New York Indem. Co. v. Niven

• Decision Date: 12 March 1931
• Docket Number: 6 Div. 626.
• Citation: 133 So. 261,222 Ala. 562
• Parties: NEW YORK INDEMNITY CO. v. NIVEN ET AL.
• Court: Alabama Supreme Court

133 So. 261

222 Ala. 562

NEW YORK INDEMNITY CO. v. NIVEN ET AL.

6 Div. 626.

Supreme Court of Alabama

March 12, 1931

Rehearing Denied April 9, 1931.

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

Suit on road contractor's bond by E. P. Niven and others against the New York Indemnity Company, with intervention by other claimants. From judgments for plaintiffs and interveners defendant appeals.

Reversed and remanded.

Martin Thompson & McWhorter, of Birmingham, for appellant.

L. H Ellis, of Columbiana, and Fort, Beddow & Ray, Cabaniss Johnson, Cocke & Cabaniss, and Lucian D. Gardner, Jr., all of Birmingham, for appellees.

THOMAS J.

The suit is upon a road contractor's bond. There were several interventions: (1) By one who furnished board to an employee; (2) for oil and gasoline used in the construction of the project; (3) by those who claim for work and labor performed during that construction; (4) for rent and repairs on a machine while so employed; (5) for repairs on a shovel; (6) for rent of a tractor; (7) for claim for chert purchased and hauled; and (8) for charges for patchwork in connection with the construction of said project.

The effect of our statutes, under recent decisions, is declared in Union Indemnity Co. v. State, for Use of Armstrong & Bro. Co., 218 Ala. 132, 118 So. 148; Pettus v. Dudley Bar Co., 218 Ala. 163, 118 So. 153; Jefferson County v. Union Indemnity Co., 218 Ala. 632, 119 So. 837; Fidelity & Deposit Co. v. Rainer, 220 Ala. 263, 125 So. 55; Union Indemnity Co. v. Handley, 220 Ala. 292, 124 So. 876; State for Use of Wadsworth v. Southern Surety Co., 221 Ala. 113, 127 So. 805, 70 A. L. R. 296. There was no misjoinder of action, and the complaint sufficiently informed defendant of the several claims and not subject to grounds of demurrer assigned.

The statutes come to us somewhat modified from the federal statutes and are within the persuasive influence of construction given theretofore by federal courts in respects applicable. State for Use of Wadsworth v. Southern Surety Co., supra; Barnewell v. Murrell,

108 Ala. 366, 18 So. 831; Harrington v. State ex rel. Van Hayes, 200 Ala. 480, 76 So. 422; Galloway Coal Co. v. Stanford, 215 Ala. 79, 109 So. 377; Alabama Fuel & Iron Co. v. Denson, 208 Ala. 339, 94 So. 311; Ex parte Sloss-Sheffield S. & I. Co., 207 Ala. 219, 92 So. 458; Loveman, Joseph & Loeb v. McQueen, 203 Ala. 280, 82 So. 530; Steagall v. Sloss-Sheffield S. & I. Co., 205 Ala. 100, 87 So. 787; O'Byrnes v. State, 51 Ala. 25, 27; Cathcart v. Robinson, 5 Pet. 264, 280, 8 L.Ed. 120.

The penalty of the bond in question was in the amount of $4,557.50, and its conditions are:

"*** in the event the said Marble City Construction Company as such contractor shall faithfully and promptly perform said contract and all the conditions and requirements thereof, then this obligation shall be null and void and of no effect, otherwise to remain and be in full force and effect.

"Provided further, (1) that upon the failure of the said Marble City Construction Co. to promptly and efficiently prosecute said work, in any respect, in accordance with the contract, the above bound New York Indemnity Company, as sureties, shall take charge of said work and complete the contract at their own expense, pursuant to its terms, receiving, however, any balance of the funds in the hands of said State due under said contract. (2) Said sureties, if they so elect, by written direction given to the State Highway Commission authorize the State Highway Commission to advertise for bids to complete the said contract at the expense of said sureties, and such sureties hereby agree and bind themselves to pay the expense of the completion of such work, (3) less any funds in the hands of the State remaining due to above bound contractor. ***" (Italics and numbers supplied.)

"Upon the completion of said contract pursuant to its terms, if any funds, remain due on said contract, the same shall be paid to said principal or sureties. *** Principals and sureties agree as a part of this obligation that such contractor shall promptly make payment to all persons supplying him or them with labor, materials, feed stuffs or supplies, in the execution of the work provided for in such contract, as provided for in Section 28 of the Act of the Legislature approved August 23, 1927, and designated as 'The Alabama Highway Code."' Section 1397 (30), (1328), Code of 1928.

