Glens Falls Ins. Co. v. Baltimore County for Use and Benefit of Dyer

• Decision Date: 05 February 1963
• Docket Number: No. 136,136
• Citation: 187 A.2d 875,230 Md. 524
• Parties: GLENS FALLS INSURANCE CO. v. BALTIMORE COUNTY, Maryland for the Use and Benefit of Frank P. DYER, etc., et al.
• Court: Maryland Court of Appeals

Page 524

230 Md. 524

187 A.2d 875

GLENS FALLS INSURANCE CO. v. BALTIMORE COUNTY, Maryland for the Use and Benefit of Frank P. DYER, etc., et al.

No. 136.

Court of Appeals of Maryland.

Feb. 5, 1963.

Richard C. Murray, Baltimore (Smith & Harrison, Towson, on the brief), for appellant.

Nolan P. Chipman and A. Frederick Taylor, Towson (Paul Martin and Martin & Taylor, Towson, on the brief), for appellees.

Before BRUNE, C. J., and HENDERSON, HAMMOND, HORNEY, and SYBERT, JJ.

HENDERSON, Judge.

This appeal is from a judgment for $52,129.94, with interest, rendered by the court without a jury in an action brought by the Dyer partnership (herein referred to as Dyer) against Mays Construction Company (herein refered to as Mays), as principal and the appellant as surety. The theory of the action was that Mays had a contract for road work with Baltimore County, known as the Liberty Manor contract, and another contract known as Belle Farms contract; that Glens Falls entered into contractor's performance and labor and material bonds, as surety, covering each contract; that Dyer furnished stone and other materials to Mays on both jobs and billed him for $52,129.94, which Mays failed to pay.

The case was tried on its merits under general issue pleas, but Glens Falls moved for judgment at the conclusion of the plaintiff's case on the ground that suit could only be brought on the bonds in the name of Baltimore County, Maryland. Dyer was granted leave to amend by interlineation and did so. Glens Falls moved to dismiss, on the ground that this brought in a new party plaintiff, but the court overruled the motion. The correctness of that ruling is the first point presented. If the amendment set up a new cause of action the appellant could interpose the defense of limitations, which they sought to do. Cf. Cline v. Fountain, etc., Company, 214 Md. 251, 134 A.2d 304; Rule 203.

We find no error. The amendment was one of form and not of substance, permissible under Rule 320. It merely brought in the county as a nominal party, for the use and benefit of Dyer, and did not change the real parties in interest. Cf. LeStrange v. State, Use of Roche, 58 Md. 26, 39 and State v. Gaver, 115 Md. 250, 256, 80 A. 891. See also Baltimore & O. R. R. v. State, Use of Allison, 62 Md. 479, 481 and Mayor & City Council of Balto. v. Yost, 121 Md. 366, 375, 88 A. 342. Under the labor and material bonds furnished to the county it was expressly provided that every claimant i. e. those contracting with the principal, Mays, or a sub-contractor of Mays, furnishing material or labor for which he was unpaid, might sue 'on this bond, in the name of the county, for the use and benefit of such claimant * * *.' For a discussion of the Maryland practice in regard to use plaintiffs see Hartford Accident & Indemnity Co. v. Net & Twine Co., 150 Md. 40, 43, 132 A. 261.

The bonds in the instant case were required by Code (1962 Suppl.) Art. 90, Sec. 11, as amended by Chapter 10, Acts of 1959, and undertook to provide the statutory coverage. It may be noted that although the statute confers the right to sue on each claimant, it does not provide that suit must be in the name of the State or political subdivision. It expressly provides that the obligee named in the bond shall not be liable for the payment of any costs or expenses of any such suit. It has been held under a similar statute that suit need not be brought in the name of the political subdivision, the nominal party, but may be brought in the name of a claimant, in his own right and not as a class suit. Aetna Cas. & Surety Co. v. Henslee, 163 Ark. 492, 260 S.W. 414. See also the cases collected in a note, 77 A.L.R. 21 and 206. Whether the statute had the effect of changing the existing practice is a question we need not decide. We think the addition of the obligee, as a nominal party, was not such a change of parties as to constitute a new suit. Nor did it change the cause of action. Cf. Smith v. Potomac Edison Co., D.C., 165 F.Supp. 681, discussing the Maryland authorities, and Cline v. Fountain, etc., Company, supra.

The appellant's chief contention on the merits is that the conduct of Dyer in releasing over $54,000 to Mays prior to suit and in releasing over $94,000, to Mays subsequent to the institution of suit, as well as certain other payments by way of settlement, discharged the surety. The factual background is rather complicated. Dyer agreed to supply to Mays the materials used to perform the two contracts with the county in which Mays was the general contractor involved in the instant case. It is conceded that Dyer supplied materials on both jobs, and that, despite repeated demands, at the conclusion of the work $52,129.94 remained unpaid. Notice of default was given to and demand for payment was made upon the surety, and suit was filed on April 28, 1961. Mays had four other road contracts with the county, three of which were bonded by Glens Falls and one by the Maryland Casualty Company. Dyer furnished materials on these contracts also. These contracts were all completed prior to the contracts in suit. Mays paid Dyer in full for the materials supplied on them, and paid for certain other materials supplied for some private entrance jobs.

In May and June of 1960, at a time when Mays owed Dyer roughly $40,000 on the contracts in question, a new series of transactions began. Dyer bid on and was awarded some seventeen contracts for road construction for the county. He employed Mays as a subcontractor or superintendent. The trial court found as a fact that these contracts were 'separate, distinct and independent' of the contracts sued upon. Dyer was bonded upon each of them, and obligated to pay the subcontractor. In June 1960, Mays was having financial difficulties and Dyer loaned him $15,000, evidenced by a demand note and chattel mortgage. After suit was filed Dyer and Mays entered into an agreement adjusting various claims and cross-claims on other contracts including one with the State Roads Commission, and as a result of the settlement, Dyer paid Mays $13,000. There was testimony that Glens Falls was fully aware of all these transactions.

We see no sinister significance in the fact that payments received by Dyer from Mays were applied to the four other contracts on which Mays was the general contractor and Dyer the supplier. The testimony is undisputed that these contracts were completed before the contracts in suit were completed, and in the absence of any direction it would seem natural, and in accordance with the usual business practice as the Chancellor found, that the payments should be so applied. Since Glens Falls was the surety on three of these contracts, it can hardly complain of that application as to them. Dyer was under no duty to forego a loan to Mays, or to specify the purposes to which the proceeds should be devoted, as regards Mays' outstanding obligations. Apparently, most of it was used to meet payrolls or other pressing needs.

In regard to the contracts on which Dyer was the general contractor and Mays the subcontractor, payments made by Dyer to Mays were only those required by the terms of those contracts and the bonds securing them. The appellant seems to contend that...