Hartford Accident & Indemnity Co. v. Natchez Inv. Co

• Decision Date: 03 December 1928
• Docket Number: 27293
• Citation: 119 So. 366,155 Miss. 31
• Parties: HARTFORD ACCIDENT & INDEMNITY CO. v. NATCHEZ INV. CO
• Court: Mississippi Supreme Court

119 So. 366

155 Miss. 31

HARTFORD ACCIDENT & INDEMNITY CO. v. NATCHEZ INV. CO

No. 27293

Supreme Court of Mississippi

December 3, 1928

(Division B.)

1. CONSTITUTIONAL LAW. Mechanics' liens. Law relating to assignment by contractor of proceeds of contract unless executing bond held not unconstitutional as impairing right to contract (Laws 1918, chapter 128, sections 2, 3).

Section 2 of chapter 128, Laws of 1918, prohibiting the assignment by a contractor of the proceeds of the contract to the detriment of subcontractors, journeymen, laborers, and material men unless the bond is issued in accordance with section 3 of the said act, is not unconstitutional.

2. STATUTORY PROVISIONS.

Section 3 of chapter 128, Laws of 1918, does not require the builder and contractor to execute the bond therein provided; but unless the bond is executed as provided by said section, the provisions of sections 1 and 2 of the statute are not suspended, but stand as security for the purpose therein mentioned.

3. CONSTITUTIONAL LAW. Corporations. State has power to regulate contract and limit powers of public corporations; legislature may make reasonable regulations affecting private individuals and corporations, but cannot deprive citizen of right or liberty of contract.

There is a difference in the power of the legislature to enact laws providing for the terms of contracts between private individuals and public corporations or agencies, and that which the legislature may enact with reference to purely private contracts. Public corporations are subject to the control of the legislative body, and have only such powers as the state confers upon them. The state has full power to regulate their contracts and limit their powers. In the case of private individuals and private corporations, the legislature has power to make reasonable regulations, but cannot under such power deprive a citizen of the right or liberty of contract. The power of the legislature in reference to private contracts, while extensive, is limited.

4. MECHANICS' LIENS. Contractor's bond referring to building contract will be held bond required under law relating to contractor's assignment of proceeds, when apparently so intended (Laws 1918, chapter 128, section 3).

When a bond is executed by a contractor in favor of the builder which refers to a contract between the builder and the contractor, requiring the contractor to execute a bond for the faithful performance of the contract, and provides, in general terms, plans and specifications of the building to be erected and the bond, which reserved to the building company the right at its option to take over and finish the contract should the contractor fail, and other rights such bond will be construed in connection with the contract referred to in the bond and made a part of the bond contract; and, where it is apparent from a consideration of the bond and the contract referred to that it was the intention of the bonding company, the builder, and the contractor to execute the bond required by section 3, chapter 128, Laws of 1918, it will be held to be such a bond.

5. MECHANICS' LIENS. Contractor's bond in accordance with law relating to assignment of proceeds of contract operates for benefit of subcontractors, journeymen, laborers, and materialmen (Laws 1918, chapter 128, sections 1-3).

Where such bond has been executed in accordance with section 3, it operates for the benefit of subcontractors, journeymen, laborers, and materialmen, and sections 1 and 2 cease to be operative in their favor.

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

Suit by the Natchez Investment Company against the Hartford Accident & Indemnity Company, wherein certain parties intervened. Decree overruling a demurrer to the original bill, and to answers and cross-bills filed by interveners, and defendant appeals. Affirmed and remanded.

This is an appeal from a decree of the chancery court of Adams county, overruling appellant's demurrer to the original bill of the Natchez Investment Company, Inc., and to answers and cross-bills filed by the interveners in the suit.

