Owens v. Georgia Life Ins. Co.

• Decision Date: 18 June 1915
• Citation: 177 S.W. 294,165 Ky. 507
• Parties: OWENS v. GEORGIA LIFE INS. CO. ET AL.
• Court: Kentucky Court of Appeals

177 S.W. 294

165 Ky. 507

OWENS v. GEORGIA LIFE INS. CO. ET AL.

Court of Appeals of Kentucky.

June 18, 1915

Appeal from Circuit Court, Jefferson County, Common Pleas Branch First Division.

Action by Lillie A. Owens against the Georgia Life Insurance Company and others. From a judgment dismissing the petition as to defendant named, plaintiff appeals. Affirmed.

Kohn Bingham, Sloss & Spindle, of Louisville, for appellant.

Humphrey Middleton & Humphrey and Fred Forcht, all of Louisville, for appellee.

SETTLE J.

The appellant, Lillie A. Owens, claiming to have sustained painful and permanent physical injuries by falling over an obstruction on a public sidewalk in the city of Louisville and that such injuries were caused by the negligence of the city and of James Ferry & Sons, a contracting corporation, engaged at the time in constructing a sewer along the street where the accident happened, brought this action for damages against the city, James Ferry & Sons, and the appellee Georgia Life Insurance Company, surety on the bond of James Ferry & Sons, as contractor. The appellee Georgia Life Insurance Company filed a demurrer to the petition, which was sustained, and, the appellant having failed to plead further as to that company, her petition was dismissed as to it. This appeal brings to us for review the judgment manifesting these rulings. It is the contention of the appellant that by the terms of the contract in which appellee became the surety of James Ferry & Sons, contractor, it became primarily and directly liable to any person injured by the negligence or default of its principal, growing out of the latter's construction of the sewer for which the bond was given, for which reason it can be joined with the principal in the action brought by appellant for the injuries sustained by her from such negligence of the principal. On the other hand, it is the contention of the appellee that its contract is exclusively one of indemnity, and that, in order to impose any liability upon it under and by virtue of the contract in question, a liability must first be placed upon its principal, the contractor.

In determining which of these contentions should prevail, it becomes necessary to consider the contract upon which the liability of the appellee for the injuries sustained by appellant is attempted to be rested. As the contract embraces 87 pages, its great length precludes its insertion in the opinion; but so much thereof as we regard pertinent to the question here involved is as follows:

"This agreement, made the ______ day of December, 1912, between the city of Louisville, party of the first part, and James Ferry & Sons, principal, and Georgia Life Insurance Company, surety, parties of the second part, witnesseth: That the said parties of the second part agree and bind themselves that the said James Ferry & Sons, principal, herein designated as contractor, and Georgia Life Insurance Company, surety, will construct a sewer," etc. Page 65 of Contract.

On page 85 of the contract will be found the following provisions:

"It is further expressly stipulated and agreed by said parties of the second part, as a part consideration of this contract, that the contractor will comply with the requirements of the eighteenth section of an ordinance of the city of Louisville, entitled 'An ordinance regulating the use of public ways in the city of Louisville,' approved September 16, 1895; and that said parties of the second part will pay all damages for personal injuries to any one on account of any damages growing out of or upon any part of the work embraced in this contract, or any obstruction placed upon any street or sidewalk of said city by any one while engaged in or about the performance of said work, and will pay all damages for injuries to, or encroachments upon the property of abutting lot owners or other persons in completing the whole or any part of the work herein mentioned, and will defend all suits and hold the party of the first part harmless against any and all loss or damage on account of either said personal injury or injuries to property, and no officer, agent or employé of said city, other than the board of public works by written order, certified by its secretary, shall have the right, power or authority to do any act or give any direction, verbal or written, by or under which the obligations of the said parties of the second part hereunder shall be in any way altered, changed or waived."

