Texas Fidelity & Bonding Co. v. Rosenberg Ind. School Dist.

• Decision Date: 25 April 1917
• Docket Number: (No. 7378.)
• Citation: 195 S.W. 298
• Court: Texas Court of Appeals
• Parties: TEXAS FIDELITY & BONDING CO. v. ROSENBERG INDEPENDENT SCHOOL DIST. et al.

195 S.W. 298

TEXAS FIDELITY & BONDING CO. v. ROSENBERG INDEPENDENT SCHOOL DIST. et al.

(No. 7378.)

Court of Civil Appeals of Texas. Galveston.

April 25, 1917.

Rehearing Denied May 17, 1917.

Appeal from District Court, Fort Bend County; Sam'l J. Styles, Judge.

Action by the Rosenberg Independent School District against the Texas Fidelity & Bonding Company and others, in which H. W. Greenway intervened. From adverse judgments, the named defendant appeals. Affirmed.

Cooper & Merrill, of Houston, for appellant. F. X. Joerger, of Rosenberg, and Huggins & Kayser and Bryan & Bryan, all of Houston, for appellees.

GRAVES, J.

Appellees, as trustees of Rosenberg independent school district, sued appellant bonding company, making the contractors, Shapley & Son, and their trustee in bankruptcy, parties, seeking to recover from the bonding company, as surety on the contract bond of the contractors, certain damages alleged to have accrued to the school district by reason of their failure to perform the conditions of a contract, by which they undertook to construct for the school district a certain school building at the town of Rosenberg. The contract alleged was in writing, and stipulated for the completion of the school building by October 1, 1913, and provided for a penalty of $10 per day for each and every day thereafter required to complete the same. The school district alleged that the contractors continued the work on the building until January 6, 1914, at which time, being unable to continue for lack of means, and having become insolvent, they abandoned the work, without any fault on the part of the school district, and delivered possession of the incompleted building to it; that the district took charge of the building on that date, for the purpose of completing the same according to the contract, but that it was not in fact completed until June 1, 1914, 240 days after the date fixed by the contract, and sought to recover from the bonding company, as such surety, the sum of $10 per day on account of the delay. The school district also sought to recover reasonable attorney's fee, alleged to be the sum of $240, and the further sum of $416.40 on account of insurance premiums claimed to have been paid for the contractors; also, other items of expense charged to have been incurred by the district in making certain repairs and alterations to the building as constructed. H. W. Greenway intervened, and likewise sought to recover from the bonding company a balance of $978, alleged to be due him from Shapley & Son on subcontract for certain plumbing work done by the intervener for the contractors on the building. The liability of the bonding company as to this intervention is based upon several clauses of the bond, which provide that the same is intended for the benefit of persons who may furnish labor and material on the contract, and may be sued upon by them, as is hereinafter referred to. A trial of the cause without a jury resulted in a judgment in favor of the school district against the bonding company for the sum of $2,594.36, and in favor of the intervener against the bonding company for $978, both with interest, and in favor of Shapley & Son on their plea of discharge in bankruptcy. Such further statement of the case as is deemed necessary will be made in what follows. The bonding company's appeal from this judgment was duly perfected and is now properly before this court for review.

A brief summary of the main provisions of both the contract and bond is the following:

(1) The bond was expressly made payable to, and for the use and benefit of, both the school district and all persons who might furnish labor and material under the terms of the contract, and of the assigns of such payees, and might be sued upon by any one of these beneficiaries as if executed to them in proper person.

(2) It further provided that:

If the contractors "shall in all things stand to and abide by and well and truly keep and perform the covenants, conditions and agreements in the contract entered into by and between the said J. M. Shapley & Son and the said Rosenberg independent school district, being date May 1, 1913, for the construction of the school building, and the performance of the work on lots in Rosenberg, Tex., as mentioned in the foregoing contract, and shall duly and promptly pay and discharge all indebtedness or liability that may be incurred by the said J. M. Shapley & Son and in carrying out said contract, and completing the same free from any mechanic's lien, and shall truly keep and perform the covenants, conditions and agreements as stipulated and mentioned and provided in the within and foregoing contract, and which are to be kept and performed at the time and in the manner and form therein specified, as well as all costs including attorney's fees, in enforcing the payment and collection of any and all indebtedness incurred by the said J. M. Shapley & Son and in carrying out the terms of said contract, and when so carried out then the above obligation to become null and void, otherwise to remain in full force and effect."

