Union Indemnity Co. v. Benton County Lumber Co.

• Decision Date: 10 June 1929
• Docket Number: 27
• Citation: Union Indemnity Co. v. Benton County Lumber Co., 18 S.W.2d 327, 179 Ark. 752 (Ark. 1929)
• Parties: UNION INDEMNITY COMPANY v. BENTON COUNTY LUMBER COMPANY
• Court: Arkansas Supreme Court

18 S.W.2d 327

179 Ark. 752

UNION INDEMNITY COMPANY v. BENTON COUNTY LUMBER COMPANY

No. 27

Supreme Court of Arkansas

June 10, 1929

Appeal from Benton Chancery Court; Lee Seamster, Chancellor reversed.

Decree reversed, and remanded.

Vol T. Lindsey, for appellant.

McGill & McGill, for appellee.

OPINION

BUTLER, J.

E. H Locher and Tom Eads were partners, doing business under the name of The E. H. Locher Construction Company, and as such entered into a contract with the commissioners of Paving District No. 1 to complete the improvement at the contract price of $ 68,941.31. Afterward it entered into a contract with the board of commissioners of Paving District No. 3 to do the work in that district for the price of $ 30,865, the two districts being in the town of Bentonville Arkansas. The Union Indemnity Company executed separate bonds as a surety for the construction company on both of its contracts. Under the contract in each case the commissioners retained in their hands ten per cent. of the sum due the construction company, to be paid when the work was finally accepted, and a maintenance bond, or bond for the maintaining of the work in good condition for a certain number of years, was filed with the commissioners.

Work was begun in District No. 1, and was completed in May, 1927, and on the final estimate there was in the hands of the commissioners the sum of $ 13,000 due the construction company. The appellee, Benton County Lumber Company, had sold to the construction company, for the completion of the work in District No. 1, an amount of material for which there was a balance due on completion of the work in the sum of $ 11,523.24. On the 8th day of June, 1927, the appellee lumber company filed a suit in the Benton County Chancery Court against the board of commissioners, E. H. Locher and Tom Eads, the Union Indemnity Company, and Martin & Mueller, a company of Iowa, alleging the facts above stated, and that the board of commissioners refused to pay it the amount of its claim, and that Martin & Mueller were claiming an assignment from said construction company. It alleged that its claim was prior to the claim of said Martin & Mueller, and prayed for the determination of the rights of the claimants to the fund in the hands of the commissioners and for judgment against the indemnity company, "if found to be liable on its bond," and against the commissioners. It was also alleged that Locher and Eads, composing the construction company, were insolvent.

At about the time of the filing of this suit the defendants, Locher and Eads, were engaged in putting down a lot of pavement in the town of Rogers, and the Union Indemnity Company was on their bond for the performance of that contract. The agent of the Union Indemnity Company was at Rogers investigating the condition of affairs of the Locher Construction Company at that place at the time of the filing of the suit. Personal service was had upon all of the defendants except the Union Indemnity Company, and as to that company a warning order was issued and an attorney ad litem for it appointed. On the 9th of June all the parties except the Union Indemnity Company met in the town of Rogers in an effort to settle their lawsuit, and during the course of their negotiations one of the attorneys representing the district commissioners was notified by the agent of the indemnity company, over the telephone, that, before that company would do anything further, the amounts due by the construction company to the claimants must be settled, and that the suit must be dismissed with prejudice. Shortly after this communication a settlement was arrived at, by the terms of which Martin & Mueller agreed to and did release their assignment of the final estimate, and the commissioners were authorized by the parties present at the conference to pay the Benton County Lumber Company out of the funds in their hands the sum of $ 7,748.24 in cash, and to some bank in Bentonville the sum of $ 5,000, and the remainder to the Locher Construction Company, and it (the construction company) was to, and did, execute its note to the Benton County Lumber Company for the sum of $ 3,500. To secure this note the construction company made to the lumber company an assignment of the final estimate of District No. 3. It was further agreed that the suit filed should be dismissed with prejudice.

On the second day following, namely, July 11, the agent of the Union Indemnity Company, having been informed of the settlement and the agreement as to the disposition of the suit, came to Rogers and secured from the clerk of the court a certificate of the order entered of record by which the case was dismissed with prejudice by the plaintiff lumber company. The local agent of the indemnity company residing at Rogers then delivered the maintenance bond, and, this being done, the board of commissioners paid to the Benton County Lumber Company the amount agreed upon, and to the bank the sum of $ 5,000, and the balance to the construction company.

Work proceeded in District No. 3 to a final completion, the Benton County Lumber Company furnishing material on that contract, consisting principally of cement, and contracting with the construction company that it would credit its account with ten cents for each cement sack returned. When the work in District No. 3 had been completed there was shown by the final estimate to be due the contractors by the board of commissioners the sum of $ 3,850, and it owed the Benton County Lumber Company and other materialmen and laborers an aggregate sum considerably in excess of the amount due them on the final estimate. The Benton County Lumber Company's balance on open account for material furnished in District No. 3, as claimed by it, amounted to the sum of $ 3,370.50.

On the 10th day of November, 1927, the Benton County Lumber Company brought suit in the chancery court of Benton County against the Locher Construction Company and against the partners individually, and against the commissioners of District No. 3, who were also the commissioners of District No. 1, by which it sought to recover judgment against the construction company on the $ 3,500 note executed in settlement of the controversy in District No. 1, less a credit of $ 1,008.85 for cement sacks returned, and for the balance due it on open account for material furnished in District No. 3 in the sum of $ 3,370.50, and prayed that its complaint be taken as an equitable garnishment of funds in the hands of the commissioners. Thereafter, on the 14th day of January, 1928, the Benton County Lumber Company filed an amended complaint, making the same allegations as in the original complaint against the defendants therein named, and making additional allegations as to the defendant Union Indemnity Company, naming it a defendant, and asking for judgment against it on the bonds executed by it to the board of commissioners for the balance claimed from the construction company on the note executed in settlement of the affairs of District No. 1, and for judgment against it on open account, after distribution of the funds in the hands of the commissioners due the construction company for District No. 3.

After the filing of the complaints a number of interventions were filed, the names of the parties intervener being given in the decree subsequently entered in the chancery court. The commissioners of District No. 3 and the Locher Construction Company and the Union Indemnity Company, defendants, filed their separate answers to the amended complaint of plaintiff.

The testimony, while voluminous and involved, presents few, if any, contradictions as to material matters, so much so that the facts recited above are practically undisputed. The court found that the note given by Locher and Eads was properly credited with the amount of the cement sacks returned, and that the balance due on that note was $ 2,708.22, and that the defendants were due plaintiff the sum of $ 3,370.50 on open account for material furnished and used in the improvement in District No. 3, and that they are indebted to the interveners as claimed by them in their several interventions, with the exception of the amount due the intervener, Arkola Sand & Gravel Company, the amount of such claim being reduced by the sum of $ 81.24 in so far as it is a liability against the Union Indemnity Company, but was correct as claimed against the construction company. The court found that, by the terms of the settlement of June 8 1927, the Union Indemnity Company was not released from its obligation as surety on the bond in District No. 1, because it knew and accepted the settlement on the conditions named, and that the Union Indemnity Company was estopped from objecting to the application of the funds in the hands of the commissioners of District No. 3 to the payment of the balance due plaintiff by the construction company on its promissory note. The court further found that the plaintiff was entitled to...