Town of Gastonia v. McEntee-Peterson Engineering Co.

• Decision Date: 25 November 1902
• Parties: TOWN OF GASTONIA et al. v. McENTEE-PETERSON ENGINEERING CO. et al.
• Court: North Carolina Supreme Court

42 S.E. 858

131 N.C. 363

TOWN OF GASTONIA et al. v. McENTEE-PETERSON ENGINEERING CO. et al.

Supreme Court of North Carolina

November 25, 1902

Appeal from superior court, Gaston county; Starbuck, Judge.

Action by the town of Gastonia against the McEntee-Peterson Engineering Company and others. From a judgment in favor of plaintiff, the American Surety Company appeals. Affirmed.

A provision in a contractor's bond binding him to indemnify a town from all suits against it for or on account of any injuries or damages sustained by any person, structure, or property, by or from the contractor, or in consequence of any act or omission of himself or his servants or agents, did not cover a liability of the town for counsel fees incurred in defending a garnishment proceeding brought against it by a creditor of the contractor.

The statement of case in the appeal of the Post-Glover Electric Company and the Illinois Insulated Wire Company in this case (42 S.E. 857) is a sufficient statement in this appeal.

Julius C. Martin, for appellant.

Burwell Walker & Cansler, for appellees.

CLARK J.

The defendant engineering company entered into a contract with the town of Gastonia to construct a waterworks and sewerage system and an electric lighting system in and for said town of Gastonia, and, with its codefendant the American Surety Company of New York, entered into a bond to pay all claims for materials used and work and labor done in the construction of said systems; and there is a balance due on said contract by the town of Gastonia, which is claimed by the said engineering company and also by persons who furnished material and performed work and labor in the construction of the said systems under the contract between the town and the engineering company, the said balance being $1,560.86; and the other plaintiffs seek by this action to charge the other defendant, the American Surety Company, upon its indemnity bond for $3,000, given as aforesaid, for the amounts alleged to be due them for work and labor performed and materials furnished in the construction of said systems and, to the end that the amounts due for materials and labor may be determined, all persons holding such claims were properly made coplaintiffs.

The contract between the town of Gastonia and the engineering company contains the following: Section A of the contract provides that the contractor is required to furnish all materials and labor required in the construction of the public works embraced in said contract. Section 5 provides that "the contractor further agrees that he will, and concurrent with this contract, does, execute a bond in the penal sum of $3,000, in such form and with such sureties as may be approved by the mayor and aldermen of the town of Gastonia, conditioned to indemnify and save harmless said town and board from all suits *** brought against said town or said board or both *** for or on account of any injuries or damages sustained or received by any person, structure, or property by or from said contractor, *** or by or in consequence of any act or omission of said contractor, his servants or agents, and the faithful performance of this contract, and for the payment of all material used, and wages of all laborers employed by said contractor." Section 10 provides that the said contractor "hereby further agrees that it shall not be entitled to demand or receive payment except in the manner set forth in this agreement, and further agrees that it will produce full releases of all claims from all persons who have furnished machinery or labor for the work, whenever the board may require it." The bond executed by the surety company provides that "if the above-bounden, the McEntee-Peterson Engineering Company, its heirs, executors, administrators, successors, or assigns shall in all things stand to and abide by, and well and truly keep and perform, the terms, covenants, conditions, and agreements in such contract contained, on its part to be kept and performed, and each of them, at any time, and in the manner and form therein specified, then said obligation shall be null and void."

Though no mechanic's lien could be filed against the property in the hands of the town, it was competent for the parties to contract, and they did contract, that the engineering company should pay for "all materials used, and wages of all laborers employed by said contractor," and the surety company became responsible for the execution of that stipulation. The engineering company has defaulted in this respect to an amount greater than the penalty of the bond executed against the American Surety Company, to wit, in the sum of $3,907.64, for material furnished by several parties who have been made coplaintiffs in this action for the purpose of ascertaining and determining the amount of the indebtedness severally due them. The town desired to know whether it should pay said balance to the engineering company, or, in view of the fact that it had stipulated with said company, and required surety, that the company should pay off all claims for labor and materials before calling on the town for settlement, whether it was not its duty to require compliance with this requirement in favor of the claimants for labor and material. Those claimants, being the beneficiaries of the contract, could have brought their separate actions on said contract against the engineering company and its surety; and it was eminently proper, and saves multiplicity of suits, the time of the court, and unnecessary court costs, that they should be coplaintiffs in this action, to the end that the entire matter should be settled and determined in one action. In Gorrell v. Water Supply Co., 124 N.C. 328, 32 S.E. 720, 46 L. R. A. 513 70 Am. St. Rep. 598, it was held, after careful consideration and full discussion, that the beneficiary of a contract, though not a party or privy thereto, can maintain an action thereon. In that case the beneficiaries, the citizens of the town, were ascertained by reference to the nature of the contract, but in this case the contract is more specific, and points out those who shall furnish labor or material as specially designated to be protected. The contract requires surety for such stipulation, and provides that the town cannot be called upon for settlement by the engineering company until receipts for such claims are furnished by the company. It was a wise, thoughtful, and considerate provision, inserted by the town, requiring the engineering company, a nonresident corporation, to pay the labor and material men, who are usually residents of the town or vicinity, before it could claim any...