E. Nelson Mfg. & Lumber Co. v. Roddy

• Decision Date: 19 November 1930
• Docket Number: No. 7512.,7512.
• Citation: 34 S.W.2d 624
• Parties: E. NELSON MFG. & LUMBER CO. et al. v. RODDY et al.<SMALL><SUP>*</SUP></SMALL>
• Court: Texas Court of Appeals

34 S.W.2d 624

E. NELSON MFG. & LUMBER CO. et al. v. RODDY et al.^*

No. 7512.

Court of Civil Appeals of Texas. Austin.

November 19, 1930.

Rehearing Denied December 23, 1930.

Appeal from District Court, Bell County; Few Brewster, Judge.

Action by the E. Nelson Manufacturing & Lumber Company and others against S. E. Roddy and others. From the judgment, plaintiffs appeal.

Reversed and rendered in part, and in part affirmed.

J. B. Talley, of Temple, for appellant C. W. Barrett & Son.

Trippet, Richey & Sheehy, of Waco, for appellants E. Nelson Mfg. & Lumber Co., C. H. Ruebeck & Co., and Acme Brick Co.

Sleeper, Boynton & Kendall, of Waco, for appellant Central Texas Iron Works.

Tom P. Scott, of Waco, for appellant W. A. Haubold.

Jno. B. Daniel, of Temple, for appellant Cox & Whisennand.

Thompson, Knight, Baker, & Harris, of Dallas, for appellee American Employers' Ins. Co.

A. L. Curtis, of Belton, and Walker Saulsbury, and Cox & Brown, all of Temple, for appellees S. E. and Dora Roddy.

Cox & Brown, of Temple, for appellee City Nat. Bank of Temple.

BLAIR, J.

By a mechanic's lien contract, dated May 30, 1928, S. E. Roddy and wife, as owners, contracted with Ray Phillips, as contractor, to construct an apartment house on a lot which was their homestead, and executed a note for $31,250, in payment of the improvements, payable on estimates of 80 per cent. of work and material incorporated in the building, until $11,250 was paid, and the balance of $20,000 was payable when the building was completed according to the plans and specifications, and upon the contractor furnishing satisfactory proof to the owners that all labor and (or) material used had been paid for. The contract provided that the note and lien might be assigned by the contractor; and attached to the contract was an assignment in blank of the note and mechanic's lien which was executed and acknowledged subsequently to the execution of the contract, but on the same date; and later the name of the City National Bank of Temple, hereinafter called bank, was written in as assignee; and the mechanic's lien contract and the assignment of the note and lien were filed for record on June 6, 1928, and duly recorded June 8, 1928, in the mechanic's lien records of Bell county, Tex., where the property was situated; and to this assignment Roddy and wife agreed.

The contract obligated the contractor to execute a bond for the faithful performance of the covenants and conditions of his contract; and he executed the bond with American Employers' Insurance Company as surety, hereinafter called surety. The contractor proceeded with the construction of the building, and was paid $11,250 of the contract price on estimates of labor and material incorporated in the building, and the bank had advanced him $11,896.12 on its purchase price of the $20,000 balance of the installment note when he abandoned the construction of the building on October 20, 1928; and all of which matters and transactions were prior to notice to owners of any claims for labor and (or) material used in the building. The owners then requested the surety to complete the work, and, upon its refusal, requested the bank to proceed with the construction work, which it did until it had expended $7,824 additional, or a total of $19,720.18, on the building contract, and the owners expended the additional necessary amount of $3,629.43 to finish the building in accordance with the contractor's obligation.

Appellant, E. Nelson Manufacturing & Lumber Company, hereinafter called plaintiff, sued the contractor, the owners, the bank, and the surety on the contractor's performance bond for certain material furnished the contractor in the construction of the building, alleging that it had given proper notice to the owners to fix a statutory materialman's lien on the property, and that the surety bond inured to its benefit; and numerous others intervened, hereinafter called interveners, under similar pleadings to plaintiff's, seeking to recover for labor and (or) material used to construct the building. The surety answered that its bond was not executed for the benefit of plaintiff and interveners; and, as regards the bank, alleged that it had a prior assignment of the contractor's interest in the contract. The bank and the owners answered that the assignment of the $20,000 balance due on the note and lien securing it constituted payment of the contract price by the owners in so far as concerns any right of the plaintiff, the interveners, or the surety, each being charged with actual or constructive notice of the assignment before furnishing any labor and (or) material, or acquiring any right in the premises.