The contract recited that the bond was attached to and made a part of it, and further provided:

"* * * In consideration of the first party's completely and faithfully executing the aforesaid work, and furnishing all the materials therefor, so as fully to carry out this contract, and the design, according to its true spirit, meaning and intent by and at the time mentioned, and to the full and complete satisfaction of the said M. L. Waller, architect, and his superintendent, does hereby agree to pay, * * * on certificates of the superintendent from time to time as the work progresses, to wit: Eighty per cent. (80%) of the estimated value of the same, subject to conditions and reductions as hereinafter provided, estimates to be made by the architect or the superintendent. * * * Twenty per cent. of the contract price shall be held by the second party as security for the faithful completion of the work and building, and may be applied under the direction of the architect in the liquidation of any damages under this contract. * * * Ten per cent. of this contract price shall be retained by the second party for thirty days, as required by law for the protection of labor. * * *

"If the contractors shall at any time refuse or neglect to furnish the proper material or workmen, or otherwise fail and refuse to comply with the plans and specifications, such failure being certified to by the architect, then second party shall be at liberty (after three days' written notice to the contractors) to provide the proper material and workmen, and deduct the cost from the money then due, or to become due, the contractors, or for sufficient reasons to terminate the employment of the contractors and take charge of the premises and all material thereon, and complete the building according to plans and specifications, charging the expense to the contractors."

The following may be culled as the most directly material facts established by the evidence: That the contractors did abandon the work on January 6, 1914. That on that date the school district, having then on hand an unexpended balance of the contract price of $5,245, took possession of the building and completed it on April 1st thereafter, instead of June 1st, making 180 days' delay, not 240, as was alleged. That the district had previously paid for the contractors on insurance only $102.40, instead of the amount alleged. And that, after the abandonment by the contractors, it then paid without architect's certificates direct to the holders of the indebtedness out of this $5,245 balance the following items: $530.79 for labor, and separate amounts of $1,764.51 and $1,200 for materials —all of which either had been previously furnished to the contractors for the building, or had been contracted for by them, and were finally used in its construction. In paying them the school district took an assignment from the holders of these $530.79 and $1,764.51 accounts, and paid a draft with bill of lading attached for the $1,200 item; also, the aggregate sum of $2,057.75 for repairs and necessary expenses in completing the building. The total contract price was $22,645, and the total amount paid the contractors before they abandoned the work, all of which was paid under architect's certificates, was $17,400, leaving above-stated balance of $5,245. That no money was paid out before the school district took possession without architect's certificates, and none after that time with them.

While there was and is some dispute as to whether or not the $17,400 paid out by the school district prior to taking charge of the work exceeded the 80 per cent. of the labor and material, as called for in the contract depending to some extent upon how the contract should be construed in those respects, we do not regard that question as important, because the proof was undisputed that the district did not know it, if there was any excessive estimate by the architect, and acted honestly, fairly, and in good faith in making the payments; such payments, made under these circumstances, were conclusive, since there were neither allegations nor proof of fraud. Kilgore v. Baptist Society, 89 Tex. 465-469, 35 S. W. 145; McKenzie v. Barrett, 43 Tex. Civ. App. 451, 98 S. W. 229.

Through several assignments, appellant attacks the judgment claiming that the agreements to retain 20 per cent. and 10 per cent., respectively, of the contract price, to make payments only upon architect's certificates, to give three days' written notice to the contractors, were each and all breached by the school district in making the payments above detailed, and in taking possession of and completing the building, under the circumstances shown, and that such breach of the several different conditions of the contract operated to release it from all liability on the bond. It...