U. S. F. & G. Co. v. Attala County Drainage Dist. No. 2
| Decision Date | 06 March 1933 |
| Docket Number | 30447 |
| Citation | 166 Miss. 817,146 So. 460 |
| Parties | U. S. F. & G. Co. v. ATTALA COUNTY DRAINAGE DIST. NO. 2 |
| Court | Mississippi Supreme Court |
DRAINS. As respects rights of canal builder's surety claiming that drainage district overpaid builder under contract calling for monthly payments based on engineer's approximate estimate of value of work done, district could rely on estimate, absent notice or knowledge that estimates were not made in good faith. This was especially so where the contract to construct canals, ditches, and drains for the drainage district, in addition to providing for monthly payments based on the engineer's approximate estimate of the value of the work done, provided that all prior estimates and payments should be superseded by, and should be subject to, correction in final estimate; the word "estimate" being defined as a valuing or rating especially from incomplete data; rough or approximate calculation; and, even though not preceded by the word "approximate," precludes accuracy.
HON. T P. GUYTON, Chancellor.
APPEAL from chancery court of Attala county HON. T. P. GUYTON Chancellor.
Suit by the U.S. F. & G. Company against Attala county Drainage District No. 2. From a decree for defendant, plaintiff appeals. Affirmed.
Affirmed.
Jas. T. Crawley and D. E. Crawley, both of Kosciusko, and Jas. A. Covington, Jr., of Meridian, for appellant.
The contract by its terms provides that the contractor shall pay all furnishers of labor and materials, and it certainly cannot be argued in the face of the above stipulation in the contract that the drainage commissioners have fully complied with all the terms of the contract, or that the contract has been fully complied with by both contracting parties, for the contract could not have been completed until all labor and material claims had been paid which had been actually incurred in the construction of the drainage system. It may be true that the actual work necessary to complete the drainage system, and the actual materials necessary to complete the system, had been used in the construction. But it takes more than the completion of the work to fulfill the contract-- it also takes the payment of the outstanding bills for labor and materials before this contract has been fulfilled.
Regardless of the fact that the bond was lost, the law read into it the obligation of the United States Fidelity & Guaranty Company to pay all just claims existing against J. E. Brown, the contractor, which were incurred in the actual construction of said drainage system under said contract.
Section 5971, Code of 1930; Commercial Bank of McGee v. Evans, 112 So. 482.
Grocery bills and accounts incurred in having meals prepared and furnished to laborers who take their meals on the boat when it is reasonably necessary for them to do so and when no profit is made from serving the same to them, are just and proper claims for payment.
Standard Oil Co. v. National Surety Co., 107 So. 559; McElrath v. Kimmons et al., 112 So. 164.
It being clearly demonstrated that the surety company, the appellant here, on the bond of J. E. Brown, contractor, was under obligation to pay the said accounts which it did pay, all as a result of the failure of the board of drainage commissioners to retain fifteen per cent of current estimates made each month to the contractor, the sole question now remains as to whether or not the drainage district which was responsible for the payment to the contractor of more than he was due under the contract will have to bear the loss suffered by the surety, or whether or not the defendants, the appellee here, can force the surety company to bear it.
The retainage fund is one of the securities for the performance of a contract, and when the surety is compelled to pay the debts due by the contractor to laborers and materialmen it becomes thereby subrogated to the contractor's right to collect the retainage fund from the county.
Mississippi Fire Ins. Co. v. Evans, 153 Miss. 635, 120 So. 742; Canton Exchange Bank v. Yazoo County, 144 Miss. 579.
When the surety on J. E. Brown's contract signed his bond, it was signed with the understanding and with the knowledge that the law said that the fifteen per cent agreed to be retained in the contract was retained for the benefit of the surety as well as for the benefit of the district, and that if it as surety had to make payments for any labor or materialmen's accounts it would do so with the knowledge that it would have for its protection the fifteen per cent retained by the drainage district under its contract. And in the event of making any such payment the surety and not the contractor would have the right to the balance of the amount due the contractor as a result of the retention of the fifteen per cent retainage agreed on, and fixed by the contract.
Noxubee County v. Long, 141 Miss. 72.
