April 9, 1928. Suggestion of Error Overruled June 11, 1928.
1. SCHOOLS AND SCHOOL DISTRICTS. Statutory notice in suit against surety and principal held sufficient without summoning all parties interested ( Laws 1918, chapter 217; Code 1906, section 3064).
In suit under Laws 1918, chapter 217, against principal and surety on contract and bond for constructing heating and ventilating system in city high school, notice published in accordance with section 6, held sufficient without necessity of summoning all parties as provided by Code 1906, section 3064.
2. SCHOOLS AND SCHOOL DISTRICTS. Bond executed under contract for installing heating and ventilating system in high school protected materialmen ( Hemingway's Code 1927, section 778; Laws 1918, chapter 217).
Under Hemingway's Code 1927, section 778, Code 1906, section 1022, an indemnifying bond executed by surety for principal on contract for installing heating and ventilating system in city high school at a time when Laws 1918, chapter 217, was in effect, held to inure to benefit of laborers and materialmen, though in fact a common-law indemnifying bond, since bond must be construed in conformity with existing statutes, and chapter 217 requires execution of usual bond with additional obligation that contractor shall promptly make payments to materialmen and laborers.
3. SCHOOLS AND SCHOOL DISTRICTS. Surety required to pay materialmen cannot recover over against board of education under contract authorizing architect in his discretion to retain percentage.
Where contract for installation of heating and ventilating system in high school authorized architect in his discretion to withhold percentage of contract price, surety cannot recover against board of education amount of such retainage as it was required to pay to materialmen under terms of bond.
4. SCHOOLS AND SCHOOL DISTRICTS. Architect's agreement with materialmen to withhold funds due principal contractor to amount of their claims held not binding on board of education.
Agreement of architect selected by board of education with materialmen to withhold funds due principal contractor to amount of their claims, held not binding on board of education, since, municipality cannot be bound by act of architect aliunde the contract.
APPEAL from chancery court of Hinds county, First district; HON. V.J. STRICKER, Chancellor.
Geo. Butler, for appellant.
The bond did not inure to the benefit of materialmen and laborers. The bond is not in double the amount of the bid or contract, as required by the city ordinances. It is not conditioned for the prompt, proper and efficient performance of the contract. It is not a performance bond at all. On the contrary, it is conditioned that if the principal, that is the Union Electric Heating and Plumbing Company, Inc., shall well and truly indemnify and save harmless the obligee from pecuniary loss resulting from a breach of any of the terms and conditions of the contract, the obligation is to be void. Again it is expressly stipulated "that in no event shall the surety be liable to other than the obligee," and again, the surety "shall not be obligated to furnish any bond or obligation other than the one executed." The ordinance required a bond in the sum of forty thousand dollars and the bond given was for twenty thousand dollars. The ordinance required a performance bond, and the surety refused to execute a performance bond. The statute requires that in addition to the usual bond it shall contain an additional obligation to pay laborers and materialmen and we have a case where the surety expressly refused to become liable to laborers and materialmen and expressly refused to execute the obligation in any form other than the one sued on. There is, therefore, no basis for the claim that the obligation should be enlarged under sec. 1022, Code of 1906. Moreover, section 1022 of the code provides that when a bond is executed for the performance of any public contract it shall inure to the person to whom it is designated by law as security and be subject to judgment in his favor, no matter to whom it is made payable, nor what its amount, nor how it is conditioned, and that the undertakers shall be bound, etc., "if such bond had the effect which a bond payable and conditioned as prescribed by law would have had." This section can have no application to a bond for a public contract given under chapter 217, Laws of 1918, unless the contract is made void by the ordinance or statute under which the contract is let, for the failure to give the bond. In other words, the law does not prescribe any effect which shall follow the execution of a bond. It does not provide that the contract shall be void, if the bond is not given.
