Southern Surety Co. v. Guaranty State Bank of De Leon

• Decision Date: 14 May 1925
• Docket Number: (No. 1726.)
• Citation: 275 S.W. 436
• Parties: SOUTHERN SURETY CO. v. GUARANTY STATE BANK OF DE LEON et al.<SMALL><SUP>*</SUP></SMALL>
• Court: Texas Court of Appeals

275 S.W. 436

SOUTHERN SURETY CO. v. GUARANTY STATE BANK OF DE LEON et al.^*

(No. 1726.)

Court of Civil Appeals of Texas. El Paso.

May 14, 1925.

Rehearing Denied June 11, 1925.

Appeal from District Court, Comanche County; J. R. McClellan, Judge.

Suit by the Southern Surety Company against the Guaranty State Bank of De Leon, Higginbotham Bros. & Co., and another. From a judgment for defendants, and for defendant last named on counterclaims, plaintiff appeals. Reformed and affirmed.

John T. Suggs, of Denison, and Y. W. Holmes, of Comanche, for appellant.

Hampton & Hampton, of De Leon, G. E. Smith and Jerome P. Kearby, both of Comanche, and Oxford & Johnson, of Stephenville, for appellees.

WALTHALL, J.

Southern Surety Company, a corporation, brought this suit against the Guaranty State Bank of De Leon, Texas, hereinafter called the bank, Higginbotham Bros. & Co., a corporation, hereinafter called Higginbotham, and W. O. Allen, and sought judgment against each under the following circumstances:

On the 23d day of August, 1921, Comanche county, acting by and through its commissioners' court, entered into a written contract with Harris & Powell, a partnership, in which contract Harris & Powell obligated themselves to furnish all labor, material and equipment and build and construct for the county certain roads, bridges, and similar structures in consideration of the moneys therein agreed to be paid. Harris & Powell were to be paid on certain stated periodical estimates, 10 per cent. to be retained by the county on the estimates until the completion of the job. Harris & Powell executed the penal bond required by law and conditioned as the law requires (article 6394f, Vernon's Sayles' Civil Stat. 1914) with the Southern Surety Company, appellant here, as surety. To secure appellant against loss by reason of its being surety on their bond, Harris & Powell, on executing the bond, assigned to appellant their estimates and retainage on their contract with the county. Harris & Powell shortly thereafter entered upon the performance of their contract and so continued until about the 25th day of August, 1922. Harris & Powell were adjudged bankrupt on August 28, 1922, but they and their subcontractors continued the work under the contract until September 8, 1922, when the contractors and subcontractors and all employees under both, abandoned the contract, and at the request of the county the surety company took up the work under its contract as surety, and carried it forward to completion in May, 1923. During the progress of the work under the contract, Harris & Powell became indebted to Higginbotham for supplies and materials used in the furtherance of the work under their contract, and also became indebted to the bank for borrowed money. About June 1, 1922, Harris & Powell were unable financially to proceed further with their work under their contract, and neither Higginbotham nor the bank was willing to extend further credit. While extending credit to Harris & Powell during the progress of the work as above, the bank and Higginbotham, by their contract, with Harris & Powell of June 1, 1922, had first and second liens, respectively, on the estimates and retainage under the contract with the county.

In order that the work under the contract with the county might proceed, on the 1st day of June, 1922, Harris & Powell, Higginbotham, and the bank entered into a written agreement, its terms to be more fully stated where necessary, by which Higginbotham would furnish additional supplies in specified amounts, and the bank would collect the estimates and pay out the money collected, first for labor and for such materials and supplies furnished, a part of the remainder to be applied on the bank's claim, and any balance remaining to be applied to the claim of each Higginbotham and the bank. From and after the 1st day of June, 1922, Harris & Powell proceeded with the work under said agreement of June 1, 1922, until their abandonment of the contract with the county on September 8, 1922. Under the above agreement, the bank collected the estimates for the month of June and deposited same to the credit of Harris & Powell, and made payment on checks of Harris & Powell to Higginbotham for all goods sold Harris & Powell from June 1st, to the date of the June payment, and the bank collected the July estimate and deposited same to the credit of Harris & Powell, and on checks of Harris & Powell made payment to Higginbotham for all goods sold after June 1st and not paid for to said date. On August 25th, the bank collected $13,300, the estimate for August, and placed same to the credit of Harris & Powell on its books, and failed and refused to pay Higginbotham for goods sold to Harris & Powell to the amount of $3,088.29.

