New Amsterdam Casualty Co. v. State Ex Rel. Green

⁵⁵⁵ Pattison, J., delivered the opinion of the Court. The appeal in this ease is from a judgment recovered for the use of the equitable plaintiff, J. Ernest ‘Green, against the appellant, the Yew Amsterdam Casualty Ohmpany, on a state road contract bond executed by it as surety. The substantial facts of the case are these: In April, 1922, the firm of OVens Laws & Company, composed of Owens Laws .and Armin Auer, was awarded by the State Roads Commission of Maryland a contract to build a concrete road in Cecil County, -and on April 22nd of that month the firm, a® principal, with the .appellant, the Yew Amsterdam Casualty Company, as its surety, executed to' the State of Maryland a bond which contained, among others, the condition that if “the above bounden principal * * * shall well and truly pay all and every person furnishing material or performing labor in and about the construction of said roadway, all and every sum or sums of money due him, them or any of them for such labor and materials for which the contractor is liable * * * then this obligation to be void or otherwise to be and remain in full force and virtue.” In the contract for building1 the road, of which the bond was made' a part., and for the faithful performance of which, the bond was executed, it was agreed “that the said contractor shall not assign this contract nor any part thereof, nor any right to any of the moneys to be paid him hereunder, or shall any part of the work to be done or materials furnished under said contract be sublet, without the consent in writing of the State Roads Commission.” After the work was started under the contract, Mr. Owens Laws, one of the contracting firm, in June, 1922, wrote to his brother-in-law, Mr. Green, the plaintiff, whom he had intimately known for years and who at the time was in Ghattanooga, Tenn., the following letter: ⁵⁵⁶ “I am going to ask you, if you have at this time, any surplus funds that the company might use for a month or so. “I have in mind a cement bill, which will be due. some time in the early part of July, and by paying this bill within 10 days the cement company will allow us a very liberal discount, and this will also make our credit that much stronger. “The State will pay us for this material next month, that is in August, and we will be in a position to meet this obligation at that time. “Write whén you will be in town again.” This letter was mot ¡answered by 'Mr. Green, but shortly thereafter, in July following, he returned to Baltimore, where he personally saw .Mr. Owens Laws ¡and discussed with him the loan suggested in his letter, ¡and it Was agreed between them, as he said, that he would loan him the money upon the condition named in the letter, and that was, that the loan was to be repaid “from the settlement that was due from the State the following month.” lie went on to slay: “Although I knew Mr. Auer, I did not know Mr. Auer the length of time I had known Mr. Laws and I wanted these stipulations so that there would be no reason about my getting my money and he said it would be perfectly agreeable to take this mouev from the settlement that was due from the State the following month to reimburse me for this money. That was the condition under which it was loaned.” It appears from the record that Mr. Green, the plaintiff, left Baltimore before the money was actually paid over to* Mr. Laws.

This was owing to the fact that arrangements had to be made as to the hypothecation of certain bonds belonging to him by means of which, he was to obtain the money to make the loan. This, it seems, was looked after by his father, who paid the money over to Mr. Laws, as shown by the following letter from Owens Laws to Green, dated July 15th, 192², in which it is said: “Today I have turned to your father the company’s demand note for fifteen hundred dollars, which amount ⁵⁵⁷ was paid over to us by him for you on July 7th. This money will enable ns to discount our cement hill. “I greatly appreciate your coming to our rescue, and we hope to he able to repay the favor some time in the future.” The note above referred to wias dated July 15th, 1922, and was signed by Owens Laws and Amin Auer, as individuals. P'rior to the 'execution and delivery of said note, Laws and Auer, by their cheek dated July 10th of the same year, paid the Tidewater Portland Oement Company the sum of $1,193.50, for cement bought from that company and used in the construction of the road.

This .amount, as claimed by them, was paid out of the sum of $1,500 borrowed from the plaintiff. The work upon the road was shortly thereafter taken over by the defendant because of the financial inability of Laws & Company, the contractors!, to' complete it, and from and' after that time thei money for the construction of the road, asi the work progressed, was paid over to the defendant company. Thei money borrowed by Laws & Company not having been paid by them, Green, through his counsel, on the 2'6th day of December, 1922, wrote the defendant demanding payment by it of the money borrowed of him by them, stating therein that “at the' time the loan was made the condition was imposed that the money was to he used in discounting the bills: for cement put into the job,” and that thei same was so used. To this letter the defendant replied denying all liability, and refused to pay the money demanded of it.