It merely provides that the public authority letting the contract shall require or exact the usual bond which the court has construed to mean a performance bond, but it does not make the contract void if the bond is not given. In the event the public authority does not require the bond, the contract is not declared to be null, nor is any other legal effect specified. Hence, the statute can have no application to a public contractor's bond, unless that bond has the effect of a validating and otherwise void contract. In some jurisdictions it is held that the members of the public body are personally liable for failure to require of the contractor a bond in accordance with the statute. See Ann. Cas. 1917B, 1092; Iron Company v. Leflore County, 135 Miss. 156. The contractor in executing the bond in question did all that the public body required of him. The surety company did all the public authorities required of it. The statute imposes neither upon the contractor nor his surety any duty as to the execution of the bond and the failure of the municipal authorities to require a bond conditioned as contemplated by the statute is not chargeable to the contractor or his surety. Here the bond is one of pure indemnity and not of suretyship and performance. Ideal Brick Co. v. Gentry, 191 N.C. 630; Trust Co. v. Construction Co., 191 N.C. 664; 14 R.C.L. 43; 31 C.J. 419. In Union Sewer Pipe Co. v. Olson, 82 Minn. 187, 84 N.W. 756, it was held that the surety was bound only by the terms of the bond and not by the terms of the law relating to public contract and that the surety was not liable for payment for material furnished to the contractor. The weight of authority supports the position of the surety company here. Wallace Equipment Co. v. Graves, 132 Wn. 141; Ideal Brick Co. v. Gentry, 191 N.C. 636; Paige Trust Co. v. Carolina Construction Co., 191 N.C. 664; Mass. Bonding Co. v. Hoffman (Ga.), 130 S.E. 375; Hannah v. Lovelace Lumber Co., 159 Ga. 856; Lumber Company v. Banks (Mo.), 117 S.W. 611; Erie to use, etc., v. Diefendorg, 278 Pa. 31; Hardison Co. v. Yearman, 115 Tenn. 639; McCrary v. McDade County (Fla.), 86 So. 612; Fulgham v. State (Fla.), 109 So. 644. Under the principles announced in the authorities cited, supra, we think it clear that the bond in this case did not inure to the benefit of the complainant and interveners; and inasmuch as it is alleged in the plea that the bond did not have the effect in the matter which a bond payable and conditioned as prescribed by law would have had, no help is to be obtained from section 1022, Code of 1906.
The court erred in holding that the plea in bar contained in defendant's answer was insufficient in point of law, and in overruling said plea and holding appellant liable on the bond. Section 6 of chapter 217, Laws of 1918, provides that when suit is instituted under the act, notice of the pendency of the suit shall be made by publication, etc., and also provides "in all suits instituted under the provisions of this act the parties interested shall be summoned as provided by section 3064, Code of 1906. In U.S.F. G. Co. v. Mobley, 143 Miss. 512, 108 So. 501, the court held that no final judgment could be entered until the publication was made. The notice that was published in this case simply states the name of the parties, the character of the suit and that the notice is published in compliance with chapters 128 and 217 of the Laws of 1918. By it no one is summoned into court and there is not in this record, or elsewhere, any summons for all persons having claims against the bond. The statute provides that only one suit is to be instituted. It contemplates that all claims against the surety shall be litigated in one suit and at one time. It provides for notice of the pendency of the suit and expressly requires that all "parties interested" shall be summoned as provided by section 3064, Code of 1906. This section provides that the defendant shall be summoned as in other actions to appeal and defend the suit and in case any necessary party defendant shall be a nonresident of or absent from the state, or cannot be found, he may be made a party by publication as in cases of nonresidents or absent defendants in chancery. This section must be construed in connection with section 3063, Code of 1906, which provides that "all persons having an interest in the controversy shall be made a party to the suit," and provides that if any necessary or proper party is omitted he may be brought in by an amendment on his own application, or that of any other party. Our contention is that a plaintiff bringing a suit under chapter 217, Laws of 1918, is required to make all known persons having claims against the bond parties defendant to the suit and if he does not know of all persons having such claims, then he must make "all unknown parties having an interest in the controversy" parties defendant to the suit, and that the defendants, both known and unknown, must be served with process as contemplated and provided in secs. 3920, 3922, and 3924, Code of 1906.
