Contee Sand & Gravel Co. v. Reliance Ins. Co.
| Decision Date | 10 March 1969 |
| Parties | CONTEE SAND AND GRAVEL COMPANY, Inc. v. RELIANCE INSURANCE COMPANY. |
| Court | Virginia Supreme Court |
William E. Baggs, Norfolk (Breeden, Howard & MacMillan, Norfolk, on brief), for plaintiff in error.
James L. Miller, Norfolk (Williams, Worrell, Kelly & Worthington, Norfolk, on brief), for defendant in error.
Before EGGLESTON, C.J., and BUCHANAN, SNEAD, I'ANSON, CARRICO, GORDON, and HARRISON, JJ.
Contee Sand and Gravel Company, Inc., filed its motion for judgment in the Circuit Court of the City of Norfolk against Reliance Insurance Company (successor to Standard Accident Insurance Company), seeking a judgment upon a labor and material payment bond issued by Standard on October 25, 1963, with Carter Contracting Company, Inc., as principal. The policy was incident to the performance of a contract whereby the Carter Company agreed to construct for Jeane Dixon and James L. Dixon a '7--Eleven' store at Laurel, Maryland.
Reliance filed its grounds of defense and a motion to dismiss upon the ground that the bond contained a condition that no suit or action shall be commenced by a claimant after the expiration of one year following the date on which the principal ceased work. Contee responded that it had sued Carter within the year, and further that Reliance was estopped by its conduct from availing itself of the condition of the bond. On June 1, 1967, the trial court sustained Reliance's motion to dismiss. Contee excepted and moved to set aside the order as contrary to the law and the evidence, which motion was overruled on July 25, 1967. We awarded Contee a writ of error.
The facts in this case are not in dispute. Contee, as subcontractor, performed work and furnished materials to Carter in connection with the construction of the store for the Dixons to the extent of $4160.49. Carter defaulted in the payment of the debt, and Contee employed William E. Baggs, a Norfolk attorney, to collect. Upon investigation it developed that Carter was financially involved and unable to pay. When inquiry was made of J. L. Carter, president of the Carter Company, on May 3, 1965, as to 'what bond was on this job', he stated that he did not know, and referred the attorney to Littleton W. Parks of the Walke-Parks Insurance Corporation of Norfolk, who wrote all of his bonds.
On the same day Baggs called Parks and advised him that Contee was attempting to collect monies due it by Carter on the Dixon 7--Eleven job. Parks acknowledged writing bonds for Carter, checked his records and told Baggs that the only bond issued by his agency for this particular job was a 'performance' type bond which did not inure to the benefit of materialman.
Parks suggested that Baggs write to the home office of Reliance. This was done on May 3, 1965, and Baggs received a reply stating that the bond was a performance bond executed solely for the benefit of the Dixons, and no rights were granted to his client. Reliance denied it had any obligation to Contee.
On May 21, 1965, Baggs brought action for Contee against Carter and recovered default judgment in the amount of $4160.49 on July 7, 1965. Writ of Fieri facias was issued on the judgment and returned 'no effects'. Baggs summoned J. L. Carter before a commissioner to answer questions concerning his property. At this hearing on May 10, 1966, Carter stated that it was useless for Contee to pursue his Company, and that Baggs should try the bonding company. When advised by Baggs that Parks had stated no labor and material payment bond had been issued, Carter told the attorney to check again.
Baggs called Parks, and the latter read the title and conditions of the bond he had written on the job. It then became obvious to Baggs that the bond described was in fact a labor and material payment bond. Baggs remainded Parks of their previous conversation and of his statement that the only bond issued on the job was a performance bond. He immediately went to Parks' office and conferred with him.
Parks wrote the home office of Reliance a letter of explanation on May 12, 1966. It appears that at the inception of the Dixon contract, Parks, as agent for Reliance's predecessor, Standard, had written and delivered a performance bond which was not accepted and was returned. Parks then wrote and delivered a labor and material payment bond but neglected to advise the company of the substitution. Parks stated that the girl in the office who usually attended to these things was sick at the time; that copies of the second bond were handled by another girl under his direction; and that, instead of being sent to the home office of the company, the copies were 'stuck' in the file along with the performance bond which had been returned.
The testimony of Parks was that when he checked the file for Baggs on May 3, 1965 he noticed the original of the performance bond, but overlooked the copies of the labor and material payment bond which were in the file. He admitted that contrary to usual practice, the home office was never advised of the substituted bond until his letter of May 12, 1966.
Immediately after this development Baggs filed claim against Reliance on behalf of Contee. Payment again was refused, but this time for the reason that action had not been filed within one year following the date that Carter ceased work on the Dixon contract. Thereafter Contee instituted the case under review.
The principal issue before us is whether Parks, by his unequivocal statement to Baggs, induced the latter to believe that no labor and material payment bond covered the Dixon contract; also if Baggs had a right to, and did rely and act upon those statements.
The bond in question, although written to Carter as principal, with Standard as surety, and the Dixons and American National Bank of Maryland as obligees or owners, Was for the use and benefit of claimants. It defined claimants 'as one having a direct contract with the Principal or with a subcontractor of the Principal, for labor, material, or both, used or reasonably required for use in the performance of the contract, * * *.' Contee qualified as a claimant and was entitled to the protection which the bond afforded.
Contee, as a sub-contractor,...
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