Title Guaranty & Surety Co. v. State ex rel. Leavenworth State Bank

61 Ind. App. 268 | Ind. Ct. App. | 1915

Lead Opinion

Caldwell, J.

This action was prosecuted by appellee against appellant, as surety, and Fisher and Stabler, as principals, on a bond given to secure the performance of a contract for the construction of a free gravel road. The cause was tried on the second paragraph of amended complaint hereinafter referred to as the complaint, the material allegations of which are to the following effect: By a proceeding regular in all respects, the Board of Commissioners of Crawford County entered into a contract in writing with Fisher and Stabler, for the construction of a free gravel road in said county. Said contractors filed with their bid, a bond which was duly approved by the county auditor. The bond was conditioned that the contractors should enter into a contract for the performance of the work, and should faithfully perform the same, and should “promptly pay all debts incurred by them in the prosecution of said work, including labor, materials furnished and for the boarding of the laborers thereon”. Copies of the contract and bond were made parts of the complaint. It is further alleged that the contractors in prosecuting said work failed to perform the conditions of their bond, in that they failed to 'pay for labor and materials furnished by a large number of persons, a tabulated statement of which is made a part of the complaint. The allegations of the complaint that become important in view of the questions raised respecting its sufficiency are as follows: “That said laborers and materialmen transferred their claims to this relator for full value, and with the agreement with said contractors that said claims should be paid out of the fund for building said road, and this relator paid said laborers and materialmen the full value of said claims, and now holds the same; that all of said labor so mentioned therein, and all of said materials went into the construction of said free gravel road”, etc. There are other allegations that the amount and value of said claims is $2,500; that payment was demanded and refused, and that said sum is due and unpaid.

Appellant’s demurrer for want of facts, filed to the complaint, was overruled, whereupon appellant answered by general denial. A jury trial resulted in a verdict against appellant in the sum of $2,250, on which judgment was rendered, and from which judgment this appeal is prosecuted. The following questions are properly presented for review: (1) The overruling of the demurrer; (2) the sufficiency of the evidence to sustain the verdict; (3) the overruling of appellant’s motion for a peremptory instruction at the close of appellee’s evidence in chief; (4) the overruling of a like motion at the close of all the evidence.

1. As we interpret appellant’s argument directed against the complaint, it is to the effect that there is no allegation that the claims were transferred to appellee absolutely; that it appears from the complaint that the claims were assigned to appellee pursuant to a supplemental or independent contract to the effect that they should be paid out of the designated fund, as evidenced by the language “with the agreement with said contractors that said claims should be paid out of the funds for building said road”; that the right to resort to the bond constitutes no part of such fund, and that appellant was not surety for the performance of such independent or additional contract, and hence can not be held liable in this action. The incurring of the indebtedness by the contractors for labor and materials furnished and used in the performance of the work, and the failure of the contractors to pay such indebtedness when due rendered appellant liable in an action brought on the bond by the persons who performed such labor and furnished such materials, in the absence of a transfer of the claims so arising. If the claims were sold and assigned to appellee, then appellee became authorized, by virtue of such sale and assignment, to maintain an action on the bond against appellant as surety,'in case of default in payment, unless there was something in the contract of assignment that precluded the right to maintain such action. Hart v. State, ex rel. (1889), 120 Ind. 83, 21 N. E. 654, 24 N. E. 151; Lane v. State, ex rel. (1896), 14 Ind. App. 573, 43 N. E. 244.