If appellant is liable to complainant and interveners then it has a right of action over against the city and the demurrer to its cross-bill was wrongfully sustained. The contract provided for a retained percentage. The contractor was entitled to draw eighty-five per cent of the value of the labor and materials furnished on the ground and upon the completion of the contract was entitled to increase his payments to ninety per cent of the contract price, and ten days thereafter entitled to draw the balance due. The bond in this case expressly stipulated that in the event of default on the part of the contractor, it should be subrogated to all the rights of the contract "including all securities . . . and all deferred payments, retained percentages and credits due to the principal at the time of such default, or to become due thereafter upon the terms and conditions of the contract." In the court below it was seemingly urged that the contract did not provide for a retainage or a final payment, but the matter of payment was left entirely with the discretion of the municipal authorities or the architect. The contract is not susceptible to this construction. In this respect it is almost identical with the contract in Y.M.C.A. v. U.S.F. G. Co., 90 Kan. 332, 133 P. 894, L.R.A. 1915C, 170. The court there, says:
"The contract of suretyship expressly provides that the surety shall not be liable, unless upon written notice to the surety its consent be obtained before making final payment, and in case of default there is a provision subrogating the surety to all the rights of the principal arising out of the contract for the erection of the building, including all deferred payments and `retained percentages,'" and the court here proceeds to hold that because the obligee failed to retain the required percentage the surety was discharged.
Now, it probably cannot be successfully maintained in the case that the failure of the authorities to retain the percentage operates to relieve the surety as to laborers and materialmen. Donnelly on Public Contracts, sec. 340; 21 R.C.L. 1015; 27 Cyc. 312; Equitable Surety Co. v. U.S., 234 U.S. 448, 58 L.Ed. 1392; Standard Asphalt Co. v. Texas Building Co., L.R.A. 1917C, 490; U.S. Fidelity Guaranty Co. v. Omaha Building Construction Co., 116 Fed. 145; Empire State Surety Co. v. Des Moines, 152 Iowa, 531, L.R.A. 1915B, 413. But it is certainly true under the authorities in this state and elsewhere that the retainage and final payment constituted a trust fund for the benefit of the surety in the event it should be called upon to pay and discharge claims arising under the bond. Canton Exchange Bank v. Yazoo County, 144 Miss. 579, 109 So. 1; Aetna Casualty Surety Co. v. Skatig County (Wash., 1922), 207 P. 237; Fidelity Deposit Co. v. Claiborne Parish, 11 F.2d 404; Prairie Bank v. U.S., 164 U.S. 232, 41 L.Ed. 412.
Morse Bryan, for appellee, city of Jackson.
The bond given by the Union Plumbing Heating Company was given to indemnify this contract and given as an indemnity bond. The board of education was under no obligation to give them notice that the Union Plumbing Heating Company the principal of said bond, had defaulted unless the board of education was attempting to enforce a claim of its own against the Union Indemnity Company. In what respect could we say that the board of education of the city of Jackson is indebted to the Union Indemnity Company? The contract does not provide such a liability, the statutes make no provision for such liability, and there is no law which imposes on municipalities liability for an indemnity contract.
The Union Indemnity Company protected itself by providing that there would be no liability attached against it unless certain conditions were complied with. It could not maintain a cause of action against the city of Jackson if the city of Jackson did not comply with the terms. The most it could do would be to claim the forfeiture of the indemnity bond, and say that thereby they were relieved and released. Appellant cites Y.M.C.A. v. U.S.F. G. Co., 90 Kan. 332, 133 Pa. 894, L.R.A. 1915C, 170. This is a case that has some similarity to the case under consideration, but it has no bearing where one of the parties is a municipality with limited contractual rights as in the instant case. In Canton Exchange Bank v. Yazoo City (Miss.), 109 So. 1, there was an assignment by the contractor to the Insurance Company of a certain retainage fund which retainage fund is specifically set forth. The same is true in First Nat. Bank v. Monroe County, 131 Miss. 828, 95 So. 727. In the case at bar there was no assignment by the Union Plumbing Heating Company to the Union Indemnity Company of any funds that might be retained, which assignment was an integral part of both of the cases above quoted.
