Watkins v. United States Fidelity & Guaranty Co. , 138 Miss. 388 ( 1925 )

^* Headnote 1. Highways, 29 C.J., section 353. 1919. The appellants, Watkins, Elixson, and R.W. Reed Co., filed a petition in the chancery court of Monroe county, alleging that O.A. Prescott Co. entered into a contract with the road commissioners of supervisors district No. 3 and with the board of supervisors of Monroe county, Miss., for the construction of fourteen miles of road in said supervisors' district No. 3 of said county; that the United States Fidelity Guaranty Company, a surety company, executed bond for said contractors in the penalty of ninety-six thousand five hundred sixty-nine dollars, conditioned according to law, which bond, among other things, provides that the sureties thereon "shall pay the agents, servants, and employees, and all persons furnishing said principal (O.A. Prescott Co.) with material and labor in the course of the performance of the work;" that soon after the execution of the contract and bond, the contractors entered into the performance of the work, and continued therein until on or about December 7, 1920, at which time they became wholly and hopelessly insolvent, and unable to go forward and complete the work, and a receiver was appointed by the chancery court of all the goods, property, and effects of the said contractors, and said contractors abandoned the work; that during the course of the performance of the work of the said contractors, O.A. Prescott Co., it became necessary for said contractors to establish movable camps to feed and house the laborers, and to furnish said laborers with supplies in the way of overalls, shoes, and clothing in order to keep them on the job, and to be able to assemble them and have them when wanted; that the petitioners furnished the supplies set forth in the exhibits to the bill to said laborers on the order of said contractors; and it is alleged that at the time of the abandonment of the work by said contractors, said O.A. Prescott Co., that said contractors were indebted to the said petitioners for the commodities so furnished in the amounts set forth in the accounts made exhibits to the bill.

It is further alleged that the surety company, said United States Fidelity Guaranty Company, under said bond was liable for the supplies so furnished to said laborers on the orders of said contractors, which supplies were not paid for, and petitioners prayed for judgment against said surety company, the United States Fidelity Guaranty Company. The accounts exhibited by the appellant Elixson, consisted mainly of orders by one McCune to Elixson issued in favor of certain laborers for specific amounts. A few of the items were charged to the commissary on the order of McCune.

The account of the appellant Watkins, consisted of various and sundry items of merchandise, a few of the items being as follows:

December 4. 12 oats, $57.00; (3) M. Camels, $8.00; M. Chesterfields $8.00 ................................................. $ 73.00 December 3. 424# flour, $6.25; (4) 2 Cs. sausage, $18.00 .......... 24.25 December 4. 10 Gal. oil, $2.00; 110# C. lard $30.25; 1 Cs. meal $7.00 ................................................. 39.25 6# Star Tob. $4.92; 18 Sx. oats, $90.00; 1 Sx. salt $1.65 ................................................. 96.57 40# meat, $9.20; 100# sug. $22.00; 2 Cs. cof. $26.40 .. 57.60 1 Cs. corn, $41.60; (6) 18 oats, $90.00; Bbl. flour, $12.50 ................................................ 144.10 December 11. oil, $2.00; (13) 4 M cigts. $32.00; 2# walnuts, $0.80 ................................................. 34.80 December 17. 14# turkey, $4.20; (19) 6# Star Tob. $4.92; Bx. B.M. Tob. $7.50 ....................................... 16.62 December 20. 12 oats, $63.00; 10 mix feed, $32.50; 1 salt, $1.10 ... 96.60 5 oil, $1.00; (23) 15 oats, $78.75; E.C. Cornell, turkey, $3.60 ......................................... 83.35 December 24, flour, $12.50; 64# meat, $14.72; Sx. meal, $1.10; 1/2 bail rope, $1.40 .................................. 29.72 December 26. 5 oil; (27) 6 plugs Star Tob. $4.86; 5 M. Camels, $8.00 ................................................. 13.86 December 29. 1 bu. I. Pot., $2.50; 20 D. feed $58.00; 6 Sx. chops, $21.90 ................................................ 82.40 1920. January 1. Bbl. flour, $12.75; 6# Star Tob. $4.92; BM Tob. $7.50 ................................................. 25.17 2# cheese .90; 2 oats, $10.50; 10 oil $2.00 ........... 13.40 45# lard, $12.38; 10 oats, $54.00; 10 gay, $9.50 ...... 75.88 c.

Other items were similar in nature and character.

The account of R.W. Reed Company is as follows:

O.A. Prescott Co., Aberdeen, Miss.

By W.D. Prescott —

Year 1920.

Oct. 10. 1 Dz. Pr. sox ................................... $ 2.65 " 3 " " " ..................................... 2.55 Nov. 1. 1 " rain coats ................................ 50.00 " 1. 1 " " .................................. 6.25 " 1. 1 " " .................................. 4.00 " 3. 3 Dz. Pr. sox ................................... 7.95 " 3. 3 " " gloves ................................ 12.00 " 3. 2 " union suits ............................... 19.00 " 3. 1 " sweater ................................... 15.60 " 3. 2 " work shirts ............................... 60.00 _______ $190.00 Less 1 coat short ......................................... 4.25 _______ $175.75

The cause was referred to a master, and the master took testimony and filed his report, allowing most of the accounts and reciting in his report that the establishment of the camps for laborers was a practical necessity.

