Opinion
No. 27293.
December 3, 1928.
1. CONSTITUTIONAL LAW. Mechanics' liens. Law relating to assignment by contractor of proceeds of contract unless executing bond held not unconstitutional as impairing right to contract ( Laws 1918, chapter 128, sections 2, 3).
Section 2 of chapter 128, Laws of 1918, prohibiting the assignment by a contractor of the proceeds of the contract to the detriment of subcontractors, journeymen, laborers, and materialmen, unless the bond is issued in accordance with section 3 of the said act, is not unconstitutional.
2. STATUTORY PROVISIONS.
Section 3 of chapter 128, Laws of 1918, does not require the builder and contractor to execute the bond therein provided; but, unless the bond is executed as provided by said section, the provisions of sections 1 and 2 of the statute are not suspended, but stand as security for the purpose therein mentioned.
3. CONSTITUTIONAL LAW. Corporations. State has power to regulate contract and limit powers of public corporations; legislature may make reasonable regulations affecting private individuals and corporations, but cannot deprive citizen of right or liberty of contract.
There is a difference in the power of the legislature to enact laws providing for the terms of contracts between private individuals and public corporations or agencies, and that which the legislature may enact with reference to purely private contracts. Public corporations are subject to the control of the legislative body, and have only such powers as the state confers upon them. The state has full power to regulate their contracts and limit their powers. In the case of private individuals and private corporations, the legislature has power to make reasonable regulations, but cannot under such power deprive a citizen of the right or liberty of contract. The power of the legislature in reference to private contracts, while extensive, is limited.
4. MECHANICS' LIENS. Contractor's bond referring to building contract will be held bond required under law relating to contractor's assignment of proceeds, when apparently so intended ( Laws 1918, chapter 128, section 3).
When a bond is executed by a contractor in favor of the builder, which refers to a contract between the builder and the contractor, requiring the contractor to execute a bond for the faithful performance of the contract, and provides, in general terms, plans and specifications of the building to be erected and the bond, which reserved to the building company the right at its option to take over and finish the contract should the contractor fail, and other rights, such bond will be construed in connection with the contract referred to in the bond and made a part of the bond contract; and, where it is apparent from a consideration of the bond and the contract referred to that it was the intention of the bonding company, the builder, and the contractor to execute the bond required by section 3, chapter 128, Laws of 1918, it will be held to be such a bond.
5. MECHANICS' LIENS. Contractor's bond in accordance with law relating to assignment of proceeds of contract operates for benefit of subcontractors, journeymen, laborers, and materialmen ( Laws 1918, chapter 128, sections 1-3).
Where such bond has been executed in accordance with section 3, it operates for the benefit of subcontractors, journeymen, laborers, and materialmen, and sections 1 and 2 cease to be operative in their favor.
APPEAL from chancery court of Adams county. HON. R.W. CUTRER, Chancellor.
Wells, Stevens Jones, of Jackson, for appellant.
The bond in this case, is one of strict indemnity.
Union Indemnity Co. v. Acme Blow Pipe Sheet Metal Works, 117 So. 251.
There is no right of action against an indemnity bond unless the obligee has actually suffered loss and such a bond is not one which guarantees the faithful performance of any act or contract.
