Crane Co. v. Longest & Tessier Co., 177 N.C. 346 (1919)

April 23, 1919 · Supreme Court of North Carolina

177 N.C. 346

CRANE COMPANY v. LONGEST & TESSIER COMPANY et al.

(Filed 23 April, 1919.)

1. Pleadings — Demurrer.

The allegations of the complaint are admitted upon demurrer and liberally construed in favor of the pleader.

2. Contracts — Interpretation—Insurance—Principal and Surety.

Doubtful and ambiguous expressions in a contract of indemnity or insurance are given a reasonable construction in favor of the insured.

3. Principal and Surety — Bonds — Indemnity—Material Men — Laborers— Guarantor of Payment.

An indemnifying bond given to an incorporated town or city for the erection of a building providing for the payment of “all persons who have contracts directly with the principal for labor and material,” etc., includes within its intent and meaning a material account furnished to-a. sub-contractor under a guarantee of payment by the principal contractor, and also comes within the express terms of the written contract stipulating to “satisfy all claims and demands incurred,” meaning those incurred in securing labor and material for the building.

4. Contracts — Guarantor of Payment — Liability:

A guarantor of payment assumes an absolute and direct liability upon the failure of the principal to pay the amount as guaranteed, therein differing from a guarantor for collection, whose promise is to piay upon condition that the one thus indemnified shall diligently prosecute the principal debtor without success.

Appeal by United States Fidelity and Guaranty Company from Lane, J., at the February Term, 1919, of Guilfoed.

Tbis is an appeal from an order overruling a demurrer to tbe complaint.

The first three allegations in the complaint allege the incorporation of the plaintiff and of the defendants, Longest & Tessier Company and the United States Fidelity and Guaranty Company.

The other allegations in the complaint are as follows:

4. That on the 10th day of July, 1918, the defendant, Longest & Tes-sier Company, entered into a written contract or agreement with the County Commissioners of Surry County, North Carolina, for the construction of a courthouse and jail at Dobson, N. C., and such commissioners, complying with the Public Laws of North Carolina, session 1913, chapter 150, section 2, or Revisal, section 2020, of 1905, as thereby amended, demanded that the said defendant, Longest & Tessier Company, give bond as required by such statute.

5. That on the 12th day of July, 1918, the defendant, United States Fidelity and Guaranty Company, of Baltimore, Md., for value received, together with its codefendant, Longest & Tessier Company, complying with the demand of the County Commissioners of Surry County, N. C., made, executed, and delivered a bond to the said County Commissioners of Surry County in the sum of twenty-four thousand five hundred dollars ($24,500), the condition thereof being as follows:

That if the principal (Longest & Tessier Company) shall faithfully perform the contract on its part, and satisfy all claims and demands incurred for the same, and shall fully indemnify and save harmless the owner (County Commissioners of Surry County) from all costs and damages which he may sustain by reason of failure so to do, and shall fully reimburse and repay the owner all outlay and expenses which the owner (County Commissioners of Surry County) may incur in making good any such default, and shall pay all persons who have contracts directly with the principal for labor or materials, then this obligation shall be null and void, otherwise it shall remain in full force and' effect.

6. That on the 21st day of October, 1916, the defendant, Longest & Tessier Company, made, executed, and delivered to the plaintiff, Crane Company, a contract for materials to be used in the construction of the Surry County courthouse and jail, such contract being in words and figures as follows:

Greensboro, N. C.

CRANE Company,

Baltimore, Md.

Dear Sirs: — Please sell and deliver to Comstock Electric Company, Inc., High Point, North Carolina, on your usual credit terms of sixty days net or two per cent for cash, ten days from date of invoice, goods, wares, and merchandise not to exceed $2,044.91 (two thousand and forty-four dollars and ninety-one cents), being quotations for material selected and ordered by tbe above Comstock Electric Company, Inc., for Surry County courthouse and jail contract at Dobson, North Carolina, and in consideration thereof we hereby guaranty and hold ourselves personally responsible for the payment at maturity for goods,^ wares, and merchandise so sold and delivered. We hereby waive notice of acceptance thereof, dates of shipment or delivery and notice of default in payment.

Witness our hand and seal, this. day of., 1916.

Tours truly,

LONGEST & TESSIER COMPANY,

By E. D. Tessier, Treas.

And accompanied said contract with its letter hereto attached, marked “Exhibit B,” and made a part hereof.

7. That after the execution of the foregoing contract of 21 October, 1916, and in compliance with the terms thereof, the plaintiff delivered to the said Comstock Electric Company, goods, wares, and building material in the sum of $1,224.04, an itemized statement of which is hereto attached, marked “Exhibit A,” and asked to be taken as a part of this paragraph; that all of said materials were used by the said Com-stock Electric Company in attempting to carry out the terms of its agreement with Longest & Tessier Company in the erection of the Surry County courthouse and jail, which the said Longest & Tessier Company contracted to build for the commissioners above named by the terms of its agreement, dated 10 July, 1916, and that all of the materials, an itemized statement of which is set out in “Exhibit A,” were used in the construction of said courthouse and jail. (Omitted from record by agreement.)