The Southern Surety Company, after the abandonment of the work by Harris & Powell, acting under its obligation, paid labor claims which arose during the period the parties were acting under the triangular agreement of June 1, 1922, and to recover which sums so paid it sued the bank for moneys collected on the estimates and made Higginbotham a party to the suit as claiming an interest in the money.

The claim of the surety company as to the bank seems to be that in collecting the estimates from the county under the agreement of June 1st, the bank was a trustee as to the amounts collected, alleged to be the sum of $14,000 for such persons as might labor and furnish material to the contractors of said work during the times referred to, but that notwithstanding the conditions and provisions of said agreement of June 1st under which such collections were made, and its trusteeship of said funds collected, the bank failed and refused to disburse any of the funds so collected, but has appropriated the entire amount to its own use and benefit. That by reason of its suretyship on the contractor's bond it became liable as surety for the payment to persons furnishing labor, in the performance of the contract with the county, not paid for by the contractors. The surety company shows a large number of persons to whom it was so liable, and to whom it made payment, and alleges that by reason of its liability and such payment it is subrogated to all of the rights previously vested in such laborers.

The surety company shows that W. O. Allen was one of the subcontractors of Harris & Powell to whom they owed a large sum of money and which it was compelled to pay and did pay, and that at the time of payment and in consideration of such payment, Allen assigned and transferred said claim to it, and that it is now the owner and holder of said claim, and now seeks recovery from the bank of the amount paid.

Higginbotham filed its second amended original and cross bill on October 22, 1923, and answered by general denial, except such matters as are admitted. It pleaded that during the progress of the work it furnished to Harris & Powell, personally, material and supplies used in and about the construction of the work to June 1, 1922, to the value of $18,579.87, for which Harris & Powell failed to pay, but approved its account for said amount and executed their note for said sum, which note is past due and unpaid. It alleges that on June 1, 1922, it declined to further furnish supplies to Harris & Powell, and that to induce it to furnish supplies to Harris & Powell, the agreement of June 1, 1922, as above, was entered into that the work might go forward. Higginbotham pleads its several provisions that in an effort to carry out said agreement, at the instance of Harris & Powell, it advanced to them and their subcontractors supplies and material from June 1 to September 8, 1922.

Higginbotham sued Comanche county, pleaded over against the bank, and filed a cross-action against the surety company, the issues and the several amounts stated, and without stating the pleading as to the several items, are substantially as follows:

It sues the county for the funds and retainage and that it be decreed title to same, and the county be directed to pay to it to the extent of its indebtedness against Harris & Powell, the sum of $23,159.49; that its claim of $3,385.33 of the $13,500 collected from the county by the bank be held superior to the claim of the surety; that its claim to the sum of $3,579.87 of said fund of $14,500, be adjudged superior to any claim of the surety, except labor claims originating after June 1st; that its claim to one-half of the excess of said funds, if any, after providing for said two above claims, and after the bank's $2,500, be held superior to the surety's claim on said excess; that it have judgment against the bank for $3,385.33, for unpaid account for supplies and material furnished Harris & Powell after June 1st; that it have judgment against the bank for the further sum of $3,579.87, to be applied as a credit on its debt against Harris & Powell in the sum of $18,579.83; that it have judgment against the bank for one-half of any excess of the $13,500 after allowing its two claims above, and the bank the $2,500, as a credit on the indebtedness of Harris & Powell in the sum of $18,579.87; that it have judgment against the surety for $3,300 being one-half of the sum the surety collected from the county for accrued earning of Harris & Powell for labor and material from June 25 to September 8, 1922, and that same be applied as a credit on the same $18,579.87, indebtedness of Harris & Powell; that it have judgment against the surety for $7,279,32, the amount due Rainey & Humphrey by Harris & Powell for labor, said account now owned by it, said amount to be applied as a credit on said $18,579.87; that it have judgment against the surety for $5,818.60, the amount due R. J. Brule by Harris & Powell for labor, said claim now owned by it, and to be applied as a credit on the debt of $10,000 owing by Brule and Harris & Powell to it; that it have judgment against the surety for $1,269.29, the amount due O. W. Barton by Harris &...