2. 3. 2. We proceed to determine whether there was anything in the contract of, assignment, as appears from the complaint, to which such an effect must be ascribed. It plainly appears from the complaint that said claims were sold and transferred to appellee, and that appellee thereby became the owner of them. There is a further averment to the effect that at the time the claims were transferred, or at some other time, and in a transaction that became connected with such transfer, the contractors agreed either with the laborers and materialmen or with appellee, that they would pay the claims out of the fund that would become due to them for building the road under the contract; in short, the contractors simply agreed that they would collect said fund and apply it on the claims. It seems to be appellant’s construction of said alleged agreement that thereby the contract price for building the road became a special or primary fund set apart for the payment of these claims, to which it was the dutyjof appellee to resort, to the exclusion of any right to have recourse to the bond, and that as appellant did not sustain the relation of surety to the arrangement out of which such duty arose, appellant can not be held liable in this action. We can not agree that appellant is right in sueh contention. From the facts alleged, it does not appear that a specific right to resort to such fund arose, unless from such facts it may be gathered that thereby said fund was assigned to the end that said claims might be paid, or that thereby a lien. on such fund was created for that purpose. A mere agreement to pay out of a fund is not sufficient to create a specific equitable lien on the fund for the payment of the debt involved. Burke v. Child (1875), 21 Wall. 441, 22 L. Ed. 623. Paraphrasing the language used by the Supreme Court of this State as applicable here, it was the duty of the contractors, as we have said, to pay the claims, and their promise to pay them out of a particular fund imposed no additional 'legal obligation upon them. The promise to pay the claims out of the fund named conferred no benefit on appellee, as such promise did not operate as an assignment to appellee of the fund or give appellee control of it. Such promise did not operate as an assignment of the fund or create a lien thereon. Ford v. Garner (1860), 15 Ind. 298. “In order to constitute an assignment, either in law or equity, there should be such an actual or constructive appropriation of the subject-matter assigned, as to confer a complete and present right on the assignee, even where the circumstances do not admit of its immediate exercise. A covenant, on the part of the debtor, to apply a particular fund in payment of the debt, as soon as he receives it, will not operate as an assignment; for it does not give the covenantee a right to the fund, save through the medium of the covenantor, and looks to a future act, on his part, as the means of rendering it effectual; while the characteristics of an assignment are, the relinquishment of all legal or equitable interest by the assign-nor, and the creation of a new and independent right in the assignee.” Ford v. Garner, supra, quoting 2 Lead. Ca. Eq. pt. 2, 233. See, also, Burton v. Morrow (1892), 133 Ind. 221, 229, 32 N. E. 921; Tiernan v. Jackson (1831), 8 L. Ed. 234, note; Christmas v. Gains (1871), 14 Wall. 69, 20 L. Ed. 762; Walker v. Brown (1896), 41 L. Ed. 865, note; Siegmund v. Kellogg-Mackay-Cameron Co. (1906), 38 Ind. App. 95, 99, 77 N. E. 1096; Harrison v. Wright (1885), 100 Ind. 515, 50 Am. Rep. 805; 4 Cyc 47; 2 R. C. L. 615. Moreover, the suit here is not based on the promise to pay the claims out of the fund named. It is grounded on the bond; It. is not contended that the. alleged promise released the contractors from the obligation to pay generally. Such contention would be unavailing under the facts alleged. If the contractors were not released from such general obligation to pay, and if there was no assignment of the fund or lien created thereon, appellant was not affected by such promise, and on default in payment, liability on the bond arose. The promise to pay out, of the fund gave appellee no new or additional cause of action. On default in payment, appellee’s cause of action became as complete without such promise as with it. In either case, appellee became entitled to maintain an action against the contractors on the claims, or against them and appellant on the bond. For the payment of a judgment recovered in any such suit, recourse might be had to said fund, not specifically as a fund appropriated for that purpose, but generally as any other fund or property might be subjected to that end. Ford v. Garner, supra, 302. The court did not err in overruling the demurrer to the complaint..

4. We proceed to consider the sufficiency of the evidence. The following facts were established without contradiction: About the time the work of building the road was commenced, the contractors arranged with appellee bank that the former should issue, to persons who performed labor and furnished materials in building the road, cheeks drawn on appellee bank, and that appellee should pay these'checks when presented, and that the contractors should reimburse appellee out of the funds received for the work, as estimates were made. Pursuant to such arrangement, the contractors issued to laborers and materialmen a large number of checks, which were paid by appellee as presented. A number of such cheeks were presented in person by the payees, and others came to appellee, and were paid after they had been cashed by other banks. • In all cases, the cheeks bore the endorsements of the payees. Each check showed on its face that it had been drawn for labor performed or material furnished in building. the highway. Appellee designated these checks as orders. No entry of their payment was made on appellee’s books, but they were preserved to be used in settlement- with the contractors. The contractors at no time had a deposit in the bank against which the checks were drawn, but they were in all eases paid out of funds of the bank. When cheeks to the amount of $400 had been paid, the contractors executed to' appellee a promissory note for that sum, and two additional notes for $750 and $1,000 respectively, when additional checks aggregating those respective amounts had been paid. The notes were entered on the books of the bank. At the trial appellee designated them as memoranda, rather than notes. The contractors failed to discharge their obligations held by the bank. The laborers and materialmen to whom the cheeks were issued were not parties to the arrangement made between appellee and the contractors, and had no knowledge of the same.