The United States Fidelity Guaranty Company excepted to the master's report, excepting to all the items of the account of Guy H. Watkins for groceries, amounting to two thousand one hundred thirty-one dollars and ninety cents, and for tobacco, etc., six hundred twenty-three dollars and nineteen cents, on the ground that same were not material furnished or used in the work of constructing the road within the meaning of the statute, and that the weight of the evidence was that said goods were bought for a commissary, and resold therein, purchases being at one price and sales at a higher price, and to the public; to the long table or mess at which the laborers took their meals or not as they wished, and at a price that included an amount for profit; that items in the commissary were furnished to the laborers and to their families living in the camps, some of whom took boarders; that the work being done was through an old and well-settled country, and that there were stores at accessible points along the way; that the stores in the city of Aberdeen were accessible to laborers; that the work was never far from Aberdeen, and many laborers went there on Saturdays to trade. Similar exceptions were taken to the other accounts.

The court sustained these exceptions and decreed that the claims for groceries, etc., were not allowable, but that the account for feed for the stock amounting to one hundred five dollars and thirty-six cents was allowable with six per cent. interest. From the decree disallowing said accounts this appeal is prosecuted.

The statute bearing upon the subject is section 1, chapter 217, Laws of 1918, which reads as follows: "That any person entering into a formal contract with this state, any county thereof, municipality therein, or any political subdivision whatsoever therein, for the construction of any building or work or the doing of repairs, shall be required before commencing same to execute the usual bond, with good and sufficient sureties, with the additional obligation that such contractor or contractors shall promptly make payments to all persons supplying labor or material therefor; and any person who has furnished labor or materials used therein and wherefor payment has not been made, shall have the right to intervene and be made a party to any action instituted on such bond, and to have their rights adjudicated in such action and judgment rendered thereon, subject, however, to the priority of the claim and judgment of the obligee. If the full amount of the liability of the surety thereof is insufficient to pay the full amount of said claims and demands, then, after paying the full amount due the obligee, the remainder shall be distributed pro rata among said interveners. The bond herein provided for may be made by any surety company authorized to do business in the state of Mississippi."

The appellant relies upon the case of Brogan v. NationalSurety Co., 246 U.S. 257, 38 S.Ct. 250, 62 L.Ed. 703, L.R.A. 1918D, 776. The syllabus of this case by the supreme court of the United States reads as follows:

"Groceries and provisions furnished a contractor for a public work for use in a boarding house which, on account of the absence of other accommodations, it was obliged to maintain for its laborers, are materials used in the prosecution of the work, within the meaning of the Act of August 13, 1894 (28 Stat. at L. 278, chapter 280), as amended by the Act of February 24, 1905 (33 Stat. at L. 811, chapter 778, Comp. Stat. 1916, section 6923), and of the bond given in pursuance of its requirements, though they would not have been such had the boarding house been conducted by the contractor as an independent enterprise undertaken solely for the sake of profit."

This decision goes further than the general authorities go in sustaining claims against sureties on contractors' bonds under similar statutes. See notes to 9 Ann. Cas. 309, 43 L.R.A. (N.S.) 165, and L.R.A. 1915F, 951. It will not be necessary for us to now decide whether we will hold with the United States supreme court, or follow the predominating number of decisions under state laws, because in our opinion the present case does not come within the announcement of the case of Brogan v. NationalSurety Co., supra.

The learned chancellor in his opinion said: "There is no question from the proof introduced before the master, but what it was decidedly to the interest of the contractors to have this boarding house on the grounds: The greater part of the proof shows that it was necessary in order that they might keep their hands, and if this had been run purely and simply as a boarding house, under this proof, I would unhesitatingly hold under the Brogan Case that the surety company would be bound for it. In this case we find that these groceries were sold to them at a profit; that they boarded them with the expectation of charging a profit for any part that they sold, and while they sold to the general public according to the proof, except a small quantity, yet that was caused by the fact that the public did not call for more.

"The proof shows that third parties, the wives of some of the hands, erected a tent and ran a boarding house themselves and bought groceries at the commissary. The record is silent as to whether or not all these accounts were paid. Of course, boarding these negroes out there — they furnished them at thirty dollars a month — there is no reason on earth why a profit could not have been made if it had been run and properly conducted. . . . Our court may hold — I do not know what they are going to hold — as to groceries furnished and handled as they were furnished and handled in this case that the surety on the contractor's bond will be liable for them; until they so hold, my opinion is that it is not the law, and it is not fair to the surety company, it is not in contemplation of the law and I shall not so hold.

"It is so easy to run a commissary out there where negroes are around, fill it up full of groceries, and charge folks looking after it, and also looking after the taking in of the teams and keeping time, and stuff be squandered and stolen and lost sight of, and it is not fair that a surety company, who is guaranteeing the performance of this contract, should be held to the merchant who sells the contractor anything that he may want."

The evidence warrants the chancellor in finding that the goods were sold for a profit; that they were sold to any person who came along and wanted to buy them; that some of the goods were sold to other boarding-house-keepers in the camp, the amount of which is not made clear in the proof, the witnesses saying it cannot be told. It is further in proof that some of the laborers left camp in debt to the commissary, the amount purchased exceeding their labor, and this amount is not disclosed. There is also testimony to the effect that the work being done was on a road through a settled country, and that stores were in convenient reach.

It is clear that the accounts shown in this record, and the facts shown with reference thereto, were not within the stipulation of the bond by the bonding company, the United States Fidelity Guaranty Company, and therefore the United States Fidelity Guaranty Company is not obligated to pay such accounts.

The judgment of the lower court will therefore be affirmed.

Affirmed.