Wm. Cameron & Co. v. American Surety Co. of New York

• Decision Date: 22 December 1932
• Docket Number: No. 1372-5959.,1372-5959.
• Citation: 55 S.W.2d 1032
• Parties: WM. CAMERON & CO., Inc., et al. v. AMERICAN SURETY CO. OF NEW YORK.
• Court: Texas Supreme Court

55 S.W.2d 1032

WM. CAMERON & CO., Inc., et al. v. AMERICAN SURETY CO. OF NEW YORK.

No. 1372-5959.

Commission of Appeals of Texas, Section B.

December 22, 1932.

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

Suit by Wm. Cameron & Co., Inc., against Southwell & Abbott, the American Surety Company of New York, T. B. Ellison and others, in which Miller Bros. and others intervened, and in which last-named defendant, as trustee for plaintiff and interveners, filed cross-action. To review the judgment of the Court of Civil Appeals [35 S.W.(2d) 217], reversing the judgment of the district court against the American Surety Company of New York, plaintiff and others bring error.

Affirmed in part, and reversed in part.

Leroy A. Smith, Bryan, Stone, Wade & Agerton, B. G. Mansell, Billingsley & Billingsley, Charles Kassel, Slay & Simon, Polk, Sansom & Terrell, McDonald & Floyd, and Hampden Spiller, all of Fort Worth, for plaintiffs in error.

Thompson & Barwise and Kelly Shannon, all of Fort Worth, for defendant in error.

RYAN, J.

This suit was brought by Wm. Cameron & Co., Inc., in the district court of Tarrant county (Acme Brick Company and others intervened, claiming the same relief, though in different amounts), to recover upon the surety bond given in connection with a contract between T. B. Ellison, owner, and Southwell & Abbott, contractors, for the construction of a warehouse in the city of Fort Worth; the American Surety Company was surety thereon for the contractors.

After the building was completed, the contract price was paid in full by the owner; the balance due thereon, when the building was completed and accepted, amounting to $6,717.80, was paid to the contractors, who deposited the same in bank for application to claims of subcontractors, materialmen, and laborers, but the money was, without the contractors' consent, appropriated to and used by the bank in payment of debts owing by the contractors to it.

The contractors, Southwell & Abbott, failed to pay Wm. Cameron & Co., Inc., $4,317.34, Miller Bros. $229.60, the Southern Ornamental Iron Works $455.54, the Acme Brick Company $2,180.32, the Builders' Material Company $47.81, B. S. Matson $606.60, Chas. T. Davis $111.84, the North Texas Iron & Steel Company $966.86, the Fort Worth Sand & Gravel Company $579.38, and the Collinsville Manufacturing Company $1,074.77, which they owed said parties for material or labor that was furnished in the construction of said building. None of said parties filed or fixed any lien against the building in accordance with the law, nor did T. B. Ellison, the owner, have any notice within thirty days of the final payment to the contractors that said claims were not paid.

Recovery was also sought against Ellison, the owner, for the amounts of said claims and to establish a lien against the property therefor.

Ellison answered, denying liability, and by way of cross-action he sought, as trustee for plaintiff and interveners, judgment against the contractors and the surety company for the respective amounts as claimed by the plaintiff and interveners, alleging that he had taken the indemnity bond for their use and benefit, and was entitled to recover the aggregate of said sums as trustee for said named parties. He further claimed an attorneys' fee of $1,500 by reason of having been forced to employ attorneys to defend him against the suit as brought by said parties and in the prosecution of his claim as trustee against the surety company; its liability therefor being, by virtue of the provisions of the bond.

Southwell & Abbott, the contractors, alleged that they had been discharged in bankruptcy of all the claims in question here.

It was agreed on the trial that the various claims, for which recovery was sought, are correct as to amounts due and unpaid; that such claimants (except T. B. Ellison) have been paid 10 per cent. thereof, through a committee appointed by the creditors of Southwell & Abbott, in 1928; that the material or labor and material covered by said claims actually went into and became a part of the building, which is the subject-matter of this suit; that such labor and material was furnished directly to the contractors, and the dates of the furnishing thereof as stated in the several accounts are correct.

