court of Tennessee.

February 14, 1921

Appeal from Chancery Court, Carter County; H. Haynes, Chancellor.

Suit by Carter County and others against the Oliver-Hill Construction Company and the Hartford Accident & Indemnity Company. From a decree for complainants, the last-named defendant appeals. Modified and remanded.

McKINNEY J.

In October, 1915, the Oliver-Hill Construction Company entered into a written contract with the road commissioners of Carter county for the construction of certain roads and highways in said county, and the Hartford Accident & Indemnity Company became surety on the bond of the construction company, which bond provided, among other things, as follows:

"In addition to guaranteeing the faithful performance of the contract as appears from same hereto attached and hereinbefore set forth, it is also understood and agreed that this bond shall protect all laborers and materialmen who furnish labor and materials used in the construction of roads contracted for, and the surety herein guarantees the full payment of all laborers and materialmen by the principal herein as required by Acts of the General Assembly of the State of Tennessee of 1899, chapter 182."

It appears that the construction company lost considerable money on this contract, and about the time said roads were completed, to wit, September 19, 1917, an involuntary petition in bankruptcy was filed against it in the federal court by some of its creditors, and about the same time a number of suits were instituted against it and the surety on said bond in the state courts, by those who claimed to have furnished labor or materials on the contract, for which the surety company was liable.

Thereafter the said surety company filed a general creditors' bill enjoining all of said suits in the state courts, and praying that all claims be adjudged in that suit.

Subsequently the said surety company filed a petition in the bankruptcy proceeding, in which it prayed that the balance due the construction company on account of said road contract be collected by the trustee in bankruptcy, and that said fund when so collected, be applied in payment of claims for labor and material furnished on said contract before general creditors should be permitted to participate, and thus relieve it, as far as possible, as surety on said bond.

The fourth prayer of said petition is as follows:

"That all persons asserting claims against said fund, or against this complainant as the surety on the bond hereinbefore referred to, whether such claims be for labor and material furnished on the contract or whether a lien is asserted against said fund on some other ground, be required to file and prove their said claims in this cause, and that the rights of such claimants be ascertained and determined by appropriate proceedings."

It is also prayed in said petition:

"That the defendants who have brought suits in the state courts against the construction company and this complainant on the bond, Exhibit A hereto, be enjoined and inhibited from further prosecution of said suits, and that all other persons be enjoined from instituting and prosecuting any suit on said bond, or against said fund, except by petition in this court and cause."

Various creditors of the construction company filed petitions in said bankruptcy court, setting forth in detail their claims against said construction company for labor and material furnished on said contract.

The referee in bankruptcy declined to enjoin the suits in the state courts, and no injunction was ever awarded by the presiding judge.

The various suits in the state courts were consolidated and heard together, and a decree was entered by the chancellor, adjudicating the rights of the parties in a general way, and referring the cause to the master for an accounting in conformity with the principles announced in his opinion and decree based thereon, and in advance of the report on reference the chancellor, in the exercise of his discretion, permitted the surety company to appeal to this court.

The first assignment of error made by the surety company goes to the action of the chancellor in overruling its plea of res judicata, it being insisted that the matters here involved were determined in the bankruptcy proceeding.

To this we cannot assent. Both the referee and the trial judge allowed only such claims for labor or material as were admitted by the surety company, and neither undertook to adjudicate the rights and equities as between the creditors and the surety company.

In said bankruptcy proceeding it was agreed that the balance due the construction company from the county was $11,130.40. With the approval of the surety company, the referee allowed claims aggregating $9,600.99. The order of the referee, after setting forth the names of the creditors and the sums allowed each, recites:

"It appears that there are items not embraced in the amounts above set forth in the claims of Barnes-Boring Hardware Company and Summers-Parrott Hardware Company which the claimants insist went into the road construction so as to give the claimants lien on the funds arising from the road contract; but the petitioner, Hartford Accident & Indemnity Company, insists that these items are not secured by lien and it does not ask payment thereof under its petition. Action on these disputed items is therefore reserved by the court until the order and status of other labor and material claims and alleged assignments against the remainder of the fund have been established and fixed by the court. The trustee will pay out of said Carter county fund said claims, the names and amounts of which are above set forth."

The Barnes-Boring Hardware Company filed a petition to review the action of the referee, and, in passing upon its claim, the court said:

"The Barnes-Boring Hardware Company was not entitled to a decree directing the payment of its claim for materials alleged to have been furnished the bankrupt beyond the $4,763.13, which the indemnity company sought to have so paid. Regardless of the question whether any of the additional items were for materials used in the contract within the meaning of the act of 1899, the hardware company itself had no lien therefor, and the payment of the same should only be directed upon the application of the indemnity company in enforcement of its equitable right as surety, and since it did not seek the payment of such additional claims but on the contrary resisted the payment of the same, such items should clearly only be allowed as unsecured claims against the bankrupt."

The court, in passing upon the claim of the Monarch Mills Company, said:

"Furthermore as the indemnity company did not seek the payment of these claims, in the enforcement of its equitable right, they could in no event have been allowed as secured claims against the bankrupt, at the instance of the claimants themselves."

What we have quoted above shows conclusively that the court allowed only such claims as the surety company admitted, and controverts the idea that the court undertook to adjudicate as between creditors of the construction company and the surety on its bond.

A number of reasons could be given as to why the plea of res judicata is not effective, but it is unnecessary to do so, since it appears positively that the court did not undertake to adjudicate as to the liability of the surety company, but only undertook to adjudicate, upon the application of the surety company and an enforcement of its equitable right, what claims should be paid out of this particular fund.

The second assignment of error is as follows:

"In holding and adjudging that food furnished to the animals and men of the contractor while engaged in work under the contract constituted valid claims for labor or materials used in said contract, and the surety on the contractor's bond was liable for the same."

Relative to the feed furnished for the work stock, we find the following statement in the stipulation of facts: "Said hay, oats, corn, etc., were used by the Oliver-Hill Construction Company in feeding its horses and mules, while engaged in the construction of the said Carter county roads under the contract as aforesaid."

As we understand the record, this stipulation applies to all claims for feed.

We are of the opinion that the chancellor was correct in allowing a recovery for feed so furnished.

In Pittsburg Coal Co. v. Southern Asphalt & Construction Co., 138 Tenn. 154, 196 S.W. 490, it was held that the surety company was liable to one furnishing coal to operate machinery used in the construction of a sewer for a city. The court said:

"The coal that furnished the power by which the machinery was operated was as much material used in the contract as the labor of men for which it was substituted."

The court further said, relative to the act of 1899, the following:

"We are cited to many cases from other jurisdictions, but all of them construe mechanic's lien statutes. The statute under consideration here is not a mechanic's lien statute, and has no application except in cases of public works. * * * These statutes are essentially different from the one under consideration, and were intended to serve a different purpose. No lien is given by the act of 1899. The bond required by that act is sole security of laborers and materialmen who do work and furnish material to the contractor."

While counsel have undertaken to differentiate between that case and the one under consideration, upon principle we think they are the same.

With reference to the construction of the act in question (chapter 182 of the Acts of 1899) the chancellor said:

"...