Dickson v. United States Fidelity & Guaranty Co.

• Decision Date: 21 May 1928
• Docket Number: 27187
• Citation: 117 So. 245,150 Miss. 864
• Parties: DICKSON v. UNITED STATES FIDELITY & GUARANTY CO. [*]
• Court: Mississippi Supreme Court

117 So. 245

150 Miss. 864

DICKSON v. UNITED STATES FIDELITY & GUARANTY CO. ^[*]

No. 27187

Supreme Court of Mississippi

May 21, 1928

Division B

1 TRIAL. Court properly refused to transfer action on indemnity bond to chancery court.

Court properly refused to transfer action on indemnity bond to chancery court, since cause was one of legal, not equitable cognizance.

2. INDEMNITY. Under bond indemnifying plaintiff as surety for building contractor, surety could sue upon becoming liable.

Bond under which defendant agreed and bound himself to "at all times save harmless and keep indemnified the U.S. F. & G. Co.... against all suits, actions, debts, damages, costs charges and expenses, including court costs and counsel fees,... and against all loss and damage whatsoever by reason of the suretyship of the U.S. F. & G. Co." was one indemnifying plaintiff against liability as well as loss, and plaintiff was not required to wait until loss occurred before it had right of action on bond, but its right of action arose at once upon its becoming liable as surety on building contractor's bond.

3. MECHANICS' LIENS. Where contractor gives bond, funds due contractor are released from equity or trust in favor of material-men and laborers (Hemingway's Code 1927, sections 2596, 2598).

Where contractor's bond is given as provided by Hemingways' Code 1927, section 2598, funds due contractor are released from equity or trust in favor of materialmen and laborers, under Hemingway's Code 1927, section 2596, and go into hands of contractor untrammeled.

4. TRUSTS. Building contract provision regarding evidence of payment of material bills, etc., before issuance of certificate of acceptance did not impress funds with trust in favor of material-men and laborers (Hemingway's Code 1927, section 2598).

Provision of building contract that, before issuance of final certificate of acceptance, contractor should submit evidence satisfactory to architect that all pay rolls, material bills, etc., had been paid, and that, before owner should make final payment to contractor, he should deliver written notice to surety and get surety's written consent thereto, did not impress funds arising out of contract with trust or equity in favor of materialmen and laborers whose materials and labor went into building, where contractor had furnished bond required, under Hemingway's Code 1927, section 2598.

5. INDEMNITY. That contractor giving bond used money received for performing contract in performing another contract on which plaintiff was also surety did not relieve defendant on bond to indemnify plaintiff (Hemingway's Code 1927, section 2598).

Building contractor gave bond required by Hemingway's Code 1927, section 2598. Plaintiff was surety for contractor on building contract with C., and also on another building contract with R. Defendant agreed to indemnify plaintiff against loss or liability as surety on contractor's bond under contract with C. Contractor used sums of money paid him by C. for payment of labor and materials used in performance of his contract with R. in excess of sums which plaintiff was required to pay out under its suretyship in matter of contract with C. Held, defendant was liable to plaintiff on indemnity bond, since, contractor having given bond, moneys coming to him under contracts were freed from any equity or trust in favor of laborers or material-men, and he could use moneys as he chose.

HON. W. H. POTTER, Judge.

APPEAL from circuit court of Hinds county, First district, HON. W. H. POTTER, Judge.

Action by United States Fidelity & Guaranty Company against A. L. Dickson. From a judgment for plaintiff, defendant appeals. Affirmed.

Affirmed.

H. & F. J. Lotterhos, for appellant.

The facts stated in the pleas being taken as true, appellant submits that by virtue of several different principles of law the appellee should not recover. If the appellee be injured, it is not damaged, and such injury will not sustain an action. Black's Law Dictionary, where "injuria absque damno" is defined as: "Injury or wrong without damage." 32 C. J. 514; Hoy v. Handsborough, 31 Cyc. 439, shows the rule that where the contract is strictly one of indemnity, that is one against loss or damages, the indemnitee cannot recover until he has made payment or otherwise suffered an actual loss or damage against which the covenant runs, and cites in support of it Bedford v. Blythe, 74 Miss. 720, 21 So. 919; McLain v. Ragsdale, 31 Miss. 701; and Hoy v. Handsborough, supra; 5 Elliott on Contracts, 75.

