Southern Surety Co. v. Illinois Powder Mfg. Co.

• Decision Date: 05 July 1930
• Docket Number: No. 9441.,9441.
• Parties: SOUTHERN SURETY CO. v. ILLINOIS POWDER MFG. CO.
• Court: Texas Court of Appeals

31 S.W.2d 314

SOUTHERN SURETY CO. v. ILLINOIS POWDER MFG. CO.

No. 9441.

Court of Civil Appeals of Texas. Galveston.

July 5, 1930.

Rehearing Denied October 2, 1930.

Appeal from District Court, Harris County; Ewing Boyd, Judge.

Suit by the Illinois Powder Manufacturing Company against A. J. Harty & Co., a partnership, the individual members thereof, and another. From the judgment rendered, defendant Southern Surety Company appeals.

Reversed, and cause dismissed.

J. T. Suggs, Jr., of Dallas, for appellant.

Campbell, Myer & Foster, of Houston, for appellee.

PLEASANTS, C. J.

This suit was brought by the appellee, Illinois Powder Manufacturing Company against A. J. Harty & Co., a partnership, and the individual members of the partnership, as principals, and against the appellant surety company as surety, to recover the purchase price of goods, wares, and merchandise sold and delivered to Harty & Co. by the plaintiff.

Adopting the convenient designation of the parties used in appellant's brief, the firm of Harty & Co., engaged in the general contracting and construction business, will hereinafter be referred to as the contractor, the appellant surety company as the surety, and the appellee powder company as the claimant.

The following summary of the pleadings of the parties is copied from appellant's brief and adopted as sufficient for the elucidation of the questions discussed and decided in this opinion:

"The plaintiff below, by its Second Amended Original Petition, on which it went to trial, after formal allegations of residence, incorporation, permits to do business, etc., alleged briefly, the following facts:

"That in March, 1926, the defendant Contractor entered into a written contract with a Mississippi Drainage District, a municipal subdivision and corporation of the State of Mississippi, for certain excavation work, including clearing and grubbing, to be done in Sunflower and Leflore County Mississippi; and that the defendant Contractor was engaged in that work during the year of 1926, in the State of Mississippi. That during said year the plaintiff sold to the defendant Contractor, for use in said job, certain blasting caps, wire, fuse, and dynamite, of the aggregate price of $1,258.44. Supplementing this allegation, plaintiff attached to its petition an itemized and verified account of the material sold, in the usual form provided by statute for suit on sworn accounts.

"Plaintiff further alleged that to secure the performance of the said contract, the defendant Contractor executed and delivered to the Drainage District a surety bond in the sum of $134,880.00, executed by Southern Surety Company as surety. In this connection, plaintiff alleged that while the said bond obligated the Surety thereon to indemnify the Drainage District only, a law of the State of Mississippi applicable to such bonds, required the additional obligation that the Contractor should make payment to all persons supplying material and labor for said job; and that this bond should be construed by the court as containing the obligations required by such Mississippi law. Plaintiff alleged that both the Contractor and the Surety had refused to pay for the material supplied by the plaintiff; that the Contractor had abandoned the work on or about August 12, 1926; and that plaintiff had done and performed all things required by the Mississippi statute, and was entitled to the enforcement of the terms thereof. Plaintiff then prayed for judgment against the Contractor and the Surety for its debt, with legal interest from September 1, 1926.

"Nowhere in its petition did the plaintiff allege that the material in question was used in the prosecution of the work in question.

"The defendants, A. J. Harty & Company, and the individual members thereof filed no pleadings whatever.

"The defendant Southern Surety Company, appellant herein, filed a plea to the jurisdiction of the court, alleging: that the Mississippi statute especially pleaded by plaintiff was in force at all times mentioned in plaintiff's petition, and that the contract in question was made, and the work thereunder performed in the State of Mississippi; that the bond sued upon was executed under the terms of, and pursuant to said statute of Mississippi; that said statute provides that only one action may be brought pursuant thereto, notice of which shall be published in the county of performance of the work, and further provides for the proration of the penal sum of said bond among claimants; that such statute contemplates an action on such a bond only in a court of competent jurisdiction in the State of Mississippi, and that there shall not be a multiplicity of suits upon such a bond; that such statute provides that the surety on such a bond shall not be liable beyond the penal sum of the bond; that no reason exists why the plaintiff could not prosecute its suit in Mississippi; but that if plaintiff be allowed to prosecute its suit in Texas, the Surety, through no fault of its own, might be deprived of its right to be sued in only one action on its bond, or its right to be held only to the extent of the penalty thereof; or, through no fault of their own, other claimants would be deprived of the protection of such bond. The Surety then prayed that the cause be dismissed without prejudice, and that the court refuse to take jurisdiction thereof.

