James Stewart & Co. v. Law

• Decision Date: 09 March 1950
• Docket Number: No. 2904,2904
• Citation: 228 S.W.2d 601
• Parties: JAMES STEWART & CO. Inc. et al. v. LAW et al.
• Court: Texas Court of Appeals

Page 601

228 S.W.2d 601

JAMES STEWART & CO. Inc. et al. v. LAW et al.

No. 2904.

Court of Civil Appeals of Texas, Waco.

March 9, 1950.

Rehearing Denied April 6, 1950.

Kilgore & Kilgore, Dallas, Lucian Touchstone, Dallas, W. Richard Bernays, Dallas, for appellants.

Carrington, Gowan, Johnson & Walker, Dallas, Lawrence W. Anderson, Dallas, for appellees.

TIREY, Justice.

Appellees brought this suit against James Stewart & Company, Inc., alleging that it had breached its contract with North American Aviation Company in that it had failed to provide the insurance protection to which John S. Law (one of the appellees herein) was entitled as an employee of the North American Aviation Company. Law was hit by a truck operated by Jett Nethery, a sub-contractor, in the performance of the construction work called for in the contract between Stewart and North American and at the time Law was hit and sustained his injuries he was acting within the scope of his employment with North American. The Pacific Indemnity Company, as workmen's compensation carrier of North American, paid Law $3,127.05 because of the injuries he sustained and the Pacific Company and Law, in a suit in tort (not this suit), recovered judgment against Nethery for the sum of $5,000, and the decree of the court awarded $3,127.05 to Pacific Indemnity Company by virtue of subrogation, and the balance was awarded to Law. Execution was returned nulla bona on this judgment and the Pacific Indemnity Company and Law brought this joint suit in contract against defendant James Stewart, for the purpose of recovering the damages fixed in behalf of Law in the tort suit. James Stewart, by cross-action, sought recovery against Grand Prairie Construction Company, its sub-contractor, for such judgment as rendered against it. Grand Prairie similarly impleaded and sought indemnity from Dye and Shaw, sub-contractors under it, but no complaint is made of the judgment of the court disposing of Dye and Shaw. On trial (nonjury) the court rendered judgment in behalf of the Pacific Indemnity Company for the sum it had paid as compensation carrier and in behalf of plaintiff Law for the sum of $1,872.95 (being the balance of the $5,000 previously awarded in the tort suit against Nethery) and also decreed that James Stewart recover against Grand Prairie the foregoing sums with legal interest and costs. Each of these defendants excepted to the judgment entered and perfected its appeal.

Points 1, 2 and 3 in appellant James Stewart's brief assail the action of the trial court in its failure to sustain certain special exceptions which stated in effect that plaintiffs' petition failed to allege (1) any provision in the contract between defendant James Stewart and the Aviation Company, which placed a duty upon James Stewart to require that sub-contractors carry public liability insurance; (2) the contract under which plaintiffs claim does not give North American a right of action against James Stewart for failure to require sub-contractors to carry liability insurance; and (3) the evidence is insufficient to show that the contract between James Stewart and the Aviation Company was made for plaintiffs' benefit. We overrule each of these contentions.

These points require a comprehensive statement. In March 1942, North American Aviation Company and James Stewart & Co., Inc., entered into a contract providing for the construction by James Stewart of certain structures on the property owned and known as North American Aviation plant near Grand Prairie in Dallas County. The contract called for the expenditures estimated in excess of $13,000,000. Pertinent to this discussion arts. 11 and 18 of this contract provided in part:

'Art. XI. Insurance. * * * Contractor shall, during the program of the work, maintain (a) Workmen's Compensation Insurance for all of its employees employed at the site of the work, or if such insurance is not required by the laws of the state wherein the work is to be performed, Employers Liability Insurance; (b) Contractor's Public Liability Insurance; and (c) Automobile Liability Insurance.

'The limits of liability provided in each Public Liability Insurance policy shall be $100,000 for injuries, including accidental death, to any one person, and, subject to the same limit for each person, $200,000 for any one accident involving two or more persons. Automobile Liability Insurance shall contain limits of $50,000 and $100,000 and shall also provide a property damage limit of not less than $5,000 covering all owned and rented equipment which is used in or on the work.

