Chappell v. National Sur. Co.

• Decision Date: 12 May 1926
• Docket Number: 222.
• Parties: CHAPPELL et al. v. NATIONAL SURETY CO.
• Court: North Carolina Supreme Court

133 S.E. 21

191 N.C. 703

CHAPPELL et al. v. NATIONAL SURETY CO.

No. 222.

Supreme Court of North Carolina

May 12, 1926

Appeal from Superior Court, Lenoir County; Barnhill, Judge.

Suit by E. V. Chappell and another against the National Surety Company. Judgment for plaintiffs, and defendant appeals. No error.

The Pratt Lumber Company, the National Surety Company, and the T H. Gill Company are corporations organized under the laws of the state of New York. On October 21, 1919, the T. H. Gill Company contracted with the highway commission of Lenoir county to construct a road known as the Pink Hill road and to furnish the necessary supplies and materials, and at the same time executed a bond in the penal sum of $15,000 with the defendant as surety. The bond had this condition:

"The condition of this bond is such that if the above bounded T H. Gill Company shall well and truly keep and perform all the terms and conditions of the foregoing contract hereto annexed, for building road improvements for the county of Lenoir, N. C., on his part to be kept and performed; and shall pay all claims of subcontractors, materialmen furnishers of equipment or apparatus, foremen, and laborers, any or all arising from the carrying forward, performing and completing the attached contract; and shall indemnify and save harmless the said county and the said highway commission of Lenoir county, N. C., and its officers and agents, as therein stipulated, then this obligation shall be of no effect; otherwise, it shall remain in full force and virtue. It is expressly understood that this bond shall be for the benefit of the materialman or laborer having a just claim, as well as for the benefit of the highway commission of Lenoir county, N. C., and the county."

E. V. Chappell performed labor and furnished material and the Pratt Lumber Company sold pipe and iron bars, all of which went into the construction of the road, and Churchill & Co. furnished feed for the teams.

Service of process could not be made on the Gill Company, and the plaintiffs brought suit against the defendant to recover the amount due on their respective claims. Before the completion of the road the Gill Company became insolvent, and a suit in equity was instituted in the United States District Court for the Northern District of New York, in which Douglas V. Ashley was appointed receiver. This was followed by an ancillary proceeding in the United States District Court for the Eastern District of North Carolina, in which said Ashley was appointed ancillary receiver. As such he completed the road. When the ancillary receiver was appointed there was in the possession of the Lenoir county highway commission and of the state highway commission (on another contract) a considerable sum, which had been retained as a percentage as the work progressed. In the ancillary proceeding the defendant, National Surety Company, and certain creditors of the Gill Company, intervened and the District Court held that the surety company had an equity against this percentage and ordered the receiver to transfer the fund to the District Court for the Northern District of New York for distribution under the orders of the latter court. Joseph C. Cheshire, Jr., as special master in the ancillary proceeding, reported the various claims filed before him against the Gill Company. These claims were paid by the defendant on account of its liability on its bond. Neither Chappell nor the Pratt Lumber Company filed any claim before the referee, but they did file their claims against the receiver and received a dividend as ordered by the court of original jurisdiction. The verdict was as follows:

"(1) Did the plaintiff E. V. Chappell furnish to T. H. Gill Company labor, materials, and supplies used in the building and construction of the Pink Hill road as alleged? Answer: Yes.

"(2) What amount, if any, is due E. V. Chappell for labor, materials and supplies furnished to T. H. Gill Company in the building and construction of the Pink Hill road? Answer: $2,588.07, with interest from July 12, 1920.

"(3) What was the date upon which E. V. Chappell furnished the labor, materials, and supplies to T. H. Gill Company? Answer: Between January 1 and July 12, 1920.

"(4) Did the plaintiff Pratt Lumber Company furnish to T. H. Gill Company labor, materials, and supplies used in the building and construction of the Pink Hill road as alleged? Answer: Yes.