Peck v. Wakely (S.C.), 2 McCord, 279, 283; Frye v. Bath Gas Electric Co., 54 A. 395, 396, 97 Me. 241, 59 L.R.A. 444, 94 Am. St. Rep. 500; Davis v. Phoenix Ins. Co., 43 P. 1115, 1117, 111 Cal. 409; Cummings v. Cheshire County Mut. Fire Ins. Co., 55 N.H. 457, 459; Civ. Code Cal. 1903, par. 2772; Civ. Code S.D. 1903, par. 1959; Civ. Code Mont. 1895, par. 3580; Vandiver v. Pollak, 19 So. 180, 181, 107 Ala. 547, 54 Am. St. Rep. 118; Pierce v. Merrill, 61 P. 64, 66, 128 Cal. 464 (citing Burton v. Dewey, 46 P. 325, 4 Kan. App. 589; Wicker v. Hoppock, 73 U.S. (6 Wall.) 94, 99, 18 L.Ed. 752, 753; Henderson-Achert Lithographic Co. v. John Shillito Co., 60 N.E. 295, 298, 64 Ohio St. 236, 83 Am. St. Rep. 745; Rice v. National Credit Ins. Co., 41 N.E. 276, 277, 164 Mass. 285; Cousins v. Paxton Gallagher Co., 98 N.W. 277, 278, 122 Iowa, 465; Finley v. United States Casualty Co., 83 S.W. 2, 4, 113 Tenn. 592, 3 Ann. Cas. 962 (quoting Frye v. Bath Gas Electric Co., 54 A. 395, 97 Me. 241, 59 L.R.A. 444, 94 Am. St. Rep. 500); Burke v. London Guarantee Accident Co., 93 N.Y. Supp. 652, 653, 47 Misc. Rep. 171; R.P. Williams Co. v. United States Fidelity Guaranty Co., 75 S.E. 1067, 1071, 11 Ga. App. 635; Shaw v. Equitable Mut. Acc. Ass'n., 99 N.W. 672, 673, 5 Neb. (Unof.) 584 (quoting and adopting definition in Weller v. Eames, 15 Minn. 467 (Gil. 383), 2 Am. Rep. 150); Ordinary of State v. Connolly, 72 A. 363, 364, 75 N.J. Eq. 521, 138 Am. St. Rep. 577; Rogers v. Shawnee Fire Ins. Co. of Topeka, Kan., 111 S.W. 592, 593, 132 Mo. App. 275; Poe v. Philadelphia Casualty Co., 84 A. 476, 479, 118 Md. 347; Bain v. Arthur, 55 So. 743, 129 La. 143; Leonard v. Bosch, 68 A. 56, 73 N.J. Eq. 438.
The word "performance" has a separate meaning from the word "indemnity."
Kundtson v. Robinson, 118 N.W. 1051, 1053, 18 N.D. 12; McGurie v. J. Neils Lumber Co., 107 N.W. 130, 132, 97 Minn. 293; Hare, Cont. 569.
If the bond in suit be construed as coming within the terms of chapter 128 of the Laws of 1918 then that law is void because it is an unwarranted interference with the freedom of contract against the following persons:
a. The owner of the property.
b. The contractor.
c. The surety of the contractor, and violates section 1, Fourteenth Amendment of the Constitution of the United States.
Wilby v. State, 93 Miss. 767; Jones v. Mississippi Farm Co., 110 Miss. 295, 76 So. 880; Vicksburg v. Mullane, 106 Miss. 199; 50 L.R.A. 421 (N.S.), 63 So. 412; Fitzhugh v. City of Jackson, 132 Miss. 585, 97 So. 190; New York Life v. Dodge, 62 L.Ed. 772. Green, Green Potter, of Jackson; Martin Byrnes; Bradley, Baldwin, All White, all of Birmingham, Ala., for appellee.
In this case the Indemnity Company is contractually liable.
Lamkin v. Byrd, 102 So. 565, 137 Miss. 523; McNeal v. Lee, 79 Miss. 455; Insurance Co. v. Hyde, U.S. Adv. Sheets, January 16, 1928, p. 163; Tysen v. Banter, 273 U.S. 417, 71 L.Ed. 718; Insurance Co. v. Lewis, 233 U.S. 389; Lackman Lumber Co. v. Robinson, 157 N.E. 376; Union Indemnity Co. v. Acme Blow Pipe Co., 117 So. 253.
The constitutionality of a contract between private parties, and that particular stipulation that a bond shall inure to the benefit of materialmen and laborers furnishing labor and materials, on a contract is specifically upheld by the courts.
