United States Fidelity & Guaranty Co. v. Parsons, 25685

Decision Date21 March 1927
Docket Number25685
Citation112 So. 469,147 Miss. 335
CourtMississippi Supreme Court

Division A

Suggestion of Error Overruled May 9, 1927.

APPEAL from chancery court of Warren county HON. R. B. ANDERSON Special Chancellor.

Suit by Mrs. Edna Earl Parsons against the United States Fidelity & Guaranty Company and others. From a decree overruling the named defendant's general demurrer, it appeals, and from part thereof sustaining a special demurrer of said defendant, complainant appeals. Affirmed and remanded.

Affirmed on direct and cross appeal, and remanded.

R. L. McLaurin, Wm. M. Hall, and A. A. Chaney, for appellant.

I. The ninth ground of the general demurrer alleged that the bill of complaint and exhibits show on their face that the complainant and J. W. McNeill accepted and retained the bond as executed without complaint, objection or notice and there was no objection that it was not written as intended until after the fire; hence both the complainant and the principal in the bond, J. W. McNeill, are charged with notice of its contents and are estopped from claiming any reformation or any rights except those shown on the face of the document.

The court will bear in mind that the contract was dated June 19 1924; the bond dated July 7, 1924; and the fire occurred on November 3, 1924, during all of which time these instruments, the contract and the bond, were in the possession of the complainant and that she without any examination or reference thereto "relied on them as being correctly made out" until after the house was destroyed by fire several months thereafter, the bond having been in her possession four months and the contract almost five months before "the error and mistake" was discovered. In support of appellant's contention, see Grimes v. Saunders, 93 U.S. 55; 23 R. C. L., page 351, section 47.

In this connection our own court has held that one who accepts an insurance policy is bound to know and is chargeable with its contents. Life Ins. Co. v. Bouldin, 100 Miss. 677. The identical question here involved was settled by our court many years ago in Rosenstock v. Miss. Home Ins. Co., 82 Miss. 674. See, also, Am. & Eng. Ency. of Law (2 Ed.), page 831; Elliott on Contracts (last edition), section 2377; Home Mut. Fire Ins. Co. v. Pittman, 111 Miss. 420; Hartford Fire Ins. Co. v. McCain, 106 So. 529; Bostwich v. Mut. Life Ins. Co., 116 Wis. 392; Graham v. Berryman, etc., 19 N. J. 29; Bainfield v. Bainfield, 24 Ore. 571. See, also, in this connection the numerous citations in 9 Rose's Notes, page 254, particularly the case of Grieve v. Grieve, 15 Wyo. 356, 11 Ann. Cas. 1162, where the court refused to reform an instrument where plaintiff negligently refused and failed to read it. See, also, Upton v. Tribilcock, 91 U.S. 45; 24 Am. & Eng. Ency. of Law (2 Ed.), 657.

II. The owner accepted the insurance in lieu of contract for new building. It is unquestionably true that where a contractor engages to erect a building on the land of another and to furnish the material and labor therefor, the destruction of the building by accident or design will not relieve him of his obligation. However, this rule prevails only where there is no exception or limitation in the building contract. This rule is announced in many authorities and we find it well expressed in Butterfield v. Byron, 153 Mass. 517, 25 A. S. R. 655. The same principle is announced in Milske v. Steiner, 5 L. R. A. (N. S.) 1105; 6 R. C. L., page 997, section 369.

The supreme court of Mississippi refused, many years ago, to apply this general rule if an exception of some kind could be found on the face of the contract to build. Jamison v. McDaniel, Miss. ; Harmon v. Fleming, 25 Miss. 135; Mitchell v. Hancock County, 91 Miss. 414.

The provision requiring the owner to take out fire insurance in proportion to his interest in the building necessarily implies that the owner would and did take title to and dominion over the work that had been done; that is, his interest in the building increased daily as the work progressed and when the partly constructed building was destroyed by fire, the insurance received from the policy took the place of and stood in lieu of the building and the owner presumably, has gotten full value of the property.

