Sherman v. Cate

• Decision Date: 15 April 1929
• Citation: 16 S.W.2d 25
• Parties: SHERMAN v. CATE et al.
• Court: Tennessee Supreme Court

Page 25

16 S.W.2d 25

SHERMAN v. CATE et al.

Supreme Court of Tennessee.

April 15, 1929.

Appeal from Chancery Court, McMinn County; T. L. Stewart, Chancellor.

Suit by Tom Sherman against J. C. Cate, the United States Fidelity & Guaranty Company, and others. Judgment for complainant was modified by the Court of Appeals and recovery allowed against defendant last named, and it appeals. Decree of Court of Appeals reversed in part.

Anderson & Word, of Knoxville, and James Clark, of Athens, for complainant Sherman.

Burn & Michael, of Sweetwater, for United States Fidelity & Guaranty Co. and Young & Stoner Const. Co.

Paul R. Stewart and E. B. Madison, both of Athens, for McMinn County Board of Education.

CHAMBLISS, J.

This suit was brought by Sherman to recover for materials furnished to Young & Stoner Construction Company, and used in erecting a public school building at Riceville, under contract with the McMinn county board of education. A lien was claimed against the building, and the United States Fidelity & Guaranty Company was made a defendant, and relief prayed against it as surety on a bond given by it to indemnify the board of education; and, in the event the bond given was not held to be a statutory bond inuring to the benefit of complainant, then for a decree against the individual members of the board on account of their failure to take such a bond, as required by the Act of 1899, c. 182.

The members of the board of education denied liability to Sherman, setting up their procurement of a statutory bond, but by cross-bill sought a decree against the guaranty company, in the event they should be held liable.

The chancellor construed the bond to be a common-law and not a statutory bond, but decreed liability thereon in favor of Sherman. From his decree, the guaranty company appealed, insisting (1) that the bond was a statutory bond; and (2) that Sherman could not recover because of his failure to file an itemized claim within 30 days, as required by the act. Sherman and the board members filed the record for writ of error; he seeking judgment against the board members, and they judgment against the guaranty company.

The Court of Appeals agreed with the chancellor as to the character of the bond, but (1) denied Sherman recovery thereon for want of privity; and (2) held the members of the board individually liable to Sherman because of their failure to comply with the statute in procuring a statutory bond for his protection; and (3) gave these members of the board judgment over against the guaranty company, on the theory that the guaranty company was, as to them, estopped to deny the statutory character of the bond. The guaranty company alone is in this court by petition, which has been granted, complaining of the decree against it in favor of the members of the board, leaving in force the decree against the members of said board in favor of Sherman.

This court has reached the conclusion that the bond in question should be construed to be a statutory bond, being led to this conclusion by several considerations.

This was quite obviously the intention of the parties to the bond contract. It was so insisted by both the obligor, surety company, and the obligees. The construction of the parties is always persuasive. In Canton Cotton Mills v. Overall Co., 149 Tenn. at page 29, 257 S. W. 402, this court said: "The rule of `practical construction' is one now widely recognized, and is thus well stated: `The interpretation given by the parties themselves to the contract as shown by their acts will be adopted by the Court, and to this end not only the acts, but the declarations of the parties may be considered.' 8 Williston on Contracts, par. 623, citing many authorities, including State v. Board of Trust, 129 Tenn. 279, 329, 164 S. W. 1151. See, also, Chicago v. Sheldon, 9 Wall. 50, 19 L. Ed. 594; Yowell v. Life Ins. Co., 141 Tenn. 70, 90, 206 S. W. 334."

Indeed, if it were necessary, reformation of the contract might properly be decreed in a case like this, where both parties agree as to the...