A trial to the court without a jury resulted in judgment for plaintiff and interveners against the contractor for the amount of their respective claims, that the surety bond did not inure to the benefit of the plaintiff and interveners, and that the payment by the owners in the course of construction of the building of the $11,250, and the assignment with the owner's consent of the $20,000 balance of the note and lien before owners' notice of plaintiff's and interveners' claims for any labor and (or) material, constituted payment by the owners of the entire contract price of the building, so as to preclude plaintiff and interveners with record or actual notice of the assignment from thereafter fixing any laborer's or materialman's liens on the property under the statutes; hence this appeal by plaintiff and interveners, raising several questions for determination.

The trial court construed the bond not to "inure to the benefit of either the plaintiff or the interveners, or either of them, because it does not so provide; and that there are no expressions or covenants in the contract which warrant the construction that it was intended that either the plaintiff or any of the interveners have any right of action on the bond." We do not sustain this conclusion, under the rule that, when the bond is construed in connection with the provisions of the contract it was given to secure, and the attending circumstances, it is reasonably clear that the parties intended that it should inure to the benefit of all who furnished labor and (or) material to construct the building.

The contract obligated the contractor to execute the bond payable to the owners, conditioned for the faithful performance of the covenants and conditions of the contract, which included (a) the furnishing by the contractor of all labor and material necessary to construct the building; and (b) the furnishing by contractor to the owners, after the completion of the building and before the $20,000 balance on the $31,250 note would become due and payable, "proofs satisfactory * * * that all labor and material bills for labor and material entering into the work have been paid in full." The contract authorized the contractor to assign the note and lien given in payment of the improvements; which he did in blank on the day he executed the contract; and he furnished surety with a copy of both the contract and the assignment of the note and lien with his application for the bond. The name of the assignee bank was inserted in the original assignment the next day, May 31, 1928, and, although the bond bears date of May 30, 1928, it was in fact executed and delivered three or four days later. Now with these facts before it, the surety executed and delivered the bond, which contained the following as to its purposes and conditions:

"Now, therefore, for the purpose of securing the said S. E. Roddy and Mrs. Dora Roddy, their heirs or assigns in the true and faithful performance of said contract together with all of the covenants and obligations of the said Ray Phillips, as contractor, therein set forth and to guarantee the true and faithful performance of said contract and the payment of all claims of each and every subcontractor, workman, laborer, mechanic and furnisher of material unto the said Ray Phillips as contractor, arising or growing out of said contract, their heirs or assigns, as their interest may appear, we, the said Ray Phillips, as principal, and the other subscriber hereto as surety, acknowledge ourselves indebted to and bound to pay to the said S. E. Roddy and his wife, Mrs. Dora Roddy, owners, their heirs, executors, administrators, or assigns, the sum of Fifteen Thousand ($15,000.00) Dollars, for the payment of which well and truly to be made, we bind ourselves, our heirs, executors and administrators jointly and severally by these presents.

"The conditions of this bond, however, are such that if the said Ray Phillips as contractor shall truly and faithfully do and perform all and every the covenants and conditions of said contract and herein promised by him to be done, kept and performed, and shall truly and faithfully pay all claims of each and every sub-contractor, workman, laborer, mechanic and furnisher of material growing or arising out of said contract, then and in such event this obligation is to become null and void and of no further force or effect; otherwise to remain in full force and effect. This obligation or any claim arising hereon may be enforced at Temple, Texas."

The authorities are agreed that, in construing bonds of this character, the intention of the parties must control as to whose benefit it inures, which intention must be gathered from the bond, the contract which it guarantees, and the attending circumstances known to the parties at the time the bond was executed. The first evidence that the parties intended that this bond should inure to the benefit of all laborers and materialmen is the contract provision for the assignment of the note and lien. The parties knew as a matter of law that any assignment of the note and lien by the contractor would preclude laborers and materialmen who thereafter furnished labor and (or) material with notice of the assignment from fixing a statutory lien on the property; and the...