Under the provisions of that bond, upon failure of the original contractor to faithfully perform such contract promptly and do the work agreed and contracted to be done, and make prompt payment, etc., or upon failure to faithfully and promptly perform in respects and in accordance with the contract, the surety had the choice of several alternatives for its protection. It might (1) take charge of said work and complete the contract at its own expense pursuant to the terms of the contract, and receive "any balance of the funds in the hands of the State remaining due under said contract"; or might (2) authorize, in writing, the state highway commission to advertise for bids for the completion of the contract agreeing, in the event the project was completed by the State Highway Commission "at the expense of said sureties," to pay the expense of the completion of such work less any funds in the hands of the state remaining due to the (above) bound contractor, the original contractor; (3) or might fail or refuse to do anything, in which case the state would have the contract completed and the appellant would be liable for the reasonable cost in excess of the contract price. In that event the penalty of the bond would be the maximum recovery of the surety.

The allegations of appellant's plea No. 2 were to the effect and of the procedure outlined by the provisions of the bond and that required by a statute that gave the state priority as to its claims. The question of the right construction of our statute in said respect is raised by the ruling of the trial court sustaining demurrer to plea 2.

The trial court in rendering a judgment in favor of Niven, in the amount of $300.50, did not prorate such judgment from the total amount of the recovery. The penalty of the bond, as indicated, was $4,557.50; appellant received from the state, for completing the contract, $2,413.03, which amount included the retained percentage in the hands of the state at the time of the default of the contract of $387.74. The sum of the penalty of the bond and the amount received from the state for completing the contract, it is insisted, are the extent of its liability in the premises, such sum amounting to $6,970.54. The appellant in discharging its obligation to the state expended $4,519.49 in completing the contract. This amount, so expended under its contract and the law that entered therein, when deducted from $6,970.54, leaves (according to the insistence of appellant) available for the payment of claims the sum of only $2,451.05, which should have been accordingly prorated in satisfaction of the total amount of plaintiffs' and claimants' claims allowed. That is to say, the various claimants are entitled to receive a percentage of the total of their respective claims allowed by the court; while, by the judgments rendered in favor of the claimants, Niven was awarded his full claim of $300.50, and in the same ratio to the other claimants.

The question therefore recurs whether, under our statutes and rules, these claims should have been prorated, and what items of expense are included in the proration?

Mr. Justice Hughes of the Supreme Court of the United States announces the following rule, under the federal statute now of force, in the case of Illinois Surety Co. v. United States, Use of J. A. Peeler, etc., 240 U.S. 214, 36 S.Ct. 321, 322, 60 L.Ed. 609, 616:

"It was evidently the purpose of the act of 1905 to remedy the defect in the act of 1894 by assuring to the United States adequate opportunity to enforce its demand against the contractor's surety, and priority with respect to such demand. Mankin v. United States, 215 U.S. 533, 538, 54 L.Ed. 315, 317, 30 S.Ct. 174; United States ex rel. Brown-Ketcham Iron Works v. Robinson, 130 C. C. A. 432, 214 F. 38, 39, 40. Accordingly it was provided that if the United States sued upon the bond, the described creditors should be allowed to intervene, and be made parties to the action, but subject 'to the priority of the claim and judgment of the United States.' And it was only in case the United States did not sue within the specified period that the creditors could bring their action. With this object in view,-to protect the priority of the United States, and at the same time to give a remedy to materialmen and laborers on the contractor's bond and a reasonable time to prosecute it (United States for use of Alexander Bryant Co. v. New York Steam Fitting Co., 235 U.S. 327, 337, 59 L.Ed. 253, 257, 35 S.Ct. 108),-it was natural that the time allowed exclusively for action by the government should begin to run when the contract had been completed, and the government, in its final adjustment and settlement according to established administrative methods, had determined what amount, if any, was due. ***

"The pivotal words are not 'final payment,' but 'final settlement,' and in view of the significance of the latter term in administrative practice, it is hardly likely that it would have been used had it been intended to denote payment. See United States v. Illinois Surety Co. [D. C.] 195 F. 306, 309; United States use of Chief All Over v. Bailey [D. C.] 207 F. 782, 784; United States ex rel. Brown-Ketcham Iron Works v. Robinson (C. C. A.2d C.) supra; United States use of Starrett-Fields Co. v. Massachusetts Bonding & Ins. Co. [D.

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