Hartford Accident & Indemnity Co. v. N. O. Nelson Mfg. Co

• Decision Date: 09 June 1931
• Docket Number: 29411
• Citation: 135 So. 349,160 Miss. 504
• Parties: HARTFORD ACCIDENT & INDEMNITY CO. v. N. O. NELSON MFG. CO
• Court: Mississippi Supreme Court

135 So. 349

160 Miss. 504

HARTFORD ACCIDENT & INDEMNITY CO. v. N. O. NELSON MFG. CO

No. 29411

Supreme Court of Mississippi

June 9, 1931

Division A

1 ACTION.

Chancery court, until final decree, has full control over procedure.

2 EQUITY.

In suit against contractor and surety, permitting intervention and filing of answer and cross-bill after cause had been submitted on merits held proper, in absence of prejudice (Code 1930, section 2279).

3. MECHANICS' LIENS.

In suit against contractor and surety, intervention based on materialmen's claim may be allowed any time within one year after final settlement of contract (Code 1930, sections 2278, 2279).

4. MECHANICS' LIENS.

Acceptance of note for money due for labor and materials furnished for building held not waiver of mechanic's lien (Code 1930 section 2276).

5. MECHANICS' LIENS.

Right to assert mechanic's lien held to inure to assignee of note accepted by materialman for money due for materials furnished in construction of building (Code 1930, section 2276).

6. PRINCIPAL AND SURETY.

Extension of time for payment of debt without surety's consent does not release compensated surety from liability, in absence of material prejudice.

7. MECHANICS' LIENS.

Acceptance by materialman claiming mechanic's lien of note from contractor without surety's consent held not to discharge surety, in absence of material prejudice.

HON. R. W. CUTRER, Chancellor.

APPEAL from chancery court of Adams county, HON. R. W. CUTRER, Chancellor.

Suit by the Natchez Investment Company against the Hartford Accident & Indemnity Company and others, wherein the N. O. Nelson Manufacturing Company filed a petition for permission to intervene after the cause had been submitted. The petition was allowed, and motion to strike out the intervener's answer, and cross-bill and demurrer thereto were overruled, and an appeal granted to the defendant named to settle the controlling principles of the case. Affirmed, and cause remanded.

Affirmed and remanded.

Wells, Jones, Wells & Lipscomb, of Jackson, for appellant.

This suit plainly shows that when the Acme Engineering Company had completed the subcontract with the Burkes that a settlement was reached between them by the Acme Engineering Company taking the note of the Burkes, due sixty days from date and secured by certain bank stock heretofore mentioned and the intervention of appellee nowhere charges that the Acme Engineering Company assigned its contract to appellee.

The Hartford Accident & Indemnity Company was in no wise a party to the transaction.

Likewise there is no equity on the face of the intervention and cross-bill because the appellee has not accounted for the collateral attached to the notes nor does it tender the collateral into court and under well settled principles appellee must account for this collateral.

50 C. J., page 234, et seq. pars. 379, 381.

The surety has a right to have the collateral accounted for before it pays off the obligation of the principal debtor.

The appellee did not come into this cause until more than twelve months after the completion of the hotel job by J. V. and R. T. Burkes.

The Acme Engineering Company, notwithstanding it was summoned, did not appear and intervene in the cause and the intervention and cross-bill do not charge that the N. O. Nelson Manufacturing Company ever gave notice that it was the transferee of the notes given the Acme Engineering Company by J. V. and B. T. Burkes and do not charge that the Natchez Investment Company, Inc., was ever served with notice of any kind showing its rights against the contractors.

Section 2278 of the Code of 1930, a rescript of chapter 128 of the Laws of 1918, provides that suit in this type of case should be commenced within one year after the complete performance of the contract.

The third ground of the demurrer is based upon the fact that the Acme Engineering Company, by taking a secured note from J. V. and R. T. Burkes, granted an extension of time and also took independent security which released the surety.