Wallace Equipment Co. v. Graves, 132 Wn. 141; Ideal Brick Co. v. Centry, 191 N.C. 636, 132 S.E. 800; Page Trust Co. v. Carolina Trust Co., 191 N.C. 664, 132 S.E. 804; Standard Oil Co. v. National Surety Co. (Miss.), 107 So. 559; Bank of Gulfport v. O'Neal, 86 Miss. 65, 38 So. 630; U.S.F. G. Co. v. Parsons, 147 Miss. 335, 112 So. 469; Little v. Cammack, 109 Miss. 753, 69 So. 594; Commercial Bank of Magee v. Evans, 145 Miss. 643, 112 So. 482; Dickson v. U.S.F. G. Co., 117 So. 245; Fidelity Mutual Ins. Co. v. Miazza, 93 Miss. 18, 46 So. 817; Insurance Company v. Shlenker, 80 Miss. 667; Pa. Fire Ins. Co. v. Gold Issue Mining Co., 243 U.S. 93.
The language of an insurance policy is always to be construed, if necessity therefor exists, most favorable for the insured.
Liverpool London, etc., v. Van Shuster, 63 Miss. 431; Shivers v. Farmers Mutual Fire Ins. Co., 99 Miss. 744, 55 So. 965.
If indemnity company not contractually liable, then sections 2 and 3, chapter 128, Laws of 1918, are integrated into the bond, under Commercial Bank v. Magee, 112 So. 482, and so integrated are valid.
Pennsylvania Fire Ins. Co. v. Gold Issue Mining Co., 243 U.S. 93, 61 L.Ed. 610; Lackland Lumber Co. v. Robinson, 157 N.E. 376.
If indemnity company is not contractually liable and if question an open one in Mississippi, then, sections 2 and 3, chapter 128, Laws 1918, are constitutional in all aspects.
U.S.F. G. Co. v. Parsons, 118 So. 475; Ala. Marble Co. v. U.S.F. G. Co., 111 So. 574; Great Southern Fireproof Hotel Co. v. Jones, 193 U.S. 540, 48 L.Ed. 787; Jones v. Great Southern Fire Proof Hotel Co., 30 C.C.A. 108, 58 U.S. App. 3987, 86 Fed. 371; Hightower v. Bailey, 49 L.R.A. 235, 108 Ky. (1900), 198; Laird v. Moonan, 32 Minn. 358, 20 N.W. 354; Mallory v. La. Crosse Abattoir Co., 80 Wis. 170, 49 N.W. 1071; Donahy v. Clapp, 12 Cush. 440; Bowman v. Phinney, 162 Mass. 593, 39 N.W. 283; Cole Mfg. Co. v. Falls, 90 Tenn. 466, 16 S.W. 1043; Colter v. Frese, 45 Ind. 96; Atwood v. Walsham, 16 R.I. 699; Atwood v. Williams, 40 Me. 409; Roanoke Land Improv. Co. v. Karn, 80 Va. 589; Norfolk v. W.R. Co., 81 Va. 125; Spokane Mfg. Lbr. Co. v. McChesney, 1 Wn. 609, 21 P. 198; Paine v. Tillinghast, 52 Conn. 532; Treuseh v. Shryock, 51 Md. 162; Ballou v. Black, 21 Neb. 13, 31 N.W. 673; Hunter v. Truckee Lodge No. One I.O.O.F., 14 Nev. 24; Henry Co. v. Evans, 97 Mo. 47, 3 L.R.A. 322; Phillipson Mechanics' Liens (3 Ed.), sec. 65; Albright v. Smith, 2 S.D. 577, 51 N.W. 590; Farmers Merchants Bank v. Federal Reserve Bank, 262 U.S. 660, 67 L.Ed. 1182; Ogden v. Saunders, 12 Wheat, 213, 231, 6 L.Ed. 606, 611; Von Hoffman v. Quincy, 4 Wall. 535, 550, 18 L.Ed. 403, 408; 40 C.J. 46; First Nat'l. Bank v. Monroe County, 131 Miss. 828, 95 So. 726; Canton Exchange Bank v. Yazoo County, 109 So. 1, 144 Miss. 