Mr Garber was the principal and the appellee was his surety under both bonds under the two building contracts, and when he used the moneys paid him under the Clancy contract, which were in excess of the total of materialmen's claims unpaid, in payment of claims for labor and material under the other contract, it served to reduce the losses which the surety had under the Rathborne, etc., contract to a small amount which would otherwise have augmented to the extent that claims under the Rathborne, etc., contract had been paid out of said moneys derived from the Clancy contract. So that, by reason of these circumstances, there was a performance by the indemnitor. 31 C. J. 43.

Under the building contract between Garber & Clancy and the surety bond guaranteeing the performance of the same, the appellee and its principal, Garber, undertook that all payrolls, material, bills and other indebtedness connected with the work should be paid. The surety had the right and duty to see what disposition its principal was making of the funds derived from the Clancy work, and when it allowed or enjoyed the benefits of the use of that money in reduction of its losses as surety under the Rathborne, etc., contract, such use was a payment of any demand under this appellant's indemnity bond, and the appellee is estopped to make demands under that indemnifying bond. 21 R. C. L. 109; McElwrath & Rogers v. Kimmons, 146 Miss. 775, 112 So. 680; Merchants Ins. Co. v. Herber, 68 Minn. 420, 71 N.W. 624; United States v. American Bonding & Trust Co. (C. C. A.), 89 F. 925; 9 C. J. 68.

A transfer to the chancery court because of the equitable defenses involved was contested by the appellee and denied by the court, and the circuit court retained jurisdiction of the cause; therefore, all defenses which would have been proper in equity should be available here. Equity regards that as done which ought to be done. 21 C. J. 200. Equity regards the substance rather than the form. 21 C. J. 204. The surety is entitled to an accounting of security received by the creditor or obligee. 32 Cyc. 235; Fidelity & Deposit Company v. Henry, 109 Miss. 858, 69 So. 1011, 1015; 31 C. J. 443.

As between the surety company and an individual indemnifying it, the law will not be so considerate of a paid surety as of a voluntary one. Costello v. Bridges, L. R. A. 1915, A. 853, (858); Hormel & Co. v. American Bonding Co., 33 L. R. A. (N. S.) 513 (note); 32 Cyc. 306.

Butter & Snow, for appellee.

The indemnity was not simply against loss, but against debts and liabilities. 31 C. J. 438; 14 R. C. L. 55. It was also, under the indemnity agreement entitled to recover attorney's fees incurred by reason of the breach of the covenants of indemnity. We, of course, recognize the general rule that in indemnity agreements against loss or damage, there can be no recovery unless damages have in fact been sustained, and that the damages recoverable cannot exceed the loss. This rule is not peculiar to express agreements of indemnity, but applies to other actions for damages. It is illustrated by the old case where the Notary gave a false certificate, and the old cases cited under the text in 31 C. J., p. 443, quoted on page 9 of appellant's brief simply illustrate the general rule and hold that there can be no recovery on an agreement of pure indemnity against loss where no loss has in fact been sustained. This is clearly the holding of the court in Hoy v. Handsborough, Freeman's Chancery 533; Bedford v. Blythe, 74 Miss. 720.

It is true that under the building contract and surety bond guaranteeing the performance thereof, the contractor agreed to furnish all the materials and perform all the work necessary to construct the building, and it was contemplated that the contractor should pay for material and labor. It is also true that appellant agreed to indemnify appellee against liability on this particular bond and contract, but it does not follow that the appellee had the right to see what disposition Garber was making of the funds derived from the Clancy work. Certainly, the appellee had no greater rights or duties in this respect than appellant had.

Prior to the adoption of chapter 128, Laws of 1918, monies becoming due under a building contract was not impressed with a trust or equity in favor of materialmen or laborers, or others. Funds due or to become due under the contract belonged to the contractor absolutely and he might assign or otherwise dispose of them as he saw fit to the prejudice of laborers and materialmen. Spengler v. Lumber Co., 94 Miss. 780; Strickland Lbr. Co. v. Rinehart, 119 Miss. 749; Delta Lumber Co. v. Trust Co., 123 Miss. 722; First National Bank v. Monroe County, 131 Miss. 828. By chapter 128, Laws of 1918, the accounts to become due under a building contract are impressed with an equity of trust to a limited extent in favor of laborers and materialmen, where no bond is given, but the statute expressly recognizes that the trust and equity so impressed in a limited way in favor of the laborers and materialmen is abrogated when a bond is given. Where a bond is given the bond becomes security to the laborers and materialmen.

The general rule is that unless there is an equity in favor of the...