The argument of appellant's counsel that a principal and surety are joint obligors and may be sued jointly by the obligee cannot be gainsaid, but here the obligee in the bond is not suing. The rule with respect to the right of action upon such a bond is correctly stated in 32 Cyc. p. 120, as follows:

"The obligee of a bond is the only one who can enforce the liability of sureties thereon, unless by virtue of a statute or of an express provision in the instrument."

Appellant does not claim the extension of a statute which permits a person other than the obligee to maintain such an action as she has brought against the appellee. Section 3752, Kentucky Statutes, provides that an action may be brought on an official bond by the commonwealth for her benefit, or for that of any county, corporation, or person injured by a breach of the covenant or condition, at the proper costs of the party suing, against the parties jointly or severally, and a recovery had against the surety as well as the principal, the amount recoverable, however, as far as the surety is concerned, being limited by section 186d, Kentucky Statutes, to the amount named in the bond; but we are aware of no statute allowing an action like that brought by appellee to be instituted by one not an obligee in the bond, against a principal and his surety jointly. There are cases, however, in which an action may be maintained by a third party against the principal and surety in such a bond, jointly; but in such case the third party must be a person for whose benefit the contract was made.

A case belonging to this class is that of Federal Union Surety Co. v. Commonwealth, 139 Ky. 92, 129 S.W. 335. In that case the state's board of sinking fund commissioners, having in control the construction of a state capitol, in requiring of the chief contractor a bond for the faithful performance of his contract, with surety approved by the board, inserted therein this provision:

"And before final payment is made, the contractor shall furnish satisfactory evidence that he has paid for all materials used in the construction of said work and satisfied the claims of all laborers and subcontractors doing work thereon."

This provision in the bond, it was held, being for the benefit of the subcontractors, laborers, and materialmen, gave them a right of action against the surety without first suing and fixing the liability of the principal in the bond. In the opinion it is said:

"When we consider the terms of the contract and bond and the evident care taken by the contracting parties with reference to the provision in favor of the laborers and materialmen, we have no doubt that it was the intention of the contracting parties to insert the provision in question both for the benefit of the commonwealth and the benefit of the laborers and materialmen. * * * But it is insisted that the board was under no legal duty to incorporate in the bond the provision for the benefit of the laborers and materialmen, and that therefore the latter have no right of action on the bond. We conclude, however, that the benefit which the board and the commonwealth derived from the provision in question, and the liability of the fund in the hands of the board to be subjected to liens by the subcontractors, were sufficient to authorize the board to make the contract and bond in question for the benefit of the laborers and materialmen. Morrison v. Payton , 31 Ky. Law Rep. 992. Being of the opinion that the board was authorized to take the bond, and to insert therein a provision for the benefit of appellees, we have no doubt of the right of the latter to bring this action to recover on the bond in question."

As the state cannot be sued without authority conferred by an act of the Legislature, it is manifest that the reason existing in that case for protecting the laborers and materialmen does not obtain with respect to persons injured in using the sidewalks of Louisville, for they are protected in having a cause of action against the city and the contractor, if injured by their negligence. Moreover, the right of subcontractors, laborers, and materialmen to sue on a contract of indemnity constitutes an exception to the general rule against allowing third parties to sue on such contracts; such right being allowed where the contractor's bond requires him to pay for all material and work. Subcontractors and materialmen cannot, however, bring a direct action against the surety when there is no express provision for a payment for labor or materials, either in the contract or bond, and it does not purport to be for their benefit. Elliott on Contracts, § 1418.

Our interpretation of the contract in question leads us to the conclusion that it is to be regarded as one made between the city of Louisville and James Ferry & Sons whereby the latter undertook to construct the sewer; appellee being merely a surety therein. If in the performance of the contract the contractor fails to perform any obligation it imposes upon him, it will be incumbent upon the appellee, as surety, to make good the default of the principal. If, in the performance of the work, the contractor's negligence either in the matter of obstructing the street or sidewalk, or otherwise, causes injury to a person traveling the same, while the surety...