579; Commercial Bank of Magee v. Evans, 112 So. 482; Yazoo County v. U.S.F. G. Co., 110 So. 780; United States v. American Surety Co., 200 U.S. 200, 50 L.Ed. 441; Mankin v. United States, 215 U.S. 536, 54 L.Ed. 317; Illinois Surety Co. v. John Davis Co., 244 U.S. 380, 61 L.Ed. 1211; United States Fidelity G. Co. v. Golden Pressed Fire Brick Co. (United States Fidelity G. Co. v. United States), 191 U.S. 426, 48 L. Ed 242, 246, 24 Sup. Ct. Rep. 142; Gibbs v. Tally, 133 Cal. 370, 80 L.R.A. 615; Federal Act (1905), 28 Statutes at Large, 278 U.S. Compiled Statutes, 1901, 2533, 8 Fed. Statutes Ann. 374; Peoples v. Metropolitan Surety Co., 105 N.E. 99, (1914) (N.Y.); McCracken v. Hayward, 2 How. 608, 11 L.Ed. 397; United States v. Ansomia Brass, etc., Co., 218 U.S. 452, 31 Sup. Ct. 49, 54 L.Ed. 1107; Title Guaranty Trust Co. v. Crane Co., 219 U.S. 24, 31 Sup. Ct. 140, 55 L.Ed. 72; Philip Carey Co. v. Maryland Casualty Co., 206 N.W. 808; Asberg v. Ass'n., 143 Minn. 354, 173 N.W. 708; People v. Surety Co., 211 N.Y. 107, 105 N.E. 99; School District v. Construction Co., 87 Or. 132, 169 P. 507; Eye-Schneider-Fowler Co. v. Roeser, 103 Neb. 614, 173 N.W. 605; United States ex rel. Hoffman v. Quincy, 4 Wall. (71 U.S.) 535, 18 L.Ed. 403; Northern Pacific R. Co. v. Wall, 241 U.S. 87, 36 S.Ct. 493, 60 L.Ed. 905; Gill v. Paysee (Nev.), 266 P. 302; Faurete v. State, 110 Ind. 463, 11 N.E. 472; Lowe v. City, 4 Okla. 287, 44 P. 196; Iddings Co. v. Construction Co., 104 Neb. 124, 175 N.E. 643; American Surety Co. of New York v. A.T. Small Quarries, 120 S.E. 617; Chambers v. Cline, 60 W. Va. 588, 55 S.E. 999; State v. Worring, 58 W. Va. 394, 48 S.E. 365; United States Fidelity G. Co. v. Fultz, 76 Ark. 410, 86 S.W. 93; Crawford v. Ozark Ins. Co., 97 Ark. 549, 134 S.W. 951; 9 C.J. 34, sec. 56; State v. Nutter, 44 W. Va. 385, 30 S.E. 67; Cox v. Ross, 56 Miss. 481; State v. Smith, 37 Miss. 571, 40 So. 23; Adams v. Williams, 97 Miss. 113, 52 So. 865; Aetna Ins. Co. v. Cowan, 111 Miss. 473, 71 So. 746; American Indemnity Co. v. Borrows Hardware Co., Court of Civil Appeals, 191 S.W. 574; U.S. v. Quincy, 71 U.S. 535; Rio Grande Lumber Co. v. Drake, 167 P. 241, 1918 L.R.A. 1192; Odgen v. Saunders, 12 Wheat. 213, 6 L.Ed. 606; 6 R.C.L., p. 97-104; State ex rel. Breeden v. Lewis, 26 Utah 120, 72 P. 388; Young v. Salt Lake City, 24 Utah 120, 67 P. 1066; State ex rel. University of Utah v. Candland, 30 Utah 406, 24 L.R.A. (N.S.) 1280, 140 Am. St. Rep. 234, 104 P. 265; Shaughnessy v. American Surety Co., 138 Cal. 379, 73 P. 150; Montague v. Furnese, 145 Cal. 205, 78 P. 640; Ballin Co. v. North Platte Engineering Co., 10 Wyo. 542, 39 L.R.A. (N.S.) 869, 121 P. 122; McDonald v. H. Gas Oil Co., 2 La. 241; Baton Rouge Sash Door Co. v. Deceur, 2 La. App. 129; Jarbart v. U.S.F. G. Co., 3 La. App. 525; Roystone