Opinion
6 Div. 751.
March 10, 1932. Rehearing Denied April 7, 1932.
Appeal from Circuit Court, Blount County; Woodson J. Martin, Judge.
London, Yancey Brower and J. K. Jackson, all of Birmingham, for appellant.
The date of the final settlement of a public contract in a suit on the bond securing the performance thereof must be alleged and proved by the parties plaintiff; this is jurisdictional and a condition to the right of recovery. Acts 1927, p. 358, § 28; Fleischman, etc., Co. v. U.S., etc., 270 U.S. 349, 46 S.Ct. 284, 70 L.Ed. 624; Salyers v. U.S. (C. C. A.) 257 F. 255; U.S. v. Stannard (D.C.) 207 F. 198; Baker Cont. Co. v. U.S. (C.C.A.) 204 F. 390; Ill. Sur. Co. v. U.S., 240 U.S. 214, 36 S.Ct. 321, 60 L.Ed. 609; U.S. v. N.Y. Steam Fitg. Co., 235 U.S. 341, 35 S.Ct. 108, 59 L.Ed. 259; U.S. ex rel. Brown-Ketcham Ir. Wks. v. Robinson, 130 C.C.A. 432, 214 F. 38, 39. The fact that one of the interveners filed his claim within the time required by the statute will not cure the defect of the prematurity of the original suit. Authorities, supra; U.S. ex rel. v. McCord, 233 U.S. 157, 34 S.Ct. 550, 58 L.Ed. 893. The prematurity of institution of the original suit being jurisdictional, is not waived by the surety's pleading to the merits. U.S. v. Amer. Bond Co., 42 App. D.C. 268. "Final settlement" has been defined as the administrative determination of the amount due under the contract. U.S. F. G. Co. v. Benson, 222 Ala. 435, 132 So. 622; State v. So. Sur. Co., 221 Ala. 113, 127 So. 805, 70 A.L.R. 296; U.S. F. G. Co. v. Simmons, 222 Ala. 669, 133 So. 731; Ill. Sur. Co. v. U.S., supra; U.S. v. Ill. Surety Co. (C.C.A.) 226 F. 653; U.S. v. George F. Pawling Co. (C.C.A.) 297 F. 65; Antrim Lumber Co. v. Hannan (C.C.A.) 18 F.(2d) 548; U.S. v. Robinson (C.C.A.) 214 F. 38; U.S. v. Title Guaranty Co. (C.C.A.) 254 F. 958; Mandel v. U.S. (C.C.A.) 4 F.(2d) 629; Amer. Bond. Co. v. U.S. (C.C.A.) 233 F. 364; Arnold v. U.S. (C.C.A.) 280 F. 338; U.S. v. Starr (C.C.A.) 20 F.(2d) 803; U.S. v. Newport, etc., Co. (C.C.A.) 18 F.(2d) 556; 40 U.S.C.A. § 270, pp. 100, 101; U.S. F. G. Co. v. Andalusia Mfg. Co., 222 Ala. 637, 134 So. 18. The surety has a well-recognized equity in the appropriation of the funds derived from the contract to the payment of the debts for labor, material, feedstuffs, and supplies for which, by its execution of the bond as surety, it is liable. Maryland Cas. Co. v. Dupree, 223 Ala. 420, 136 So. 811; Citizens' Bank v. Pearson, 217 Ala. 391, 116 So. 350; Henningsen v. U.S. F. G. Co., 208 U.S. 404, 28 S.Ct. 389, 52 L.Ed. 547; Prairie St. Nat. Bank v. U.S., 164 U.S. 227, 17 S.Ct. 142, 41 L.Ed. 412; U.S. v. Rundle (C.C.A.) 107 F. 227, 52 L.R.A. 505. Having such interest in debts incurred by the subcontractor for which it was liable, it would be inequitable to allow the principal contractor to give an acquittance to such subcontractor, if, at the same time, the subcontractor is asserting a claim against the surety for the work and labor done by himself. Authorities, supra. The surety cannot be called upon to pay the claims of a subcontractor who has himself failed to pay his own bills in a larger amount. U.S. F. G. Co. v. Benson Hdw. Co., 222 Ala. 429, 132 So. 622; Pettus v. Dudley Bar Co., 218 Ala. 163, 118 So. 153.
Inzer, Inzer Davis, of Gadsden, for appellees.
