Fidelity Union Casualty Co. v. State

GALLAGHER, C. J. This appeal is prosecuted by Fidelity Union Casualty Company., a corporation, from a judgment against it in favor of the state of Texas on a contractor’s bond upon which it was surety. The state entered into a contract with K. S. Hull, Jr., to improve a public highway in Bell county. By the terms thereof, said Hull'agreed at his own proper cost and expense to make the stipulated improvement in accordance with his proposal and plans and specifications attached thereto, to begin the work on or before July 27, 1927, and to complete the same within sixty working days. The state, by the terms of said contract, agreed, in consideration of the full and true performance by said Hull of the work stipulated, to pay to him the prices set forth in said proposal in the manner provided in said specifications.' Hull’s proposal contained a stipulation that all material owned by the state on hand at the site of the improvement should be used by him in. making the same, and that the price thereof should be deducted from the final estimate. The only reference in the attached proposal and specifications to the manner in which payments should be made to Hull was that the same should be upon a unit basis at the respective prices per unit stipulated in his proposal. To secure the performance of said contract, said Hull, as principal, with appellant, Fidelity Union Casualty Company, as surety, executed and delivered to the state a bond in the penal sum of $11,183.30, the total estimated cost of such improvement, conditioned that he should well, and truly perform all the terms and conditions of said contract within the time therein mentioned, and pay all lawful claims for labor performed and material furnished in making such improvement. Neither said contract, said proposal, nor said plans and specifications contained any provision for partial payments on the contract price for making such improvement. The state, through its engineers, on July 25, 1927, issued its estimate No. 1, which showed that the total amount of work done to that date was $1,598.10. It retained $159.81, being 10 per cent, of said amount, and paid to Hull the sum of $1,438.-29, the remainder of the estimated value of the work done by him at that time. The state, through its engineers, on August 25, 1927, issued its estimate No. 2, which showed ■that the total amount of work done to that date was $5,801.70. It retained $580.17, being 10 per cent, of said amount, deducted $1,-438.29 previously paid to Hull, and paid to him the sum of $3,783.24, the remainder of said estimate. The state, through its engineers, on September 25, 1927, issued its estimate No. 3, which showed that the total amount of work done to that date was $11,-703.76. Said estimate further showed that previous payments to Hull amounted to $5,-221.53, that the state had furnished to him material of the value of $2,356.44, and that, after retaining $1,170.37, • being 10 per cent, of the total amount of work done to that date and deducting previous payments and the value of material furnished, a balance of $2,-955.44 was due Hull. The state, however, retained only said sum of $1,170.37, deducted previous payments amounting to $5,221.53, and paid to him the remainder, $5,311.86, notwithstanding he then owed the state said sum of $2,356.44 for material furnished by it and used by him in the performance of his contract. The state thereafter, on the 19th day of October, 1927, through its engineers, issued what it termed a final estimate on said work. The several items of work performed, the contract price, and the amount due therefor to the contractor, were identical with like items in the estimate of September 25, 1927, with the exception of a single item listed as “additional force account as per statement attached, $220.42.” The statement attached showed that said account accrued for extra labor furnished and performed by Hull and rendered necessary by excessive floods. All the same was furnished and performed after the estimate of September 25, 1927, had been issued and approved. There was no provision in the contract requiring the performance of such work. Said so-called final estimate showed that the state owed Hull $1,170.37, the aggregate amount theretofore retained by it on said three prior estimates, and said further sum of $220.42 for said extra work, or a total of $1,390.79. Hull then being still indebted to the state in said sum of $2,356.42 for the material furnished by it and used by him in performing his contract, no payment was made to him on said estimate. His indebtedness to the state exceeded the amount due’ him according to said estimate in the sum of $965.69. Apparently demand for repayment of said sum was made, and Hull wrote that he would be in a position to make such payment when his work was finally