Independence Trust Co. v. Porter & Boyd, Inc., 191 N.C. 672 (1926)

April 28, 1926 · Supreme Court of North Carolina

191 N.C. 672

INDEPENDENCE TRUST COMPANY et al. v. PORTER & BOYD, Inc., et al.

(Filed 28 April, 1926.)

1. Roads and Highways — State Highway Commission., Principal and Surety —Materialmen—Rabor—Assignment of Claims — Contracts'.

Where under the written terms of a bond given by a contractor for the building of a road project to the State Highway Commission, the surety is obligated to pay for the labor on and the materials furnished therefor, the assignment of the moneys due or to become due the contractor under his contract advanced for the purpose stated is valid, and upon compliance with the statute as to notice, etc., the assignee may recover out of the moneys withheld by the State Highway Commission and due the contractor paid over, under bond for its repayment, to the surety on the bond.

2. Roads and Highways — State Highway Commission — Rabor—Material-men — Principal and Surety — Assignment of Claim.

The contractor for the building of a state highway gave bond to the State Highway Commission conditioned, among other things, for the payment for the labor and the material used in the project: Held, an assignment by the contractor of moneys due or to become due him under the contract to one furnishing money for the payment of such labor and material, was contemplated by the bond and included in the liability of the surety thereon.

Appeal by defendant, Massachusetts Bonding and Insurance Company, from Shaw, J., at January Special Term, 1926, of MeoKlenburg.

Civil action to recover on two bonds — one given for funds assigned tbe plaintiffs by Porter & Boyd, Inc., road contractor, and turned over to tbe surety on tbe contractor’s bond by tbe State Highway Commission, and tbe other to secure tbe faithful performance of a road-building contract and to protect materialmen and laborers, tbe latter having assigned their claims to tbe plaintiffs.

Erom a judgment overruling a demurrer interposed by tbe Massachusetts Bonding and Insurance Company, tbe said defendant appeals.

Stewart, McRae & Bobbitt for plaintiffs.

J. F. Flowers for defendant Bonding Company.

Stacy, C. J.

There are two causes of action stated in tbe complaint, hence two distinct questions are raised by tbe demurrer.

Eirst, it is alleged that Porter & Boyd, Inc., road contractor, is indebted to tbe plaintiffs in tbe sum of $37,398.51, with interest, for moneys advanced or loaned on written assignments made by tbe said contractor to tbe plaintiffs for all deferred payments, retained percentages and all other moneys due or to become due under a contract with tbe State Highway Commission for tbe construction of a section of road in Person County, known as Project No. 463; that plaintiffs duly filed with tbe State Highway Commission notice of their claims as required by law, and also notified tbe Massachusetts Bonding and Insurance Company, surety on tbe bond of tbe said Porter & Boyd, Inc.; that tbe work was satisfactorily completed by tbe contractor according to tbe terms of its contract; that tbe State Highway Commission bad on band, at tbe time of tbe completion of tbe work, a balance of approximately $20,000 due tbe contractor under said contract, which amount was turned over to tbe Massachusetts Bonding and Insurance Company, under a bond given for its return in case tbe plaintiffs were adjudged to be entitled to said funds by virtue of their assignments; and that tbe State Highway Commission has agreed to submit to tbe jurisdiction of tbe court' in this action, in order that tbe rights of all tbe parties may be judicially determined.

Hpon these tbe facts chiefly pertinent, we think tbe demurrer as it relates to tbe first cause of action was properly overruled.

By written assignments, duly executed, all moneys due and to become due under tbe contract between Porter & Boyd, Inc., and tbe State Highway Commission, for tbe building of Project No. 463, including tbe retained percentages, etc., were all transferred to tbe plaintiffs. Trust Co. v. Construction Co., ante, 664. There being no question as to tbe validity of these assignments, it would seem that tbe plaintiffs, as against a demurrer, should be held to be entitled to tbe balance due tbe contractor by the State Highway Commission upon the satisfactory completion of the work. Hall v. Terra Gotta Co., 97 Kan., 103, Ann. Cas., 1918 D, 605, and note.

The liability of the Massachusetts Bonding and Insurance Company is on the bond given by it to the State Highway Commission to save it harmless or to insure the return of the funds due the contractor on Project No. 463, in case the plaintiffs should be adjudged entitled to said funds. This is the only bond declared upon in the first cause of action.

Second, it is alleged that the contractor, Porter & Boyd, Inc., gave to the State Highway Commission, as required by law, a bond in the penal sum of $148,710.00 with the Massachusetts Bonding and Insurance Company, as surety thereon, for the faithful performance of its contract in building the aforesaid road, and to insure the payment of all laborers qnd materialmen doing work on, or furnishing material for, said road construction; that the plaintiffs, in order to keep the contractor supplied with labor and materials for the work, advanced the sum of $11,069.65 to pay the laborers and took from them assignments-of their claims against the contractor; that the balance now due on said assignments, and for which the bond of the Massachusetts Bonding and Insurance Company is liable, amounts to $8,693.10; and that proper notice of said claims has been duly filed with the State Highway Commission.

On these the facts chiefly relevant, we think the demurrer as it relates to the second cause of action was properly overruled. Undoubtedly, the laborers, had they not assigned their claims, would have been entitled to maintain an action on said bond, and we think it must be .held, in keeping with the general trend of authorities on the subject, that the claims of laborers and materialmen may be assigned without losing the protection of the bond given and intended for their benefit. Title Guaranty & T. Co. v. Crane, 219 U. S., 24; Bank v. Casualty Co., 93 Wash., 635, Ann. Gas., 1918 D, 645.

Here, the bond in suit was intended to perform a double purpose: 1. To insure the faithful performance of all obligations assumed by the contractor towards the State Highway Commission. 2. To protect third persons furnishing materials or performing labor in and about the construction of said roadway. Plyler v. Elliott, ante, 54; Town of Cornelius v. Lampton, 189 N. C., 714. In its second aspect, the bond contains an agreement between the obligors and such third persons that they shall be paid for whatever labor or materials they furnish or supply to enable the principal in the bond to carry out its contract with the State Highway Commission. U. S. v. National Surety Co., 92 Fed., 549.

The general rule is that the assignment of a debt carries with it the security. 2 R. C. L., 633. The application of this general principle to such cases as the present obviously accords with the purpose of the bond. U. S. v. Rundle, 100 Fed., 400.

Affirmed.