Davis Co., Inc. v. D'Lo Guaranty Bank

• Decision Date: 11 January 1932
• Docket Number: 28794
• Citation: 138 So. 802,162 Miss. 829
• Parties: DAVIS CO., INC., v. D'LO GUARANTY BANK
• Court: Mississippi Supreme Court

138 So. 802

162 Miss. 829

DAVIS CO., INC., v. D'LO GUARANTY BANK

No. 28794

Supreme Court of Mississippi

January 11, 1932

(In Banc.)

1 SUBROGATION.

In determining rights of surety on bridge contractor's bond where contract contained no provision for progress payments entire contract price should be treated as retainage (Code 1930, sections 5971-5976).

2 SUBROGATION. Surety on bridge contractor's bond held entitled, as against subcontractor's assignee, to have laborers and materialmen paid from money which county paid contractor (Code 1930, sections 5971-5976).

The contract with county for repair of bridge provided for payment of entire contract price on satisfactory completion of the work. The contractor sublet the work and subcontractor assigned his share of the proceeds of the contract to bank. Subcontractor, upon completion of work, had failed to pay labor and materials furnished, but the bank demanded payment to it of part of proceeds of contract due subcontractor without deduction of disbursements made to materialmen and laborers by the contractor.

3 BRIDGES.

Rights and liabilities of parties to county bridge repair contract, including surety on contractor's bond, held governed by statutes respecting public contracts (Code 1930, sections 5971-5976).

4. BRIDGES. Rights and obligations of parties to county bridge repair subcontract held governed by statutes respecting private contracts (Code 1930, sections 2275, 2276).

The agreement between the contractor and subcontractor subletting the contract with the county for repair of bridge was a contract between private corporation and private individual, the subcontractor having no contract relations whatever with county.

5. BRIDGES.

County bridge contractor had privilege of determining whether subcontractor should furnish bond (Code 1930, section 2276).

6. BRIDGES.

On subcontractor's execution of bond, statutory restrictions on subcontractor's rights to assign proceeds of bridge repair subcontract were removed (Code 1930, sections 2275, 2276).

7. BRIDGES.

Liability of subcontractor's sureties held not affected by subcontractor's assignment for funds due under contract (Code 1930, sections 2275, 2276).

8. SUBROGATION.

County bridge contractor, on subcontractor's default, after accepting subcontractor's assignment of proceeds of contract, held remanded to rights against subcontractor and his sureties to reimburse itself for amount it paid out in exoneration of its surety under original contract (Code 1930, sections 2275, 2276).

SMITH, C. J., and ANDERSON, J., dissenting.

HON. T. P. DALE, Chancellor.

APPEAL from chancery court of Simpson county HON. T. P. DALE, Chancellor.

Action by the D'Lo Guaranty Bank against the Davis Company, Incorporated, and others, wherein defendant named and another filed a cross-bill and certain laborers and materialmen intervened and propounded their claims. From the decree rendered, the defendant named appeals. Affirmed.

Superseding opinion in 133 So. 219.

Affirmed.

Butler & Snow, of Jackson, for appellant.

The contract between the Davis Company, Inc., and Hinds county did not provide for progress payments and no progress payments were made, or could be made, unless specifically authorized in the contract.

Sec. 4042, Hemingway's Code of 1927.

The contract between the Davis Company, Inc., and Hinds county was a public contract and is governed by chapter 217, Laws of 1928 (2617-2622, Hemingway's Code of 1927) and chapter 128 Laws of 1918 (sections 2596, 2603, Hemingway's Code of 1927) have no application.

Canton Exchange Bank v. Yazoo County, 144 Miss. 579; United States Fidelity & Guaranty Company v. City of Canton, 128 So. 744.

The doctrine of subrogation is "one of equity and benevolence; . . . its basis is the doing of complete, essential and perfect justice between the parties, without regard to form, and its object is the prevention of injustice. It does not rest on contract, but upon principles of natural equity. The courts should rather incline to extend than restrict the operation of the doctrine. It applies wherever any person other than a mere volunteer pays a debt or demand which in equity and good conscience should have been satisfied by another, or where one person finds it necessary for his own protection to pay the debt for which another is primarily liable, or where a party has such an interest in property as makes it incumbent upon him to get in an outstanding claim or equity for its protection.

Prestridge v. Lazar, 132 Miss. 168.

The contract price stands as security for the performance of the contract and the payment of laborers and materialmen just as the bond stands for the performance of the contract and the payment of laborers and materialmen.

