Employers' Liability Assur. Corp. v. A. W. Johnson Co.

• Decision Date: 12 March 1962
• Docket Number: No. 5-2537,5-2537
• Citation: 234 Ark. 806,354 S.W.2d 733
• Parties: EMPLOYERS' LIABILITY ASSURANCE CORP., Ltd., Appellant, v. A. W. JOHNSON COMPANY, Appellee.
• Court: Arkansas Supreme Court

Page 733

354 S.W.2d 733

234 Ark. 806

EMPLOYERS' LIABILITY ASSURANCE CORP., Ltd., Appellant, v. A. W. JOHNSON COMPANY, Appellee.

No. 5-2537.

Supreme Court of Arkansas.

March 12, 1962.

Fulk, Lofton, Wood, Lovett & Parham, Little Rock, for appellant.

Mehaffy, Smith & Williams and R. Ben Allen, Little Rock, for appellee.

McFADDIN, Justice.

The question posed is whether the appellee was entitled to judgment on the indemnity bond signed by appellant. In January 1955, Kelly Engineering Company (hereinafter called 'Kelly'), entered into a contract with Flake et al. (hereinafter called 'Wallace'), by the terms of which contract Kelly agreed to furnish the materials and labor to completely air-condition the Wallace Building in Little Rock. The contract between Kelly and Wallace contained two paragraph here germane. They are:

'Art. 21. Bond. The contractor shall, at owner's expense, provide a bond, in the amount of $100,000.00 with an approved Surety Company as surety, to the approval of the Owner, for the faithful performance of the contract, and also for the use and benefit of all parties who may become entitled to liens, under said contract. This Bond shall remain in force for and until one (1) year after the completion of the work, and acceptance of same by the Engineer and Owner. This bond shall also cover the payment to the Owner of any damage on account of failure of the Contractor to complete the work at the time specified in the agreement * * * 'Art. 26. Guarantees. Before signing contract owner shall require Contractor to furnish bond satisfactory to Owner and covering the latter's faithful performance of the contract and the payment of all debts and obligations resting upon Contractor thereunder.'

Kelly tendered to Wallace, who accepted it, the bond hereinafter copied, signed by appellant, Employers' Liability Assurance Corporation, Ltd. (hereinafter called 'Insurance Company'). Appellee, A. W. Johnson Company (hereinafter called 'Johnson'), furnished materials and supplies to Kelly which were used in airconditioning the Wallace Building; and when Kelly failed to pay in full for such items, Johnson instituted the present action, on the bond, against the Insurance Company, as sole defendant, for the amount due by Kelly to Johnson. The Insurance Company denied liability. Trial to the Circuit Judge without a jury resulted in judgment for Johnson and this appeal ensued in which are presented, inter alia, the matters now discussed.

I. Provisions Of The Bond. The first and vital matter is the wording of the bond which the Insurance Company signed and on which Johnson sought to recover. Omitting only signatures, it reads:

'Know all Men by these Presents:

'That we KELLY ENGINEERING SERVICE, a partnership composed of E. W. Kelly and Bill Kelly, 922 Main Street, Little Rock, Arkansas, of Little Rock, Arkansas (sic) (hereinafter called the Principal), as Principal, and THE EMPLOYERS' LIABILITY ASSURANCE CORPORATION, LIMITED, with its chief office in the City of Boston, Massachusetts (hereinafter called the Surety), as surety, are held and firmly bound unto LEON FLAKE, OSCAR F. KOCHTITZKY, JR. and MARTHA LOUISE KEATON of Exchange Building, Little Rock, Arkansas (hereinafter called the Obligee) in the penal sum of--One Hundred Thousand and no/100--Dollars ($100,000.00) (which sum is hereby agreed to be the maximum liability hereunder), lawful money of the United States of America, well and truly to be paid, and for the payment of which we and each of us hereby bind ourselves, our heirs, executors, administrators, successors and assigns, jointly and severally, firmly by these presents.

'Whereas, said Principal has entered into a certain contract in writing, bearing date January 17, 1955, with the said Obligee for the furnishing and installation of air conditioning system in the Wallace Building, 105 Main Street, Little Rock, Arkansas, in accordance with plans and specifications prepared by Pettit & Pettit, Engineers, Little Rock, Arkansas, a copy of which is or may be attached hereto, and is hereby referred to and made a part hereof.

'Now, Therefore, the condition of this instrument is such that if the Principal indemnifies the Obligee against loss or damage directly arising by reason of the failure of the Principal faithfully to perform the above mentioned contract, then this instrument shall be null and void; otherwise it shall remain in full force and effect.

'IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and affixed their seals at Little Rock, Arkansas this 18th day of January 1955.'

We point out the great difference between the provisions of the contract and the provisions of the bond. The contract provided in Article 21 that Kelly would make a bond 'for the faithful performance of the contract, and also for the use and benefit of all parties who may become entitled to liens, under said contract.' If the Insurance Company had signed a bond with such provisions in it (i. e., for performance and third party beneficiaries), like the contract stated, then clearly Johnson could have maintained an action on the said bond under such cases as Trinity Universal Ins. Co. v. Willbanks, 201 Ark. 386, 144 S.W.2d 1092; H. B. Deal & Co. v. Marlin, 209 Ark. 967, 193 S.W.2d 315; and H. B. Deal & Co. v. Bolding, 225 Ark. 579, 283 S.W.2d 855.

The bond signed by the Insurance Company in this case is not a performance bond as in the cases last cited above: instead, it is a mere indemnity bond saying that the surety shall indemnity 'the Obligee against loss or damage directly arising by reason of the failure of the Principal faithfully to perform the above mentioned contract.' The distinction between a performance bond and an indemnity bond is well recognized. In 9 Am.Jur. 64, 'Building...