Co. v. Darling, 154 P. 158 (1915); Roberts v. Speric, 235 P. 708; Hollenbeck v. Amweg, 170 P. 148 (1917); Provident Inst. for Savings v. Jersey City, 113 U.S. 506-514, 28 L.Ed. 1102; Fife v. United States Ins. Co., 223 S.W. 635; Stewart v. Brewster, 284 S.W. 53; Lee v. Newman, 55 Miss. 374; 1 Chitty's P. 5; Arnold v. Lyman, 17 Mass. 400; Null v. Marston, 17 Mass. 579; 1 Branch (App.) 429; Burker v. Bucklin, 2 Denio, 45; Hendricks v. Lindsey, 93 U.S. 143; Lawrence v. Fox, 20 N.Y. 268; 1 Pars. on Con. (5 Ed.), 466-468; Accident Indemnity Co. v. W. J. Knox Net Twine Co., 132 A. 261; Independence Trust Co. et al. v. Porter Boyd, Inc., 132 S.E. 806; Title Guaranty T. Co. v. Crane, 31 S.Ct. 140, 319 U.S. 24, 55 L.Ed. 72; Bank v. Casualty Co., 161 P. 475, 93 Wn. 635, Ann. Cas. 1918D., 645; Plylet v. Elliott, 131 S.E. 306, 191 N.C. 49; Town of Cornelius v. Lampton, 128 S.E. 334, 189 N.C. 714; United States v. National Surety Co., 92 F. 549, 34 C.C. 526; Yawkey-Crawley Lumber Co. v. Sinaike, 206 N.W. 976; United States Gypsum Co. v. Gleason, 135 Wis. 539, 543, 116 N.W. 238, 17 L.R.A. (N.S.), 906; R. Connor Co. v. Aetna Indemnity Co., 138 Wis. 13, 18, 115 N.W. 811; Elec. A. Co. v. United States F. G. Co., 110 Wis. 434, 85 N.W. 648, 53 L.R.A. 800; Warren Webster Co. v. Beaumont Hotel Co., 151 Wis. 1, 10, 138 N.W. 102; Concrete Steel Co. v. Ill. Surety Co., 163 Wis. 41, 47, 157 N.W. 543; Builders' L. S. Co. v. Chicago, B. S. Co., 167 Wis. 167, 170, 160 N.W. 320; Building Cont. L.M.L. Ins. Co. v. Southern S. Co., 185 Wis. 83, 200 N.W. 770; United States F. G. Co. v. Yazoo County, 110 So. 780; Standard Oil Co. v. Nat'l Surety Co., 107 So. 559; U.S. Gypsum Co. v. Gleason, 135 Wis. 539, 116 N.W. 238, 17 L.R.A. (N.S.) 906; City and County of Denver v. Hindry, 40 Colo. 42, 90 P. 1028, 11 L.R.A. (N.S.) 1028; Knight Jillson Co. v. Castle, 172 Ind. 97, 87 N.E. 976, 27 L.R.A. (N.S.) 573; School District v. Iron Works, 147 Mo. 580, 49 S.W. 507; Snider v. Wilkinson Lumber Co. (Ind. App.), 96 N.E. 960; Plumbing Heating Co. v. McClay, 43 Neb. 649, 62 N.W. 50; Lyman v. City of Lincoln, 38 Neb. 794, 57 N.W. 532; Ochs v. Carnahan, 42 Ind. App. 160, 76 N.E. 788, 80 N.E. 163; St. Louis Public Schools v. Woods, 77 Mo. 197; Baxter v. Camp, 71 Conn. 245, 41 A. 803, 42 L.R.A. 514, 71 Am. St. Rep. 169; Jefferson v. Asch, 53 Miss. 446; Tyson v. Benton, 273 U.S. 418, 71 L.Ed. 718; German Alliance Ins. Co. v. Lewis, 233 U.S. 389, 58 L.Ed. 1011, L.R.A. 1915C, 1189, 34 Sup. Ct. Rep. 612; Hamilton Fire Ins. Co. v. Copp, U.S. Adv. Sheets, 234; Sprout v. South Bend, U.S. Adv. Sheets, 513; Liberty Warehouse Co. v. Association (U.S.), U.S. Adv. Sheets 293; Ribneck v. McBride, U.S. Adv. Sheets, 614; Negro v. U.S., U.S. Adv. Sheets, 432; Fairmont Creamery Co. v. Minnesota, 274 U.S. 1, 71 L.Ed. 893.