It is contended by appellee that under these facts, the claims represented by such cheeks and after-wards embodied in said notes or memoranda were not satisfied and discharged as obligations in the transaction in which appellee advanced and paid to the holders thereof the sums represented by them, but that they were thereby kept alive and passed to appellee as assignee thereof and' that, as such assignee, appellee was authorized to maintain this action on the bond, because of the failure of the contractors to pay them in the hands of appellee, as debts incurred by the contractors by reason of labor performed, and' materials furnished in the building of the road. If appellee did thereby become such assignee, then under authorities already cited, appellee is correct in such further contention. Appellant, however, takes the position that the transaction as arranged and carried out was in the nature of a loan of money and the satisfaction and payment of claims rather than their assignment; that.the claims thereby lost their identity, and a new indebtedness originated, based on such loan, and that such new indebtedness is not covered by the provisions of the bond respecting the- payment of the claims incurred through labor done and material furnished. In our judgment, appellant is right in such contention. By an arrangement between appellee and the contractors, and to which the laborers and materialmen were not parties, and of which they had no knowledge, appellee agreed to advance the money to be used in the payment of the claims as it should be needed for that purpose, which money the contractors agreed to repay to appellee. There was no evidence of any agreement or understanding that the claims should be deemed to be assigned and kept alive in the transaction in. which they were in fact paid. The checks were issued, presented, endorsed and paid as other checks, save for the presence of the distinguishing feature that the drawers had no funds in. the bank from which such payment should be made. By reason of such distinguishing feature, the bank might have contracted for the purchase and assignment of the claims. Such a contract, if made and executed, would have resulted in the preservation of the claims in their original nature. The bank in fact, however, contracted to advance the money for the payment of the claims, and that the contractors should repay to the bank the money so advanced. This arrangement was executed. There was no fact or circumstance shown indicating that the payees of the checks contracted to assign them or that they understood that they were so doing. To us it seems that there can be no doubt that the bank might have maintained an action against the contractors on the new indebtedness as such, and as so created. The transaction could not amount to both an absolute assignment of an existing indebtedness and the creation of a new indebtedness respecting the same items. The agreement here was express, and hence it can not successfully be contended that the law will presume an assignment. We hold that under the evidence the claims were not assigned, and that this action can not be maintained on the bond, for their nonpayment, as claims for labor done and materials furnished. See the following: United States v. Rundle (1901), 107 Fed. 227, 46 C. C. A. 251, 52 L. R. A. 505; Martin v. Michigan, etc., R. Co. (1886), 62 Mich. 458, 29 N. W. 40; Hardaway v. National Surety Co. (1907), 150 Fed. 465, 80 C. C. A. 283; affirmed in Hardaway v. National Surety Co. (1909), 211 U. S. 552, 29 Sup. Ct. 202, 53 L. Ed. 321; Dudley v. Toledo, etc., R. Co. (1887), 65 Mich. 655, 32 N.W. 884. Our attention is called to Missouri, etc., R. Co. v. Brown (1875), 14 Kan. 557. The opinion in that case contains but a meager statement of the facts involved. From such facts, it seems to us to be out of harmony with the weight of authority. An effort is made in Martin v. Michigan, etc., R. Co., supra, to distinguish it on the ground of the scope of the Kansas statute. Except as distinguished, the supreme court of Michigan in the Martin case declines to follow it.

5. The conclusion at which we have thus arrived necessitates a reversal, unless it be that another view of the ease justifies an affirmance. As we have indicated, the bond here is conditioned, among other thing's, that the contractors “shall promptly pay all debts incurred by them in the prosecution of said work, including' labor, materials furnished”, etc. We are required to ascertain, first the relation existing between the ideas expressed respectively by the words “all debts incurred”, etc., and “labor, materials furnished”, etc., as indicated by the word “including”. The connection in which this word is used under various circumstances may shape its meaning somewhat. Under some circumstances, or in some connections, perhaps, it may be used as a word of limitation, or enumeration; that is, to the effect that certain specific things mentioned comprise all of the . class designated by some general expression. In the quoted provision of thé bond here, the word “including”, in our judgment, is used to express the idea of a class comprehending as a part of its members certain things specifically mentioned or to which particular attention is directed; that is, the class indicated by the expression “debts incurred”, etc., is not necessarily exhausted by the specific debts referred to as growing out of labor performed oí material furnished. The' purpose as expressed by the bond is to secure the payment of debts incurred in the prosecution of the work. Among such debts are those growing out of labor performed and material furnished. But if there are other debts, regardless of their nature or origin, that sustain such an intimate, immediate and exclusive relation to the building of the road that it may be said that such debts were incurred in the prosecution of that work, they too are covered by the provisions of the bond literally interpreted. See Montello Salt Co. v. State (1911), 221 U. S. 452, 31 Sup. Ct. 706, 55 L. Ed. 810, Ann. Cas. 1912 D 633, 22 Cyc 62, notes; 4 Words and Phrases, “including” 3500.

6. Appellant is a surety for profit, rather than for accommodation. Such a surety is-not “a favorite of the law”. Its status is in the nature of an insurer rather than a surety. It follows that if the contract of suretyship here is fairly open to two constructions, that construction will be adopted which is most favorable to the persons intended to be protected by the bond. United States Fidelity, etc., Co. v. Poether (1913), 180 Ind. 255, 102 N. E. 372; Kansas City v. Davidson (1910), 154 Mo. App. 269, 133 S. W. 365; Hormel & Co. v. American Bonding Co. (1910), 33 L. R. A. (N. S.) 513, note.