The surety company claimed that they should be subrogated in their claim against the board of education. In the first place, the contractors would have no claim against the board of education other than for the funds in their hands. The contractor, the Union Plumbing Heating Company, would have no cause of action against the board of education in the event all of the claims had been paid, except for the balance due under the contract. In the next place, there was no assignment by the Union Plumbing Heating Company to the Union Indemnity Company of any funds which the board of education might retain on the contract, and if there is any cause of action it must be one of contractual relation, and in view of the fact that this was an indemnity contract, i.e., the Union Indemnity Company indemnified the city of Jackson from any loss whatsoever of labor or material on account of their contract with the Union Plumbing Heating Company, we do not see where or how they have any claim against the municipality. They protected themselves by saying that they would not be liable on the event they were not notified before final payment was made. The final payment had not been made before the suit was filed. Their relief, therefore, is one of defense to the suit as brought by the sub-contractors and not one of offense against the party who was indemnified against loss.
The city of Jackson is not liable to S.P. Cagle on his demand, for the reason that he is attempting to enforce a lien against the municipality. See the cases cited under First National Bank v. Monroe County, 131 Miss. 828, 95 So. 727.
Alexander Alexander, for appellee, Acme Blow Pipe Sheet Metal Works.
The bond sued on, by virtue of section 742, Hemingway's Code, and section 2447a, inures to the benefit of laborers and materialmen under the contract. The contract, specifications and bond constitute a single entity and these, together with the requirements of sections 742 and 2447A, Hemingway's Code, create a liability upon the part of the bonding company for the payment of labor and materials furnished under said contract. The following selected cases support this contention and are deemed sufficient: Commercial Bank of Magee v. Evans (Miss.), 112 So. 482; Little v. Cammack, 109 Miss. 753, 69 So. 590; Standard Oil Co. v. National Surety Company (Miss.), 107 So. 559; Bank of Gulfport v. O'Neal, 86 Miss. 45; U.S.F. G. Co. v. Carson (Miss.), 112 So. 469; Philip Carey v. Maryland Casualty Co., 206 N.W. 808; Royal Indemnity Co. v. Day, 150 N.E. 426, 44 A.L.R. 374; Stoddard v. Hibbler, 156 Mich. 335, 120 N.W. 787.
Appellant presents his case as if a bond specifically conditioned for the payment of labor and materials had been demanded and refused. The record presents no such facts and the appellant is permitted to argue his case upon this rather bold presumption. We are not concerned with the circumstance surrounding the execution of the bond except the relevant fact that it was executed in connection with and a part of the contract and therefore comes within the definition of "the usual bond" contemplated by the statute. It is only the inadequate and defective bond which needs the reconstruction of the statutes. Hence it can never be a defense but only the pleading of one's own wrong, to urge that a particular bond, given under the circumstances in which the statute requires a provision protecting materialmen, does not in precise terms contain such protective provisions. On the contrary the courts have held that even where a surety company executes its bond under such circumstances, it is not protected against statutory reconstruction even by a provision that it shall not be held to cover liability for labor and materials. The requirements of the statute cannot be thus defied nor contracted against. Philip Carey Co. v. Maryland Casualty Co., 206 N.W. (Ohio) 808; Globe Indemnity Co. v. Barnes, 281 S.W. 215; So. Surety Co. v. Klein, 278 S.W. 527; Ingold v. Hickory, 178 N.C. 614, 101 S.E. 525. The statutes in force at the time of the execution of the bond are of course, read into and form a part of it. 32 C.J. 1162, 26 C.J. 81; Cravens v. New York Life Ins. Co., 148 Mo. 583, 53 L.R.A. 305, 71 Am. St. Rep. 628, 50 S.W. 519; Reeves v. National Fire Ins. Co., 41 S.D. 341, 4 A.L.R. 1293, 170 N.W. 575; Lindemann v. American Ins. Co., 217 Mich. 698, 187 N.W. 331. Omissions or agreements as between the owner, city of Jackson and the contractor, Union Plumbing Heating Company, may not effect the rights of materialmen as third parties. Rosenbaum v. Carlisle, 78 Miss. 882; Standard Asphalt Co. v. U.S.F. G. Co., 99 Kas. 567, 162 P. 299, L.R.A. 1917C, 490; 22 R.C.L. 632; Phex Co. v. Salem, 103 Or. 514, 201 P. 222; The Home v. Selling, 91 Or. 428, 179 P. 261. The only Mississippi case emphasized by the appellant is the Pidgeon Thomas Iron Co. v. Leflore County, 135 Miss. 156. In this case there was never a gesture of compliance with chapter 217, Laws of 1918. The bond involved in that case was not the "usual bond." It was not a bond which was required nor in which future laborers or materialmen had any interest. It was executed before the contract was made. It would have been a different case entirely if thereafter a bond had been executed in connection with the contract of construction itself. The same criticism may be lodged against the case of Union Sewer Pipe Co. v. Olson, 82 Minn. 187.