Kennedy Geisenberger, of Natchez, for appellees.
Section 3, Chapter 128, of the Laws of 1918, Hemingway's Code 1927, sec. 2598, is constitutional.
Union Indemnity Co. v. Acme Blow Pipe Sheet Metal Works, et al., 117 So. 251; U.S.F. G. Co. v. Parsons, 147 Miss. 335, 112 So. 469.
When a contract or agreement is made up of several instruments, the provisions of all of the instruments must be construed and taken into consideration by the courts when called upon for a construction of the contract itself. This is true, as general rule, even though one instrument makes no reference to the other, but is the result of the principle of law that the intention of the parties control, and the intention must be gathered from all undertakings, agreements and circumstances surrounding or affecting the contract.
32 Cyc. 72; Note 19, 32 Cyc., page 73; Doyle v. Faust (Mich.), 153 N.W. 725.
The bond in this case falls within the purview of Sec. 3, Chapter 128, of the Laws of 1918.
By-Fargo Co. v. Free (Utah), 148 P. 427; 9 C.J. 31; Boyd v. Mississippi Home Insurance Co., 75 Miss. 47, 21 So. 708.
Brandon Brandon, of Natchez, for appellees.
Chapter 128 of the Laws of 1918, is constitutional.
Union Indemnity Co. v. Acme Blow Pipe Sheet Metal Works, et al., 117 So. 251; United States Fidelity Guaranty Co. v. Parsons, 147 Miss. 335, 112 So. 469.
The bond here sued on is one which guarantees the faithful performance of the contract.
9 C.J. 31; 31 C.J. 426; I. 32 C.J. 1147; Boyd v. Mississippi Home Insurance Co., 75 Miss. 47, 21 So. 708; Wadlington v. Hill, 18 Miss. 560; 13 C.J. 523; 13 C.J. 525; A. S. Spengler v. Stiles-Tull Lbr. 60, 94 Miss. 780; 48 So. 966.
Where several instruments are made as part of one transaction, they will be read together, and each will be construed with reference to the other.
13 C.J. 528; Floyd v. Arky, 89 Miss. 162, 42 So. 569; 13 C.J. 542; Newmans v. Supreme Lodge Knights of Pythias, 110 Miss. 371, 70 So. 241; L.R.A. 1916C, 1051; Pratt v. Canton Cotton Co., 51 Miss. 470.
Where a contract is ambiguous, it will be construed more strongly against the parties preparing it.
13 C.J. 545; Home Mutual Fire Ins. Co. v. Pittman, 71 So. 739; 32 C.J. 1148; Penn. Mutual Life Insurance Co. v. Gordon, 104 Miss. 270, 61 So. 311; Phillip Carey Co. v. Maryland Casualty Co., 206 N.W. 808, 47 A.L.R. 495; Doe v. Bernard, 7 S. M. 319; Heard v. Garritt, 34 Miss. 152; Newman v. Supreme Lodge, Knights of Pythias, 110 Miss. 371, 70 So. 241; L.R.A., 1916C, 1051; Boyd v. Mississippi Home Insurance Co., 75 Miss. 747, 21 So. 708; Pratt v. Canton Cotton Co., 51 Miss. 470; Tufts v. Greenwald, 66 Miss. 360, 60 So. 156; Wadlington v. Hill, 10 S. M. 560; Atkinson v. Sinnott, 67 Miss. 502, 7 So. 289; Waddell v. DeJet, 76 Miss. 104, 23 So. 437; Turner v. Ackar, 2 M. Dec. 736.