8. That before the said plumbing contract of the Comstock Electric Company with Longest & Tessier was completed the said Comstock Electric Company abandoned the said contract, and failed and neglected to finish the work; that thereupon the said Longest & Tessier Company took the materials which the plaintiff had shipped to be used in the construction of said Surry County courthouse and jail, and undertook the completion of the contract which the said Comstock Electric Company had abandoned, but that before it could complete the same and before it could carry out its agreement with the County Commissioners of Surry County, dated 10 July, 1916, and before it could comply with the terms of its guaranty with the plaintiff, as above alleged, the said defendant, Longest & Tessier Company, became insolvent and was duly adjudged a bankrupt on the. 29th day of May, 1917.

9. That the plaintiff is informed and believes, and so alleges, that by reason of tbe bond executed by tbe United States Fidelity & Guaranty Company, of Baltimore, Md., to tbe County Commissioners of Surry County, for tbe benefit of Longest & Tessier Company, and by reason of tbe guarantee executed by tbe said Longest & Tessier to tbe plaintiff,, tbe said United States Fidelity and Guaranty Company, of Baltimore, and its codefendant, Longest & Tessier Company, became liable to tbe plaintiff for tbe amount due tbe said plaintiff for materials furnished by virtue of said guarantee, to tbe Comstock Electric Company, to be used in tbe construction of tbe Surry County courthouse and jail, and that by reason of said bond and guarantee, and tbe contracts herein-before mentioned, tbe defendants are due and owing tbe plaintiff the-sum of $1,224.04, with interest thereon from 2 February, 1917, until paid.

10. That said Longest & Tessier Company is due and owing the plaintiff tbe sum of $1,224.04 as a balance remaining for materials furnished by tbe plaintiff to the Comstock Electric Company, to be used in the-construction of tbe Surry County courthouse and jail, under and by virtue of tbe terms of its guarantee to tbe plaintiff, as hereinbefore-alleged.

Wherefore, plaintiff prays for judgment against tbe defendants and each of them for tbe sum of $1,224.04, with interest thereon from 2' February, 1917, together with tbe costs of this action, to be taxed by-tbe clerk. Clieeobd Erazieb,

Attorney for Plaintiff.

Tbe demurrer is as follows:

Tbe United States Fidelity and Guaranty Company, one of tbe defendants above named, demurs to tbe complaint filed in this cause on tbe following ground:

That it appears from tbe complaint, and upon tbe face thereof, that tbe said defendant is not liable to any person for .labor or material used, in tbe construction of said Surry County courthouse unless tbe same is. due upon a contract made .directly with tbe said Longest & Tessier Company, and that tbe contract sued on in this case was not made directly with said Longest & Tessier Company, but that tbe goods sued for in this case were sold by tbe plaintiff directly to tbe Comstock Electric: Company and delivered to said Comstock Electric Company.

J NO. L. ReNDLEMAN,

Jerome & Scales,

Attorneys for Defendant, United States Fidelity and Guaranty Company.

Tbe demurrer was overruled, and tbe defendant guaranty company' excepted and appealed.

Clifford Frazier, attorney for plaintiff.

John L. Bendleman and Jerome & Scales, attorneys for defendant.

Allen, J.

The demurrer is based upon that part of tbe bond in which the defendant agrees that it “shall pay all persons who have contracts directly with the principal for labor or materials,” the defendant surety company contending that the plaintiff did not furnish the material, for which recovery is sought, by contract directly with Longest-Tessier Company, the principal, but that the contract of sale was with the Com-stock Electric Company.

The allegations of the complaint are admitted by the demurrer, and they must be liberally construed in favor of the pleader. Brewer v. Wynne, 154 N. C., 471.

It is also a correct rule of construction, as insurance contracts are prepared by the insurer, that doubtful and ambiguous expressions will be construed in favor of the insured, if this can reasonably be done. Grocery Co. v. Casualty Co., 157 N. C., 116.

Applying these principles, it seems to us clear that the claim of the plaintiff is protected by the bond of the defendant.

The materials furnished by the plaintiff were ordered by the electric • company, but there is no allegation that the order was accepted; and, on the contrary, it appears that there was no sale until the principal gave its guaranty, and this is a guaranty of payment, which imposes .an absolute and direct liability and not a guaranty of collection.

As said by Shepherd, J., in Jenkins v. Wilkinson, 107 N. C., 707, and approved in Voorhees v. Porter, 134 N. C., 600: “There is a plain distinction between a guaranty of payment and a guaranty of collection. 'The former is an absolute promise to pay the debt at maturity, if not paid by the principal debtor, and the guarantee may begin an action against the guarantor. The latter is a promise to pay the debt upon the condition that the guarantee shall diligently prosecute the principal

■ debtor without success.’ Jones v. Ashford, 79 N. C., 173; Baylie’s Sureties and Guarantors, 113.”

If, therefore, the liability of the defendant was dependent on the lan'guage quoted and relied on, we would not hesitate to hold that the allegations of the complaint bring the claim of the plaintiff within the class

■ of contracts for materials made directly with the principal, but the obligations of the bond are broader than this as it is expressly stipulated to “satisfy all claims and demands incurred for the same,” meaning the claims and demands incurred in securing labor and material for building the courthouse, and the allegations of the complaint show that the material furnished by the plaintiff was used for this purpose.

Affirmed.