Wells, Stevens Jones, for appellees, S.P. Cagle and Stuart C. Irby Co.
We adopt the brief of Alexander Alexander, counsel for the Acme Blow Pipe Sheet Metal Works, but will make certain additional comments on the questions involved, particularly with reference to the cases relied upon by appellant. Counsel for appellant has cited the case of Pidgeon Thomas Co. v. Leflore County, 135 Miss. 155, as sustaining his position that the provisions of chapter 217, Laws of 1918, are not read into the bond in this case by virtue of sec. 1022, Code of 1906, sec. 778, Hemingway's Code 1927. The Pidgeon Thomas case is no more related to the case at bar than would be a decision of this court on a murder charge. The bond in that case was not a contract bond, it was only a bid bond and the failure of the principal and surety company in that case to comply with its terms would have, of course, subjected it to an action by Leflore county. That bond was never given within the purview of chapter 217, Laws of 1918, and consequently nothing could be read into it; only those bonds which are contract bonds, that is, given to protect the principal from defaults of the contractor, have the provisions of chapter 217, Laws of 1918, read into them. It is a pure begging of the question to say that the bond in this case is not controlled by the laws of 1918 because the wording is restricted for the sole protection of the principal obligee. No right is denied the appellant by the operation of the statutes for it knew when it wrote the bond that it must contract with the city of Jackson on terms dictated by the state and those terms are prescribed by chapter 217, Laws of 1918, and sec. 1022, Code of 1906.
Counsel for appellant further argues that because chapter 217, Laws of 1918, does not expressly vitiate the contract, upon the failure to give the bond required, no liability is imposed upon anyone and especially upon the surety who flies in the face of the positive requirements of what the contract should be and attempts to "get by" with a bond written in defiance of mandatory law. Failure to give the bond called for by chapter 217 of the Laws of 1918, would vitiate the contract, for the statute is mandatory and this court has so held in Commercial Bank of Magee v. Evans (Miss.), 112 So. 482.
Counsel for appellant cites a line of cases which we admit tend to support his theory but the essential difference between all those cases and the case at bar is that there was apparently no statute involved in any of those cases which read into the bond the requirements of the statute as to whom the bond should protect and what its provisions should be. Therefore, the authorities relied upon by appellant are not conclusive or even persuasive in this case.
Wells, Stevens Jones, for cross-appellant, S.P. Cagle.
The case of S.P. Cagle against the city of Jackson and the board of education thereof, is based upon an estoppel. The city of Jackson and its board of education are both shown to have been guilty of a breach of faith which would not be tolerated by any court for a minute were this a question between individuals only. The public authorities were guilty of about as rank a breach of faith in the handling of the funds on this job as can be well imagined. They lead Cagle to rely on them and then tossed him over board without notice.
The doctrine of estoppel operates against the city as shown by the following cases: Natchez v. Mallery, 54 Miss. 499; City of Jackson v. Merchants Bank and Trust Co., 112 Miss. 537, 73 So. 573. The city and its board of education invited, in fact demanded, of Cagle that he file his claim with them because as they informed him the contractor was in a shaky financial condition. In addition to that they required him to get an order from the contractor on them for the payment of the amount due him. Cagle got the order and it was accepted by the city and by the board of education and the board agreed to withhold Cagle's money. Instead of doing that it took the easier way of clearing its books by writing one warrant, payable to the contractor, relying on the promise of the contractor to pay Cagle when it knew full well that the contractor was insolvent and irresponsible, and when it knew it was under direct obligation to withhold Cagle's money. This cause should be reversed and remanded on the cross-appeal of S.P. Cagle as against the city of Jackson and its board of education.