The surety company, it must be presumed, would not have signed the bond except for the provision requiring that insurance be carried on the building as the work progressed. By this means the surety company sought to protect itself against this contingency and to exempt itself from any loss that might be occasioned by fire. There is no other reasonable or logical construction that could be placed upon this provision in the contract. Piaggio v. Somerville, 119 Miss. 6; G. & S. I. R. R. Co. v. Horn, 135 Miss. 804; Roland v. Lindsey, 104 Ark. 49, Ann. Cas. 1914C 332; Story's Equity Jurisprudence, section 325; 32 Cyc., pages 176-177; Gallagher v. St. Patrick's Church, 45 Neb. 535, 63 N.W. 864; Hohn v. Shideler, 72 N.E. 575; 9 C. J. 857, sub-section B; note in Ann. Cas. 1914C 336.

III. It was error to charge the contractor with pro rata of insurance premium and yet deny him all benefits therefrom. A failure on the part of the contractor to pay his part of the insurance premium does not constitute a breach of the builder's contract; but, if anything, only creates a liability against him for his pro rata of the premium.

The owner having collected the twelve thousand five hundred dollars in full and retained it, necessarily accepted it in lieu of the building. In other words, the owner took and retained the fund that was created for the sole purpose of protecting the contractor and his surety, and not only seeks to have the contract breached for the failure of the contractor to pay one hundred twenty-six dollars of the insurance premium, but demands as well a new building and without tendering to the surety and contractor the fund created by contract for their protection.

IV. The bill of complaint seeks to show a breach of the building contract because of non-payment by the contractor of claims for labor and material, but it does not show that these debts in favor of the laborers and materialmen would be a debt against the owner or a lien against the building. The building had been destroyed by fire and there could, therefore, be no lien against it for labor and material furnished in its construction. Nor could there be any debt against the owner for labor and material. Nor could the laborers and materialmen fix a lien on the land where the house would have stood had it been built. Therefore, we submit, the averments in the bill to the effect that there are outstanding bills for labor and material show no breach of the contract.

V. The bill of complaint shows that the complainant breached the contract with the surety by failing to reserve fifteen per cent of the cost of materials. This was a material breach. This question appears to have been conclusively settled by our court in Picard v. Shants, 70 Miss. 381.

The above authority from our own court is conclusive, but we might add that it is in harmony with an unbroken line of decisions from the United States supreme court, the circuit court of appeals, and various state courts. Prairie State Bank v. U.S. 164 U.S. 239; Fidelity & Deposit Co. v. Agnew, 152 F. 955.

VI. Complainant seeks to recover six hundred sixty dollars which is alleged to have been paid a supervising architect for the erection of the second building, and we submit that under the terms of the contract the builder, McNeill, never undertook to assume the expense of a supervising architect, and that this demurrer should have been sustained.

Complainant further seeks to recover four hundred seventy-five dollars as a fair rental value on account of failure of the respondents, McNeill, contractor, and the surety to construct, complete and deliver the house within a reasonable time. The complainant should not be entitled to recover for this item for the reason that the bill of complaint shows no legal or equitable right to recover, it appearing that the original building was destroyed by fire a few days before the contractual limit for completion of the building, and the surety could not be liable for loss of rental value, the owner having collected and retained all of the insurance in lieu of the building.

VII. Section 3, chapter 128, Laws of 1918, is unconstitutional, being a limitation and a restriction on the right of the surety company to contract and to do business with whomsoever it pleases. The legislature has no right to add new parties to bonds or to this bond in question without the consent of the surety company, denying to the surety company the right to say or to know with whom it is contracting. This act is violative of the Fourteenth Amendment to the Constitution of the United States, and also of sections 16 and 24 of the Constitution of Mississippi.

The statute in question seeks to write into every contract, the provisions of the contract to the contrary notwithstanding absolute and unconditional liability of the surety for all labor and materials furnished in the construction of the building. A statute with such provisions, we say, unquestionably abridges the privilege of citizens of the United States and deprives them of property without due process of law. All men have and should have the right of acquiring, possessing and protecting property and property rights and the section of the constitution above referred to provides "that no person shall be deprived of his property without due process of law." This right is seriously invaded if a citizen is not at liberty to contract with whomsoever he pleases and upon such terms and...

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