February 23, 1931.
1. MECHANIC'S LIENS. Statute requiring provision in contractor's bond for payment of laborers and materialmen has effect of writing such conditions into bond, and contrary stipulations are ineffective ( Laws 1918, chapter 128, section 3).
Under section 3 of chapter 128, Laws of 1918, where a bond is given as provided for therein, the bond inures to the benefit of the materialmen who furnished material that went into the building. The statute has the effect of writing the conditions therein provided for into the bond, and no stipulations contrary to the statutory provisions will be permitted to have effect.
2. MECHANICS' LIENS. Stipulations may be written into contractor's bond affecting liability of surety company and contractor to owner or builder; surety on contractor's bond providing for payments to contractor from owner in cash or current funds held relieved from obligation to pay owner to extent notes taken by contractor without surety's consent interfered with contract stipulation ( Laws 1918, chapter 128, section 3).
As between the contractor and the surety on his bond and the owner or builder, stipulations may be written into the bond which may affect the liability of the surety company and the contractor to the owner or builder, and where the surety contract provides for the payments to be made in cash or current funds, and the contractor and the owner, without the consent of the surety, provide for taking the note of the owner with a lien upon the property instead of cash, the surety company is relieved from the obligation to pay the owner to the extent that such notes and contracts may interfere with the contract stipulation.
3. MECHANICS' LIENS. Assignee of notes and lien given by owner to contractor could not recover on contractor's bond value of notes taken, where bond provided for payment to contractor in cash or current funds ( Laws 1918, chapter 128, section 3).
Where a contract of suretyship giving bond under section 3 of chapter 128, Laws of 1918, provides for payment in cash or current funds, and a person acquires a note from the owner with a lien to enforce the same on the building to be constructed, and the contractor assigns such note with the lien to another, the assignee has only the same rights that the contractor would have, and is not entitled to recover on the surety bond the value of the notes so taken. The section does not provide for the security of money borrowed by the contractor for the purpose of erecting a building, but only applies to the subcontractors and materialmen.
4. INTERPLEADER. In concursus proceedings to bring materialmen and subcontractors into courts to adjust claims under contractor's bond, court may allow reasonable fee to attorneys representing concursus proceedings; court in concursus proceedings to adjust claims of materialmen and subcontractors under contractor's bond may not allow attorneys' fees to materialmen and subcontractors for attorneys representing their separate interests ( Laws 1918, chapter 128, section 3).
Where a surety bond is given, as provided in section 3, chapter 128, Laws of 1918, and concursus proceedings, or proceedings in the nature of concursus proceedings, are instituted to bring the materialmen and subcontractors into court for the adjustment of all claims, it is permissible for the court to allow a reasonable fee to the attorneys representing the concursus proceedings, but the court is not authorized to allow attorneys' fees to materialmen and subcontractors for attorneys employed by them and representing their separate interests in the concursus proceeding.
5. MECHANICS' LIENS. Materialmen and subcontractors are entitled to interest as against surety on contractor's bond from maturity of demand for material or labor ( Laws 1918, chapter 128, section 3).
Interest is allowable on bills for material and labor incurred, under the provisions of section 3, of chapter 128, Laws of 1918, as in other cases of contract, from the date of maturity of the demand for such material or labor.ON SUGGESTION OF ERROR.
6. MECHANICS' LIENS. Bond securing performance of building contract and providing for attorney's fee for instituting concursus proceeding held to cover such fee ( Laws 1918, chapter 128, section 3).
Where a surety company makes a bond for the faithful performance of a building contract by a contractor to the owner, and such contract provides for attorney's fees for instituting concursus proceedings, the bond will be held to recover such attorney's fees.
7. INTERPLEADER. Concursus proceeding under Louisiana law is equivalent of statutory proceedings interpleading materialmen in suit on contractor's building bond ( Laws 1918, chapter 128, section 3).
A concursus proceeding under the Louisiana law is the equivalent of a proceeding under chapter 128, Laws of 1918, interpleading materialmen in a suit on the contractor's building bond in favor of the owner as provided for in section 3 of said act.
8. MECHANICS' LIENS. Materialman having taken proceeding inconsistent with stipulations of building bond and accepted security for claim, held to have waived right to resort to bond, being relegated to security ( Laws 1918, chapter 128, section 3).
Although a materialman is protected under the contractor's bond made by a surety company guaranteeing the faithful performance of a contract and the payment of materials, yet such materialman is not entitled to recover from the surety if he has taken a proceeding inconsistent with the stipulations of the bond and has taken security from the owner for his claim. The statute does not prevent either waiver or estoppel in such case.
APPEAL from chancery court of Adams county; HON. R.W. CUTRER, Chancellor.
Wells, Jones, Wells Lipscomb, of Jackson, Arthur G. Powell, of Atlanta, Ga., and Wallace Stevens, of Hartford, Conn., for appellant.
The materialmen cannot take the benefit of the bond and repudiate any of the conditions expressed in it. The surety signed the bond with the condition stated in the face of it, as a condition precedent to any liability under it, that there was to be no liability unless payments to the contractor were paid in cash. Neither the materialmen nor any one else can sue and recover on this bond with these conditions broken, without subjecting the surety to a liability it never assumed under the contract. Every obligation assumed by the surety under the bond whether in express language or by operation of law, was assumed subject to these conditions.