"(5) What amount, if any, is due Pratt Lumber Company for labor, materials, and supplies furnished to T. H. Gill Company in the building and construction of the Pink Hill road? Answer: $4,939.21, with interest from March 1, 1920.

"(6) What was the date upon which Pratt Lumber Company furnished the labor, materials, and supplies to T. H. Gill Company? Answer: Between December 5, 1919, and March 1, 1920.

"(7) Did the plaintiff Churchill & Co. furnish to T. H. Gill Company feed for team, which team was then working upon and constructing the Pink Hill road? Answer: Yes.

"(8) What amount, if any, is due Churchill & Co. for labor, materials, and supplies furnished to T. H. Gill Company in the building and construction of the Pink Hill road? Answer: $437.46, with interest from June 8, 1920.

"(9) What was the date upon which Churchill & Co. furnished the labor, materials, and supplies to T. H. Gill Company? Answer: Between January 17 and June 8, 1920.

"(10) What was the date of the completion of the Pink Hill road by T. H. Gill Company or Douglas V. Ashley, receiver thereof? Answer: August 11, 1921.

"(11) Did the plaintiffs Pratt Lumber Company and E. V. Chappell, or either of them, file proof of their claim with Joseph B. Cheshire, Jr., master appointed by the United States District Court for the Eastern District of North Carolina in the ancillary suit in equity, wherein Pratt Lumber Company was the plaintiff and T. H. Gill Company was the defendant, originating in the United States District Court for the Northern District of New York? Answer: No.

"(12) Are either of the plaintiffs Pratt Lumber Company or E. V. Chappell estopped from asserting their claims against the defendant, National Surety Company? Answer (by the court): No.

"(13) Are the claims of either the Pratt Lumber Company or E. V. Chappell barred by the statute of limitations? Answer (by the court): No.

"(14) Are the claims of either the Pratt Lumber Company or E. V. Chappell (or Churchill & Co.) barred by reason of failure to file claims with the highway commission within 6 months after the completion of the project? Answer (by the court): No."

All the issues, except 12, 13, and 14, were answered by consent, and these three were answered by the court as a matter of law. Judgment was rendered in favor of the plaintiffs, and the defendant excepted and appealed. The assignments of error are referred to in the opinion.

S. Brown Shepherd, of Raleigh, for appellant.

Connor & Hill, of Wilson, and Dawson & Jones, of Kinston, for appellees.

ADAMS J.

The appellant assigns for error, his honor's ruling that Chappell and the Pratt Lumber Company are not estopped in this action by reason of their failure to file their claims with the special master appointed in the ancillary cause. In the United States District Court for the Eastern District of North Carolina the Pratt Lumber Company instituted a suit in equity against the T. H. Gill Company, in which intervening creditors prayed the court to adjudge that their claims were entitled to priority in the disposition of the amounts due the receiver over the claims of the defendant's general creditors. Pratt Lumber Co. v. T. H. Gill Co., 278 F. 783. It was therein determined that the creditors who had furnished material or performed labor had no priority over the claims of general creditors, and that the respective rights of the National Surety Company (the defendant in this action), the original receiver, the ancillary receiver, and the general creditors, were involved in other jurisdictions. The ancillary receiver was directed, after praying certain special claims and the cost of the proceeding, to remit to the original receiver, appointed by the District Court for the Northern District of New York, the fund deposited with the Raleigh Savings Bank & Trust Company, to be subject to the order of the court of original jurisdiction upon the determination by that court of the respective rights of the interested parties. This order was made November 26, 1923, and on the same day another order was signed in the United States District Court sitting in Raleigh, reciting that the defendant herein had filed a statement of claims which it had paid on account of its bonds to the state highway commission and the road commission of Lenoir county; that these claims had been approved by the special master; and that the defendant herein was entitled to be reimbursed as a contractual right out of the retained percentage existing at the time the receiver was appointed.

It...