7. From our statement of the facts, it appears that as one of the steps in the prosecution of the work of building the road, the contractors made the arrangement with appellee for the payment of the claims for labor to be done and material furnished. This arrangement was made with specific reference to such work. All the claims involved in this action were paid by appellee under such arrangement. They were claims for labor performed and materials furnished in the building of the road. It would, therefore, seem that the contractors’ liability thus arising is an indebtedness' “incurred by them in the prosecution of said work”. In City of Alpena v. Title Guaranty, etc., Co. (1909), 158 Mich. 678, 123 N. W. 1126, a statute involved required that contracts for public work be accompanied by a bond to secure the payment of all claims for labor performed and materials furnished in prosecuting the work. It is there held that claims for labor performed and materials furnished in repairing a dredge and other machinery used by the contractor in performing the work were not covered by the bond. The basis of the decision is that the repairs rendered a utility available not only for performing the particular work, but with a surplus of the utility over, that might be used in other work. . It is apparent that that decision is sound. If it should be held that such a claim were within the surety contract of liability, it would follow that a claim arising from the purchase of a new dredge required in performing the work, but which might also be used in conducting many subsequent enterprises of a like nature, or with a surplus value on the market, is also covered by such a bond. That ease is easily distinguishable from the case at bar. The benefit which the contractors here arranged to receive from appellee was of such a nature that it could not be applied on any work except the building of the road. It was so applied, and thereby exhausted with no surplus over. See, also, Standard Boiler Works v. National Surety Co. (1912), 71 Wash. 28, 127 Pac. 573, 43 L. R. A. (N. S.) 162, note.

8. Apparently the proceeding involved here for the building of the free gravel road was brought and prosecuted under the provisions of §62 et seq. of the act of 1905 (Acts 1905 p. 521, §7711 Burns 1908), commonly known as the three-mile gravel road law, although that fact does not specifically appear! Section 74 of that act being §7723 Burns 1908, Acts 1905 p. 521, provides among other things, that with his proposal, each bidder “shall submit his bond * * * to the approval of the board, conditioned for the faithful performance of the work * * * which bond shall be for the benefit of any person or corporation who shall suffer loss or damage by reason of any failure or neglect of such bidder to enter into a proper contract * * * , or to pay for any labor or material therefor that shall have been furnished either to him or to any sub-eontraetor, agent or superintendent under him.” The bond here is conditioned among other things that the contractors “shall promptly pay all debts incurred by them in the prosecution of said work, including labor, materials furnished and for the boarding of laborers thereon.” It is thus apparent that the bond here is conditioned more broadly than required by said section, in that it contains the provision respecting the payment of all debts incurred and all claims for boarding laborers. There is, however, no statute that prohibits a board of county commissioners from taking or requiring a bond thus broadly conditioned. Section 4 of the act of 1899 (Acts 1899 p. 170, §5592 Burns 1901), makes it the duty of boards of commissioners in receiving bids for certain public works to take a bond conditioned in the exact language of the provision above quoted from the bond involved here. Independent of the statute last mentioned, the situation here- presents- the question of whether the board exceeded its power in causing to be inserted in the bond the provision for the pay-: ment of debts incurred by the contractors in the prosecution of the work, regardless of the nature or origin of said debts, or in accepting a bond voluntarily executed and so conditioned, and whether such provision is enforceable. The question has frequently come before the courts as to whether boards of county commissioners and municipal authorities have the power, in the absence of an express statutory grant, to insert in such a bond an enforceable provision for the payment of claims for labor performed and materials furnished in the construction of the public work involved. With prac-. tical uniformity, it has been held that while such public bodies may exercise only granted powers, yet that express authority to cause the work to be performed carries with it the incidental power to do all proper acts reasonably necessary to that end; and that by virtue of such incidental power, such bodies may cause such a provision to be inserted in the bond, in the absence of express statutory authority to that effect.