The construction of chapter 128 of the Laws of 1918, as rendering the bond sued on in this case liable for the accounts of the intervenors is to make said law void and unconstitutional as interfering with the freedom of contract against property owners, contractors and surety companies in violation of section 1 of the Fourteenth Amendment to the Constitution of the United States.
Williams v. Fears, 179 U.S. 270, 21 Sup. Ct. Rep. 128; Standard Oil Company v. United States, 221 U.S. 1, 31 Sup. Ct. Rep. 502; Adkins v. Children's Hospital, 261 U.S. 525, 43 Sup. Ct. Rep. 394; Allgeyer v. Louisiana, 165 U.S. 578, 17 Sup. Ct. Rep. 427.
Williamson Greer Company granted an extension of time to the Natchez Investment Company, Inc., for the payment of part of the contract price without the consent of the surety. The account was novated and the contract bond released of any liability therefor.
Interest is not allowable on claims made by materialmen against the contractor's bond.
McElwrath and Rogers v. Kimmons et al., 112 So. 164.
The recovery on the bond is a recovery of the penalty named in the bond and penalties do not bear interest until judgment, therefore, neither are they to be enlarged by judicial construction but are to be strictly construed.
This court has repeatedly given a strict construction to contracts for attorney's fees and has gone to the extent of denying the right to recover attorney's fees in certain cases where the contracts provided for them.
Middleton v. Zachary, 101 So. 588; Forman v. McFarland, 87 So. 275.
Chapter 128, Laws of 1918, does not permit the recovery of attorney's fees, the recovery is based solely on Article 30 of the general contract. That article, however, provides for a reasonable attorney's fee only for the enforcement of the contract between the owner, the Natchez Investment Company, and the contractors and the suit instituted by the Natchez Investment Company in this case is not such a suit.
Attorney's fees were not reasonable in this suit.
Mississippi Fire Ins. Co. v. Evans, 120 So. 730.
The allowance of five thousand dollars even if a fee is allowable is an abuse of discretion, wholly and utterly unsupported either by reason, the evidence in the case, equity or justice.
Wells, Jones, Wells Lipscomb, of Jackson, for appellant.
No fees can be allowed to any one in any case unless, first, that person recovers in the cause which he institutes, or unless he pays into court a fund to protect himself against multiple claimants, in which event he would be entitled to a reasonable attorney's fee for instituting the suit, the same to be paid out of the fund.
Rowland v. Maddox, 183 Mass. 360, 67 N.E. 347; Rasch v. Rasch, 278 Ill. 261, 115 N.E. 871; U.S.F. G. v. Carter, 158 Ky. 737, 166 S.W. 238; Hester v. Park Commission, 84 Mich. 450, 47 N.W. 1097; Hollander v. Central Metal Co., 109 Md. 131, 71 A. 442, 446; Mohr, Weill Lbr. Co. v. Russell, 109 Ga. 579, 34 S.E. 1005; Johnson v. United Railways Co., 152 S.W. 362, 366; Fraser v. Cole, 214 Fed. 556 (14) 562; Morgan v. Grass Fibre Corp., 11 F.2d 431; Huff v. Bidwell, 195 Fed. 430; German Nat. Ins. Co. v. Va. State Ins. Co., 108 Va. 393, 399, 61 S.E. 870, 873; Ribes v. Patty, 74 Miss. 381, 20 So. 862; 49 A.L.R., page 1149.
G. Garland Lyell, of Jackson, and Engle Laub, of Natchez, for appellees.
The agreed statement of facts precludes the appellant, from contending that Williamson-Greer Company received the note of Natchez Investment Company as a payment, and also precludes the appellant, from placing the Williamson-Greer Company in any class different from that occupied by other materialmen who did not accept notes. It also provides that the Williamson-Greer Company received the note as security for their claim, and also specifically provides that should the bond sued on be held to be a bond guaranteeing the faithful performance of the contract then Williamson-Greer Company would be entitled to a judgment against Hartford Accident Indemnity Company for the full amount sued for and demanded, as in the agreement set forth.
The contract provided for the payment of the attorney's fee and such fee was properly allowed.
The guarantor is ignorant of the parties with whom his principal may contract, the amount, the nature, and the value of the materials required, as well as the time when payment for them will become due. These particulars would probably be impossible even for the principal to furnish, and it is to be assumed that the surety contracts with knowledge of this fact. Not knowing when or by whom these materials will be supplied, or when the bills for them will mature, it can make no difference to him whether they were originally purchased on a credit of sixty days, or whether after the materials are furnished, the time for payment is extended sixty days and a note given for the amount maturing at that time. If a person deliberately contracts for an uncertain liability, he ought not to complain when that uncertainty becomes certain.
U.S.F. G. Co. v. United States, 191 U.S. 416, 48 L.Ed. 247; Hartford Accident Indemnity Co. v. N.O. Nelson Mfg. Co. (Miss.), No. 29411. Engle Laub, Brandon Brandon, Kennedy Geisenberger and E.H. Ratcliff, all of Natchez, for appellees.
Where the bond has been taken under the provision of a statute and inures to the benefit of persons from whom the contractor obtains labor and materials, the owner becomes liable to the same extent that he would have if he had not required any bond, where he releases the surety or by his acts brings about a situation in which it would be unconscionable to hold the surety to his obligation; however unauthorized acts of the owner which may be sufficient to release the surety on such a bond as against the owner may not be sufficient to release him as against laborers and materialmen.