When the defendant admits that it knew that the fifteen per cent retainage was kept back for the benefit of the surety then it paying the same to the contractor without the consent of the surety before a final completion and fulfillment of the contract, was done at its own risk and binds the drainage district to save the surety harmless from any loss it suffered as a result of the negligence or fault of the appellee.
The appellee argues that it was not its fault that the money was paid out, but was the fault of its engineer. The engineer was the employee of the appellee. He was the one who had general supervision and charge of the work. He was the agent of the appellee and acting within the scope of his authority when he gave the estimates of work done by the contractor.
The principal is liable to third persons in a civil suit for frauds or misfeasance, or neglect of duty in his agent, though the principal did not authorize or assent to it. The liability runs through all stages of the service.
Story on Agency, chapter 17, sections 452 and 454; 2 Kents Com. 9th Add. 856, Note (a); 36 Miss. 403.
The principal is bound by all the acts of his agent within the scope of the authority which he held out to the world to possess. (1917-1922 Troy Wagon Works Co. v. Reynolds, Orleans No. 8481 (1921); White v. Johnson, Orleans, No. 8084.)
The principal is liable to third persons for agents' acts admittedly within scope of employment.
Clasp Envelope Co. v. True-Silk Co., 5 La. App. 658.
The assignee of a laborer or materialman is generally held to be entitled to recover on a public contractor's bond executed pursuant to such a statute.
U. S. F. & G. Co. v. Bartlett, 231 U.S. 237, 58 L.Ed. 200; Dodd v. Maddox, 72 Cal.App. 705, 238 P. 130; West v. Detroit Fidelity & So. Co., 118 Neb. 544, 225 N.W. 673.
And when the surety company was compelled to pay the laborers and materialmen's claims the surety was even in a stronger position than assignee.
The payment to the contractor of the fifteen per cent retainage before due as a matter of law released the surety pro tanto of all liability to the drainage district but not to the laborers and materialmen.
Picard v. Shantz, 70 Miss. 381; First National Bank v. Fidelity & Deposit Co., 40 So. 40; U. S. F. & G. Co. v. Parsons, 147 Miss. 361, 112 So. 469.
The rights of laborers and materialmen are independent of the rights of the obligee in the bond, and are the same as though the two undertakings were embraced in separate instruments.
Equitable Surety Co. v. U.S. 234 U.S. 448, 48 L.Ed. 1394; 77 A.L.R. 195, para. C; U. S. F. & G. Co. v. American Blower Co., 41 Ind.App. 620, 84 N.E. 555; King v. Murphy, 49 Neb. 670; F. Union Surety Co. v. Com, 139 Ky. 92; People, use of Reynolds v. Banhager, 151 Mich. 40, 114 N.W. 669.
It is well settled that a stipulation in a building contract that a percentage of the price retained until the final completion and acceptance of the work is as much for the benefit of the surety as for the protection of the owner, and a failure to comply therewith releases the former in so far as the rights of the latter are concerned.
Fortworth Independent School District v. Aetna Casualty & Surety Co., 48 F.2d 1; Jersey City Water Supply Co. v. Metropolitan Construction Co., 76 N. J. L. 419, 69 A. 1088.
As provided by the contract in this case, the United States Fidelity & Guaranty Company had a legal right to demand that the defendant, the drainage district, withhold the fifteen percent retainage until the contract was completed, and the consequent right to a sum out of the amount so retained sufficient to pay all the claims that it was compelled to pay, which in this instance amounted to the sum of eight thousand three hundred eighty-one dollars and sixty-two cents as decided by the chancellor in the court below, or the sum of eight thousand seven hundred fifteen dollars and fifty-six cents as claimed by the appellant in this case.
U. S. F. & G. Co. v. City of Canton, 157 Miss. 682, 128 So. 744; Canton Exchange Bank v. Yazoo County, 109 So. 1; Prairie State National Bank v. U.S. 164 U.S. 227.
The surety is subrogated to the right of the materialmen and laborers, but regardless of the subrogation, since the surety would have to pay the claims of the laborers and materialmen if proper and correct it may bring its action to recoup any loss sustained by it as a result of the obligee breaching its contract.
Smythe & Smythe and C. E. Morgan, all of Kosciusko,...
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