Trinity Universal Ins. Co. v. Bellmead State Bank of Waco, 16604

• Decision Date: 29 October 1965
• Docket Number: No. 16604,16604
• Citation: 396 S.W.2d 163
• Parties: TRINITY UNIVERSAL INSURANCE COMPANY, Appellant, v. BELLMEAD STATE BANK OF WACO, Texas, Appellee.
• Court: Texas Court of Appeals

Page 163

396 S.W.2d 163

TRINITY UNIVERSAL INSURANCE COMPANY, Appellant, v. BELLMEAD STATE BANK OF WACO, Texas, Appellee.

No. 16604.

Court of Civil Appeals of Texas, Dallas.

Oct. 29, 1965.

Rehearing Denied Nov. 19, 1965.

Brundidge, Fountain, Elliott & Churchill, L. E. Elliott, Dallas, for appellant.

John B. McNamara, Jr., Waco, for appellee.

WILLIAMS, Justice.

Appellant Trinity Universal Insurance Company, also referred to as Surety, appeals from a summary judgment of the District Court of Hunt County awarding appellee Bellmead State Bank of Waco, Texas, also referred to as Garnishor, the sum of $24,966.84 which had been tendered into court by Farmers Electric Cooperative, Inc., referred to as Cooperative, and being the balance of the proceeds of a contract for the construction of a building which Marble Construction Company, Inc., as contractor, agreed to construct for Cooperative, and for the performance of which Trinity Universal Insurance Company bound itself as surety. Bellmead Bank claimed that as a garnishor its right to the fund was superior to the rights of the Surety. The district court, in sustaining appellee's motion for summary judgment, and in overruling appellant's motion for summary judgment, found that appellant had failed to secure a protected assignment pursuant to Art. 260-1, Vernon's Ann. Revised Civil Statutes of Texas, and that appellee, as Garnishor, was entitled to the funds.

Appellant, in its points of error, contends that the trial court erred in holding that Art. 260-1, V.A.C.S., operated to nullify Surety's rights as subrogee to enforce the contractual provisions of the construction contract. The facts are stipulated by the parties, as follows:

'1.

'On or about July 3, 1962, Marble Construction Company, Inc., executed and delivered to Surety an application for a surety bond, conditioned for the performance of a contract for the construction of a building for FARMERS ELECTRIC COOPERATIVE, INC., Garnishee, a copy of which application is attached to the claim of Surety, identified as Exhibit 'A' and made a part hereof.

'2.

'Pursuant to said application, Surety on or about July 3, 1962, executed and delivered to FARMERS ELECTRIC COOPERATIVE, INC., Garnishee, its contractor's bond, a true copy of which is attached to the claim of Surety, heretofore filed herein, identified as Exhibit 'B' and made a part hereof, whereby, Surety became Surety for Marble Construction Company, Inc. for the construction work described in a copy of said contract, attached to the claim of Surety and identified as Exhibit 'C' and made a part hereof.

'3.

'Thereafter, and on or about the 16th day of April, 1963, said Marble Construction Company, Inc. became financially unable to proceed further in the performance of the contract. It then owed for labor and material used on said project in excess of $25,000.00 and had but $7,000.00 available for payment thereof and for completion of said project. Contractor turned over to Trinity Universal said $7,000.00 and Trinity Universal agreed that in carrying out its obligations under the bond it would assume responsibility for the completion of said contract. But, because contractor did not desire to publicize its financial responsibility, it was agreed that contractor would continue in the management of the work and would issue its checks to all intents and purposes as though financially able to do so; and that as checks were issued by contractor Trinity Universal would deposit in the account of said contractor in the First National Bank in Dallas, sums of money to cover the checks drawn by Marble Construction Company, Inc. as payments for labor and materials used in the prosecution of said work.

'4.

'Pursuant to such arrangement, Trinity Universal advanced as completion costs of said contract and in payment of materials used in the prosecution of the work the sum of $102,112.98.

'5.

'As a part of the transactions aforesaid, contractor delivered to Surety its written directions addressed to Farmers Electric Cooperative, Inc., dated April 19, 1963, a copy of which is attached to Surety's claim, heretofore filed herein and identified as Exhibit 'D'. In response thereto, said Cooperative, by its attorney, Don Hayter, replied by letter of April 26, 1963, a copy of which is attached to Surety's claim, heretofore filed herein and identified as Exhibit 'E'. Subsequent thereto, said Cooperative paid to Surety, the following amounts due for work and materials furnished to Trinity Universal pursuant to the foregoing arrangement, to wit:

May 20, 1963 $ 7,859.70

July 24, 1963 13,675.50

For a total of $21,535.20

That after application of said sums and the $7,000.00 delivered to Surety by contractor, Surety's advances for construction costs still unpaid is the sum of $80,577.78.