40 C.J. 359; section 488.
This bond and statute gives the workmen and materialmen distinct individual rights of which they cannot be deprived by any unauthorized acts of the owner or the contractor or by anyone other than themselves.
U.S.F. G. Co. v. D'Angelo, 150 La. 188, 193, 90 So. 564; Maryland Casualty Company v. Cherry Vale Gas, Light Power Company, 99 Kan. 563, 162 P. 313, L.R.A. 1917; Equitable Surety Company v. U.S., 34 Sup. Rep. 803, 234 U.S. 448, 58 L.Ed. 1394; First National Bank of Alexandria v. Hudson Construction Co., 100 So. 451; Williams v. Baldwin, 228 S.W. 554; First Presbyterian Church v. U.S.F. G. Co., 133 Minn. 429, 158 N.W. 709.
The constitutionality of chapter 128, Laws of 1928, has been upheld. The liberty of contract is not abridged by statute providing if owner shall take bond from building contractor it shall, subject to obligee's rights, inure to benefit of laborers and materialmen.
The general rule is that a bond, whether required by statute or not is good at common law if entered into voluntarily and for valid consideration, and if not repugnant to the letter or the policy of the law. A bond executed in pursuance of a statute is not necessarily void because the statute is afterwards declared unconstitutional. If entered into for a lawful purpose without duress and for a valid consideration independent of the statute, such bond may be enforced as a common law obligation.
The allowance of an attorney fee where the bond indemnified against such expense is proper.
Although the bond did not provide for interest, interest necessarily followed as an incident to the debt. Miss. Fire Ins. Co. v. Evans, 120 So. 738, 743, 153 Miss. 635; U.S.F. G. Co. v. Parsons et al., 122 So. 544, 154 Miss. 587.
Recovery on a bond as to a materialman is not excluded.
Southern Surety Co. v. Klein (Tex. Civ. App.), 278 S.W. 527; Globe Indemnity Co. v. Barnes (Tex. Civ. App.), 281 S.E. 215, 288 S.W. 121.
After the bond has once been given then no action of the surety company or the obligee can in any wise destroy the rights of the furnisher of materials, and their rights under the bond become vested and fixed upon their furnishing material which enters into the construction of the building, and these rights of the materialmen are absolute, regardless of the fact that the obligee has violated any of the provisions of the bond itself, and the surety and the owner have nothing whatsoever to do with these rights of the materialmen once they become fixed by the giving of the bond.
Where a bond is executed with the intention of parties to comply with the requirements of the statute the terms of the statute become part of the obligation by incorporation even though the bond itself be silent as to the obligation.
Globe Indemnity Co. v. Barnes, 288 S.W. 121.
It is a well settled principle of law that the law will not compel one to enter into a contract, but in proper case may fix liability of one who voluntarily does contract.
Globe Indemnity Company v. Barnes, 288 S.W. 121; Hartford Accident Indemnity Co. v. Natchez Investment Co., 119 So. 370.
The Casualty Company was not released from liability for that part of the claim for which notes were accepted. It has not been shown that appellant has been in any way prejudiced by the giving and acceptance of the notes or by the extension of credit thereby involved, and this alone would be fatal to its contention.
Board of Commissioners v. Clemens, 85 W. Va. 11, 100 S.E. 680, 7 A.L.R. 373; Pickens County v. National Surety Co., 13 F.2d 758; New Amsterdam Casualty Co. v. U.S. Shipping Board (C.C.A.), 16 F.2d 847; Atlantic Trust Company v. Laurenberg (C.C.A.), 163 Fed. 690; Maryland Casualty Co. v. Ohio River Gravel Co., 20 F.2d 517, 21 F.2d 744, 275 U.S. 570, 48 S.Ct. 157, 72 L.Ed. 431.
Extension of credit to the contractor can be held to release the surety only on the theory that it was a departure from the contract and it cannot be said that such an extension of credit by one of the furnishers of materials to the contractor, as here complained of, was in any sense a departure from the terms of the contract.
The taking of other and additional security will not affect a lien.
Kingsland Douglass Mfg. Co. v. Massey, 69 Miss. 296, 13 So. 269.
The relinquishment by the creditor discharges a surety only to the extent that he is injured thereby.
Taylor v. Continental Supply Company, 16 F.2d 578.
There would have to be shown to have been a debt once existing and now cancelled to serve as a consideration for a new liability if novation is to be established.
Adams v. Power, 48 Miss. 450.
Interest on some claims due laborers and materialmen by the contractor follow as a necessary incident thereto, under the Laws of 1912, chapter 229, Hemingway's Code 1927, section 2223, though the bond guaranteeing performance of the contract does not expressly provide therefor.
The word concurso or consursus is the name of a suit or remedy provided by the laws of Louisiana to enforce claims against an insolvent or failing debtor.
Schoeder Syndics v. Nicholson, 2 La. 350; Ponchatrain Apartments, Inc. v. Maryland Casualty Co. et al., 129 So. 671.
An allowance against the building contractor's surety of attorney's fees in a concursus proceeding was proper.
The provision in the bond for the payment of attorney fees was for the benefit of subcontractors furnishing labor and material in the construction of the hotel.
Stowell et al. v. Clark, 118 So. 370. Brandon Brandon and E.H. Ratcliff, all of Natchez, for appellees.
