United States Fidelity & Guaranty Co. v. Cicero Smith Lumber Co. ( 1927 )

The Cicero Smith Lumber Company instituted this action against R. L. Pendergrass, J. C. Garrett, H. H. Vaught, and W. E. Vaught, as principals, and the appellant company, as surety, on a certain contractor's bond given to guarantee the erection of a school building for the New Hope common school district No. 20, in Lubbock county, Tex. The school district was also made a party defendant.

The substance of the allegations is that the appellee lumber company had furnished to the contractors certain materials, shown by the petition, which were used in constructing the school building, and that there was an unpaid balance due plaintiff on the account for materials in the sum of $1,370.60, with interest from April 1, 1924. The prayer was for judgment against the school district for any sums then remaining in the building fund of said district; that plaintiff have judgment against the appellant surety company, as surety on the bond, and the other defendants, as principals.

It appears that J. R. Hale, J. E. and J. L. Murfee, and B. Quinn intervened, claiming certain amounts due them for material furnished and labor performed in the erection of said school building. They also prayed for judgment against the appellant surety company as surety on the bond and against the other defendants as principals.

The appellant answered, alleging, in substance, that it had been released from any liability on said bond, first, because 20 per cent. of the contract price had not been retained by the school board until the building was completed, which violated the terms of the contract; and, second, on account of the fraud of H. H. and W. E. Vaught and the said lumber company in the execution of the contract. The prayer is that it be released from liability, and in the alternative that it have judgment over against Garrett, Pendergrass, W. E. and H. H. Vaught, for any judgment which the plaintiff might recover against it.

During the trial it was developed that Pendergrass had abandoned the work without the knowledge and consent of the appellant, and that a large part of the material furnished by the lumber company was so furnished after the abandonment. By leave of the court, appellant filed a trial amendment, setting up these facts. The defendant Garrett had not been served with citation, and did not appear, and was dismissed from the case.

The case was tried to a jury and submitted upon special issues. The substance of the findings is as follows: (1) There is an unpaid balance of $1,370.60 due the Cicero Smith Lumber Company on April 1, 1924, for material furnished in the construction of the school building in controversy. (2) The payment by the school trustees of more than 80 per cent. of the contract price was done without the knowledge and consent of the Cicero Smith Lumber Company. (3) The Cicero Smith Lumber Company had no knowledge of the abandonment by Pendergrass of the contract, nor did it consent to such abandonment. (4) The Cicero Smith Lumber Company did not by its representations induce the defendants Vaught Vaught to sign the contract and bond under the belief that they were signing as sureties and not as contractors.

Based upon this verdict, the court rendered judgment in favor of the lumber company against the common school district for $412, which was agreed by all parties to be the balance then in the hands of the district. Judgment was also rendered against Pendergrass, as principal, and W. E. and H. H. Vaught and the appellant, as sureties, for the full amount claimed in the petition. It was further decreed that the interveners recover the amounts prayed for respectively, and the appellant was denied a recovery against the Vaughts.

The first proposition urged in the brief is that sureties upon a contractor's bond for the construction of a public school building are discharged where the trustees of the district fail to retain 20 per cent. of the contract price until after the building was completed, as required by the contract. We overrule this contention, for the reason that the bond recites that it was made for the use of all persons who might furnish material under the contract, and further provides that any one furnishing material could sue upon the bond, though not specifically named as an obligee therein. In answer to special issue No. 2, the jury found that the payment of more than 80 per cent. of the contract price had been made by the school trustees without the knowledge and consent of the lumber company. While such excess payment by the trustees would have released the sureties from all liability to the owners of the building, the rule is otherwise as to parties furnishing material to be used in the building. The rule is that, where the obligation names materialmen and laborers as obligees, the sureties are not discharged from liability to them by reason of the owner having made payments in violation of the bond, unless such obligees knew of such violation at the time they furnished the material. Williams v. Baldwin (Tex.Com.App.) 228 S.W. 557; Thompson v. Kleinman (Tex.Civ.App.) 259 S.W. 597; Southern Surety Co. v. Nalle Co. (Tex.Com.App.) 242 S.W. 197. This proposition is without merit, for the further reason that the bond provides that any alterations made by agreement between the contractor and the owner in the terms of the contract, or of any of the stipulations therein contained, should in no wise release the principal or the sureties. Having agreed in advance that alterations and changes might be made, the sureties are estopped from claiming release upon that ground.

