Robinson Mfg. Co. v. Blaylock

• Decision Date: 27 October 1926
• Docket Number: 217.
• Citation: 135 S.E. 136,192 N.C. 407
• Parties: ROBINSON MFG. CO. et al. v. BLAYLOCK et al.
• Court: North Carolina Supreme Court

135 S.E. 136

192 N.C. 407

ROBINSON MFG. CO. et al. v. BLAYLOCK et al.

No. 217.

Supreme Court of North Carolina

October 27, 1926

Appeal from Superior Court, Lenoir County; Bond, Judge.

Action by the Robinson Manufacturing Company and others against R L. Blaylock and others to recover for materials furnished and used in the construction of public school building. From a judgment for defendant American Surety Company on agreed facts, plaintiffs and defendant Board of Education of Lenoir County appeal. Affirmed.

Dickinson & Freeman, of Goldsboro, and F. E. Wallace, of Kinston, for appellants Robinson Mfg. Co. and others.

Cowper Whitaker & Allen, of Kinston, for appellant Board of Education.

Stewart McRae & Bobbitt, of Charlotte, for appellee American Surety Company.

STACY C.J.

On July 12, 1924, R. L. Blaylock, contractor, entered into a written agreement with the board of education of Lenoir county for the erection of a public school building at Moss Hill, N. C., in which it was stipulated, among other things, that, in consideration of the sum of $26,316, payable up to 85 per cent. of the contract price in monthly installments on estimates of the architect, with 15 per cent. to be retained and held until the completion of the building, "the contractor shall and will provide all materials and perform all the work" necessary for the erection of said school building; and on the same day, for a valuable consideration, the board of education of Lenoir county took from the contractor, as principal, and the American Surety Company, as surety, a bond of indemnity in the sum of $4,579, to "indemnify the obligee against any loss or damage directly arising by reason of the failure of the principal faithfully to perform said contract," etc.

On February 18, 1925, the contractor defaulted, having received prior to that time $22,244.84 of the contract price for work on said building. Thereafter, the board of education, on order of the bonding company, expended $277.41 for the completion of the building, leaving a balance of $3,716.06 due under the contract and held by the school board as the 15 per cent. retained percentage. At the time of default by the contractor, claims for work done on and materials furnished for said building amounting to $8,284.96 were outstanding and unpaid.

On April 28, 1926, the surety paid into court the sum of $4,579, the full penalty of its bond (unless it be liable for interest thereon), for distribution pro rata among the laborers and materialmen, as provided by the statute.

The American Surety Company now contends that the retained percentage, amounting to $3,716.06, in the hands of the board of education of Lenoir county, should be turned over to it by reason of its contract of suretyship which contains, inter alia, a stipulation to the effect that in case of default by the contractor, the surety "shall also be subrogated to all of the rights of the principal; and any and all moneys or property that may at the time of such default be due or that thereafter may become due to the principal, under said contract, shall be credited upon any claim which the obligee may then or thereafter have against the surety, and the surplus, if any, applied as the surety may direct."

The plaintiffs, on the other hand, contend that said amount should be applied to the payment of their claims, being, as they are, laborers and materialmen. The appeal presents the single question as to who is entitled to this fund. The trial court held that it should be paid to the American Surety Company. We think the judgment is correct and that it must be affirmed.

It is conceded by all the parties that the bond executed by R. L. Blaylock and the American Surety Company was taken and given, in view of the provisions of C. S. § 2445, as amended by chapter 100, Public Laws 1923, requiring every county, city, town, or other municipal corporation, which lets a contract for building, repairing, or altering any building, public road, or street, to take from the contractor of such work (when the contract price exceeds $500) a bond, with one or more solvent sureties, before beginning any work under the contract, payable to said county, city, town, or other municipal corporation and conditioned "for the payment of all labor done on and material and supplies furnished for the said work," and upon which suit may be brought for the benefit of laborers and materialmen having claims. Warner v. Halyburton, 187 N.C. 414, 121 S.E. 756.