The right to exercise such incidental power in cases where the public body is authorized to contract for improvements is sustained on the theory that thereby skilled labor and good materials may be more easily procured, and as tending to promote justice and equity among all persons contributing to the performance of the work. See the following: United States Gypsum Co. v. Gleason (1908), 135 Wis. 539, 116 N. W. 238, 17 L. R. A. (N. S.), 906; Knapp v. Swaney (1885), 56 Mich. 345, 23 N. W. 162, 56 Am. Rep. 397; Des Moines, etc., Works v. Marxen & Rokahr (1910), 87 Neb. 684, 128 N. W. 31; American Surety Co. v. Lauber (1899), 22 Ind. App. 326, 53 N. E. 793; Young v. Young (1899), 21 Ind. App. 509, 52 N. E. 776; Williams v. Markland (1896), 15 Ind. App. 669, 44 N. E. 562; Brown v. Markland (1899), 22 Ind. App. 652, 53 N. E. 295; King v. Downey (1900), 24 Ind. App. 262, 56 N. E. 680; Hines v. Consolidated Coal, etc., Co. (1902), 29 Ind. App. 563, 64 N.E. 886; City & County v. Hindry (1907), 40 Colo. 42, 90 Pac. 1028, 11 L. R. A. (N. S.) 1028, note; Jenkins v. Chesapeake, etc., R. Co. (1913), 49 L. R. A. (N. S.) 1166, note 1183; National Surety Co. v. Hall-Miller, etc., Co. (1913), 104 Miss. 626, 61 South. 700, 46 L. R. A. (N. S.) 325; 29 Cyc 1040; 4 McQuillin, Mun. Corp. §1690. Where such a body is authorized to contract for public improvements, if it may by virtue of such incidental power take an enforceable bond to secure the payment of claims for labor and material, no reason occurs to us why such a bond may not be taken containing an additional provision securing the. payment of any other debt incurred by the contractor in pursuing the work, where the nature of the debt is, such that the improvement not only was to but also actually did receive its full and exclusive benefit.

In City of Philadelphia v. Nichols (1906), 214 Pa. St. 265, 63 Atl. 886, where a public improvement ordinance specified the scope of the bond, it was held that a bond voluntarily given, but more comprehensive than specified, might be enforced according to its terms. In that case, and in others in harmony with it, importance is attached to the element that the bond involved was voluntarily given, and that it was not prohibited by statute. In some instances such bonds are enforced as common-law rather than statutory obligations. See the following: Waterous, etc., Co. v. Village of Clinton (1910), 110 Minn. 267, 125 N. W. 270; Farr v. Rouillard (1899), 172 Mass. 303, 52 N. E. 443; McIntire v. Linehan (1901), 178 Mass. 263, 59 N. E. 767; Stephenson v. Monmouth Min., etc., Co. (1897), 84 Fed. 114, 28 C. C. A. 292; Whitsett v. Womack (1845), 8 Ala. 466; Miller v. Vaughn (1884), 78 Ala. 323; United States v. Maurice (1823), Fed. Cas. No. 15, 747; United States v. Hodson (1870), 77 U. S. 395, 19 L. Ed. 937; United States v. Tingey (1831), 5 Pet. *115, 8 L. Ed. 66. In United States v. Hodson, supra, the bond involved was given by a distiller to secure' a compliance with the revenue statutes. The court in holding the bond enforceable as given, although broader in its provisions than required by statute, said: “The record is silent as to any coercion or duress. The bond is, therefore, to be’ considered a voluntary one. A bond in this, form is not prohibited by the statute, nor is it contrary to public policy. It was founded on a sufficient consideration, and it was intended to subserve a lawful purpose.” Tbe government was tbe obligee in tbe bond involved in that case, and also in tbe bond involved in United States v. Tingey, supra. In tbe former, tbe court in commenting on tbe latter said: “Tbe bond was held to be valid. Tbe decision was put on tbe grounds that tbe government bad tbe capacity to make tbe contract, that tbe United States were a body politic, and that, as an incident to its general right of sovereignty, it was competent to enter into any contract not prohibited by law, and found to be expedient' in tbe just exercise of tbe powers confided in it by tbe Constitution.” The question being one of power, we fail to see tbe distinction between tbe validity of an act done by the government pursuant to a power incident to sovereignty, and an act done by a board of commissioners pursuant to a power incident to authority expressly granted.