We hardly think it necessary to cite authorities to show that any extension of time to the principal debtor, without the consent of the surety, releases the surety but if any be needed we cite 50 C. J. Principal and Surety, pars. 227, 228, 229 and 230; 50 C. J., page 148; Smith v. Clopton, 48 Miss. 66, cited in note 88, 50 C. J., page 148.

Counsel for appellee misconceives our argument with reference to the effect that the taking of the note by the Acme Engineering Company released appellant from liability. We not only contend that the taking of this note and the granting of the extension of time operated as a release of the surety, there being sufficient consideration for the extension, but we further contend that independent of the question of release that appellee, in its intervention, did not account for the collateral attached to the note and in its failure so to do destroyed the equity of its intervention.

Brandon & Brandon, of Natchez, for appellee:

This intervention and cross-bill of complaint is not barred by the statute of limitation.

Sections 4, 5, and 6, chapter 128, Laws of Mississippi of 1918.

The record in this case discloses that, though J. V. & R. T. Burkes had performed their contract, the obligee, Natchez Investment Company, Inc., had not even to the date that the intervention was filed "made final settlement" under the contract.

The assignment of the note by A. W. Moore carried with it an assignment of the lien, claim, and right of action against the Hartford Accident & Indemnity Co., as surety under the statute.

Dodds v. Cavitt, 133 Miss. 470, 97 So. 813; Assignments, 2 R. C. L., section 43, page 633.

The assignment of a debt operates as an assignment of all collaterals or liens securing its payment.

Ross-Meehan Brake-Shoe Foundry Co. v. Pascagoula Ice Co., 72 Miss. 608, 18 So. 364; Leftwich Lbr. Co. v. Florence Mutual Building Loan & Savings Association, 104 Ala. 584, 18 So. 48; Mechanics Lien, 18 R. C. L., section 101, 960; 140 A. S. R. 260; 11 L. R. A. 742; 21 Ann. Cas. 964.

Taking the note with collateral security did not waive the lien or release Hartford Accident & Indemnity Company as surety.

The lien conferred by the statute is not waived by the lienor taking a note and security, especially where the maturity date of the note is within the time limit for suit to be brought.

Smith & Vaile Co. v. Butts, 72 Miss. 269, 16 So. 242; Leftwich Lumber Co. v. Florence Mutual Building, Loan & Savings Association, supra; Hinds v. Chicago Building & Mfg. Co., 115 Ala. 637, 22 So. 160; Mechanics Lien, 18 R. C. L., section 112, page 969; Annotation 35 L. R. A. N. S. 93; Mechanics Liens, 18 R. C. L., section 113, 971; Maryland Casualty Co. v. Ohio River Gravel Co., 20 F.2d 514 at 517; U. S. F. & G. Co. v. Pressed Brick Co., 191 U.S. 416, 24 S.Ct. 142, 48 L.Ed. 242; Kingsland-Douglass Mfg. Co. v. Massey, 69 Miss. 296, 13 So. 269.

OPINION

Smith, C. J.

Burkes entered into a contract with the Natchez Investment Company to construct a building for it, executing to it an indemnity bond with the Hartford Accident & Indemnity Company as surety thereon. The investment company received the building from Burkes after paying him all but about four thousand dollars of the amount for which he agreed to construct it, under an agreement that Burkes would make good any defects which the architect might find in the building. Afterwards, in October, 1927, the Natchez Investment Company sued Burkes and the indemnity company on this bond, making as party defendants thereto a number of subcontractors and materialmen to whom Burkes was indebted for labor and material in the construction of the building, most of whom had notified the indemnity company of Burkes' indebtedness to them. One of these materialmen, the Acme Engineering Company, accepted from Burkes a sixty-day promissory note in settlement of the amount due it, secured by a transfer to it of bank stock certificates. This note was purchased from the Acme Engineering Company for value by the appellee, the N. O. Nelson Manufacturing Company. The Acme Engineering Company was made a defendant to the investment company's bill of complaint, and publication was made for it, but the Nelson Manufacturing Company was not referred to in the bill of complaint, nor made a party defendant thereto.

Demurrers to the bill of complaint were overruled, and the decree so doing was affirmed by this court on appeal thereto, to settle the principles of the case, in September,...