New Amsterdam Cas. Co. v. State

• Citation: 128 A. 641,147 Md. 554
• Decision Date: 07 April 1925
• Docket Number: 71.
• Parties: NEW AMSTERDAM CASUALTY CO. v. STATE, TO USE OF GREEN.
• Court: Maryland Court of Appeals

128 A. 641

147 Md. 554

NEW AMSTERDAM CASUALTY CO. v. STATE, TO USE OF GREEN.

No. 71.

Court of Appeals of Maryland

April 7, 1925

Appeal from Superior Court of Baltimore City; Robert F. Stanton Judge.

"To be officially reported."

Suit by the State, to the Use of J. Ernest Green, against the New Amsterdam Casualty Company. Judgment for plaintiff, and defendant appeals. Reversed without a new trial.

Argued before PATTISON, URNER, ADKINS, OFFUTT, and WALSH, JJ.

Aubrey Pearre, Jr., and William L. Henderson, both of Baltimore (Stewart & Pearre, of Baltimore, on the brief), for appellant.

Walter L. Clark, of Baltimore (Charles T. Reifsnider and Edwin C Irelan, both of Baltimore, on the brief), for appellee.

PATTISON J.

The appeal in this case is from a judgment recovered for the use of the equitable plaintiff, J. Ernest Green, against the appellant, the New Amsterdam Casualty Company, on a state road contract bond executed by it as surety.

The substantial facts of the case are these:

In April, 1922, the firm of Owens Laws & Co., composed of Owens Laws and Armin Auer, was awarded by the state roads commission of Maryland a contract to build a concrete road in Cecil county, and on April 22d of that month the firm, as principal, with the appellant, the New Amsterdam Casualty Company, as its surety, executed to the state of Maryland a bond which contained, among others, the condition that--

If "the above bounden principal * * * shall well and truly pay all and every person furnishing material or performing labor in and about the construction of said roadway, all and every sum or sums of money due him, them or any of them for such labor and materials for which the contractor is liable, * * * then this obligation to be void or otherwise to be and remain in full force and virtue."

In the contract for building the road, of which the bond was made a part, and for the faithful performance of which the bond was executed, it was agreed:

"That the said contractor shall not assign this contract nor any part thereof, nor any right to any of the moneys to be paid him hereunder, or shall any part of the work to be done or materials furnished under said contract be sublet without the consent in writing of the state roads commission."

After the work was started under the contract, Mr. Owens Laws, one of the contracting firm, in June, 1922, wrote to his brother-in-law, Mr. Green, the plaintiff, whom he had intimately known for years and who at the time was in Chattanooga, Tenn., the following letter:

"I am going to ask you if you have at this time, any surplus funds that the company might use for a month or so.

I have in mind a cement bill, which will be due some time in the early part of July, and by paying this bill within 10 days the cement company will allow us a very liberal discount, and this will also make our credit that much stronger.

The state will pay us for this material next month, that is in August, and we will be in a position to meet this obligation at that time.

Write when you will be in town again."

This letter was not answered by Mr. Green, but shortly thereafter in July following, he returned to Baltimore, where he personally saw Mr. Owens Laws and discussed with him the loan suggested in his letter, and it was agreed between them, as he said, that he would loan him the money upon the condition named in the letter, and that was that the loan was to be repaid "from the settlement that was due from the state the following month." He went on to say:

"Although I knew Mr. Auer, I did not know Mr. Auer the length of time I had known Mr. Laws and I wanted these stipulations so that there would be no reason about my getting my money, and he said it would be perfectly agreeable to take this money from the settlement that was due from the state the following month to reimburse me for this money. That was the condition under which it was loaned."

It appears from the record that Mr. Green, the plaintiff, left Baltimore before the money was actually paid over to Mr. Laws. This was owing to the fact that arrangements had to be made as to the hypothecation of certain bonds belonging to him by means of which he was to obtain the money to make the loan. This it seems was looked after by his father, who paid the money over to Mr. Laws, as shown by the following letter from Owens Laws to Green, dated July 15, 1922, in which it is said:

"To-day I have turned to your father the company's demand note for fifteen hundred dollars ($1,500.00), which amount was paid over to us by him for you on July 7th. This money will enable us to discount our cement bill.