There is, however another viewpoint from which this case should be considered. As we have indicated, tbe highway proceeding involved here was apparently prosecuted under tbe act of 1905, of which §7723 Burns; 1908, supra, is a part. Tbe bond here; however, as we have said, is conditioned in tbe language of §4 of tbe act of February 27, 1899, being §5592 Burns 1901, supra,which in so far as concerns tbe provision for tbe condition of tbe bond is tbe same as §1 of tbe act of March 14, 1877 (§4246 R. S. 1881, §5592 Burns 1894), and §4 of the act of February 27, 1899 (Acts 1899 p. 170, §5592 Burns 1901), supra, and §5 of tbe act of April 10, 1907. Acts 1907 p. 580, §5897 Burns 1908. State, ex rel. v. Sullivan (1881), 74 Ind. 121, involved a bond given in a proceeding to construct a road under tbe provisions of tbe act of March 3, 1877. Acts 1877 p. 82, §6855 Burns 1894, §5091 et seq. R. S. 1881. Section 5 of that act (§5095 R. S. 1881) required that the contractor give “such reasonable security for the proper performance of his contract * * * as the county commissioners may deem expedient.” A bond was in fact given by the contractor, conditioned not only for the proper performance of the work, but also that the contractors should “promptly pay all debts incurred by them in the prosecution of such work, including labor and the boarding of laborers at work thereon.” It was held that §4246 R. S. 1881, supra, was authority for taking such a bond. This section provides that “no bid for the building or repairing of any court house * * * or other county building or work shall be received or entertained * * * unless such bid shall be accompanied by a * * * bond * . * * which bond shall guarantee the faithful performance of the work * * * and that the contractor * * * shall promptly pay all debts incurred by him in the prosecution of such work, including labor, materials furnished and for boarding the laborers thereon.” There is a like holding in Dewey v. State, ex rel. (1883), 91 Ind. 173; Faurote v. Slate, ex rel. (1887), 110 Ind. 463, 11 N. E. 472; and Hart v. State, ex rel. (1889), 120 Ind. 83, 21 N. E. 654, 24 N. E. 151. In the Faurote case, the court said: “Section 4246 is a general provision and applies to all bonds taken in connection with contracts for public works,, which boards of commissioners are authorized to make.” But in State, ex rel. v. McCray (1892), 5 Ind. App. 350, 32 N. E. 341, involving a suit on a bond given in a highway proceeding brought under the act of July 18, 1885 (Acts 1885 p. 162, §6879 et seq. Burns 1894), it was held that such bond could not be supported or extended in its terms by recourse to said §4246 R. S. 1881, §5592 Burns 1894. Section 10 of the act of , 1885 (Acts 1885 p. 162, §6888 Burns 1894) provides that a bond shall accompany the bid, but the act is silent as to the conditions of' the required bond.. The decision in the McCray case is based on two grounds: (1) a specific admission that the bond was' executed under the provisions of said §10; (2) the fact that under the latter act, the superintendent of construction is required to receive the bond, and that he alone is authorized to sue on it, while the bond provided for by said §4246, supra, is taken by the commissioners, and that laborers and others as beneficiaries thereunder may sue on it. State, ex rel. v. McCray, supra, seems to be in conflict with Lane v. State, ex rel. (1896), 14 Ind. App. 573, 43 N. E. 244. In the latter case, it is held that in a highway proceeding, brought either under the act of 1877, supra, or under said act of 1885, a bond may be taken and enforced under the provisions of said §4246 R. S. 1881, supra, the court saying that there can be no doubt that a bond given by a contractor under the act of 1885 is governed by §4246, supra, citing State, ex rel. v. Sullivan, supra, and Herrod v. State, ex rel. (1896), 15 Ind. App. 648, 43 N. E. 144, 44 N. E. 378. The Lane case endeavors to distinguish the McCray ease on the ground that the bond involved in the former contained a condition that the contractors “should promptly pay all debts incurred by them in the prosecution of the work, including labor, materials furnished and for the board of laborers”, as provided by §4246, thus indicating that the bond was executed with a view to that section. It is somewhat difficult, however, to harmonize the two cases. It may be said also that Hart v. State, ex rel., supra, does not seem to be in entire accord with Faurote v. State, ex rel., supra, and Robling v. Board, etc. (1895), 141 Ind. 522, 40 N. E. 1079, in certain particulars. The disparity, however, if it exists, is not important here. There are some reasons in support of a conclusion that' none of the cases cited are controlling in the situation presented by the case at bar. Thus, the road involved in each of the cases, State, ex rel. v. Sullivan, supra; Dewey v. State, ex rel., supra; Faurote v. State, ex rel., supra; and Hart v. State, ex rel., supra, was built under the act of March 3, 1877. Section 5 of that act (§5095 R. S. 1881, supra) made provision for a bond by the use of general language, that the successful bidder “shall give such reasonable security for the proper performance of his contract * * as the county commissioners may deem expedient.” The road involved in Lane v. State, ex rel., supra, was built under the act of 1885. Section 10 of that act (§6888 Burns 1894, supra) provided merely that “a bond executed by the bidder * * * shall accompany such bid.” The act was silent as to the scope of the bond. The court in Faurote v. State, ex rel., supra, in holding that a bond may be taken under the provisions of said §4246 R. S. 1881, supra, where the road is built under said act of March 3, 1877, bases the decision on the fact that §5095, supra, provided generally that reasonable security be given, while §4246, supra, described specifically the character of all bonds to be taken by county commissioners on letting contracts for the construction of county work. It would seem that the basis of the decision in the Faurote case would not support a like decision in the case at bar. Section 74 of the act of 1905, under which the road here was built, being §7723 Burns 1908, supra, provides specifically respecting the scope of the bond, in that it shall be conditioned for the faithful performance of the work, and that it “shall be for the benefit of any person or corporation who shall suffer loss or damage by reason of any failure or neglect of such bidder * * * to pay for any labor or material therefor, and that shall have been furnished either to him or to any sub-contractor, agent or superintendent under him.”

