Ideal Brick Co. v. Gentry

• Decision Date: 28 April 1926
• Docket Number: 281.
• Citation: 132 S.E. 800,191 N.C. 636
• Parties: IDEAL BRICK CO. et al. v. GENTRY et al.
• Court: North Carolina Supreme Court

132 S.E. 800

191 N.C. 636

IDEAL BRICK CO. et al. v. GENTRY et al.

No. 281.

Supreme Court of North Carolina

April 28, 1926

Appeal from Superior Court, Cumberland County; Dunn, Judge.

Action by the Ideal Brick Company and another against L. Gentry, the Board of Education of Cumberland County, Fidelity & Casualty Company of New York, and others. From a judgment overruling demurrers to the complaint of plaintiffs and to the cross-bill interposed by the Board of Education, the Fidelity & Casualty Company of New York appeals. Error.

Civil action to recover for materials furnished by plaintiffs and used by the contractor in the construction of a public school building.

The primary purpose of the suit is to hold the Fidelity & Casualty Company of New York liable for the claims of the plaintiffs by reason of a $15,000 bond executed to the board of education of Cumberland county to indemnify it against loss due to any failure of the contractor to complete the school building in accordance with the terms of a written contract. The case was heard on demurrers filed by the Fidelity & Casualty Company to the complaint of the plaintiffs and a cross-bill interposed by the board of education. From judgments overruling the demurrers, the Fidelity & Casualty Company of New York appeals.

Where contract for building of school provided that contractor was to pay for labor and materials, but bond which was not given under statute was conditioned to indemnify board of education only, and expressly limited recovery thereon to obligee surety was not liable to unpaid materialmen, under C.S. § 2445, prior to its amendment by Pub.Laws 1923, c. 100, § 1.

Bringing action within time stipulated in school contractor's bond is condition precedent to recovery, but need not be alleged in complaint.

Ruark & Fletcher, of Raleigh, for appellant.

Cook & Cook and C. M. Walker, all of Fayetteville, for appellees.

J Bayard Clark, of Fayetteville, for appellee Board of Education.

STACY C.J.

The office of a demurrer is to determine the sufficiency of a pleading, admitting, for the purpose, the truth of the allegations of fact contained therein. Whitehead v. Tel Co., 129 S.E. 602, 190 N.C. 197; Davies v. Blomberg, 117 S.E. 497, 185 N.C. 496.

The plaintiffs allege in their complaint that L. Gentry, a contractor, entered into a written agreement with the board of education of Cumberland county July 11, 1922, for the erection of a school building at Linden, N. C., in which it was stipulated, among other things, that "the contractor shall provide and pay for all materials, labor, water, tools, equipment, light and power necessary for the execution of the work"; that in pursuance of its duty, under C. S. § 2445, and for a valuable consideration, the board of education, on July 13, 1922, took from the contractor, as principal, and the Fidelity & Casualty Company of New York, as surety, a bond in the sum of $15,000 for the faithful performance of said contract, the condition of the bond being "that if the principal shall indemnify the obligee for all loss that the obligee may sustain by reason of the principal's failure to comply with any of the terms of the contract, then this obligation shall be void; otherwise it shall remain in force"; that the plaintiffs, relying upon said bond as security, furnished certain materials to the contractor which were used by him in the partial erection of said school building, but for which he has failed to pay the plaintiffs, and they demand judgment against the defendants for the amount of their claims, to wit, $756.57 and $627. It is further alleged that the contractor failed to complete the building, that he abandoned the work, and his present whereabouts is unknown, and for this reason he has not been served with summons in the instant action.

The bond, which is attached to and made a part of the complaint, contains the further provision:

"No right of action shall accrue hereunder to or for the use or benefit of any one other than the obligee, and the obligee's rights hereunder may not be assigned without the written consent of the surety."

There is no provision in the contract, which is also attached to and made a part of the complaint, requiring that a bond be given, the only reference to a bond being "owner to pay bond premium, if bond required."