accepted. He never paid any part thereof, and was subsequently adjudged a bankrupt. [1081] The state instituted suit against Hull as principal and appellant as surety on said bond to recover said balance of $965.69, with legal interest thereon. There was a trial to the court. No verbal testimony was introduced. The case was submitted wholly on the records of the highway department, aided by a single written stipulation. The pertinent fact contained therein was that the “Superintendent of Aid Projects” had issued his voucher to Hull for the full amount due upon the third estimate above referred to without deducting said amount of $2,356.44 due the state for material used by him, because said estimate was not a final one. The court found that Hull had been discharged in bankruptcy from liability for the debt sued for, and rendered judgment in his favor, but rendered judgment in favor of the state against appellant for the sum sued for, with legal interest from December 3,1927, and all costs of suit. Opinion. Appellant presents assignments of error in which it assails the judgment rendered against it on the ground that the testimony showed conclusively that it was discharged from liability for the price of the material furnished by the state and used by Hull in performing his contract, because the state failed to retain in its hands out of the contract price sufficient funds to pay the same. The terms of the contract pertinent to this contention have been hereinbefore recited. The state had on hand, at the site of the improvement which Hull agreed to make, certain road-building material amounting in value to approximately one-fourth of the amount to be paid for the whole job when completed. Hull agreed that the state should retain the stipulated value of said material out of the consideration which it agreed to pay him for performing such contract. He further agreed to complete the work stipulated within sixty working days. No time for making payment for said work was specified. The contract merely provided that the consideration stipulated therein should be paid him for “the full and true performance of said work.” Had successive estimates and partial payments thereon been contemplated, the contract should have contained a stipulation providing therefor. Acts 39th Leg. (1925) c. 186, § 13 (Vernon’s Ann. Civil St. art. 6674m). When successive estimates and partial payments are authorized by the terms of the contract, it has been f requently held that a strict compliance with such terms is reguired and that a failure to comply therewith relieves the surety from liability. Williams v. Baldwin (Tex. Com. App.) 228 S. W. 554, 557, par. 3; Ætna Casualty & Surety Co. v. Russell (Tex. Com. App.) 24 S.W.(2d) 385, 387, 388, pars. 1 and 2; Ætna Casualty & Surety Co. v. Robertson Lumber Co. (Tex. Civ. App.) 3 S.W.(2d) 895, 898, par. 2, and authorities there cited; Park Presbyterian Church v. Wm. Cameron & Co. (Tex. Civ. App.) 38 S.W.(2d) 901, 902, par. 3. There is no contention that appellant consented to the partial payments made to Hull nor that it is in any way estopped to urge the same as grounds for discharge from liability herein. Since the issuance of said estimates and the partial payments of the contract price made thereunder were voluntary on the part of the state, it remained its duty throughout to retain the price of 'the material so furnished by it out of the consideration promised for the performance of the contract. Apparently the work contemplated by the original contract was in fact completed when the state issued said third estimate and paid Hull thereunder more than twice the price of the material so furnished him. If so, the mere fact that its engineers did not make said estimate in the form of a final one nor call it such did not release it from its contractual obligation to retain the amount due for material out of the consideration promised Hull for the performance of his contract by deducting said amount from such estimate before the payment of the same. See authorities above cited, and also the following: Indemnity Insurance Company v. Bassett (Tex. Civ. App.) 299 S. W. 714, 716, par. 1 (writ refused); First National Bank v. Alexander et al. (Tex. Civ. App.) 4 S.W.(2d) 298, 301, par. 4; Hatch v. First State Bank (Tex. Civ. App.) 270 S. W. 1093, pars. 1 and 2; Security State Bank v. Dawson (Tex. Civ. App.) 261 S. W. 821, 823, par. 2; Lee v. First National Bank of Purdon (Tex. Civ. App.) 254 S. W. 394, 397, par. 7; Womack v. Davidson (Tex. Civ. App.) 242 S. W. 1107, 1108, par. 2; Kempner v. Patrick, 43 Tex. Civ. App. 216, 95 S. W. 51, 53; Kiam v. Cummings & Son, 13 Tex. Civ. App. 198, 36 S. W. 770; 27 Am. & Eng. Ency. of Law (2d Ed.) p. 516. The judgment of the trial court is reversed, and judgment is here rendered that the state take nothing herein and that appellant recover its costs.