The contention of appellant that the original suit was instituted prior to final settlement of the contract, and that therefore judgment should have gone against this intervener, is without merit. The final settlement was determined as a fact. A warrant issued by the highway department showing that it was for final payment on the project was introduced. Furthermore, the bill of exceptions shows that it does not contain all the evidence, and the Supreme Court will presume that there was additional evidence sufficient to establish the fact and date of the final settlement. U.S. F. G. Co. v. Benson Hdw. Co., 222 Ala. 435, 132 So. 622; U.S. v. Title Guarantee Co. (C. C. A.) 254 F. 958; Ill. Sur. Co. v. U.S. (C.C.A.) 215 F. 334; Robinson v. U.S. (C.C.A.) 251 F. 461; U.S. v. Arnold (D.C.) 268 F. 130; Jones v. White, 189 Ala. 622, 66 So. 605. Appellant having appeared generally by filing demurrer to the original complaint and agreed to the entering of judgments in favor of several interveners against it, and agreed to plead in short by consent, the cause having been then continued and at a subsequent session of the court appellant proceeded to trial of the cause on the merits, appellant cannot now for the first time insist that the trial court was without jurisdiction to try said cause, even though it be conceded that the cause was prematurely brought by the original plaintiff. Vaughan v. Robinson, 22 Ala. 519; Aachen Munich F. I. Co. v. Arabian T. G. Co., 10 Ala. App. 395, 64 So. 635; U.S.C.A., Title 40, § 270; Mahoney v. O'Leary, 34 Ala. 97; Ala. Code Ann. 1928, § 1397 (30); Foster v. Napier, 73 Ala. 595; Robinson v. U.S., supra. The original contractor had the right to agree with Chambers on a settlement of their existing accounts relative to the construction of the project, and to the payment to Chambers to complete the project. Determination by the trial court sitting without a jury on testimony heard viva voce of ordinary jury questions will not be disturbed. Bookmiller v. Jones, 216 Ala. 298, 113 So. 32.
The action is against the surety upon a contractor's bond for construction of a state highway, project S-170, in Blount county. Gen. Acts 1927, p. 356, § 28.
The appeal is to review judgments rendered in favor of certain interveners, upon claims against the contractor for labor and materials.
The point is here raised that the original suit, brought by J. R. Ricks, in which all other claimants intervened as per statute and order of court, was prematurely brought.
Under our statute, no suit on the bond shall be "commenced until after the complete performance of said contract and final settlement thereof." This means after the date "when the amount due under the contract is determined by the appropriate administrative authority." United States Fidelity Guaranty Co. v. Benson Hardware Co., 222 Ala. 431, 435, 132 So. 622, 625.
The amount due is so "determined" when the final estimate of the highway department is approved by the Governor. United States Fidelity Guaranty Co. v. Andalusia Mfg. Co., 222 Ala. 637, 134 So. 18.
The claimants introduced in evidence, over objection of defendant, a certified copy of the auditor's warrant on file in the office of the state treasurer, drawn in favor of W. C. McCoy, the contractor and principal in the bond, purporting to be in payment of final estimate on this project. This warrant was dated September 26, 1929, the date of final settlement alleged in the original complaint in this cause filed October 3, 1929. While this warrant might not be evidence of the date of final settlement as against a plea of the statute of limitations, it was evidence of a final settlement prior to date of its issuance by the constituted legal authority, evidence that the suit was not prematurely filed.
But it is claimed the record discloses that in fact a final settlement for the entire performance of the contract was not made until some days after the suit was filed; that a final settlement prior to bringing suit must be averred and proven as part of plaintiff's case in such actions.
Reliance is had upon the federal rule in actions on contractor's bond of this character. Illinois Surety Co. v. United States, 240 U.S. 214, 218, 221, 222, 36 S.Ct. 321, 60 L.Ed. 609; Fleischmann v. United States, 270 U.S. 349, 46 S.Ct. 284, 70 L.Ed. 624.
Appellees insist the federal rule is founded upon the federal law, under which the United States is given the first security and right of action on the bond, actions by materialmen being subordinated and postponed for six months after final settlement, etc.; that under our statute a defense that the action was prematurely brought should be set up by plea in abatement. This upon the authority of Herndon v. Garrison, 5 Ala. 380; Mahoney v. O'Leary, 34 Ala. 97; Foster v. Napier, 73 Ala. 595.
