State ex rel. Union Indem. Co. v. Shain

• Decision Date: 06 December 1933
• Citation: 66 S.W.2d 102,334 Mo. 153
• Parties: State of Missouri at the Relation of Union Indemnity Company, a Corporation, Relator, v. Hopkins B. Shain, Francis H. Trimble and Ewing C. Bland, Judges of the Kansas City Court of Appeals
• Court: Missouri Supreme Court

66 S.W.2d 102

334 Mo. 153

State of Missouri at the Relation of Union Indemnity Company, a Corporation, Relator, v. Hopkins B. Shain, Francis H. Trimble and Ewing C. Bland, Judges of the Kansas City Court of Appeals

Supreme Court of Missouri

December 6, 1933

Writ quashed.

Watson Ess, Groner, Barnett & Whittaker for relator.

(1) The opinion of the Court of Appeals, in holding that the contract requirement of a written estimate and certification thereof is not for the benefit of the surety, is erroneous in law and in direct conflict with the last previous holdings of this court. Taylor v. Jeter, 23 Mo. 244; Southern R E. & Finance Co. v. Bankers Surety Co., 273 Mo. 293; State ex rel. Seibel v. Trimble, 299 Mo. 164; Evans v. Graden, 125 Mo. 72. (2) The opinion of the Court of Appeals, in holding that the diversion of funds made possible by anticipated payments for the purpose of repaying the Russell Sales & Service Company on account of its previous loans does not constitute prejudice to the surety is erroneous in law, in direct conflict with the terms and provisions of the statute, and in direct conflict with the last previous rulings of this court. See authorities under Point I, supra; Sec. 2890, R. S. 1929. (3) The opinion and decision of the Court of Appeals, in holding untenable the contention of defendant that the contract in suit must be given the construction placed thereon by the parties, is erroneous in law and in direct conflict with the last previous rulings of this court. Clayton v. Wells, 324 Mo. 1176; McFarland v. Gillioz, 327 Mo. 690.

Mahan Mahan & Fuller for respondents.

Ferguson, C. Sturgis and Hyde, CC., concur.

OPINION

FERGUSON

Certiorari seeking to quash the opinion of the Kansas City Court of Appeals in the case of David A. Chernus doing business as the Chernus Construction Company against L. J. Kennedy and J. B. Coats, doing business as the Kennedy-Coats Construction Company and the Union Indemnity Company, a Corporation, reported in 55 S.W.2d at page 744. The action was based upon an indemnity bond executed by the Union Indemnity Company as surety for the Kennedy-Coats Company in the performance of a road construction contract. Trial was had in the Circuit Court of Cole County. By stipulation a jury was waived and the cause tried to the court; the finding and judgment of the trial court was for plaintiff in the sum of $ 1796.41 with an attorney's fee of $ 300 making an aggregate of $ 2096.41 from which judgment the defendant Union Indemnity Company appealed. The appeal went to the Kansas City Court of Appeals and that court in the opinion which is, by this proceeding, here for review affirmed the judgment of the trial court on condition that plaintiff remit the sum of $ 300 allowed as attorney's fee. The indemnity company alleging the opinion to be in conflict with prior decisions and rulings of this court then applied for and was granted the writ herein.