Argued orally by Geo. Butler, for appellant, and by Julian Alexander and W.E. Morse, for appellee.
This is an appeal from the chancery court of the First district of Hinds county, Miss., wherein the Union Indemnity Company, a surety company, is appellant, and the Acme Blow Pipe Sheet Metal Works; the board of education of the city of Jackson, Miss., and others, are appellees.
The controversy arose out of a contract requiring a bond, to erect a public building, and bond given therefor in pursuance of the contract. The suit was initiated in the circuit court on declaration filed by the Acme Blow Pipe Sheet Metal Works against the surety company and its principal, the Union Electric Plumbing Heating Company, upon contract and bond entered into January 25, 1925, for putting in a heating and ventilating system in certain high schools in the city of Jackson, Miss., for which said city was to pay the contractor twenty thousand dollars. The contract provided for furnishing, by the principal, of all labor and materials necessary, and specifically provided that the contractor should provide payment for all materials and labor. The suit filed in the circuit court was on the bond, and alleged that plaintiffs were materialmen and entitled to sue on the bond under chapter 217, Laws of 1918.
The surety company appeared and demurred to the declaration. The bond was attached to the declaration, and was an indemnity bond, in form, and not a performance bond, and did not contain any provisions for payment for labor and material, as provided by chapter 217, supra.
After the demurrer was overruled in the circuit court, on application of the surety company, appellant here, the case was removed to the chancery court, and there, in due course, the complainant filed his bill setting up all requisite facts and charging the surety company with liability on the bond and contract which were attached to the bill, as provided in chapter 217, Laws of 1918.
Thereupon, by order of the court, in turn, Cagle, Stewart C. Irby Co., and Whitlock Coil Pipe Co. et al., were permitted to intervene and also set up their claims.
The board of education filed its answer to the original bill denying any liability. The Union Indemnity Co. filed separate answers to each of the intervener's bills, and also to the original bill. Likewise, there was a demurrer contained in the answer of the surety company and also specific pleas.
The surety company made its answer a cross-bill against the board of education of the city of Jackson, alleging that, under the contract, if it should be held liable to the materialmen, the board of education had agreed to retain fifteen per cent., and not having retained so much as was required by said contract, if it was required, by the court's decree, to pay the claims for which suit had been brought, that the surety company was entitled to be subrogated to the full extent of fifteen per cent. of the contract price.
As to the interveners, and the board of education of the city of Jackson, the surety company specifically pleads that said city had passed ordinances requiring all bonds to be performance bonds, in double the amount of the contract, and other details unnecessary to mention, and said that the bond executed was not for double the amount of the contract, and that, therefore, they were not liable.
Upon final hearing of the cause, the court entered a decree adjudging to the Acme Blow Pipe Sheet Metal Works, S.P. Cagle, Stewart C. Irby Co., the Whitlock Coil Pipe Co., and Southern Foundry Machine Co., the sums severally found to be due to them, and directing that the sum of one thousand one hundred ninety-nine dollars and forty cents, the amount the city owed on the contract, less the clerk's commissions, be paid ratably to the parties above mentioned. The court denied the plea that the bond was in contravention of the ordinance of the city of Jackson. No ordinances were proven by the pleader, he distinctly declining to offer proof. The court sustained the city of Jackson's demurrer to the cross-bill, and denied the surety company any relief as to the retainage. The court denied to Cagle, Whitlock Coil Pipe Co., and Stewart C. Irby Co., any relief as against the board of education of the city of Jackson, and denied any claims of priority set up by any of the interveners, and certain interveners appealed here by way of cross-appeal.
Such other facts as are necessary will be detailed with the several points presented here for decision.
On direct appeal, of the surety company, so far as the main appeal is concerned, two grounds are assigned for reversal:
1. That the court should not have proceeded with the hearing and entry of final decree, because the notice published was insufficient and all parties interested had not been made defendants and summoned as provided by section 3064 of the Code of 1906.