'6.

'The fund tendered into Court by FARMERS ELECTRIC COOPERATIVE, INC. represents the retained percentages due under and by virtue of the contract identified as Exhibit 'C'.

'7.

'That on the 2nd day of December, 1963, Bank recovered judgment against Marble Construction Company, Inc. in the 74th District Court of McLennan County, Texas in Cause No. 31,655 on the docket of said Court for the total sum of $53,469.75, together with interest thereon from said date until paid at the rate of six per cent (6%) per annum, together with $20.90 costs of suit; That said judgment is still unsatisfied and Bank is the present legal and equitable owner and holder of said judgment and of said judgment lien.

'8.

'That on the 5th day of December, 1963, a Writ of Garnishment was served on FARMERS ELECTRIC COOPERATIVE, INC. by Bank herein; That thereafter, on the 20th day of December, 1963, FARMERS ELECTRIC COOPERATIVE, INC., Garnishee, filed its answer to said Writ of Garnishment in which said Garnishee set out that at the time said Writ of Garnishment was served upon it and at the time of filing its answer that it had in its possession approximately $25,966.84 as the balance due on a certain contract between FARMERS ELECTRIC COOPERATIVE, INC. and Marble Construction Company, Inc. for the construction of a structure known as Headquarters Building, Farmers Electric Cooperative, Inc., designated as Project Tex-67, Raines-Rockwall.

'9.

'That thereafter, Bank filed its Controverting Affidavit transversing the Answer of said Garnishee.

'10.

'That the occasion for the difference in the sum of $25,966.84 set out in the Answer of FARMERS ELECTRIC COOPERATIVE, INC., Garnishee, to the Writ of Garnishment by Bank, and the sum of $25,616.84 paid into the Registry of this Court by said Garnishee is the result of the sum of $350.00 attorney's fees allowed to Garnishee's attorney for filing the Answer to said Writ of Garnishment.'

Material portions of the construction contract which is made a part of the stipulations are as follows:

'Art. III, page 10.

'Section 1. Payments to Bidder:

'(a) On or before the fifteenth (15th) day of each Calendar Month, the Owner shall make partial payment to the Bidder for construction accomplished during the preceding Calendar Month on the basis of estimates thereof certified to by the Bidder and approved by the Architect solely for the purposes of payment; provided, however, that such approval by the Architect shall not be deemed approval of the workmanship or materials; and provided further, that in estimating the amount of construction accomplished, consideration shall be given only to equipment or materials incorporated into the Project. Only ninety (90) percent of each such estimate approved during the construction of the Project shall be paid by the Owner to the Bidder prior to Completion of Construction.

'(e) No payments shall be due while the Bidder is in default in respect of any of the provisions of this Proposal, and the Owner may withhold from the Bidder the amount of any claim by a third party against either the Bidder or the Owner based upon an alleged failure of the Bidder to perform the work hereunder in accordance with the provisions of this Proposal.

'Section 2. Release of Liens: Upon completion of Construction of the Project, but prior to the payment to the Bidder of any amount in excess of ninety (90) percent of the Bid Price, as and if revised, the Bidder shall deliver to the Owner in duplicate, on forms approved by the Administrator, releases of all liens and of rights to claim any lien from manufacturers, materialmen and subcontractors who have furnished materials or services for the construction of the Project and a certificate in a form satisfactory to the Administrator, to the effect that all labor used on or for the Project has been paid and that all such releases have been submitted to the Owner, and the Owner shall deliver to the Administrator for his approval one of the duplicates of each release and certificate.'

The Exhibit 'D' referred to in the stipulation, is a letter from Marble Construction Company, Inc. to Farmers Electric Cooperative, Inc., dated April 19, 1963, which is copied as follows:

'MARBLE CONSTRUCTION COMPANY, INC.

P.O. Box 18092

Dallas 18, Texas

April 19, 1963

Mr. Joe Lytle

Farmers Electric Cooperative, Inc.

Greenville, Texas

Project Tex-67, Rains-Rockwall

Headquarters Building

Dear Mr....