Perry v. Southern Sur. Co.

• Decision Date: 14 October 1925
• Docket Number: 28.
• Parties: PERRY v. SOUTHERN SURETY CO.
• Court: North Carolina Supreme Court

129 S.E. 721

190 N.C. 284

PERRY v. SOUTHERN SURETY CO.

No. 28.

Supreme Court of North Carolina

October 14, 1925

Appeal from Superior Court, Pasquotank County; Cranmer, Judge.

Action by L. B. Perry against the Southern Surety Company. Judgment for defendant, and plaintiff appeals. No error.

Parol trusts cannot arise between parties to deed.

Action by plaintiff to recover on a contract by defendant to complete plaintiff's building contract with board of graded school trustees of Elizabeth City. From a judgment in favor of defendant upon a jury verdict, the plaintiff appealed. Affirmed.

The plaintiff contended: That he had a contract to build two school buildings for the board of trustees of Elizabeth City and that on or about July 1, 1922, he gave, with defendant as surety, a bond to "save said board harmless as to plaintiff's due and proper execution of said work." That in August, 1923, he was in need of financial assistance to complete the high school building, and made application to the trustees to reduce the amount of the compensation agreed to be retained until the completion of the contract to 10 per cent., with defendant's consent; but the trustees refused, for that they did not have the money on hand to make the desired advances. The plaintiff and defendant agreed September 11, 1923: (a) That plaintiff transfer and assign and set over to defendant all unpaid balances on building contract; (b) that plaintiff remain in charge of the construction work until completion of contract, without further charge for his services; (c) that plaintiff convey to defendant the Wineke apartment property in Elizabeth City (d) that plaintiff pay by his personal note $6,000 on specified claims already due; (e) that defendant pay all other labor and material accounts now due, as per statement and all labor and material accounts accruing thereafter in the completion of the buildings; (f) that defendant is to keep in a named bank in Elizabeth City funds sufficient to pay for labor and material to complete the buildings, same to be deposited in the name of plaintiff trustee, and checks to be countersigned by defendant's attorney in fact, and checks to be issued on deposited fund for statements approved by plaintiff, who, by such approval, guarantees correctness (g) that at conclusion of contract for construction of buildings the defendant render itemized statement to plaintiff for all disbursements, including attorney's fees. That the defendant furnished funds for material and work on buildings to the extent of $33,000, but wrongfully refused to continue to carry out the September contract, and did not pay the accounts agreed on, and damaged the plaintiff to the extent of the unperformed contract and caused his credit and business reputation to suffer damages in a large sum.

The defendant contended that in July, 1922, its relations with plaintiff were fixed when it accepted the written application of plaintiff, and upon it executed his bond as surety, and that the subsequent agreement was pursuant to this relation, and that they advanced funds and took a deed for the Wineke apartment property, and the assignment of the unpaid balance of the contract price, because of the duty of plaintiff to secure it, and finally, to save defendant harmless on account of the suretyship, and denied plaintiff's contentions.

The application executed and admitted by plaintiff contains, among others, the following covenants:

"Second. That we, the undersigned, will at all times indemnify and keep indemnified the company, and hold and save it harmless from and against any and all liability, damages, loss, costs, charges, and expenses of whatsoever kind or nature, including counsel and attorney's fees, which the company shall or may, at any time, sustain or incur by reason or in consequence of having executed the bond herein applied for, or by reason or in consequence of the execution by the company of any and all other bonds executed for us at our instance and request, and that we will pay over, reimburse, and make good to the company, its successors and assigns, all sums and amounts of money which the company or its representatives shall pay or cause to be paid or become liable to pay on account of the execution of any such instrument, and on account of any liability, damage, costs, charges, and expenses of whatsoever kind or nature, including counsel and attorney's fees, which the company may pay, or become liable to pay by reason of the execution of any such instrument, or in connection with any litigation, investigation, or other matter connected therewith, such payment to be made to the company as soon as it shall have become liable therefor, whether the company shall have paid out said sum or any part thereof or not."