Argued orally by Gerard H. Brandon, Garner W. Green and Beekman S. Laub, for appellees.
(After stating the above facts.) Section 1 of chapter 128, Laws of 1918 (Hemingway's 1927 Code, section 2596), amends section 3074, Code of 1906, giving to subcontractors, laborers, etc., the right to bind the amount due the contractor by written notice provided for in said section, and, when such notice is given, the funds then due by the builder to the contractor are impounded in favor of such materialmen, subcontractors, laborers, etc. By section 2 of chapter 128, Laws of 1918, (Hemingway's 1927 Code, section 2597) it is provided that "no contractor or master workman except as hereinafter provided shall have the right to assign, transfer or otherwise dispose of in any way, the contract or the proceeds thereof, to the detriment or prejudice of the subcontractors, journeymen, laborers, and materialmen as declared hereinbefore and all such assignments, transfers, or dispositions shall be subordinate to the said rights of the subcontractors, journeymen, laborers and materialmen as well as the owner. Provided, however, that this section shall not apply to any contract or agreement where the contractor or the master workman shall enter into a solvent bond conditioned as provided for in section 3 hereof."
It will be seen from a study of these two sections that the legislature has provided a lien upon funds due the contractor by the builder in favor of laborers, journeymen, subcontractors, and materialmen. When the conditions of the statute are complied with, the builder is obliged to hold, for the purpose of paying or satisfying these claims, at least to the extent that such funds due the contractor by him will pay them; and, if such funds are insufficient to pay them in full, they shall be prorated. In practically all of the states, such liens are in force, and are upheld as valid regulations of contract rights by the legislature. A giving of liens in favor of those who have performed labor or furnished material which is used in a building where the builder has not, prior to such notice, paid out the contract price, is universally upheld. Such sections are in furtherance of a wise public policy, designed to protect people whose labor and material have been furnished to the contractor for use in the building constructed by him for a third person.
As we understand this, section 1 is in nowise challenged as being within the competence of the legislature to enact, but section 2 of the act is challenged as impairing the right of a contractor to make contracts and to receive the price therefor, and dispose of it, as he sees proper, as a necessary incident to the protection of his business. Of course the section does not prohibit the subcontractors, journeymen, laborers, and materialmen from waiving such right or entering into contracts by which such rights are waived or otherwise provided for, but it does give rights to the subcontractors, journeymen, and laborers and materialmen against the funds due the principal contractor for the protection of their contracts with him, and in furnishing labor and material in carrying out his contract. The legislature has the power to regulate the right of contract in a reasonable manner, so long as the right to contract is not destroyed or seriously impaired. The effect of the statute before us in the case named is similiar to impounding money due to one person by a process of garnishment to the satisfaction of the claims of another person against the owner of such funds, and it has always been, as we understand it, permissible for the legislature to provide remedies to parties furnishing labor and material, or in selling property, by providing liens or other proceedings impounding the property or its proceeds.