21 R. C. L., p. 103; Pickard v. Schaeutz, 70 Miss. 381; U. S. F. & G. Co. v. Parsons, 147 Miss. 361; 5 L. R. A. (N. S.) 418.

Where the contract required the owner to pay for the work only when it was completed, the court held that the sureties on the contractor's bond had a right to expect, and good faith required, that the owner should hold the funds until all the debts contracted by the contractor, which could be established as liens, were paid, or the time for filing the same had expired, and the sureties should not be called upon to reimburse the owner because of his negligence in failing to so retain the money.

Lucas County v. Roberts, 49 Iowa 159.

That Dabney is the principal debtor, the United States Fidelity & Guaranty Company, The Davis Company, Inc., and Welch and Graves are sureties and only secondarily liable to laborers and materialmen is clearly established.

Canton Exchange Bank v. Yazoo City, 144 Miss. 579; Gillian v. McElmore, 441 Miss. 253.

The liability of the Davis Company, Inc., to laborers and materialmen grows out of the requirements of the statute and the giving of the bond under the statute.

Oliver Construction Co. v. Dancey, 137 Miss. 474; Pidgeon Thomas Iron Co. v. Leflore County, 135 Miss. 155.

The right of subrogation does not arise out of contract. It arises out of equity and is independent of the contract. It is not at all necessary that the contract provide for subrogation. The right to it is an equitable right depending upon the relation of the parties and the transactions between them, arises by implication and in furtherance of natural justice and equity.

Canton Exchange Bank v. Yazoo County, 144 Miss. 579; Prestridge v. Lazaar, 132 Miss. 168; Robinson v. Sullivan, 102 Miss. 581.

In the case of a surety subrogation springs into existance the moment the bond is executed and the rights of the surety to subrogation as to third persons are in no way dependent upon the reservation or protection of the right to subrogation in the bond or other instrument.

Canton Exchange Bank v. Yazoo County, 144 Miss. 579.

The language of chapter 81, Code of 1906 would clearly extend the lien to a public building, but the court has held that a lien was not given on public buildings.

Panola County v. Gillen, 59 Miss. 198; McKinnin v. Gowen & Brothers, 127 Miss. 545.

Materialmen of a private subcontractor are not protected by the bond given under chapter 218, Laws of 1918.

Alabama Marble Co. v. U. S. F. & G. Co., 146 Miss. 414.

In the case of a public contractor such remote materialmen are protected.

Oliver Construction Co. v. Dancy, 137 Miss. 474.

Davis as Principal contractor, and his surety, under chapter 217, Laws of 1918, would be liable to remote laborers and materialmen of Dabney and his subcontractors, whereas a bond taken by Davis from Dabney in identically the same language does not indemnify or protect Davis and his surety against such remote claims.

Ala. Marble Co. v. U. S. F. & G. Co., 146 Miss. 414.

Davis nor his surety would have been liable to these laborers and materialmen of Dabney, the subcontractor, but for the principal bond in the case.

Pidgeon thomas iron co. V. Leflore county, 135 miss. 155.

Davis should not be treated as owner under the private contractor's statute, for the purpose of determining the rights of the assignee of Dabney, and his rights as owner ignored under the private contractor's statute for the purpose of settling with Dabney.

Harris v. Warren, 61 Miss. 509; Lake v. Brannon, 90 Miss. 737; Canton Exchange Bank v. Yazoo County, 144 Miss. 579.

As owner Davis was under no obligation to laborers and materialmen, unless he was actually indebted to Dabney when the laborers' claims were demanded.

Harris v. Warren, 61 Miss. 509; Lake v. Brannon, 90 Miss. 737.

Davis ought not to be in a worse position for having required Dabney to give a performance bond than he would be without it. If he had required no performance bond under the private contractor's statute, he would have owed the laborers and materialmen nothing as owner, because, as owner, he had promised to pay them nothing. His obligation to them arose out of the public contractor's statute and not the private one.

When the Davis Company sublet the work to Dabney, the Davis company and the contract price were security to laborers and materialmen contracting with Dabney, that they would be paid. Dabney expressly assumed to pay them, and thereby the Davis Company, so far as laborers and materialmen were concerned, was only surety for Dabney, and to indemnify itself as such surety held the entire proceeds of the contract.

Grilliam v. Elmore, 141 Miss. 253; Pickhard v. Shantz, 70 Miss. 381; U. S. F. & G. Co. v. Parsons, 147 Miss. 361; Canton Exchange Bank v. Yazoo County, 141 Miss. 579; U. S. F. & G. Co. v. City of Canton, 128 So. 744, 157 Miss. 680.

The contract price involved in this case, retained by the county until the contract was performed and then paid over to...