The surety company adopted, referred to, and made a part of its bond the contract of construction and all contract documents executed between the contractor and owner thereby, by that very act of the surety company, each and every clause, provision, and condition of the building contract and all contract documents were incorporated in and became as much a part of the bond and more, as the printed form of the bond itself.
Even though a statute be unconstitutional, yet, if the parties contract with reference to the same and thereby incorporate its terms voluntarily into their contract and make the same a part thereof, then the terms and provisions of the statute will be given force and effect as would any other part of the contract, and the question of its constitutionality in such event is immaterial to an adjudication of the rights of the parties under the contract.
Southern Surety Company v. Nalle Co., 242 S.W. 197; 6 R.C.L., par. 74, pages 76 and 77; Boyd v. Ala., 24 L.Ed. 302; State v. Stanton, 6 Wall, 50, 18 L.Ed. 721; Liverpool, etc., Steamship Co. v. Immigration Commissioners, 113 U.S. 33, 5 S.Ct. 352, 28 L.Ed. 899; San Bernardino County v. Southern Pac. R. Co., 118 U.S. 417, 6 S.Ct. 1144, 30 L.Ed. 125; Equitable Surety Company v. Stemmons, 239 S.W. 1037.
The obligation of the appellant was that it guaranteed that obligation of the principal contractor who defaulted and by that default appellant defaulted, for its obligation was that of guarantor guaranteeing to pay on the dut date. Thereby interest began to run on the accounts as against appellant.
W.C. Martin and Martin, Byrnes Meyer, all of Natchez, Bradley, Baldwin, All White, all of Birmingham, Ala., and Green Green, of Jackson, for appellees.
The action of party who delivered materials to defendant contractor in accepting the defendant's short-time notes, and renewals thereof, which notes the party discounted and secured credit without a showing that the defendant surety company was in any way prejudiced or actually harmed by the extension of time, did not release the surety.
People v. Traves, 154 N.W. 130; Murray City v. Banks, 219 P. 246, p. 248; City of Philadelphia v. Fidelity Deposit Co., 231 Pa. 208, 80 A. 62; Standard Salt Cement Co. v. Nat. Surety Co., 134 Minn. 121, 158 N.W. 802; U.S. v. U.S.F. G. Co., 178 Fed. 721; Ohio Co. v. Clemens, 100 S.E. 680, 7 A.L.R. 373; 21 R.C.L. 1163.
The delivery of a note is not a payment.
Wileman v. King, 120 Miss. 392, 82 So. 265; Federal Land Bank v. Collins, 127 So. 570; Citizens Bank v. Kretschmar, 91 Miss. 608, 44 So. 90.
The acceptance of the negotiable note of a third person for an antecedent debt, unless taken in payment and satisfaction, has no effect upon the rights and liabilities of parties to the original debt.
Wadlington v. Covert, 51 Miss. 631.
A materialman does not discharge a surety on the contractor's bond, given to secure moneys due laborer's and materialmen, by receiving acceptance from the contractor, and thereby extending the time of payment, where the acceptances have not been paid, and it does not appear that the contractor was solvent when they were made and insolvent when they were due, or that the extension resulted in loss or injury to the surety.
Chafee v. U.S.F. G. Co., 128 Fed. 918.
A surety company, signing the bond of a city contractor, conditioned on the contractor paying subcontractors as their claims become due, is not discharged from liability merely because the contractor made payments on account of materials furnished by a materialman, and thereafter, without the knowledge of the surety, executed a ninety-day note for the balance due.
People v. Bowen, 153 N.W. 672; Board of Commissioners v. Clemens, 100 S.E. 680, p. 681; U.S.F. G. Co. v. United States, 178 Fed. 692; United States F. G. Co. v. United States, 191 U.S. 416, 48 L.Ed. 242, p. 246; City of Montpelier v. National Surety Co., 122 A. 488; Philadelphia v. Fidelity Deposit Co. of Maryland, 80 A. 62.
This paid surety can attach no condition which would be in conflict with that written into the bond by the statute of Mississippi.
Surety on a bond cannot be released from the original contract by a change in the agreement between the contractor and the owner of the building, and an action on the bond can be maintained against him by a materialman for the unpaid amount due him on account of material furnished to the contractor. Because the duties of the sureties in such cases of third parties are entirely independent of the owner's rights, and when the third party's rights are fixed they can be destroyed only by his own acts, and not by the acts of the principal debtor or contractor.
Pingrey on Suretyship Guaranty, section 112, p. 129; Doll v. Crume, 59 N.W. 806; U.S.F. G. Co. v. U.S., 178 Fed. 692; Federal Union Surety Co. v. Commonwealth, 129 S.W. 335, 339; United States v. Hazzard, 53 App. Div. 410, at 412; Forburger Stone Co. v. Lion Bonding Surety Co., 170 N.W. 897; Asheville Supply Foundry Co., 151 S.E. 94, 198 N.C. 177; Roper Lumber Co. v. Lawson, 143 S.E. 848, 195 N.W. 840; Dickson v. United States Fidelity Guaranty Co., 117 So. 245, 150 Miss. 864; Knight Gilson Co. v. Castle, 27 L.R.A. (N.S.) 596; Conn v. State ex rel. Stutsman, 125 Ind. 518; Steffes v. Lemke, 40 Minn. 97; Lumber Co. v. Peterson Sampson, 124 Iowa 615; Griffith v. Rundle, 23 Wn. 456; School Dist. v. Livers, 49 N.W. 507; United States Fidelity Guaranty Co. v. American Blower Co., 84 N.E. 557; Kauffman v. Cooper, 65 N.W. 796; United States to use of Anniston Pipe Foundry Co. v. National Surety Co., 92 Fed. 551; Kansas City Hydraulic Press Brick Co. v. National Surety Co., 149 Fed. 507; U.S. Fidelity Guaranty Co. v. Omaha Building Const. Co., 116 Fed. 145.