'Should all or any part of the contract be sublet, Contractor shall, in addition to the foregoing types of insurance, maintain Contractor's Protective Liability Insurance in an amount not less than $100,000 for injuries, including accidental death to any one person, and, subject to the same limit for each person, not less than $200,000 for any one accident involving two or more persons, except that Contractor's Protective Liability Insurance need not be maintained to the extent that in any cost-plus contract between Contractor and a subcontractor the subcontractor maintains Workmen's Compensation or Employers Liability Insurance and Contractor's Liability Insurance and Automobile Liability Insurance, as above set forth, and provided Contractor is named as an additional insured in such policies of insurance. Certificates of all such insurance shall be filed with Agent or Defense Plant Corporation.

'Article XVIII-Assignment. All covenants and agreements herein contained shall be extended to and be binding upon the successors and assigns of contractor and owner * * *.'

Evidence was tendered to the effect that the Pacific Indemnity Company issued to North American Aviation Company a policy of workmen's compensation insurance which became effective on April 27, 1944; that John S. Law was an employee of North American on April 27, 1944, and he received an accidental injury to his right hand and arm on said date, when he was involved in a collision with a truck operated by Jett Nethery, a sub-contractor engaged in the performance of the work in question. The accident occurred on the premises of the Aviation Company and at the time of the accident Law was acting in the course of his employment for the Aviation Company; that Pacific Indemnity Company obligated itself and did pay to Law the sum of $3,127.05 on account of his injuries. Suit in tort was filed by Pacific Indemnity Company and John S. Law against Nethery and all of the other defendants in this cause to recover their damages resulting from the accident to Law. Nethery did not answer. Each of the other defendants filed answers and plaintiffs moved the court to dismiss the cause without prejudice against all of the other defendants therein named save and except Nethery, and this order was granted. (Appellees say in their brief that such parties were held in the tort suit 'until the employment status of Nethery was determined and it became known that he did not have automobile liability insurance. They had an opportunity to defend the suit knowing these circumstances but failed and refused so to do.') The court then proceeded to hear evidence on this tort action, which evidence was submitted to a jury, and the jury found that Law had sustained damages by reason of such accident in the sum of $5,000, and the court received the verdict of the jury, and of this sum it awarded $3,127.05 to Pacific Indemnity Company on the theory of subrogation, and the balance was awarded to Law.

The plaintiffs, in their joint petition in this suit, set out substantially the foregoing facts and in addition thereto specifically alleged the subrogation clause in the compensation policy, which clause provided in part: 'The Company shall be subrogated, in case of any payment under this policy, to the extent of such payment, to all rights of recovery therefor vested by law either in this Employer, or in any Employee or his dependents claiming hereunder, against persons, corporations, associations or estates'; that Pacific Indemnity Company became obligated to pay and did pay to John S. Law the sum of $3,127.05 by way of compensation and medical expense by reason of his injuries and disabilities which resulted to Law by virtue of the accident sustained by him in the course of his employment with North American. The petition further alleged that each of the defendants had actual notice of the suit that these plaintiffs filed against Jett Nethery to recover their damages by virtue of the accident sustained by Law, and that they failed and refused to defend the same; that judgment under date of January 10, 1946 was rendered in the amount of $5,000, which was awarded as herein set out; that in due time execution issued on said judgment and was returned unsatisfied.

Paragraph 7 of the plaintiffs' petition alleged: 'That the contract which provided that defendant should carry automobile liability insurance and see that the sub-contractors in the performance of the work called for by said contract between plaintiff and defendant did also was made for the benefit of North American Aviation, Inc., and its employees including the said John S. Law, and also for the benefit of Pacific Indemnity Company as assignee of the said North American Aviation, Inc.; that defendant failed to see that Jett Nethery, one of the sub-contractors engaged in the performance of work provided for in the contract between plaintiff and defendant was provided with adequate automobile liability insurance and thereby breached its said contract with North American Aviation, Inc.; that by reason of the aforesaid breach of contract North American Aviation, Inc., through its workmen's compensation insurance carrier. Pacific Indemnity Company, was forced to pay the sum of $3,127.05 to John S. Law and recover the same in its judgment against Jett Nethery; that said judgment has not been satisfied and Pacific...