"Seventh. That these covenants and also all collateral security, if any, at any time deposited with the company concerning the said bond, or any other former or subsequent bonds, executed for us or at our instance, shall, at the option of the company, be available in its behalf and for its benefit as well concerning the bond or undertaking hereby applied for, as also concerning all other former or subsequent bonds and undertakings executed for us or for others at our request.

Eighth. That our execution of any other instrument, whether relative to the bond hereby applied for or to any other former or subsequent bonds executed for us or at our request, shall not release us from liability under the foregoing covenants, unless such other instruments shall expressly stipulate that we shall be released from such liability."

"Eleventh. That the suretyship is for the special benefit of the indemnitor, its property, income, and earnings now owned or hereafter acquired, to which the company looks for its indemnity, and the indemnitors represent that it is specifically and beneficially interested therein.

Twelfth. That the company shall have every right and remedy which a personal surety without compensation would have, including the right to secure its discharge from its suretyship, and, should it make payment hereunder, shall have every right and remedy of the undersigned for the recovery of same."

It is also covenanted that the defendant may have access to all books and papers, including deposit accounts, and that--

"These covenants shall be binding, not only upon us jointly and severally, but as well upon our heirs, executors, administrators, successors, and assigns."

The verdict is as follows:

"(1) Did the plaintiff, Perry, and the defendant, Southern Surety Company, make and enter into that certain agreement of September 11, 1923, a copy of which is attached to the complaint, as alleged in the complaint? Answer: Yes.

(2) If so, was a provision requiring the plaintiff, Perry, to repay the defendant company all such amounts as said company should

pay out under the terms of said agreement omitted therefrom by the mutual mistake of the parties, the inadvertence of said parties, or the draftsman (or the mistake of the defendant company, induced by the fraud of the plaintiff, Perry, as alleged in the answer)? Answer: Yes.

(3) Was said Perry ready, able, and willing to perform said contract as alleged in the complaint? Answer: Yes.

(4) If so, was a provision permitting said Perry to redeem said property, upon the payment to defendant company of all amounts paid out by them under said agreement, omitted from said deed by the mutual mistake of the parties, or the inadvertence of said parties or the draftsman (or the mistake of the defendant company, induced by the fraud of the plaintiff, Perry, as alleged in the answer)? Answer: Yes.

(5) Did the defendant company wrongfully breach said contract, as alleged in the complaint? Answer: No.

(6) What general damages, if any, is the plaintiff, Perry, entitled to recover of the defendant company? Answer: None.

(7) What sum, if any, is the defendant company entitled to recover of the plaintiff, Perry? Answer: $15,000."

The judgment provides:

"That plaintiff take nothing by his cause of action set up in the complaint; that the contract and agreement and deed between the plaintiff and defendant be and the same are hereby reformed in accordance with the findings of the jury as above set out and the allegations of the answer.

That the cause be and the same is hereby referred to E. L. Sawyer as referee, who will hear the evidence and state an account between the parties, and ascertain the true amount due by plaintiff to defendant for advances made pursuant to said contract and agreement so reformed as prayed for in the answer, and who will make report to the next term of superior court in said county of the amount so found by him to be due by way of accounting from plaintiff to defendant, which sum so found shall be and constitute a lien against the premises known as the Wineke apartment described in the pleadings in this cause, and also against the balance of funds on deposit in trustee's account, referred to in said pleadings, and also against the remainder of the funds on deposit in the office of the clerk of the superior court.

That upon payment of said sum so ascertained upon said accounting to be due by plaintiff to defendant the said lien shall be discharged, and that upon failure of plaintiff to pay off and discharge the same within 30 days from confirmation of said account by the court, said balance in trustee's account and said balance of funds in the clerk's hands shall be applied towards the satisfaction of said claim, and the balance of said indebtedness, if any, may be enforced by advertisement and sale of the premises known as the Wineke apartment after advertisement as provided by law for and in the case of mortgages and deeds of trust, said sale to be made...