It was further agreed that Ellison completed the full payment of his contract with Southwell & Abbott, by check dated March 7, 1927, and from that date nothing further was due and owing by him to them; that he did not have notice, in accordance with law, of any of the claims now asserted, within thirty days of said final payment, but on March 10, 1927, he received a letter from the Acme Brick Company, as follows: "This is to advise you that there is owing to us for brick furnished on your building $2,194.80, same being charged to Southwell & Abbott, contractors on this building. This money is due and we are proceeding to file against the building to protect our interest," and on the same day said brick company wrote and sent to the American Surety Company its letter as follows: "This is to advise you that Southwell & Abbott owe this company $2,194.80 for brick furnished on the T. B. Ellison warehouse, and that this amount is due and unpaid. We have this day advised Mr. T. B. Ellison of this, in writing." In answer thereto, the Acme Brick Company, in due course of mail, received from the American Surety Company the following letter:

                                        "March 17, 1927
                            "In Re: Bond 589137-B
                "Southwell & Abbott to T. B. Ellison, dated
                                11/27/26
                

"Acme Brick Company, Neil P. Anderson Building, Fort Worth, Texas. Attention: Mr. J. E. Fender. We have your letter of the 10th inst. advising that Southwell & Abbott owe you $2,194.80 for brick furnished on the T. B. Ellison warehouse. This is to advise that it will be unnecessary for you to file materialman's lien against this job in order to preserve your rights under the bond of the American Surety Company covering contract of Southwell & Abbott and your account will be paid within a reasonable length of time the same as if you had filed your materialman's lien against this property, but this letter does not admit any liability not set forth in the bond.

                    "Yours very truly
                       "Earl L. Howell, Inspector American
                          Surety Company, of New York."
                

It was further agreed that the American Surety Company is and was, when said bond was executed, a corporation surety for hire, organized, among other things, for the purpose of issuing such bond.

The trial court (a jury having been waived) rendered judgment against the American Surety Company in favor of plaintiff and interveners for the respective amounts claimed by them; no recovery was had against Southwell & Abbott because of their discharge in bankruptcy; it was further adjudged that no recovery be had against Ellison, the owner, and his property was freed from any liens filed upon the same by said parties; it was further adjudged that Ellison recover from the American Surety Company the sum of $750 as a reasonable attorneys' fee for the defense of this suit against him by such subcontractors and materialmen and for the prosecution of his cross-action to clear title to his property from the cloud of the liens attempted to be filed by such subcontractors and materialmen. The surety company was, upon satisfaction of said judgment severally rendered against it, subrogated to the rights of such subcontractors and materialmen upon the claims filed by them in the bankruptcy proceedings of Southwell & Abbott, and all dividends paid in such proceedings and received by them after December 1, 1929, shall be credited upon the judgment in their favor against the surety company.

On appeal, the honorable Court of Civil Appeals at Waco held that the judgment in favor of the laborers and materialmen is erroneous, because the bond was not payable to them and did not inure to their benefit, that Ellison was not entitled to recover any attorneys' fees, reversed the same, and rendered judgment that said parties take nothing as against the surety company. 35 S.W.(2d) 217.

The contract and bond are on printed forms, and each bears the notation that it has received "the approval of the National Association of Builders' Exchanges, the Associated General Contractors of America, the Joint Conference on Construction Contracts, the National Association of Master Plumbers, the National Association of Sheet Metal Contractors of the United States, the National Electrical Contractors' Association of the United States, the National Association of Marble Dealers, the Building Granite Quarries Association, and the Building Trades Employers' Association of the City of New York." The form of contract contains the printed statement: "Copyright 1915-1918-1925 by the American Institute of Architects," and the bond contains the printed statement: "Copyright 1915-1925 by the American Institute of Architects," and both are stated to be "standard" forms.

The bond is as follows:

"Know all men: That we Southwell & Abbott, a partnership composed of William H. Southwell and John W. Abbott, a firm of General Contractors, of Fort Worth, Texas, hereinafter called the Principal, and American Surety Company of New York, hereinafter called the Surety or Sureties, are held and firmly bound unto T. B. Ellison, of Fort Worth, Texas, hereinafter called the Owner, in the sum of Fifteen Thousand and no/100 Dollars, ($15,000.00), for the payment whereof the Principal and the Surety or Sureties bind themselves, their heirs, executors, administrators, successors and assigns, jointly and severally, firmly, by these presents.

"Whereas, the Principal has, by means of a written Agreement, dated November 24th, 1926, entered into a contract with the Owner for construction of warehouse for Ellison Furniture & Carpet Co., Fort Worth, Texas, a copy of which Agreement is by reference made a part hereof;...