Appellees are entitled to recover interest.
Section 2276, 1930 Code; Stowell v. Clark, 152 Miss. 32, 118 So. 370; Miss. Fire Ins. Co. v. Evans, 153 Miss. 635, 120 So. 738, at p. 743; U.S. Fidelity Guarn. Co. v. Parsons, 154 Miss. 587, 122 So. 544, at p. 549.
There was a prior appeal of this cause, wherein chapter 128, Laws of 1918, was adjudged constitutional following prior decisions, and that decision on this prior appeal settled the principles of the case and is not here again reviewable under the law of the cause.
Argued orally by Arthur G. Powell and L. Barrett Jones, for appellant, and by S.C. Laub, W.A. Geisenberger, Gerard Brandon and Garner Green, for appellees.
This is the second appeal of this cause, the decision in the first appeal being reported in 155 Miss. 31, 119 So. 366, on which appeal a statement of the case as it had then developed was made. The constitutionality of chapter 128, Laws of 1918, was upheld, and the contract between the Hartford Accident Indemnity Company and the Natchez Investment Company, Inc., was construed and the bond held to be a bond in accordance with the provisions of section 3, chapter 128, Laws of 1918.
On a remand of the cause to the court below the various materialmen who had furnished material for the building, and others who had advanced money to the Natchez Investment Company, or to the contractor upon a note given by that company, propounded claims against the appellant, Hartford Accident Indemnity Company, setting forth their claims and praying judgment for the amount thereof against the Hartford Accident Indemnity Company and contractors, and also for interest upon the said claims and for attorneys' fees incurred in propounding and litigating their claims. A cross-bill was filed against Hartford Accident Indemnity Company and the contractors, the suit having been filed as a concursus proceeding by the Natchez Investment Company, Inc., for the benefit of all such persons, and such persons being made defendants to that bill.
Among the provisions of the contract between the contractors and the Natchez Investment Company, Inc., for the building of the hotel, was a provision stating that the owners should make payments on account of the contract, as provided therein, on or about the 1st and 15th day of each month, the value, based on the contract price, of labor and materials incorporated in the work and of materials suitably stored at the site thereof up to the 1st and 15th day of each month, as estimated by the architects, less the aggregate of previous payments. It was also provided in the contract that the contractor should furnish and pay for all materials and labor used in the construction of the building.
On the hearing in the court below agreed statements of facts were entered into between the Hartford Accident Indemnity Company and the several materialmen whose claims were propounded in the said proceeding. These agreements are practically and substantially alike, and, in effect, agree that on the 18th day of October, 1926, the Natchez Investment Company, Inc., entered into contract with J.V. and R.T. Burkes of New Orleans, Louisiana, for the construction of a hotel according to plans and specifications known as project No. 640 of Weiss, Dreyfous Seiferth, Inc., and that the Burkes entered upon the construction of the hotel. That the materials claimed by the several claimants were actually furnished to the Burkes, the contractors, and that the amount of them was correct, and that the prices were fair and reasonable, and the balance due, shown in the claim, was unpaid by J.V. and R.T. Burkes, and that they went into the hotel building. The agreements reserved the question as to whether an attorney's fee was due and payable to the claimants, and also whether interest was due and payable; also agreed that demand had been made upon the Natchez Investment Company for the payment of the said sums of money.
The bond of the appellant contained, among other things, the following clauses:
"1. The obligee shall, at the times and in the manner specified in the contract, fully comply with all the terms thereof, and if the obligee default in the performance of any matter or thing agreed or required in this bond, or in the contract, the surety shall thereupon be relieved of all liability hereunder.
"3. If at any time there come to the notice or knowledge of the obligee information that any claim for labor performed or for materials furnished the principal in or upon the work specified in the contract remains unpaid, or that any lien or notice of lien for such work or materials has been filed or served, the obligee shall withhold from the principal payment of any moneys due or to become due to the principal under the contract until the payment of such claim or discharge of such lien or notice of lien, and will so notify the surety, giving a statement of the particular facts and amount of each such claim lien or notice of lien.
"4. If any changes or alterations by the principal or obligee shall be made in the plans or specifications for the work described in the contract, the obligee shall immediately notify the surety thereof, giving a description and stating the amount of money involved by such changes or alterations. Provided, however, that should the cost of such changes or alterations in the aggregate amount to a sum equal to ten per cent of the penal sum of this bond, no further changes or alterations shall be made by the principal or obligee until the consent of the surety shall first be obtained thereto.
"8. None of the conditions or provisions contained in this bond shall be deemed waived or altered by the surety unless the written consent to such waiver or alteration be duly executed by its authorized officers and its seal be duly affixed thereto; nor shall the obligee consent to an assignment of the contract or any part thereof without the express consent of the surety duly executed and attested as aforesaid; nor shall this bond or any rights thereunder be assignable except with the consent of the surety duly executed and attested as aforesaid."