It is next insisted that the appellant was released because the evidence failed to show that the material set out in the itemized account was used in the construction of the said school building. The finding of the jury is that the debt sued for was for material furnished and used in the construction of the building. The issue was properly submitted, was not objected to, and appellant is in no position to attack the finding because of the insufficiency of the evidence to support it. It is true appellant requested a peremptory instruction, but the action of the court in refusing to direct a verdict in its favor has not been assigned as error, nor is it suggested or urged as fundamental error in the brief. Since consideration of that point would require us to review the entire statement of facts (which we are not required to do), we could, at our discretion, disregard this assignment. Questions relating to the sufficiency of the evidence to support the verdict must be raised in a motion for new trial in the court below, or they are held to be waived. Phillips Petroleum Co. v. Booles (Tex.Com.App.) 276 S.W. 667; Egan v. Lockney Farmers' Co-Op. Co. (Tex.Com.App.) 284 S.W. 937; Houston Oil Co. v. Kimball, 103 Tex. 94, 122 S.W. 533, 124 S.W. 85. Notwithstanding this rule, we have considered the assignment, and are convinced that the evidence is sufficient to show that the materials involved in the suit were used by the contractors in constructing the building, and that the testimony fully supports the jury's finding. The account sued on was made out against the contractors and school trustees, and was properly verified under R.S. art. 3736. Only one of the defendants, Pendergrass, controverted by sworn plea the correctness of the account. As against the other defendants, it was sufficient, in the absence of a sworn denial, to prove that the material had been furnished and used in the construction of the building. In addition to this, May, the manager for the lumber company, testified that the materials were used in the construction of the school building; that he had talked the matter over with Garrett, Pendergrass, and Vaught, and they said they would pay it as soon as they could. He said he went over the account with them after the materials were furnished and used on the job, and that the materials set out in the account corresponded with the bill which he and Garrett, one of the contractors, had figured as being necessary to complete the building according to the plans and specifications. Pendergrass, another one of the contractors, testified that Garrett bought practically all of the material and all of the lumber from the Cicero Smith Lumber Company, and there were no items on the list handed him that did not go on the job, except a few items such as hay and wire. We think this testimony is sufficient to support the findings.

The appellant complains of the action of the court in refusing to give it a judgment over against W. E. and H. H. Vaught. We think this contention is sound. The contract made the basis of the suit was signed by W. E. and H. H. Vaught, as contractors, together with Pendergrass and Garrett, and the bond was signed by the Vaughts as principals and by the appellant as surety. The appellant alleged that it signed the bond as surety, relying upon the fact apparent from the face of the bond and contract that the Vaughts were principals as to appellant; that appellant had no knowledge of any alleged agreement between the Vaughts and the lumber company; that the former were to be held merely as sureties, and that the Vaughts are therefore estopped to deny their liability upon the bond as principals. This issue was not submitted to the jury, but there is no evidence in the record tending to disprove the appellant's plea of estoppel. Appellant had the right to rely upon the facts as they appeared from the contract and bond, and which showed that the Vaughts were contractors and principal obligors. In the absence of evidence, there can be no presumed finding by the court which would deny the effect of the appellant's plea of estoppel. We think the judgment of the trial court is erroneous in denying the appellant the right to recover over against W. E. Vaught and H. H. Vaught, as principals, and in this particular the judgment will be reformed and rendered in favor of appellant and against the Vaughts for the amount which the appellee has recovered against the defendant.

The appellant further contends that, because the several interveners filed their pleas of intervention more than one year after the completion of the building, their causes of action were barred. It appears that interveners filed their petitions within less than a year from the publication of notice of the suit. Moreover, the appellant did not plead the statute of limitation as against the interveners, and the rule is that it must be pleaded in order to be made available. Edwards Mfg. Co. v. Southern Security Co. (Tex.Civ.App.) 283 S.W. 624; Van Zandt v. Desdemona Independent School District (Tex.Civ.App.) 283 S.W. 626. For the reasons stated, this proposition is overruled.

The fourth proposition is without merit, and is also overruled.

That portion of the judgment of the trial court denying the appellant a recovery against the Vaughts is reversed, and is here rendered in favor of appellant, and, as reformed, the judgment is affirmed.

Reformed and affirmed.