Upon this proposition, this action is based on chapter 217, Laws of 1918, requiring that a person entering into a formal contract with a state, or any county or any municipality therein, or any political subdivision therein, for the construction of any building, etc., shall be required to execute the "usual bond," with good and sufficient sureties, with the additional obligation that such contractor shall promptly make payments to all persons supplying materials therefor, and giving all parties, all materialmen and laborers, the right to intervene in any suit instituted on the bond, and to have their rights adjudicated in such action and judgment rendered thereon, subject, however, to the priority of the claim of the obligee. Section 4 of this act provides that only one suit may be maintained, and that all parties must be interveners in one suit. Section 6 is in the following language:
"In all suits instituted under the provisions of this act, notice of the pendency of such suits shall be made by publication in some newspaper of general circulation published in the county or town where the contract is being performed, if there be such paper; otherwise, in a paper having a general circulation therein, for at least three weeks, the last publication to be at least one week before the trial of said cause. In all suits instituted under the provisions of this act the parties interested shall be summoned as provided by section 3064 of the Code of 1906."
The notice pursuant to this section was addressed "To whom it may concern," and advised all parties that the suit was pending in the court named (naming the court), and the date of the return day, and all other essential requirements of said section 6 quoted supra.
Appellant's contention, in effect, is that complainant must make all known persons parties to the suit, and all unknown parties, having an interest in the controversy, parties defendant to the suit, and that known and unknown must be served with process in the usual way.
We think the notice was ample to give notice to all unknown parties who might have claims which could be propounded against the bond, and that all parties had opportunity to come in under this notice, and that it advised them just as certainly as if the notice had been addressed to all unknown parties, or as if all unknown parties had been made parties to the suit.
We cannot say from this record that the complainant knew that any party had any claim, and no contention is here made that any rightful party had not appeared herein.
We do not think there is any merit in this contention.
2. The next point urged by the appellant is as follows:
"That the bond sued on was not a performance bond, but was a bond of pure indemnity; that it was not the usual bond contemplated by chapter 217, Laws of 1918; that it refused and declined to give the bond contemplated by chapter 217, Laws of 1918; that, therefore, the bond did not inure to the benefit of laborers and materialmen, and that it would have deprived the appellant of certain constitutional rights, should the court, by virtue of section 1022, Mississippi Code of 1906, or otherwise, read into the bond the additional obligation to pay laborers and materialmen."
It may be stated, as a fact, that the bond, in form, was a common-law, indemnifying bond, and that it did stipulate that it should not be liable in any manner or form, except as therein set forth, and that no other parties than the obligee should have any rights thereunder. In other words, the bond was executed payable to the owner letting the building contract, indemnifying the owner, and no one else.
The bond was part of the contract, and the contract was made a part of the bond, and the bond was for the purpose of protecting the owner, the municipality, and was the "usual bond" as described in chapter 217, supra.
There can be no question about the fact that the bond was executed at a time when said chapter 217 of the Laws of 1918, was in full force and effect. Can the parties make a contract and execute a bond, which contradicts, and is in the teeth of the statute relating to public buildings, when their contract was with a municipality for a public, a school building?
Counsel in his brief, and in his pleadings, mentioned several sections of the Constitution, but presents no argument, nor cites any authority, as to a denial of a constitutional right.
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 was specifically upheld in the case of U.S.F. G. Co. v. Parsons, 147 Miss. 335, 112 So. 469.
Section 778, Hemingway's 1927 Code, section 1022, Code of 1906, is in the following language:
"When a bond, recognizance, obligation, or undertaking of any kind shall be executed in any legal proceeding, or for the performance of any public contract, or for the faithful discharge of any duty, it shall inure to the person to whom it is designed by law as a security, and be subject to judgment in his favor, no matter to whom it is made payable, nor what is its amount, nor how it is conditioned; and the persons executing such bond or other undertaking shall be bound thereon and thereby, and shall be liable to judgment or decree on such bond or undertaking as if it were payable and conditioned in all respects as prescribed by law, if such bond or other obligation or undertaking had the effect in such proceeding or matter which a bond or other undertaking, payable and conditioned as prescribed by law, would have had; and where any such bond or undertaking is not for any specified sum, it shall bind the parties executing it for the full amount for which any bond or undertaking might have been required in the state of case in which it was given." — and is applicable, together with chapter 217, Laws of 1918, to the bond in this case.
