Guilford Lumber Mfg. Co. v. Holladay

• Decision Date: 05 November 1919
• Docket Number: 394.
• Citation: Guilford Lumber Mfg. Co. v. Holladay, 178 N.C. 417, 100 S.E. 597 (N.C. 1919)
• Parties: GUILFORD LUMBER MFG. CO. ET AL. v. HOLLADAY ET AL.
• Court: North Carolina Supreme Court

100 S.E. 597

178 N.C. 417

GUILFORD LUMBER MFG. CO. ET AL. v. HOLLADAY ET AL.

No. 394.

Supreme Court of North Carolina

November 5, 1919

Appeal from Superior Court, Guilford County; Lane, Judge.

Action by the Guilford Lumber Manufacturing Company and others against M. L. Holladay, the Greensboro College for Women, and J. L. Armfield, trading as the Gate City Trust Company. From judgment against de fendant Armfield in favor of the college Armfield appeals. Reversed.

A principal is not allowed to surrender the security which it holds for the performance of a bond, and then to hold the personal surety on the bond liable for it.

Where a creditor without the consent of the surety parts with a fund he has the right to apply in satisfaction of the obligation the surety is exonerated to the extent of the value of the fund.

Raper & Raper, of Lexington, for appellant Armfield.

T. C Hoyle, of Greensboro, for Greensboro College for Women.

BROWN J.

This action was brought by plaintiffs, who are materialmen against the contractor, Holladay, the Greensboro College for Women, which owned the building, and one Armfield, surety on the contractor's bond. The plaintiffs were awarded judgment against the college, the owner of the building, for the amounts of their claims, and the college was awarded judgment against the surety, Armfield, for the amount it is compelled to pay the plaintiffs. The controversy is between the college and the defendant Armfield, surety upon the bond of Holladay, the contractor.

These facts were found by the referee and adopted by the court. Briefly stated, they are:

Greensboro College for Women contracted with M. L. Holladay to erect for it a dormitory building. The contractor executed to the college a bond, with Armfield, surety, conditioned as follows:

"Now, therefore, the condition of the above obligation is such that if the above bounden, M. L. Holladay, shall construct said building in accordance with said contract, plans, and specifications heretofore designated, and shall supply such labor and material as is named in said contract, and shall fully indemnify and save harmless Greensboro College for Women for all costs and damages which it may suffer by reason of said Holladay's failure to do so, and shall fully reimburse and pay to said Greensboro College for Women all outlay and expenses which it may incur in making good said default (which outlay and expense shall include attorney's fees and increased compensation of architect, if on account of such default said College shall be compelled to employ counsel to defend itself, or pay additional compensation to the architect); then in such case this bond shall be null and void; otherwise to be in full force and effect."

The contractor completed the building according to contract, and college accepted the same.

Upon completion of the building, Holladay, the contractor, gave to the college a complete statement of amounts and persons to whom he was indebted for material, giving names of plaintiffs.

After this notice the college made up settlement with Holladay and found it was due him $4,800, which was more than the amount he owed for material, as per his statement.

The college then paid this amount to the contractor, Holladay, and he failed to apply the money to the materialmen.

The plaintiffs the materialmen make no claim against the surety upon the contractor's bond. Under the statute they obtained judgment against the college, the owner of the building, and their claims were properly declared a lien thereon. The question presented upon this appeal is this: Can the college compel Armfield, the surety on the contractor Holladay's bond, to make good to it the sum it is required to pay the plaintiffs on account of its failure to retain the money when settling with the contractor? We are of opinion that the college cannot recover against the surety on the contractor's bond, upon two grounds:

I. The liability sought to be enforced does not come within the terms and conditions of the bond. The bond provides that the contractor, Holladay, shall construct the building in accordance with the contract, plans, and specifications furnished, and shall supply such labor and material as is named in the contract, indemnify and save harmless the college from all costs and damages which it may suffer by reason of said Holladay's failure to do so. The bond further provides that the surety shall fully reimburse and pay to said college all outlay and expenses which it may incur in making good said default. According to the admitted facts, Holladay has fully complied with every one of the conditions named in the bond. He has constructed the building in accordance with contracted plans and specifications. He has supplied the labor and the kind of material specified in the contract. There is nothing required of Holladay in the language of that bond which, so far as the college is concerned, Holladay has not performed. He completed the building according to contract, and the college...