It was then that the suit upon the bond in this case was brought. Thei declaration, in addition -to the sialient facts, above stated, contained the allegation that thei said loan from the plaintiff to Laws & Company was made “upon the condition'” that the said Laws & Company “were to use the .said money or moneys in the paying for labor performed and materials furnished in and about the construction of ©aid roadway, .and such money was so used in paying the cement hill of -the Tidewater Portland Oement Company, amounting to $1,193, .and ⁵⁵⁸ the balance of .said amount so loaned' as aforesaid was used in paying labor performed and hardware furnished 'and usad in the construction of * * * said highway.” A demurrer to the declaration Was overruled and the case proceeded to trial, resulting in a verdict for the plaintiff for the sum of $1,294.95, being the 'amount paid by Laws & Company to' the Tidewater Portland Cement Company for the cement bought by 'them from -it .and used in the construction of the road, with interest thereon. A judgment was entered upon the verdict .and it is from [that judgment that the appeal in this ease has been tafeen. By the demurrer, the question was presented whether' one lending money to a road contractor upon the condition that the money so loaned is to be, and is, used to pay for material uaedi iu the construction of the road, can recover against the eontractor’si .surety, if the contractor fails to repay the money so' borrowed, where the bond contains a provision, as required by tbe statute (Code, art. 91, sec. 36) that the contractor “.shall well and truly pay all and every person furnishing material and pierforming labor in and about the construction of said roadway, 'all and 'every, sum or sums of money 'due him, them or .any of them, for such labor and materials for which the contractor is liable.” It is not; only conceded by Hie plaintiff, hut it is made •clear by the decision of this Court in the case of State, use of Southern Maryland Bank v. National Surety Company, 126 Md. 290 , that without the words “upon the condition” found in the clause set out in the declaration, the demurrer to the dealuratioii should have been sustained.

Therefore, it is only because of the insertion of those word's in the declaration that the claim is made that the declaration is good and that the demurrer was properly overruled. In the case of State, use of Southern Maryland Bank v. National Surety Company, supra, the contractor for the construction or re-construction of a public road in Charles County borrowed money from the Southern Maryland Bank, for which it gave its promissory note®. The notes were not paid ⁵⁵⁹ and suit was instituted against the contraetor’s'. bond as in this ease. The bond in that ease contained a covenant toi pay all debts for labor .and material incurred by the contractor in the construction and improvement of the road.

A demurrer to the declaration was filed >and sustained, and the sole ques^ tion there presented for determination was the liability of the surety company upon the bond for the money borrowed from the banik -and used to pay the wages of laborers employed upon the work and for materials obtained and used in the construction of the State highway. It was there held, notwithstanding the broad construction now given to> such .undertakings, that the same could “hardly be extended so as tot reverse the rule that the liability of the surety upon his bond is dependent upon his covenants .and agreements'.” And in support of its statement, the court ¡cites a number of eases of this and other state®. It is true that, iu that case, Judge Stockbridge, speaking for this Ooru’t, thereafter said: “Here the indebtedness sought to be recovered consists of money loaned upon promissory notes. It does not appear either from the notes themselves, or from any allegation in the narr. that the loan was made upon .any condition whatsoever.

It is alleged that the money so obtained was used in paying for labor and materials, but there is no allegation that the loan was made upon such a condition. If such a condition had been imposed when the loan was made, .an entirely different question might have been presented, one which this Court is not now called on to decide.” This expression of the Court in respect to a question not raised and not involved in the decision of the case, was a mere dictum, without any. binding effect, as conceded -by the counsel for the plaintiff. It is, however, upon this expression, followed by others found in American Fidelity Company v. State, 128 Md. 50 ; American Fidelity Company v. State, 135 Md. 326 , and Gill v. Mullan, 140 Md. 1 , in which reference® are made thereto., that the plaintiff chiefly relied for a decision favorable to him upon the question presented. ⁵⁶⁰ In the ease of American Fidelity Company v. State, 128 Md. 50 , the suit was brought by a lumber company against the surety on a roiad contractor’s bond to- recover the amount owing to it for lumber sold and furnished by it to the contractors., which was used iu the construction of the road. Two questions were presented by the appeal .and both were decided .against the appellant, the surety on the bond.

The first went to. the validity of the .statute requiring the above mentioned provision to be inserted in the bond, and' the second, to the liability of thei surety upon the facts of that case. There the party furnishing the material used in the construction of the road had not been fully paid therefor by the contra, ctor, and his failure to pay to the plaintiff the amount so owing to- it was a, clear breach of his covenant, found both in the bond and contract, to. “pay .all and every person furnishing materials * * * in and about the construction of said roadway.’’ Consequently, from the unmistakable meaningl of the language of the bond, if the contractor failed to. pay such indebtedness, the defendant, >as .surety on the bond, became liable for its payment. Atad wa find nothing said in that case by way of reference to. the Southern Maryland Bank case that supports the plaintiff’s contention in this case. In American Fidelity Company v. State, 135 Md. 326 , whetre there was a, similar contract .and bond, the suit was