The statute, as amended, provides that every bond given to any county, city, town, or other municipal corporation, for the building, repairing, or altering of any public building, public road, or street, as required by this section, "shall be conclusively presumed to have been given in accordance therewith, whether such bond be so drawn as to conform to the statute or not, and this statute shall be conclusively presumed to have been written into every such bond so given." The amount of the bond is to be equal to the contract price when over $500 and not more than $2,000; when the contract price is between $2,000 and $10,000, the amount is to be determined by adding to $2,000, 35 per cent. of the excess of the contract price over $2,000; and when the contract price is over $10,000, the amount of the bond is required to be $2,000 plus 25 per cent. of the excess of the contract price over the sum of $2,000. It is further provided in the amended law that only one action may be brought on such bond, all claimants to be duly notified, which was done in the instant case, and, if the aggregate sum exceed the amount of the bond, the payments are to be prorated. "If the recovery on the bond shall be inadequate to pay the amounts found due to all the claimants, judgment shall be given to each claimant pro rata of the amount of the recovery."

The surety is also allowed, by paying into court in such suit the full amount of the penalty of the bond, to be relieved from any other or further liability thereon. Standard Electric Time Co. v. Deposit Co., 191 N.C. 653, 132 S.E. 808.

The principle is well established by many authoritative decisions, here and elsewhere, that, in determining the surety's liability to third persons on a bond given for their benefit and to secure the faithful performance of a building contract as it relates to them, the contract and bond are to be construed together. Morganton Mfg. Co. v. Andrews, 165 N.C. 285, 81 S.E. 418, Ann. Cas. 1916A, 763. The obligation of the bond is to be read in the light of the contract it is given to secure, and, ordinarily, the extent of the engagement entered into by the surety is to be measured by the terms of the principal's agreement. Ideal Brick Co. v. Gentry, 191 N.C. 636, 132 S.E. 800, and cases there cited.

It is stipulated in the present bond that "this bond is subject to the provisions of section 2445 of the Revised Statutes of North Carolina and amendments thereto." The right of the laborers and materialmen to recover on said bond is conceded, and it has been paid in full. The contest is over the retained percentages withheld under the contract and now in the hands of the owner.

In this connection, it may be well to bear in mind the distinction between the remedies afforded and intended to be afforded by the present statute, being applicable, as it is, to public works, and those given by the lien statutes which apply only to private works of a similar nature. Noland Co. v. Trustees, 190 N.C. 250, 129 S.E. 577.

C. S. § 2437, one of the lien statutes, in terms, provides that all subcontractors and laborers who are employed to furnish, or who do furnish, labor or material for the building, repairing, or altering of any house or other improvement on real estate, shall have a lien on said house and real estate for the amount of such labor done or material furnished, when notice thereof has been given as required by law; "but the sum total of all the liens due subcontractors and materialmen shall not exceed the amount due the original contractor at the time of notice given." Orinoco Supply Co. v. Eastern Star Home, 163 N.C. 513, 79 S.E. 964.

The policy of the lien law is to protect subcontractors and laborers against loss for labor done and materials furnished in building, repairing, or altering any house or other improvement on real estate, to the extent of the balance due the original contractor at the time of notice to the owner of claims therefor, but it is not provided that the owner shall be liable in excess of the contract price, unless he continue to pay after notice of claim from the subcontractor or laborer, and then only to the extent of such payments after notice. "After such notice is given, no payment to the contractor shall be a credit on or discharge of the lien herein provided." C. S. § 2438.

Where the original contractor has been paid in advance, or the owner has settled with him in full, prior to notice of any claim from a laborer or materialman for work done or material furnished and not paid for, there is no provision in any of the lien statutes whereby a subcontractor or laborer may acquire a lien against the property or sue the owner for the value of such claim. Rose v. Davis, 188 N.C. 355, 124 S.E. 576. Liens are given, to subcontractors and those who furnish labor, materials, and supplies, to the end that they may force collection from their debtor, the original contractor, and not for the purpose of rendering the owner primarily liable for such claims, except where proper notice has been given before settlement with the contractor. Morganton Mfg. Co. v. Andrews, supra.

But in the statute now under consideration (C. S. § 2445 [amended by Pub. Laws 1923, c. 100]), passed as a partial substitute for the lien statutes in an effort to...