The contractor making a contract with subcontractors, journeymen, laborers, materialmen, has no constitutional right to be free from the obligation of paying them, nor has he the right to claim the proceeds derived from the builder under his contract, free from the claim of the laborers, subcontractors, journeymen, and materialmen with whom he has contracted, and whose material or labor he has secured in the performance of his own contract. We see no difference in principle in providing the security given by section 2 to such subcontractors, journeymen, laborers, and materialmen from that given by law in section 1 of the statute. We recognize the difference in the power of the legislature to deal with contracts made by public bodies, such as the state, county, or municipality, or other agencies of the public, and the right to regulate contracts made between private individuals. In case of public bodies and public corporations, being agencies of the state, acting for its purposes, and having such powers only as the state confers upon them, the state has, in the absence of constitutional restriction, a plenary right to prescribe the terms and conditions of public contracts, or contracts of public boards, or municipalities, and parties dealing with such powers or agencies of the state deal with them in the light of the law giving them power and imposing restrictions upon their right of contract. But, in the case of individuals, the legislature had no such plenary right. The citizen has the liberty of contracting, which cannot be entirely destroyed by the state, except in given circumstances deemed necessary for the protection of the public. In the case of private contracts, the legislature can only impose reasonable regulations and restrictions, etc., and cannot entirely take away the right, nor deny it to such an extent as to substantially destroy the right. However, its power to regulate contracts and provide conditions under which they can be made and enforced is quite large, and it is a delicate question to draw any precise limitation upon such right. We do not think section 3 of chapter 128 of the Laws of 1918 goes beyond the constitutional limit in this record. This section does not prohibit parties from making reasonable contracts; it does not require the bond therein provided for to be executed by the parties; nor does it prohibit them from taking other kinds of bonds or contracts of a reasonable nature in conducting their business of contracting. The section provides that: "When any contractor or subcontractor entering into a formal contract with any person, firm or corporation, for the construction of any building or work or the doing of any repairs, shall enter into a bond with such person, firm or corporation guaranteeing the faithful performance of such contract and containing such provisions and penalties as the parties thereto may insert therein, such bond shall also be subject to the additional obligations that such contractor or subcontractor, shall promptly make payments to all persons furnishing labor or material under said contract," etc.
This bond comes into operation when the parties enter into the kind of contract and the kind of bond provided for in the section, and does not intend to prevent the parties from making other and different contracts and bonds; but, if a bond is not given, as provided for in section 3 of the statute, then sections 1 and 2 continue in force for the benefit of the materialmen, subcontractors, journeymen, and laborers, and they have the full right to protect their interests in accordance with the terms of these sections. If the parties desire to be freed from the operation of sections 1 and 2, they may execute the bond provided for in section 3, and, when that is done, the contractor and owner, or builder, are freed from the provisions of sections 1 and 2, and the bond given stands in lieu or instead of the securities provided for in such sections, and operates for the benefit, not only of the contractor and the builder, but for such other persons as well.
Does the bond given in the present case come within the provisions of section 3? In other words, is it such a bond as is provided for therein?
In determining this question, we are to construe the bond in the light of the contract which the bond refers to, and, in so doing, it will appear that the parties intended to execute the bond provided for and required by the contract between the owner and contractor, and, by reference to the quoted provisions in the statement of facts, it will be seen that the contractor was required to give such a bond as was called for by section 3 of the act; and we think it was the intention of all the parties to give the bond therein provided for, and that the bond is to be construed in connection with the contract; it was designed to protect the owner and contractor, and that it was so dealt with by all parties. It will be seen from a recital of the bond itself that it referred to the contract, and to the plans and specifications made a part of the contract and the bond. This being true, it is plain we think that it was the intention and purpose of the parties to execute a bond in conformity with section 3 of the act above quoted.
This brings the case within the decision rendered in the case of U.S.F. G. Co. v. Parsons et al., 147 Miss. 335, 112 So. 469, 53 A.L.R. 88, and that case controls the present case. Consequently it is manifest that the contractor was free to make assignments of the amount due, and that the amount assigned to the bank was a valid assignment, freed from the claims of the subcontractors, journeymen, laborers, and materialmen.
We do not think the cases relied on, construing chapter 217, Laws of 1918, which provides for the bonds and the securities of people who furnish labor and material for public works, have any controlling force in the present case. As stated above, no constitutional question arises as to the power of the legislature to dictate the terms and conditions of public contracts, and the necessary conditions and requirements deemed by the legislature to be proper in such cases.
The judgment of the court below will be affirmed, and the case remanded, for further proceedings in accordance with this opinion.
Affirmed and remanded.