Under a statute like ours, where only one suit may be brought, and that within sixty days after final settlement, a statute requiring notice to all known creditors of the pendency of such suit and of their right to intervene therein as per order of the court, tantamount to notice that the entire matter is already drawn within the jurisdiction of the court, such creditor may well be lulled into acquiescence, and fail to institute an original suit of his own within the limited time allowed by law.
We think any issue as to the premature filing of the suit should be promptly raised by appropriate plea. The question is one of procedure rather than of substantive law.
In this case, however, the allegation of the complaint touching final settlement had already been adjudicated. There were many interveners. The record shows agreed judgments had already been entered in behalf of many of them before the trial of the interventions now under review. Certainly it is not for the surety to admit the allegations of the complaint applicable alike to all interveners, entering judgments for such of them as he may elect, and thereafter deny such averments as to those interveners he may wish to defeat.
When the allegations going to the maturity of the cause of action on the bond are once adjudicated in an action of this kind, it need not be retried in each intervention suit.
The main issue of fact relates to the claim of intervener, R. D. Chambers. It appears that W. C. McCoy, the contractor and principal in the bond sued upon, subcontracted the work to Chambers, who was to receive the contract price, less 10 per cent. to be retained by McCoy.
After the work proceeded for some months, Chambers not being able to continue under his subcontract, it was surrendered by mutual agreement, and Chambers continued as superintendent in charge of the work upon a salary. Judgment was rendered for the amount claimed as salary or wages.
Chambers' version is that, in consideration of his turning over his equipment, his interest in sums retained by the state on prior estimates, and all interest in future estimates under his subcontract, McCoy assumed payment of all outstanding bills for labor and material for which the subcontractor was bound, and agreed to pay him a stipulated salary and expense fund as superintendent, and under this arrangement the project proceeded to completion.
The theory of the surety company is that, if it be conceded the trial court, under the controverted evidence, is not to be reversed upon his finding in keeping with Chambers' version as above outlined, still it appears that Chambers had become largely indebted for labor and materials for which the surety was liable, and which, by reason of McCoy's bankruptcy, it has been compelled to pay; that McCoy's assumption of these demands cannot cut off the right of the surety to a deduction of same from any demand due Chambers.
True, of course, when a subcontractor sues on the bond for the full amount due him as such from the principal in the bond, the surety is entitled to deductions for claims of laborers and materialmen of the subcontractor, for which the surety is held directly liable to such laborers and materialmen. The subcontractor being primarily liable for such bills, the surety may recoup the amount of his liability to the subcontractor to the amount of his liability to such laborers or materialmen. This is the holding in United States Fidelity Guaranty Co. v. Benson Hardware Co., 222 Ala. 430, par. 15, page 438, 132 So. 622.
But this does not prevent transactions in good faith in course of the performance of the contract fixing the primary liability for such bills for labor and material as between the principal and subcontractor.
The bond is security to subcontractors and others against defaults of the principal under his contracts with them. The law imposes no obligations on the subcontractor toward the surety other than such as arise out of his contract with the principal in the bond.
But it is argued that the subcontractor had become so largely indebted to the principal that the transaction was tantamount to a voluntary release, which, if given effect, works a fraud on the surety. Any conspiracy between an insolvent principal and other beneficiaries under the bond to shift a greater burden to the surety than would arise in the due course of bona fide operations is illegal. United States Fidelity Guaranty Co. v. Butcher, 223 Ala. 606, 137 So. 446.
Admittedly, for reasons explained in appellant's brief, the record before us does not contain all the evidence before the trial court as to the state of the accounts between the contractor and subcontractor at the time the subcontract was rescinded and Chambers put on a salary basis.
The insistence that the uncontradicted evidence is enough to show the lower court in error, notwithstanding other evidence before him, and not before us, cannot be sustained. It appears such accounts were complicated with old outside indebtedness, not connected with this project, and with charges for equipment sold by the contractor to the subcontractor, and returned on such rescission. This court could not with any degree of assurance ascertain the state of affairs from the oral testimony, in the absence of the book accounts to which such testimony was directed.
It was within the discretion of the trial court to permit the filing of interventions by the other three claimants while the suit was still pending, although the time named in the first order and notice had expired. United States Fidelity Guaranty Co. v. Benson Hardware Co., supra.
Affirmed.
ANDERSON, C. J., and GARDNER and FOSTER, JJ., concur.