The Natchez Investment Company, Inc., filed its bill against the Hartford Accident & Indemnity Company upon a contract of indemnity for the performance of a contract for the construction of a hotel building for the Natchez Investment Company, Inc., by J. V. and R. T. Burkes, a copartnership doing business in New Orleans, La. The bill set out the making of a contract between J. V. and R. T. Burkes and the Natchez Investment Company, making the plans and specifications for the building, the contract between J. V. and R. T. Burkes and the Natchez Investment Company, Inc., and also the bond given by the Hartford Accident & Indemnity Company, exhibits to the bill.

It is alleged that under date of October 18, 1926, the Natchez Investment Company, Inc., entered into a certain agreement or contract with J. V. and R. T. Burkes for the construction of a certain building in Natchez, known as project No. 640 on the files of Weiss, Dreyfus, Inc., architects at New Orleans, La.; that said contract or agreement had as a part thereof certain specifications compiled by the architects and referred to in said contract and made a part thereof (copy of which specifications were made a part of the bill); that the said specifications contained 126 numbered pages, and also three pages preceding these numbered ones, all bound in a binder, and marked: "Plans No. 640. Specifications for the Eola Hotel, a seven story fireproof building to be erected at Natchez, Miss." It is alleged that in the said specifications appears the following language:

"Article 30.--It shall be the obligation of every contractor and subcontractor estimating upon work under this contract operation to figure and to include within his bid to furnish a bond in the sum and conditioned as the law of the state of Mississippi requires, in a surety company satisfactory to the owner or architects; contractor likewise to pay the cost of any required cancellation of the same. He shall also secure and pay for lien and privilege certificate which will be required of him before final payment is made under this contract.

"The bond shall also secure the owner the faithful performance of the contract, in strict accordance with plans and specifications, it shall protect the owner against all liens or claims that may be filed against the building according to the laws of the state of Mississippi and shall provide for the payment of reasonable attorney's fees for the enforcement of the contract and the institution of concursus proceedings, if such proceedings become necessary.

"Guarantee.--It is the intent of the architects to secure first class, permanent material and construction, and to this end each contractor will be held responsible for and must rectify all defects discovered in his work within one year after completion of the entire structure and its acceptance by the architect. Should any material or workmanship called for by these specifications, be of such a nature as to render this guarantee impossible, notice of this effect must be served in writing upon the architects previous to the signature of the contract; failure to do so will be construed as tacit agreement to the strictest terms of this guarantee.

"Obligations of Bondsmen.--The contractor's bondsmen shall obligate themselves to all the terms and covenants of these specifications, and of the contracts covering the work executed hereunder, and the owner and the architect reserve the right to make all desired changes, alterations, and additions, under the conditions and in the manner hereinbefore described, without in any measure affecting the liability of the bondsmen or releasing them from any of their obligations hereunder. The owner and the architect reserve the right to make such changes, alterations, and additions in the manner specified without notice to the contractor's surety, and waiver of such notice shall not affect the validity of the bond.

"The sureties for the various contractors shall be, and are hereby declared and acknowledge themselves to be, bound to the owner as guarantors, separately and in solido with the contractors of the fulfillment of the terms of the foregoing."

The bond given and made Exhibit C to the declaration, contained the following language:

"Whereas the principal and the obligee have entered into a certain written contract (hereinafter called the contract), dated October 18, 1926, to construct Eola Hotel building as per plans and specifications No. 640, prepared by Weiss & Dreyfus, architects, New Orleans, La., 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 obligation is such that if the principal shall indemnify the obligee against loss or damage directly caused by the failure of the principal faithfully to perform the contract, then this obligation shall be null and void; otherwise it shall remain in force; provided, however, this bond is executed by the surety, upon the following conditions, which shall be precedent to the right of recovery hereunder.

"1.--The obligee shall, at the time and in the manner specified in the contract, fully comply with all the terms thereof, and if the obligee default in the performance of this bond, or in the contract, the surety shall thereupon be relieved of all liability hereunder.

"2.--If the principal shall in any manner default in the performance of any manner or thing specified in the contract, the obligee shall immediately so notify the surety and thereafter the surety shall have the right at its option to assume, or assume and sublet the contract, and to proceed thereunder...