Do these allegations, taken in connection with the instruments themselves, entitle the plaintiffs to recover on the bond given by the Fidelity & Casualty Company of New York? We think not. True, it is provided in C. S. § 2445, that every county, city, town, or other municipal corporation which lets a contract for building, repairing or altering any building, public road or street, shall require the contractor of such work (when the contract price exceeds $500) to execute a bond, with one or more solvent sureties, before beginning any work under the contract, payable to said county, city, town, or other municipal corporation, and conditioned for the payment of all labor done or materials and supplies furnished on said work, and upon which suit may be brought for the benefit of the laborers and materialmen having claims. Noland Co. v. Hester, 129 S.E. 577, 190 N.C. 250.

And it is alleged that the bond in suit, which is attached to and made a part of the complaint, was taken and given in view of the requirements of this statute and for the protection of the county board of education; but it will be observed that the bond is one of strict indemnity, the board of education of Cumberland county being the obligee mentioned therein, and it is not conditioned, as required by the statute, for the payment of all labor done or materials and supplies furnished on said work. Hence, as the bond is attached to and made a part of the complaint, the allegations that it was taken and given in view of the requirements of the statute for the protection of the plaintiffs and to insure the faithful performance of the contract as it relates to them must be considered more in the nature of legal conclusions of the pleador rather than allegations of fact. Surety Co. v. Excavator Co., 160 P. 617, 61 Okl. 219, L. R. A. 1917B, 558. It is not nominated in the bond that it is given for the faithful performance of the contract as it relates to the plaintiffs, and the only reference in the contract to the bond is, "owner to pay bond premium, if bond required." On the other hand, it is expressly stipulated in the bond that it is given to "indemnify the obligee," the board of education of Cumberland county, and that "no right of action shall accrue hereunder to or for the use or benefit of any one other than the obligee."

Conclusions of law are not admitted by a demurrer. Bank v. Bank, 112 S.E. 11, 183 N.C. 466, 22 A. L. R. 1124.

"It is fully recognized that, for the purpose of presenting the legal question involved, a demurrer is construed as admitting relevant facts well pleaded and, ordinarily, relevant inferences of fact necessarily deducible therefrom; but the principle is not extended to admitting conclusions or inferences of law," etc. Hoke, J., in Board of Health v. Com'rs, 91 S.E. 1019, 173 N.C. 250.

The principle is well established by many authoritative decisions, here and elsewhere, that in determining the surety's liability to third persons on a bond given for their benefit and to secure the faithful performance of a building contract as it relates to them, the contract and bond are to be construed together. Mfg. Co. v. Andrews, 81 S.E. 418, 165 N.C. 285, Ann. Cas. 1916A, 763. In application of this principle, recoveries on the part of such third persons, usually laborers and materialmen, though not expressly named therein, are generally sustained where it appears, by express stipulation, that the contractor has agreed to pay the claims of such third persons, or where by fair and reasonable intendment their rights and interests were being provided for and were in the contemplation of the parties at the time of the execution of the bond. Lbr. Co. v. Johnson, 97 S.E. 732, 177 N.C. 44; Supply Co. v. Lbr. Co., 76 S.E. 273, 160 N.C. 428, 42 L. R. A. (N. S.) 707; Gastonia v. Engineering Co., 42 S.E. 858, 131 N.C. 363; Morton v. Water Co., 84 S.E. 1019, 168 N.C. 582; Gorrell v. Water Supply Co., 32 S.E. 720, 124 N.C. 328, 46 L. R. A. 513, 70 Am. St. Rep. 598. The obligation of the bond is to be read in the light of the contract it is given to secure, and ordinarily the extent of the engagement entered into by the surety is to be measured by the terms of the principal's agreement. Brown v. Markland, 53 N.E. 295, 22 Ind.App. 655; Dixon v. Horne, 105 S.E. 270, 180 N.C. 585; Scheflow v. Pierce, 97 S.E. 167, 176 N.C. 91.

Here the contract contains the express stipulation that "the contractor shall provide and pay for all materials, labor etc., necessary for the execution of the work," but the obligation of the bond is not for the faithful performance of the contract as it relates to the plaintiffs; the surety agrees to indemnify the obligee, and no one else, against all loss that the obligee may sustain by reason of the principal's failure to comply with any of the terms of the contract, and all other persons are expressly excluded from its protective provisions. A similar limitation was upheld in Mfg. Co. v. Andrews, supra. It is a principle too well established to require the citation of authorities that, "as a party consents to bind himself, so...