It was also provided in paragraph 7 of the bond that the surety shall not be liable unless the contract was paid in cash; and, under paragraph 11, the obligation of the surety should be construed strictly as one of suretyship only, and should not be for the benefit of any person other than the named obligee.
The contract between J.V. and R.T. Burkes, the principal in the bond, and the Natchez Investment Company, Inc., was for the price of three hundred sixteen thousand eight hundred twenty-two dollars, exclusive of extras, and provided that payment was to be made in current funds. The Natchez Investment Company, Inc., floated a bond issue with which to erect the building, but the proceeds thereof had to be supplemented by individual funds of the company. The bond issue netted about two hundred eighty thousand dollars. After the work started, and the contractors became entitled to their first estimate, instead of being paid in cash or in current funds, the contractors were given notes aggregating thirty-eight thousand dollars. These notes were assigned to banks and money procured from the banks by J.V. and R.T. Burkes, and the funds so obtained were used in paying for labor and material that went into the building. The notes so given were extended to them as of payment. It appears that J.V. and R.T. Burkes owed the bank, to which the thirty-eight thousand dollars worth of notes was disbursed, sums of money and procured an additional credit with the bank in the sum of fifteen thousand dollars. It was understood between the Natchez Investment Company, Inc., and the contractors, J.V. and R.T. Burkes, that the giving of the notes did not extinguish the lien that the contractors had upon the building, and this seems to have also been understood by the bank to which the notes were assigned. The appellant, Hartford Accident Indemnity Company, was not consulted about this transaction and its consent thereto was not obtained. An arrangement was also made by the Natchez Investment Company, Inc., and by the Burkes with certain other materialmen, who had sold material to the Burkes to go into the hotel building, to accept the notes of the Natchez Investment Company for the amount of their claims, with an understanding that their lien would not be released against the hotel property by taking the notes of the Natchez Investment Company, the owner thereof. This arrangement was not consummated with any of the parties furnishing material, except the Williamson-Greer Company, whose claim was for twelve thousand eight hundred fifteen dollars and ten cents. This note was due one year after date and was dated July 1, 1927, and bore interest at six per cent per annum, and provided for attorneys' fees and costs incurred in collecting the same, and recited that it was secured by a lien allowed by law to the payee as to the furnishing of material, labor, and supplies in the construction of the Eola Hotel of Natchez, Mississippi. This note was made payable direct to Williamson-Greer Company by the Natchez Investment Company, Inc., and J.V. and R.T. Burkes gave credit to the Natchez Investment Company, Inc., for the amount of this note on the contract price. The notes given to J.V. and R.T. Burkes were dated November 10, 1926. One was for twenty-eight thousand eight hundred twenty-three dollars, due February 8, 1927, or ninety days after date, and bore interest at the rate of eight per cent from maturity until paid, and provided for ten per cent additional if placed with an attorney for collection. This note contained no recital of the reserving of the lien upon the hotel property for its payment, and was a negotiable instrument. The other two notes were for five thousand dollars each, dated November 10, 1926, and due ninety days after date, and bore interest at the rate of eight per cent, waived protest and notice of nonpayment, and also provided that the note might be extended without notice and without affecting the liability of any parties thereto, and if the makers should fail in business or become bankrupt, or have filed against them, or any of them, proceedings in involuntary bankruptcy or for the appointment of a receiver, this note and all other debts and obligations of the maker, direct or contingent, should immediately become due and payable; and that at the maturity of the note, or when otherwise due, as provided, any and all money, stocks, bonds, or other securities or property of any nature whatsoever on deposit with or held by, or in the possession of, said bank, as collateral or otherwise, to the credit or for account of the makers, indorsers, or other parties hereto, or any of them, should be and stand applied forthwith to the payment of this note, or any other indebtedness due said bank by said parties or any of them; and if this note be not paid when due, and it should be placed in the hands of an attorney, that a ten per cent attorneys' fee should be paid. These notes seem to have been made upon a blank form of the New Orleans Bank Trust Company of New Orleans, Louisiana, to which the notes were assigned by J.V. and R.T. Burkes.
On the hearing the chancellor rendered a decree against J.V. and R.T. Burkes and T.J. Bartlette, trustee in bankruptcy, for J.V. and R.T. Burkes, and Hartford Accident Indemnity Company. That said bond is a bond guaranteeing the faithful performance of the contract for the erection and construction of the Eola Hotel building in Natchez, Mississippi, and the surety on the bond is liable for the payment of the respective sums set forth, and decreed to be due and owing the creditors, or claimants, set forth in the judgment adjudging the said Hartford Accident and Indemnity Company and J.V. Burkes and R.T. Burkes, jointly liable to the said creditors in the amounts due to each in the sum set forth in the decree, and adjudging interest on the said sums due on the date they were due and at six per cent from the date of judgment until paid. It also adjudged a fee to the attorneys representing the Natchez Investment Company, Inc., in the concursus proceedings in the sum of five thousand dollars. It refused to allow attorneys' fees to the materialmen who were brought into court and had filed cross-bills seeking to preserve their right for material, but fixed what would be a reasonable fee and made a finding of fact of what would be reasonable in each case, should the liability be adjudicated in favor of the said claimants by the judgment of this court, setting out specifically the amount each claimed. It reserved in the decree the future determination of the claim propounded by N.O. Nelson Manufacturing Company, as assignee of A.W. Moore, doing business as the Acme Engineering Company, who had obtained leave of the court to intervene in the cause as defendant and cross-complainant. It also reserved for future adjudication the claim of New Orleans Bank Trust Company, which had brought a proceeding in the circuit court to establish a mechanics' lien on the Eola Hotel, and which cause had been transferred to the chancery court.