We look solely to opinion of the Court of Appeals for the facts and in making a statement thereof and in outlining the case draw upon the opinion by way of numerous quotations therefrom. The plaintiff, Chernus, was awarded a contract for the construction of a section of a State Highway in Caldwell County. He "sublet the grading work" specified in his contract with the State Highway Commission to the Kennedy-Coats Construction Company. To insure "the performance of said subcontract defendant Union Indemnity Company executed a bond . . . in which the Kennedy-Coats Construction Company was principal, the Union Indemnity Company surety and plaintiff the obligee." The defendant indemnity company was engaged in the surety business for compensation and executed the bond for a specified compensation which was paid. The subcontract provided that the Kennedy-Coats Company was to be paid the price fixed by the original contract between Chernus and the State Highway Commission for said grading work less five per cent to be retained by Chernus. The work called for by the subcontract was completed by the Kennedy-Coats Company and accepted by the State Highway Commission, but the Kennedy-Coats Company "failed to pay certain laborers and materialmen and plaintiff instituted this suit." Certain of such claims which plaintiff alleges he, as the original contractor, was compelled to pay are enumerated in the petition with other claims of a like nature which plaintiff alleges he considers lienable and collectible and upon which demand had been made against him. Some of these items were eliminated and the trial court, after making certain findings of fact later referred to, entered judgment for plaintiff in the amount and as aforesaid upon the remaining items. The Kennedy-Coats Company made default. The original contract between Chernus and the State Highway Commission provided that no payments on account of the work would be made by the Highway Commission to the contractor "unless and until the highway engineer" made a monthly estimate in writing of the work performed and "materials in place complete during the preceding month" and "the value thereof at the unit prices contracted" and that "from the amounts so ascertained" ten per cent should be retained "until after the completion of the entire work and the balance . . . certified to the Commission for payment" and a like provision was incorporated in the subcontract. One defense pleaded by the defendant indemnity company was to the effect that in making payments to the Kennedy-Coats Company during the progress of the work plaintiff failed to conform to the method of payment prescribed and payed said Kennedy-Coats Company "large sums of money in excess of the sums due and owing to said company . . . to the prejudice and damage" of the indemnity company. The trial court made a comprehensive finding of facts and the Court of Appeals held there was substantial evidence to support such finding and the judgment thereon. The trial court found that in the performance of the subcontract the Kennedy-Coats Company failed and refused to pay laborers and materialmen as itemized and set out in the finding and that plaintiff "became legally obligated to pay" and did pay said claims aggregating $ 3,858.24; that other such claims which plaintiff was "legally obligated to pay" but had not yet paid, which were listed, aggregated $ 680.97; that the total for which plaintiff was thus liable was $ 4,539.21; that plaintiff under the provision of the original contract requiring ten per cent to be retained had duly retained and held "as the balance earned by the Kennedy-Coats Company in the performance of the subcontract, the sum of $ 2,397.60; and that after deducting said balance from the sum (above stated) which plaintiff was legally obligated to pay "plaintiff has suffered a pecuniary loss by the failure of said Kennedy-Coats to pay said claims in the sum of $ 2,141.61. The finding of the trial court is set out in the opinion and that part thereof which relates to the defense of alleged anticipated and overpayments made to the Kennedy-Coats Company in the progress of the work, and which are alleged to have been made contrary to the method of payment prescribed by the contract, is found in paragraphs 7, 8, 9, 11 and 12 of such finding as follows:

"7. The Court finds that during the performance of said general contract by the plaintiff and said subcontract by said Kennedy-Coats said Highway Commission, in conformity with said general contract, at monthly intervals caused its engineer to estimate in writing the amount of work performed under said contracts during the preceding month and to certify the same to said Highway Commission for payment; that payments were made to the plaintiff by said Highway Commission in accordance with said written estimates of twenty to twenty-five days after the actual estimates were made by the engineer.

"8. The Court further finds that the plaintiff, at various times during the time the road in question was under construction made payments to the Kennedy-Coats Construction Company prior to the time of the receipt of the engineer's estimate for the current month; that said construction work progressed continuously to completion; that the engineer's estimate was received from twenty to twenty-five days after the actual estimate was made on the job; that while some of such payments were made previous to the receipt of engineer's estimate, yet in truth and in fact the work had been progressing continuously and at no time did the plaintiff make any payment during the progress of the work in excess of the amount actually earned by the said Kennedy-Coats Construction Company.

"9. The Court further finds that the defendant Indemnity Company was at no time prejudiced or injured by the payments so made as aforesaid, and that the money so paid by the plaintiff was used for necessary labor, material and supplies going into said construction work.

"11. The Court finds that on the final estimate being made for the work done under said subcontract, the said Kennedy-Coats Construction Company was shown to have earned under said contract the sum of $ 27,427.98, after deducting the 5% due the plaintiff under the terms of said contract; that under the terms of said contract the plaintiff should have retained from the amount due said company an amount equal to 10% of the amount earned as aforesaid; that the amount which should have been retained under the said contract was $ 2,742.80 whereas in truth and in fact, the plaintiff only retained the sum of $ 2,397.60; that by such over-payment the defendant Union Indemnity Company was prejudiced to the extent and amount of $ 345.20, and said defendant should have credit on plaintiff's claim for the amount last aforesaid.

"12. The Court further finds that after allowing...