Friedman v. American Surety Co. of New York

• Citation: 154 S.W.2d 659
• Decision Date: 05 September 1941
• Docket Number: No. 14048.,14048.
• Parties: FRIEDMAN v. AMERICAN SURETY CO. OF NEW YORK et al.
• Court: Court of Appeals of Texas

Page 659

154 S.W.2d 659

FRIEDMAN v. AMERICAN SURETY CO. OF NEW YORK et al.

No. 14048.

Court of Civil Appeals of Texas. Fort Worth.

September 5, 1941.

Rehearing Denied October 10, 1941.

Appeal from County Court at Law No. 2, Tarrant County; Thomas J. Renfro, Judge.

Action by Harry B. Friedman against the American Surety Company of New York on a bond executed by F. M. Kuhlman, subcontractor under plaintiff in construction of a school building, with defendant as surety, to recover the amount of an unemployment compensation tax paid by plaintiff on wages paid by the subcontractor, in which defendant filed a cross-action against William Cameron & Co., Inc., for any amount recovered by plaintiff. From a judgment for defendant and cross-defendant, plaintiff appeals.

Affirmed in part, and reversed and rendered in part.

Conforming to answer by Supreme Court to a certified question, 151 S.W.2d 570.

Phillip Tocker, of Fort Worth, for appellant Harry B. Friedman.

Lloyd E. Price and Hamilton Rogers, both of Fort Worth, for appellee American Surety Co. of New York.

Melvin F. Adler and Charles Kassel, both of Fort Worth, for cross-appellee Wm. Cameron & Co., Inc.

SPEER, Justice.

This suit was filed in the County Court at Law No. 2, Tarrant County, Texas, by Harry B. Friedman against American Surety Company of New York, to recover $293.98 plus interest and attorney's fees, on a bond executed by F. M. Kuhlman as principal and the above-named company as surety. Allegations were made that Kuhlman was insolvent and the surety alone was sued.

Primarily the suit involved payment by Friedman of a tax or "contribution" to Texas Unemployment Compensation Commission on wages paid by Kuhlman, as subcontractor under Friedman, in the construction of the North Side Senior High School building in the City of Fort Worth. The tax was demanded of Friedman by the Commission and under a threat of suit and penalty, he paid it. Under Article 5221b—17, paragraph (e), Vernon's Annotated Texas Civil Statutes, Kuhlman, the subcontractor, was not an employing unit, but Friedman, the original contractor, was such.

Friedman contracted with Kuhlman to do all the lathing and plastering of the building. Kuhlman obligated himself by the contract to execute a bond to Friedman to guarantee the faithful performance of the contract. The bond was made and American Surety Company of New York signed it as Kuhlman's surety.

Defendant Surety Company answered by general denial and specially that the laws of Texas purporting to levy and exact social security taxes, for the reimbursement of which plaintiff seeks to recover, are void in that they contravene the provisions of the Bill of Rights, and of the State and Federal Constitutions. The respective articles and various sections of said Bill of Rights and Constitutions pointed out by appellee will be referred to by us later in this discussion.

The Surety Company filed a cross-action against William Cameron & Company, Inc., in which it sought judgment for any amount that Friedman should recover against it.

Trial was had to the court without a jury and judgment was entered that Friedman take nothing and the Surety Company was denied any relief against Cameron & Company. Friedman appealed from the judgment entered, and we certified to the Supreme Court the question of whether or not Articles 5221a and 5221b, Vernon's Annotated Texas Civil Statutes, and the various sections and subsections thereof, violate Article I, Sections 3, 16, 17 and 19 of the Bill of Rights and Constitution of Texas, Vernon's Ann.St., or either of said sections.

In Friedman v. American Surety Co., 151 S.W.2d 570, the Supreme Court answered our question, holding the legislative act inquired about was not in violation of the Constitution. A full statement of the pleadings of the parties and the facts developed upon the trial will be found in the opinion of the Supreme Court above referred to, and we see no necessity for restating them here.

In answering the certified question propounded by us, the Supreme Court foreclosed against American Surety Company two of its principal contentions urged in support of the judgment of the trial court. Against the very forceful reasoning of Chief Justice Alexander in a dissenting opinion, the majority opinion by Justice Critz (by which we are bound) held: (a) That Articles 5221a and 5221b, V.A.T.S., and the various sections, subsections and amendments thereto, were not violative of the Constitution. And (b) that Subdivision (e) of Article 5221b—17, effective at the date of the contract between Friedman and Kuhlman, giving Friedman the right to recover back from Kuhlman such taxes as Friedman should be required to pay on account of Kuhlman's employees, was not affected by the subsequent amendment of the Act by the 46th Legislature, Regular Session, p. 455, which did not contain that right.

This brings us to a consideration of two other points raised in the appeal, which were not before the Supreme Court on the certified question. They are: (1) Were the conditions of Kuhlman's contract and bond with and to Friedman such as to render Kuhlman and his surety on the bond liable to Friedman for the tax paid by the latter; and (2) if the surety on Kuhlman's bond was liable to Friedman, could it recover in its cross action against William Cameron & Company?

To our minds the opinion of the Supreme Court answers the first of these two questions in favor of Friedman, but much is said in the Surety Company's briefs about the provisions and conditions in the contract and bond.

The contract between Friedman and Kuhlman recites that Kuhlman knew the conditions of the contract between Friedman and the School District, the owners of the building to be constructed, and Kuhlman obligated himself by the subcontract to Friedman in the same manner that Friedman was obligated to the owners of the building.

In the statement of the facts set out by us in the certificate to the Supreme Court (151 S.W.2d 570, 573) it will be seen that Friedman finished his contract for the construction of the building in December 1937 and that Kuhlman's subcontract was completed and accepted by Friedman at the same time. Kuhlman received the price agreed to be paid for the performance of his part of the work. But in April 1938 Friedman was advised by the Texas Unemployment Compensation...