We are of the opinion that the provisions of the contract for the construction of the hotel and the bond constitute a bond under section 3 of chapter 128, Laws of 1918, and that the bond inures for the benefit of the materialmen who furnished the material that went into the hotel, and that the operation of this law had the effect of writing into the bond provision for the payment of claims of persons furnishing labor or material under the said contract, as though it had been actually written therein, and that none of the provisions of the bond had the effect of writing out of the contract these provisions and could not have that effect. In other words, it is not competent, where the bond is given, as provided by the act, to dispense with these stipulations. All stipulations contrary to the statutory provisions must be disregarded so far as persons furnishing labor or material are concerned.
We are further of the opinion that the bond did not protect the note given by the Natchez Investment, Inc., to the Williamson-Greer Company. Between the Natchez Investment Company, Inc., and the appellant, the Hartford Accident Indemnity Company, the provisions that payments should be made, as provided in the contract, in cash or current funds, where made, and the statute did not prevent their insertion in the contract. When the Natchez Investment Company, Inc., gave these notes instead of paying cash, and contracted to reserve the lien on the hotel for the benefit of the holders of the notes, it waived its right as against the surety company as to the claims flowing from the notes. By that contract between J.V. and R.T. Burkes and the Natchez Investment Company, Inc., the Burkes, and the assignees of the Burkes, had a negotiable instrument of value against the Natchez Investment Company, Inc., and a right to resort to the hotel building for the satisfaction of that claim, but it had no right, after making this novation, which was done without the consent of the Hartford Accident Indemnity Company, to charge the indemnity company with the loss occasioned by the failure or bankruptcy of the Natchez Investment Company, and the bankruptcy of J.V. and R.T. Burkes. The parties accepting these notes must look to the security which they accepted in lieu of their rights under the bond against the Hartford Accident Indemnity Company. Parties taking and accepting the notes of the Natchez Investment Company under such circumstances have no greater rights than their assignors had, and they only succeed to whatever rights the contractor would have against the Natchez Investment Company, Inc., and the hotel, had the notes not been transferred or assigned.
We are of the opinion that the court was correct in allowing five thousand dollars fees to the attorneys instituting the concursus proceeding, and that the court was also correct in denying attorneys' fees to the attorneys representing claimants or materialmen who were brought in or appeared in the suit to propound their claims under the proceedings. The contract and the statute do not contemplate payment of all attorneys who may be employed, but only a reasonable attorney's fee to the attorneys representing the proceedings known as concursus proceedings. The court was also correct in allowing interest on the claim of the several claimants; such claims bore interest from the date when they were due unless there is a contract to the contrary. This rule generally prevails as to contracts, and no reason is shown as to why it should not be applied in the present case.
It follows from these views that the judgment of the court below is affirmed as to the claims of all persons, except that allowed to Walter Williamson and A.A. Greer, doing business as Williamson-Greer Company, for fourteen thousand eight hundred thirty-three dollars and forty-two cents which is reversed and the judgment disallowed; and the petition dismissed as to all parties, except the Natchez Investment Company, Inc. Affirmed as to O.L. Bunn; the Coburn Trolley Track Manufacturing Company; Gibbens Gordon, Inc.; Hockaday, Inc.; the R.C. Lieb Company; Natchez Drug Company; National Show Case Company; Swartz Stewart; Walter C. Schultz; Southern Cement Company; Truscon Steel Company; White Stone Company, Inc.; Woodward, Wight Co., Limited; R. Lee Parker, Jr.; R. Scudamore, Jr.; R. Lee Parker, Jr., and R. Hicks Parker, doing business as Natchez Brick Company; C.R. Burkett, doing business as Burkett Sheet Metal Works; W.A. Jacobie; St. Bernard Cypress Company; Geisenberger Bros. Drug Company; M.P. Phelan; Enochs Lumber Manufacturing Company; Southern G.F. Company; Feltus Bros. Hardware Company; Chamberlain Metal Weather Strip Company; Ingalls Iron Works; Capitol Paint Glass Company; Mosler Safe Lock Company. Affirmed as to attorneys' fees allowed in concursus proceedings, and reversed as to Williamson-Greer Co.
Affirmed, except as to Williamson-Greer Company.
ON SUGGESTION OF ERROR.
Suggestions of error have been filed on behalf of appellant and of certain appellees which have had the individual consideration of each of the judges of this division, and after such consideration, we have decided that they should be overruled.
On behalf of the appellant, it is earnestly insisted that it was error to allow attorney's fees, that neither the statute nor the bond provided for attorney's fees, and that the allowance of the fee was, therefore, error. In the consideration of the case on the former appeal, reported in 155 Miss. page 31, 119 So. 366, we held that: "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 bonding 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."