I greatly appreciate your coming to our rescue and we hope to be able to repay the favor some time in the future."

The note above referred to was dated July 15, 1922, and was signed by Owens Laws and Armin Auer, as individuals. Prior to the execution and delivery of said note, Laws and Auer, by their check dated July 10th of the same year, paid the Tidewater Portland Cement Company the sum of $1,193.50, for cement bought from that company and used in the construction of the road. This amount, as claimed by them, was paid out of the sum of $1,500 borrowed from the plaintiff. The work upon the road was shortly thereafter taken over by the defendant because of the financial inability of Laws & Co., the contractors, to complete it, and from and after that time the money for the construction of the road, as the work progressed, was paid over to the defendant company. The money borrowed by Laws & Co. not having been paid by them, Green, through his counsel, on the 26th day of December, 1922, wrote the defendant demanding payment by it of the money borrowed of him by them, stating therein that "at the time the loan was made the condition was imposed that the money was to be used in discounting the bills for cement put into the job," and that the same was so used. To this letter the defendant replied denying all liability, and refused to pay the money demanded of it. It was then that the suit upon the bond in this case was brought.

The declaration, in addition to the salient facts above stated, contained the allegation that the said loan from the plaintiff to Laws & Co. was made "upon the condition that the said Laws & Co. were to use the said money or moneys in the paying for labor performed and materials furnished in and about the construction of said roadway, and such money was so used in paying the cement bill of the Tidewater Portland Cement Company, amounting to $1,193, and the balance of said amount so loaned as aforesaid was used in paying labor performed and hardware furnished and used in the construction of * * * said highway."

A demurrer to the declaration was overruled, and the case proceeded to trial, resulting in a verdict for the plaintiff for the sum of $1,294.95, being the amount paid by Laws & Co. to the Tidewater Portland Cement Company for the cement bought by them from it and used in the construction of the road with interest thereon. A judgment was entered upon the verdict, and it is from that judgment that the appeal in this case has been taken.

By the demurrer, the question was presented whether one lending money to a road contractor upon the condition that the money so loaned is to be, and is, used to pay for material used in the construction of the road, can recover against the contractor's surety, if the contractor fails to repay the money so borrowed, where the bond contains the provision required by the statute (section 36, art. 91) that the contractor "shall well and truly pay all and every person furnishing material and performing labor in and about the construction of said roadway, all and every, sum or sums of money due him, them or any of them for such labor and materials for which the contractor is liable."

It is not only conceded by the plaintiff, but it is made clear by the decision of this court in the case of Southern Maryland Bank v. National Surety Co., 126 Md. 290, 94 A. 916, that without the words "upon the condition," found in the clause set out in the declaration, the demurrer to the declaration should have been sustained. Therefore it is only because of the insertion of those words in the declaration that the claim is made that the declaration is good and that the demurrer was properly overruled.

In the case of Southern Maryland Bank v. National Surety Company, supra, the contractor, for the construction or reconstruction of a public road in Charles county, borrowed money from the Southern Maryland Bank, for which it gave its promissory notes. The notes were not paid, and suit was instituted against the contractor's bond as in this case. The bond in that case contained a covenant to pay all debts for labor and material incurred by the contractor in the construction and improvement of the road. A demurrer to the declaration was filed and sustained, and the sole question there presented for determination was the liability of the surety company upon the bond for the money borrowed from the bank and used to pay the wages of laborers employed upon the work and for materials obtained and used in the construction of the state highway. It was there held, notwithstanding the broad construction now given to such undertakings, that the same could "hardly be extended so as to reverse the rule that the liability of the surety upon his bond is dependent upon his covenants and agreements." And in support of its statement, the court cites a number of cases of this and other states.

It is true that in that case Judge Stock-bridge, speaking for this court, thereafter said:

"Here the indebtedness sought to be recovered consists of money loaned upon promissory notes. It does not appear either from the notes themselves, or from any allegation

...