Verschoyle v. Holifield, 1745-7085.

• Decision Date: 25 January 1939
• Docket Number: No. 1745-7085.,1745-7085.
• Citation: 123 S.W.2d 878
• Parties: VERSCHOYLE et al. v. HOLIFIELD et al.
• Court: Texas Supreme Court

Page 878

123 S.W.2d 878

VERSCHOYLE et al. v. HOLIFIELD et al.

No. 1745-7085.

Commission of Appeals of Texas, Section B.

January 25, 1939.

Error to Court of Civil Appeals of Third Supreme Judicial District.

Suit by the Gulf Refining Company for itself and in behalf of other creditors of R. B. Holifield against R. B. Holifield, Dozier Construction Company, its receiver, its surety, and the State Highway Commission to recover amount due for labor and material to Holifield as subcontractor in construction of public highway under contract between the state and Dozier Construction Company, and to fix liens upon retained percentage, in which divers persons and corporations were made parties. Judgments against C. H. Verschoyle and others were affirmed, 90 S.W.2d 907, by the Court of Civil Appeals and they bring error.

Reversed and remanded in part, reformed in part and, as reformed, affirmed, and affirmed in part.

Dan Moody and J. B. Robertson, both of Austin, for plaintiffs in error.

Burgess, Chrestman & Brundidge, O. A. Fountain, Herbert W. Whisenant, Sullivan & Wilson, Rice, Hyman & Suggs, and Jack F. Hyman, all of Dallas, Powell, Wirtz, Rauhut & Gideon, Cofer & Cofer, James R. Boyd, Joseph Cocke, Lloyd W. Davidson, all of Austin, William McCraw, Atty. Gen., and Leonard King, Asst. Atty. Gen., Levy & Levy, Marion J. Levy, and M. L. Cook, all of Galveston, Dibrell, Mosheim & Campbell, of Seguin, Witt, Terrell & Witt, of Waco, E. W. Bounds, of Fort Worth, Thomas R. Smith, of Colorado, and E. Murphy, of San Angelo, for defendants in error.

SMEDLEY, Commissioner.

The case originated as a suit by Gulf Refining Company, for itself and in behalf of other creditors of R. B. Holifield, against Holifield, Dozier Construction Company, its receiver, its surety and the State Highway Commission, the purpose of the suit being to recover judgment for debts due for labor, material, etc., furnished to Holifield as subcontractor in the construction of a public highway in Sterling County under contract between the state and Dozier Construction Company, and to fix liens upon and obtain distribution of a fund amounting to $18,731.10 retained by the State Highway Commission, being the balance due by the state under the contract. Many persons and corporations were made parties by intervention and by cross actions.

The case was tried without a jury, resulting in the rendition of judgment against Holifield in favor of a number of the claimants for various amounts due them for labor, material, etc., and awarding to such claimants the right to participate ratably in the division of the said fund retained by the State Highway Commission which had been paid into the registry of the court. A number of the parties, including plaintiffs in error Verschoyle, Bates and Standard Accident Insurance Company, were denied participation in the fund, the court holding that they had no claim or lien against it. Personal judgment was rendered against Verschoyle in favor of several of the parties, and judgment was rendered in favor of Bates and Standard Accident Insurance Company against certain of the parties on causes of action asserted by Verschoyle and Bates, Verschoyle having assigned his cause of action to Standard Accident Insurance Company before the conclusion of the trial. The trial court made elaborate findings of fact. There is no statement of facts. On appeal by Verschoyle, Bates and Standard Accident Insurance Company, the judgment of the district court was affirmed by the Court of Civil Appeals. 90 S.W.2d 907.

The first assignment of error presents the contention that Verschoyle and Bates, by reason of having advanced money to Holifield which was used in making payment for labor and materials in the completion of the construction of the highway, and on account of an agreement with Holifield were entitled to be subrogated to the rights of those to whom the money so advanced by them was paid by Holifield, and in particular to a lien or to the right to fix a lien, under the provisions of Chapter 17, Acts Regular Session 39th Legislature, Articles 5472a, 5472b, Vernon's Annotated Texas Statutes, on the fund retained by the State Highway Commission.