There is an additional reason: The subject-matter of the act of March 14, 1877, of which §4246 R. S. 1881, supra, forms a part, as indicated by its title, is indemnity to counties and protection of laborers, materialmen and others “from loss by persons contracting for county buildings and work.” In State, ex rel. v. Sullivan, supra, and eases following it, in holding that a bond may be given' under §4246, stress is placed on the fact that road building by the county commissioners is county work. At the time of the letting of the contract here, the act of February 27, 1899, of which §5592 Burns 1901, supra, is a part, had succeeded said act of March 14, 1877. While §4246, supra, of the latter act is included in substance in §4 of the act of 1899, supra, and the same language is used in each in specifying the condition of the bond, the title of the latter act designates certain specific kinds of county work, as court houses, jails, etc:, as the subject-matter of legislation, but employs no general terms to that end. There is then at least some doubt whether it may be said that the bond in the' case at bar is authorized by §5592, supra. We hold, however, that the board of county commissioners here was authorized to take said bond as conditioned, and that it is enforceable according to its.terms. Authority to take such bond as enlarged in scope beyond the provisions of §7723 Burns 1908, supra, we prefer to base on the incidental powers of the board rather than on the provisions, of said §5592 Burns 1901, supra. We do not regard State, ex rel. v. Fletcher (1891), 1 Ind. App. 581, 28 N. E. 111, or United States Fidelity, etc., Co. v. Poetker, supra, as in conflict with our conclusion. A different sort of bond was under consideration in each of those eases, and no question of the incidental or implied powers of a public board or official is involved in either of them.

9. The complaint declares on claims for labor performed and materials furnished as assigned to appellee. We have held that under the evidence, such claims were paid rather than assigned, and that the transaction relied on as showing • an assignment in fact resulted in the creating of an indebtedness in favor of appellee. A ease of -variance between allegation and proof is thereby presented. It is provided by statute that such a variance is not to be deemed material unless it has actually misled the adverse party to his prejudice in maintaining his action or defense; but where such adverse party shows to the court that he has been so misled and in what respect, the court may order the complaint amended on such terms as may be just. §400 Burns 1914, §391 R. S. 1881. It is further provided that where the variance is not material, the court may direct the fact to be found according to the evidence, or may order an immediate amendment without costs. §401 Burns 1914, §392 R. S. 1881. There is a further provision that no judgment shall Jbe reversed for any defect in form, variance, etc., which might be amended by the court below, but such defect shall be deemed to be amended in the appellate tribunal, and that no judgment shall be reversed where it shall appear to the court that the merits of the cause have been fairly tried and determined- in the court below. §700 Burns 1914, §658 R. S. 1881.

These sections of the code when properly applied tend to promote the ends of justice, and to minimize the effect of errors, and defects, technical in nature. They should not be weakened by construction, but mindful of the rights of the parties that may be injuriously affected, they should be given full force. Here all the material facts were established without contradiction. In short, there is no controversy respecting the facts. Although difficult questions of law are thereby presented, conflicting inferences of fact can not be reasonably deduced from the evidence. Under such circumstances, the complaint should be deemed to be amended to conform to the proof. The complaint being amended, the evidence sustains the verdict. Our discussion of the evidence disposes of other questions that are properly presented. Judgment affirmed.

---

Rehearing

On Petition for Rehearing.

Caldwell, J.

Appellant, by its petition for a rehearing, earnestly and ably contends that the court in its original opinion erred in two material respects, to the following effect: (1) In holding that the bond involved in this action, although broader in its conditions than required by the statute under which it was apparently given, may nevertheless be enforced according to its terms. (2) In applying §§400, 401, 700 Burns 1914, §§391, 392, 658 R. S. 1881, in order that the judgment below might be affirmed.

8. Respecting the first point, the holding is substantially that where a board of county commissioners is authorized by a statute to contract for the performance of a work of public improvement, it may, by virtue of its incidental powers, require of the contractor the execution of a bond with surety, conditioned for the proper performance of the work and other matters properly related thereto, even in the absence of a statute providing that such a bond be taken; that where a statute requires that a bond be taken, conditioned as specified by such statute, the board may, by virtue of such incidental powers, take a bond more broadly conditioned than required by the statute, provided the statute does not prohibit the taking of such a bond, and if the matter of the additional provisions is properly related to the work of the improvement, and that if such a bond be voluntarily given in consideration of the contract it may be enforced according to its terms. It is now contended that this court in developing such general principles and in specifically applying them ran counter to certain decisions of the supreme court and also of this court, as United States Fidelity, etc., Co. v. Poetker (1913), 180 Ind. 255, 102 N. E. 372; State, ex rel. v. Heim (1915), 58 Ind. App. 654, 108 N. E. 776; and State, ex rel. v. Fletcher (1891), 1 Ind. App. 581, 28 N. E. 111.

