Metropolitan Casualty Ins. Co. v. Texas Sand & Gravel Co.

• Decision Date: 01 February 1934
• Docket Number: No. 1444.,1444.
• Citation: 68 S.W.2d 551
• Parties: METROPOLITAN CASUALTY INS. CO. OF NEW YORK v. TEXAS SAND & GRAVEL CO. et al.
• Court: Texas Court of Appeals

68 S.W.2d 551

METROPOLITAN CASUALTY INS. CO. OF NEW YORK v. TEXAS SAND & GRAVEL CO. et al.

No. 1444.

Court of Civil Appeals of Texas. Waco.

February 1, 1934.

Rehearing Denied March 1, 1934.

Appeal from District Court, McLennan County; Giles P. Lester, Judge.

Suit by the Texas Sand & Gravel Company against E. R. Leach and others, wherein C. H. Strain intervened. From a judgment, the Metropolitan Casualty Insurance Company of New York appealed.

Affirmed in part, and reversed in part.

Sleeper, Boynton & Kendall, of Waco, for appellant.

Tirey & Tirey and Naman, Howell & Brooks, all of Waco, Touchstone, Wight, Gormley & Price, of Dallas, and Charles Gibbs, of San Angelo, for appellees.

ALEXANDER, Justice.

E. R. Leach entered into a contract with the state of Texas for the construction of a public highway in Ector county. He executed the statutory bond provided for in Revised Statutes, art. 5160, as amended by Acts 1929, c. 226, § 1 (Vernon's Ann. Civ. St. art. 5160), with the United States Fidelity & Guaranty Company as surety, to secure the faithful performance of the contract. Leach sublet the entire contract to L. A. Murdoch, who executed and delivered to Leach his bond with the Metropolitan Casualty Insurance Company of New York as surety, to insure the faithful performance of his contract. Texas Sand & Gravel Company brought suit against Leach, Murdoch, and the two above-named surety companies as sureties on said bonds to recover the contract price of certain materials furnished to Murdoch and used in the construction of said road. C. H. Strain intervened in the case and sought judgment against the same parties for the contract price of certain labor furnished by him and used by Murdoch in the construction of the road. Judgment was entered in favor of Strain against Leach, Murdoch, United States Fidelity & Guaranty Company, and Metropolitan Casualty Insurance Company, jointly and severally, for the sum of $635.67. A judgment for a like amount was rendered in favor of Leach over against Murdoch and the surety on his bond. Judgment was rendered in favor of the Texas Sand & Gravel Company against the same defendant. The Metropolitan Casualty Insurance Company alone appealed.

Since the removal of the case to this court, the judgment in favor of Texas Sand & Gravel Company has been settled, and the appeal in so far as said appellee is concerned has been dismissed. The only matter remaining for consideration is the judgment in favor of C. H. Strain.

Appellant's first contention is that the bond given by it to secure the performance of the contract by Murdoch was an indemnity bond given for Leach's protection only, and was not made for the use and benefit of those furnishing Murdoch with labor and material, and that by reason thereof Strain was not entitled to recover against the appellant on said bond. The bond in question, not being one required by the statute, is to be construed as a common-law obligation, and, if liability is to be fixed against the surety in favor of Strain, it must be by virtue of the provisions of the bond. It bound Murdoch as principal and appellant as surety "unto E. R. Leach in the penal sum of $33,609.26," and contained the following condition: "The condition of this obligation is such that if the bounded principal, L. A. Murdoch, shall in all things well and truly perform all the terms and conditions of the foregoing contract, to be by him performed and within the time mentioned therein, and shall pay all claims for labor performed and materials furnished and about the construction of the said road, and shall have paid and discharged all liabilities for injuries which have been incurred in and about said construction under the operation of the statutes of the State, then this obligation is to be void; otherwise to be and remain in full force and virtue."

It will be noted that Strain is not named as a payee in the bond, and that said bond does not, by express terms, provide that it is given for the benefit of any one other than Leach. If the furnishers of labor and material were made beneficiaries under said bond, it was by virtue of the terms of the defeasance clause, which provided that, if Murdoch "shall pay all claims for labor and material furnished, * * * then this obligation is to be void." The effect to be given to such a defeasance clause depends on the intention of the parties. In ascertaining such intention, considerable weight is usually given to the question as to whether or not the provision in question was or was not necessary for the complete protection of the payee named in the bond. If such provision was necessary to the complete protection of the named payee, then the bond is generally construed as an indemnity bond for his protection only. National Bank of Cleburne v. G., C. & S. F. Ry. Co., 95 Tex. 176, 66 S. W. 203; Oak Cliff Lumber Co. v. American...