"The Surety (appellant) then pleaded a general demurrer, a general denial, and a special plea of its suretyship, praying for judgment over against its principals for such amount as it might be held liable to plaintiff.

"Trial was had before the court without a jury, and resulted in a judgment for the plaintiff, overruling appellant's plea to the court's jurisdiction and its general demurrer, and decreeing judgment for plaintiff for the full amount of its debt and interest as prayed for, against this appellant and its principals. Judgment over against the principals in favor of this appellant was also rendered."

Under appropriate assignments and propositions appellant's brief vigorously and ably assails the ruling of the trial court in not sustaining appellant's plea to the jurisdiction, and in assuming jurisdiction of appellee's suit.

The pleadings and evidence show that appellee is an Illinois corporation, having a permit to do business in Texas and also in the state of Mississippi. The articles, for the purchase price of which this suit was brought, were sold by appellee to A. J. Harty & Co. for use in the performance of a contract undertaking of that firm entered into in March, 1926, with a drainage district in the counties of Leflore and Sunflower in the state of Mississippi for clearing, grubbing, and excavation in the construction of a drainage system for the district. This contract binds the contractor to furnish all labor and material required in its performance, and provides for compliance by the contractor in the performance of the work with all federal, state, and local laws, ordinances, and regulations, and further provides that the contractor furnish an indemnity bond to secure the faithful performance of the contract. Such bond, payable to the drainage district, was furnished by the contractor, with appellant, an Iowa corporation having a permit to do business in the states of Texas and Mississippi, as surety. This bond does not contain the express obligation that the contractor would make prompt payment for labor and material used in the performance of the contract, but, since the statute of the state of Mississippi (Hemingway's Code Miss. 1927, § 2617), which was pleaded and relied on by both appellee and appellant, requires such bond to contain that obligation, it must be read into the bond. This statute (Hemingway's Code Miss. 1927, §§ 2620-2622) further provides that only one action shall be brought on the bond, notice of which shall be published in the county or town in which the contract is performed, and in which all parties interested shall intervene; and that, in event the penalty of the bond shall be insufficient to pay all claims adjudged against it, the surety may pay the full amount of the penalty into court for pro rata distribution among the judgment creditors of the contractor, and be discharged from further liability.

Prior to the institution of this suit in August, 1927, the firm of Harty & Co. had dissolved and abandoned its contract and two members of the firm were residents of Texas and within the jurisdiction of the trial court. Notice of the bringing of this suit was published in the state of Mississippi as required by the statute of that state.

Upon this state of the record we agree with appellant that the trial court erred in not sustaining the plea to the jurisdiction of the court. Unlike the usual questions of jurisdiction, which are only dependent upon the legal power or authority of the court over the parties and the intrinsic subject-matter of the suit, the question here presented must be considered in the light of the broad principles of state comity and public policy.

The general rule that a defendant in a transitory action based upon a contract may be sued in whatever jurisdiction he may be found, has, among other well-marked limitations, the requirement that, when the contract liability upon which the suit is based is one imposed by a statute which provides a remedy for its enforcement, that remedy is exclusive unless made cumulative by the statute, and a suit brought to enforce the right created by the statute must be brought in the jurisdiction of its creation.

That the contract sued on in this case is not a common-law obligation seems to be settled by the decisions of the courts of this state. Oak Cliff Lumber Co. v. American Indemnity Co. (Tex. Civ. App.) 266 S. W. 429; General Bonding & Casualty Co. v. Waples Lumber Co. (Tex. Civ. App.) 176 S. W. 651; American Indemnity Co. v. Burrows Hardware Co. (Tex. Civ. App.) 191 S. W. 574; Murphy v. Huey & Philp Hardware Co. ...