Jefferson County Board of Education v. Union Indemnity Co.

• Decision Date: 20 December 1928
• Docket Number: 6 Div. 177
• Citation: 119 So. 837,218 Ala. 632
• Parties: JEFFERSON COUNTY BOARD OF EDUCATION for Use of BENSON PAINT & VARNISH CO. v. UNION INDEMNITY CO.
• Court: Alabama Supreme Court

119 So. 837

218 Ala. 632

JEFFERSON COUNTY BOARD OF EDUCATION for Use of BENSON PAINT & VARNISH CO. v. UNION INDEMNITY CO.

6 Div. 177

Supreme Court of Alabama

December 20, 1928

As Modified, on Denial of Rehearing, Jan. 24, 1929

Appeal from Circuit Court, Jefferson County; John Denson, Judge.

Action by the Jefferson County Board of Education, suing for the use of the Benson Paint & Varnish Company, against the Union Indemnity Company. From a judgment of nonsuit, plaintiff appeals. Transferred from the Court of Appeals under Code 1923, § 7326. Reversed and remanded.

Cabaniss Johnston, Cocke & Cabaniss, of Birmingham, for appellant.

London Yancey & Brower and J. Kirkman Jackson, all of Birmingham and Manning W. Heard, of New Orleans, La., for appellee.

FOSTER J.

This action was brought by Benson Paint & Varnish Company against John Boswell and Union Indemnity Company. By amendment the plaintiff is changed to Jefferson county board of education, suing for the use of Benson Paint & Varnish Company, and by said amendment John Boswell is stricken as a defendant.

The complaint alleges that on January 5, 1926, contract was entered into between Jefferson county board of education, hereinafter referred to as the county board, and John Boswell for the erection of a school building at Springdale, Jefferson county. The contract provided that the contractor shall and will furnish all materials and perform all work for the erection and completion of the building. On January 7, 1926, John Boswell, as principal, and the Union Indemnity Company, as surety, entered into bond with the county board in the penal sum of $12,000, and conditioned in the following language that: "The principal shall faithfully perform the contract on his part, and satisfy all claims and demands incurred for the same, and shall fully indemnify and save harmless the owner from all cost and damage which he may suffer by reason of a failure so to do, and shall fully reimburse and repay the owner all outlay and expenses which the owner may incur in making good any such default, and shall pay all persons who have contracts directly with the principal for labor or materials, then this obligation shall be null and void; otherwise it shall remain in full force and effect." The complaint alleged that Benson Paint & Varnish Company contracted with Boswell for material used in the construction of the building, which material was furnished and used and has not been paid for. Demurrer was sustained to the complaint, and appellant took a nonsuit on account of the adverse ruling of the court, and assigns it as error. The question is the effect of the provisions in the contract and bond, and whether an action may be maintained on account of and for the benefit of the paint company.

A similar question was considered and determined by this court in the case of Union Indemnity Co. v. State, 217 Ala. 35, 114 So. 415, decided subsequent to the ruling of the trial court in this case, as also the case of Union Indemnity Co. v. State (Ala.Sup.) 118 So. 148. In the former case the statutes and principles of law pertaining to the state highway commission were held to justify the execution of a bond to secure the performance of a contract for road construction, and construed a special provision whereby there was guaranteed "the *** payment of sums due for 'labor, materials and supplies used in the performance of this contract.' " There was no statute in Alabama authorizing expressly the execution of such a contract with the inclusion of such a stipulation, and there is none which gave similar authority to the county board when the bond here sued on was executed. The Act of 1927, p. 37, had not been enacted. The court held that the highway commission had plenary powers in the construction and maintenance of highways. Section 1328 of the Code merely requires a bond "for the faithful performance of the work agreed and contracted to be done," and that it shall be "conditioned to do and perform the work in accordance with the contract or agreement." This court stated in said case that "we confine our decision to the question of authority to stipulate for the payment of bills for labor and materials as part of the obligation of the contract, and of the statutory bond for its performance." This court reviewed the conflicting authorities of other jurisdictions, and adopted the view of those states which support such provisions, and the right to sue thereon for the benefit of a materialman, though there is no statute which makes specific provision for them. Many authorities, in addition to those there cited, are collated in 49 A.L.R. beginning on page 534.

As illustrative of the principles which were emphasized, it would not be amiss to quote from the case of American Fidelity Co. of Montpelier, Vt., v. State, 128 Md. 50 97 A. 12, which expresses the view we adopt as applicable to this subject: "Should the fact that neither the act nor the bond expressly state that the laborers and materialmen should have a right of action, or how and where their suits should be brought, deprive creditors such as this appellee from his right of action? In a note to Knight & J. Co. v. Castle, 27 L.R.A. (N.S.) 573, the right of the materialmen and laborers to maintain an action on a contractor's bond is discussed thoroughly and at length, with cases cited to support the text. It is there said: 'An ancient general principle denies an action for the breach of a contract to one who neither made it nor has succeeded to the interest of the one who did make it, notwithstanding he had sustained a damage by the breach, or would have been substantially benefited by the performance of such contract. In later times that general principle became subject to an exception now widely recognized and well established, viz., that a third person for whose benefit others make a contract may in certain circumstances recover upon it against the party to it who defaults in performing the beneficial covenant. The courts have had occasion to act so frequently upon this exception that it has acquired the force of an independent rule of law. Cases arising upon beneficial contracts which have required the courts to consider and apply this exception-generated rule have been very numerous and exceedingly varied in character, and the judicial determinations made in...