State Prison v. Massachusetts Bonding & Insurance ( 1926 )

On 23 January, 1922, Porter Boyd, Inc., road contractor, entered into a written agreement with the State Highway Commission to construct a section of road in Mitchell County, known as Project No. 856, in which it was stipulated, among other things, that, for and in consideration of the price agreed upon, the contractor was "to furnish and deliver all the materials and to do and perform all the work and labor in the improvement" of the said section of highway; and to insure a faithful compliance with the terms and conditions of the said contract in all respects, on the part of the contractor, the State Highway Commission took from the contractor, as principal, and the Massachusetts Bonding and Insurance Company, as surety, a bond in the sum of $99,570.00, conditioned for the faithful performance of the contract; also to "save harmless the State Highway Commission of North Carolina from any expense incurred through the failure of said contractor to complete the work as specified," and "well and truly pay all and every person furnishing material or performing labor in and about the construction of said roadway."

Preparatory to carrying out its contract with the State Highway Commission on the project above mentioned, Porter Boyd, Inc., entered into a written agreement with the State prison in which it was stipulated, among other things, that for a certain consideration, the plaintiff would lease or "hire to the party of the second part a number of State convicts varying from sixty to seventy-five (as agreed upon from time to time) to be used in the quarrying of rock and building of State highways in Mitchell County"; and to insure the faithful performance of this contract, the State prison took from Porter Boyd, Inc., as principal, and the National Surety Company, as surety, a bond in the sum of $5,000.00, conditioned as follows:

"Now, therefore, the condition of this obligation is such that if the party of the second part shall faithfully perform the contract on his part, and satisfy all claims and demands, incurred for the same, and shall fully indemnify and save harmless the party of the first part from all cost and damage which he may suffer by reason of failure so to do, and shall fully reimburse and repay the party of the first part all outlay and expense which the party of the first part may incur in making good any such default, then this obligation shall be null and void; otherwise, it shall remain in full force and effect."

The contractor defaulted under its contract with the State prison and also under its contract with the State Highway Commission.

Suits were instituted by the State prison to hold both bonds liable to the extent of $5,389.53, the amount due by the contractor for labor of the leased convicts and unpaid at the time of its failure. The two actions were consolidated and tried as one, resulting in a verdict and judgment as above stated.

In limine, the Massachusetts Bonding and Insurance Company demurs oretenus to the complaint, on the ground that it does not state facts sufficient to constitute a cause of action, in that, it nowhere appears on the face of the complaint, by averment or otherwise, that the plaintiff has complied with chapter 160, sec. 3, Public Laws 1923, requiring written notice of its claim to be presented to the State Highway Commission within six months after the completion of the said work, or be barred against recovering from said commission or any bondsman. In support of its position, the defendant relies upon the following authorities:Dockery v. Hamlet, 162 N.C. 118; Board of Ed. v. Greenville, 132 N.C. 4;Dayton v. Asheville, 185 N.C. 12.

With respect to the demurrer, it is sufficient to say that the bonds and contracts in suit were executed prior to the time section 3 of the act above mentioned became effective (3 September, 1923), and it is apparent that the provisions of this amendatory statute were intended to be prospective, and not retrospective, in operation. See Humphrey v. Stephens,191 N.C. 101, and Hicks v. Kearney, 189 N.C. 316. Hence, if intended to affect the right of action, and necessary to be pleaded, we think the provision must be held nonapplicable to the instant case. Comrs. v. Blue,190 N.C. 638. To hold otherwise would threaten the constitutionality of the section. 25 R. C. L., 789. On the other hand, if it were intended to affect only the remedy, it may be taken advantage of by answer and not by demurrer. In either event, the demurrer must be overruled. Brick Co. v.Gentry, 191 N.C. 636.

The contention of the Massachusetts Bonding and Insurance Company that furnishing or supplying labor for the work in question by the State prison, under the circumstances disclosed by the record, is not within the terms of the bond executed by it as surety, must be resolved against the bonding company on authority of what was said in Aderholt v. Condon, 189 N.C. 748,Town of Cornelius v. Lampton, 189 N.C. 714, and Scheflow v. Pierce,176 N.C. 91.

We also think it is clear that the National Surety Company is equally liable to the plaintiff, to the extent of its bond, for the payment of the contractor's debt. The contractor agreed to pay plaintiff for the labor furnished or supplied, and the National Surety Company obligated itself as surety to be bound until the contractor should "faithfully perform the contract on his part," i.e., pay for the labor so furnished or supplied.Mfg. Co. v. Andrews, 165 N.C. 285.

We then have a case of one debt secured by two bonds. Comrs. v. Dorsett,151 N.C. 307; Smith v. Carr, 128 N.C. 150; Adams Equity, 269-270. In the citation to Adams Equity, just made, it is said: "The right of contribution arises among sureties, where one has been called on to make good the principal's default and has paid more than his share of the entire liability. If all the sureties have joined in a single bond, the general rule, in the absence of any express or implied contract, is that of equality. If their liabilities have been created by distinct bonds, the contribution is in proportion to their respective penalties."

It was error to hold that the liability of the Massachusetts Bonding and Insurance Company was primary and that of the National Surety Company secondary.

Let the cause be remanded, to the end that judgment may be entered in accordance with the law as declared herein. The costs will be divided between the two defendants.

Remanded.