Turning to the contract between the contractor and the owner, construed in connection with the bond, in article 30 of the contract, it is provided: "It shall be the obligation of every contractor and subcontractor estimating upon work under this contract operation to figure and to include within his bid to furnish a bond in the sum and conditioned as the law of the State of Mississippi requires, in a surety company satisfactory to the owner or architect; contractor likewise to pay the cost of any required recordation of contract and bond and the cost of any required cancellation of the same. He shall also secure and pay for lien and privilege certificates which will be required of him before final payment is made under this contract. The bond shall also secure the owner the faithful performance of the contract, in strict accordance with plans and specifications, it shall protect the owner against all liens or claims that may be filed against the building according to the laws of the state of Mississippi and shall provide for the payment of reasonable attorney's fees for the enforcement of the contract and the institution of concursus proceedings, if such proceedings become necessary."
Under the contract which the bond was given to secure, the attorney's fees were provided for expressly, and it must have been within the contemplation of the parties making the bond and the parties looking to it that the bond was given to displace the materialmen's liens given by the statute under sections 1 and 2. But it is said that there is no such proceeding in Mississippi as a concursus proceeding. The contract was drawn in Louisiana where concursus proceedings exist; and it is substantially an interpleader between all parties interested in such proceedings that they may all be brought in court at one time and all rights determined in one suit. The proceeding here is substantially in accord with a concursus proceeding in Louisiana, and there is no error in the allowance of the attorney's fees. The attorney's fees appear to be large considering the function of the attorney's bringing it; but the chancellor had the matter before him with proof, and is in better position to determine the reasonableness of the amount of fee than is this court. There is no substantial merit in the contention of the appellant in the suggestion of error. The last decision, 132 So. 535, does not change the decision in 155 Miss. 31, 119 So. 366. That opinion is referred to in the beginning of the last opinion, and the two are to be taken together. While parties have a constitutional right to make private contracts, and to embody in them such stipulations as they desire, yet the Legislature may provide rights, under law, for materialmen and laborers which private contracts cannot displace; and where the contractor gave the bond contemplated by the contract and thus secured the benefit of displacing the liens of the materialmen, he cannot dispense with the requirements of the statute under section 3 that the bond given shall secure the rights of the materialmen and laborers It was, of course, optional to give the bond or leave the statute in force, but, having given the bond, the statutory conditions must remain embraced in the bond, and, as stated before, the statute has the effect of writing the conditions in the bond therein provided. The suggestion of error on behalf of the appellant is overruled.
For the appellee Williamson-Greer Company it is suggested that we erred in holding that this company had waived its right under the bond. The provision of agreement relied upon, made upon the trial of the cause, to sustain this proposition reads as follows:
"That the said Williamson-Greer Company have received as security for their said claim a note of the Natchez Investment Company, Inc., for the amount of the claim, secured by a mortgage on the Eola Hotel and Levy Office Building at Natchez, Mississippi.
"That if it should be finally held in this cause by the court that the bond hereinabove referred to as having been executed by the Hartford Accident Indemnity Company as surety on the terms and conditions as shown by the pleadings in this cause was and is a bond guaranteeing the faithful performance on the part of the said J.V. R.T. Burkes, contractors, of their contract for the construction of said Eola Hotel Building under said project number 640, as alleged by the pleadings in this cause and same is still in force then that the said Williamson-Greer Company is entitled to a judgment against the Hartford Accident Indemnity Company for the full amount herein sued for and demanded as hereinabove agreed and as alleged in the cross-bill of complaint filed by Williamson-Greer Company, but the Hartford Accident Indemnity Company does not agree that they are additionally liable for interest and attorney's fees to said Williamson-Greer Company, but the question of liability for interest and attorney's fees is left to the court as a matter of legal construction under the contract documents and bond; however, it is agreed that said Williamson-Greer Company has been required to come into this proceeding as a creditor for the enforcement and protection of their rights and that it has been necessary for them to employ attorneys, to-wit: Engle Laub of Natchez, Mississippi, and that they have thereby incurred reasonable attorney's fees for the services required and to be required in the prosecution of their claim to final judgment; and that such proceedings have become necessary by reason of the failure of the contractors, J.V. R.T. Burkes, to pay the amount of their indebtedness to the said Williamson-Greer Co."
The counsel for Williamson-Greer Company seem to give small attention to the part of the agreement "and same is still in force." The effect of the decision formerly rendered is that the Williamson-Greer Company waived its right, or was estopped to assert its right, on the bond by reason of having taken the obligations of the Natchez Investment Company secured by lien on the hotel building. A party cannot thus deal with the bond; he could look to the bond and demand payment for the material furnished under it, but he cannot violate the terms of the bond as to what the contractor was to receive in payment, or the materialmen, for the material furnished. The bond stipulated that the materialmen and contractor should be paid in money. This was an important provision for the protection of the surety on the contractor's bond. There is quite a difference in having money, which is accepted by all persons in satisfaction of all demands, and in taking a mere note and lien; and it is well known that for cash a better bargain can be secured than one on credit secured by note and lien. The Williamson-Greer Company took their security, and whether they intended to waive their right against the bond or not in doing so is not controlling. The question is: Did their conduct in so doing operate as a waiver and estoppel of their right to resort to the bond? The securities taken were not taken by the consent of the surety, and we think the Williamson-Greer Company waived its right to resort to the bond and that it must look to the security which they took apart from the bond.
Suggestion of error overruled.