The following are the facts, as found by the trial court, on which the claim to the right of subrogation is based:

After the contract for the construction of the highway was made between the state and Dozier Construction Company as contractor and the usual contractor's bond executed and delivered, said company sublet the contract to Holifield, with the agreement that Holifield should assume and perform all the obligations of the original contractor, that all money to be paid by the State Highway Department under the contract should be paid to Dozier Construction Company, and that said company should retain nine per cent thereof and pay the balance to Holifield. To secure the performance of his agreement with Dozier Construction Company Holifield executed and delivered his bond in the sum of $103,461.12 payable to that company, which bond was signed by Public Indemnity Company as surety acting through plaintiff in error Bates as its attorney in fact. Bates was an employee of plaintiff in error Verschoyle, who was the state agent for Public Indemnity Company and approved and authorized the execution of the bond. While Verschoyle's agency contract required him promptly to report the execution of such bonds and to remit the premiums thereon, he neither reported the bond nor remitted the premium to the company until about seven months after the execution of the bond.

After entering upon the performance of the contract and long before its completion, Holifield became financially embarrassed, and in May, 1932 substantially all of the work ceased, labor payroll and many bills for material being past due and unpaid, so that Holifield was unable further to prosecute the work on his own resources or credit. Verschoyle had a personal interest of ten per cent commission in the underwriting profits of Public Indemnity Company on its Texas business under his contract, and at the time of Holifield's cessation of work a substantial profit had been earned by the company on its Texas business. That profit was in danger of being reduced or possibly extinguished if the company sustained a material loss on Holifield's bond which Verschoyle had caused to be executed in the name of the company. When Verschoyle learned of the cessation of the work and of Holifield's financial distress, he feared that by reason of his failure to report the execution of the bond promptly he might be held personally liable for such loss as Public Indemnity Company might sustain by reason of Holifield's default.

On June 11, 1932 Verschoyle, together with Youngblood and Brisson, two of Holifield's creditors, made a written contract with Holifield in which it was agreed that they would advance to him $15,000 to be used in the completion of the road and that to secure repayment of said money so advanced Holifield would assign to Youngblood and Bates all proceeds due or to become due Holifield from Dozier Construction Company, which money received by Youngblood and Bates, after payment of payrolls due at the time, should be distributed to Verschoyle, Youngblood and Brisson until $10,000 should be paid to Verschoyle and $5,000 jointly to Youngblood and Brisson. At the same time Holifield by written instrument transferred and assigned to Youngblood and Bates all the proceeds then due or which might thereafter become due to him from Dozier Construction Company on the contract. When Verschoyle presented the assignment to Holland Page, president of the Dozier Construction Company, for acceptance by said company, he declined to accept it unless Verschoyle, Youngblood and Brisson would agree to pay "past due bills for labor and material and all such bills to completion of the job". Verschoyle made such promise and the assignment was accepted by Dozier Construction Company.

Pursuant to the foregoing arrangement Youngblood and Brisson and Verschoyle and Bates advanced money in various amounts which were used in payment for labor and material in the construction of the road. Part of the total amount so advanced by Verschoyle and Bates was repaid to them, with the result that Verschoyle and Bates advanced an aggregate net amount of $12,586.57 never refunded to them. Of this amount $1,800 was advanced by Bates and $10,786.57 by Verschoyle.

On July 5, 1932, after part of the advancements had been made by Verschoyle and Bates, Youngblood and Brisson refused to make any further payments. Whereupon Verschoyle and Bates agreed with Holifield, who was unable to secure money elsewhere, that they would advance to him additional money to finish the work, upon Holifield's agreement that the assignment theretofore made should secure such further money and that they "should be subrogated to all of the rights of all parties to whom was paid any money thereafter so furnished by Verschoyle and Bates or either of them and that Verschoyle and Bates should stand in the shoes of such parties so paid with regard to any lien or right to fix a lien to secure payment of such sums". Pursuant to this agreement Verschoyle and Bates made additional advancements, being all or the greater part of the total net sum of $12,586.57 advanced by them and never repaid to them. No creditor of Holifield who was paid by funds advanced by Verschoyle and Bates made any agreement to assign to Verschoyle and Bates any lien or right to establish a lien or that Verschoyle and Bates should be subrogated to any such right or lien.

The first contention made by plaintiffs in error is that, under the facts as found by the trial court, plaintiff in error Verschoyle, even in the absence of an agreement for subrogation, was not a volunteer in making advancements which were used to pay for labor and material in the construction of the road, and was by reason of making the advancements in such...