In the Poetker case, a bank cashier’s bond was involved. It was executed pursuant to a statute, the terms of which required that the board of directors take from the cashier a bond with surety, conditioned as specified by the statute. The bond as in fact executed contained limitations the effect of which, literally construed, was to narrow the conditions of the bond as required by the statute. Under such circumstances, the court held, in an action brought against the surety on the bond, that it should be construed and enforced as if it in fact contained the statutory conditions undiminished and unqualified. The question of whether a board of directors of a bank has the power, in the discharge of the discretionary duties of that office, to exact from a bank cashier as a part of the contract of employment, a bond conditioned more broadly than a statutory requirement that a bond with certain specified conditions be taken, or whether such a bond, if given, may be enforced according to its terms, was not involved, and hence not decided. In State, ex rel. v. Heim, supra, a contract for a public improvement provided that the contractor’s bond required by the board of' commissioners should contain a certain condition not specified by the statute. The bond as executed in fact contained only the statutory conditions. In a suit brought by the board of commissioners against the surety on the bond, the plaintiff declared on a breach of such additional condition, not in fact contained in the bond. This court held that as the condition involved was not contained in the bond or required by the statute, it could not be read into the bond, and enforced as against a surety, in the absence of an allegation and proof that it had been omitted from the bond by mistake of the parties. It is evident that that ease is not in conflict with the decision in the ease at bar. State, ex rel. v. Fletcher, supra, involved a recognizance bond, executed by a defendant, conditioned primarily for his appearance at court for trial. We do not regard that case as controlling here.

As tending to support the original opinion, we call attention to the following in addition to the decisions cited therein: City of St. Louis v. Von Phul (1896), 133 Mo. 561, 34 S. W. 843, 54 Am. St. 695; Hamilton v. Gambell (1897), 31 Or. 328, 48 Pac. 433; Knapp v. Swaney (1885), 56 Mich. 345, 23 N. W. 162, 56 Am. Rep. 397; Devers v. Howard (1898), 144 Mo. 671, 46 S. W. 625; City of Philadelphia v. Steward (1900), 195 Pa. St. 309, 45 Atl. 1056; Bunneman v. Wagner (1888), 16 Or. 433, 18 Pac. 841, 8 Am. St. 306; Portland v. Bituminous Paving Co. (1898), 33 Or. 307, 52 Pac. 28, 72 Am. St. 713, 44 L. R. A. 527; Trustees, etc. v. Rausch (1890), 122 Ind. 167, 172, 23 N. E. 717; Puget Sound State Bank v. Gallucci (1914), 82 Wash. 445, 144 Pac. 698; Dolese Bros. Co. v. Chaney (1915), 145 Pac. (Okl.) 1119. 1 Elliott, Roads & Sts. (3d ed.) §646.

9. As to the second point urged, appellant does not controvert the statement contained in the original opinion to the effect that there is no controversy respecting the facts, and that from them conflicting inferences can not reasonably be deduced. Neither does appellant call attention to any additional defense that it might make or to any additional fact that it might urge in its own behalf on a retrial. Under such circumstances, we believe that the court, as indicated in the original opinion, properly applied the sections mentioned, in order that the judgment below might be affirmed. Southern R. Co. v. Howerton (1914), 182 Ind. 208, 105 N. E. 1025, 106 N. E. 369; 1 Ency. Pl. and Pr. 608, 610. The petition for a rehearing is overruled.

Note. — Reported in 109 N. E. 237, 111 N. E 19. As to liability of surety company as distinguished from that of individual sureties, see Ann. Cas. 1912 B 1087. As to right of one furnishing labor or material to sue on bond given by contractor to property owner, see Ann. Cas. 1916 A 754. See, also, under (1) 5 C. J. 985; 4 Cyc 91, 96; (2) 5 C. J. 913; 4 Cyc 47; (3) 25 Cyc 665; (4) 5 C. J. 916, 924; 4 Cyc 49; (5) 22 Cyc 62, 63; (6) 32 Cyc 306; (7) 37 Cyc 235; (8) 11 Cyc 484; (9) 4 C. J. 749; 3 Cyc 444.

Case Details

Case Name: Title Guaranty & Surety Co. v. State ex rel. Leavenworth State Bank

Court Name: Indiana Court of Appeals

Date Published: Jun 18, 1915

Citation: 61 Ind. App. 268

Docket Number: No. 8,609

Court Abbreviation: Ind. Ct. App.