We are not unmindful of the fact that other jurisdictions have held that where the operating part of a bond is contradictory to the bond required by statute, that the bond will not be rewritten, or will not be construed with reference to the statute, but the bond, as written, will be permitted to stand.
In Wallace Equipment Co. v. Graves, 132 Wn. 141, 231 P. 458, appellant's contract was sustained, and it was held that the statute could not be invoked to make an indemnifying bond a performance bond in reality, and to permit other than the obligee to share in the benefit of the bond in case of a breach by the principal.
However, in the case of Ideal Brick Co. v. Gentry, 191 N.C. 636, 132 S.E. 800, there was a dissent which is in line with authorities taking the contrary view, and in line with the position already assumed by this court on this identical question. To like effect is Page Trust Co. v. Carolina Trust Co., 191 N.C. 664, 132 S.E. 804, holding that as it was not nominated in the bond that said bond should inure to the benefit of laborers and materialmen, it could not be construed or written into the bond thus to do, and held to the literal language in which the bond was written.
Other cases could be cited, but the position of this court has been virtually settled by the statute quoted which provides that the bond shall be construed to be in conformity with the existing statutes, and Standard Oil Co. v. National Surety Co. (Miss.), 107 So. 559; Bank of Gulfport v. O'Neal, 86 Miss. 45, 38 So. 630; U.S.F. G. Co. v. Parsons, 147 Miss. 335, 112 So. 469, and Little v. Cammack, 109 Miss. 753, 69 So. 594.
"The statute wrote into Owen's bond the condition it required to be in there. The statute is mandatory. The obligor and the obligee, as well as the sureties on the bond, are presumed to have known what the statute requires when the bond was executed. The bond having been executed, and having accomplished its purpose, the law will write into the bond what it requires should be written into it. In other words, in the execution of a bond by a contractor to do public work, so far as the condition of the bond is concerned, the law takes care of that, and makes it what it should be."
It is clear that the statute may not be ignored by those undertaking to make surety bonds, and the effect of section 778, Hemingway's 1927 Code, and chapter 217 of the Laws of 1918, may not be set aside by parties ignoring the law, or it may be, undertaking to thwart the law by contracting against the statute. It would be far better for those corporations, whose existence and maintenance depends upon following the law, to observe it rather than to flout it, or seek to contract against it. They are under no compulsion to make such bonds, but if they make them, such bonds will be construed and applied as if they had complied with the law.
3. Appellant contends that the demurrer to its cross-bill should not have been sustained wherein it was sought to hold the city for the fifteen per cent. retainage, or so much as was necessary to repay it for any amount it might have to pay to laborers and materialmen.
The court correctly sustained the demurrer to the cross-bill for the reason that the contract plainly shows that the architect had discretion in the matter of payments, and there was no contract specifying that, in all events, fifteen per cent. was to be retained. The architect was allowed to approve eighty-five per cent of the materials as furnished, and it does not follow that there would have been any retainage if the contract had been literally complied with. Besides that, the view taken of the contract is utterly untenable, and no relief can be granted on the cross-bill.
On the cross-appeal of Cagle, Stewart Irby Co., it is contended that the court erred in dismissing the bill of said parties against the board of education of the city of Jackson, for the reason that the architect selected by said board had agreed with said parties to withhold from the funds due the principal contractor the amount of their claims, and that notwithstanding this agreement, the architect and the board of education had paid out a considerable amount to the contractor after this agreement, and after their claims had been filed with the architect.
We know of no rule by which a municipality may be bound by the act of an architect aliunde the contract. Neither can it be said that the architect selected by the board of education of a municipality to do the express things required of an architect, independent of, and aside from, the contract, estops the municipality, when it is not shown that such architect is, in any sense, the agent of the city in any capacity which could operate as an estoppel.
The court below so held, and we think reached the correct conclusion.
The decree of the court below is approved in all respects.