Appellees Brief — Hartford Accident & Indemnity Co. v. Bunn

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"SUPREME COURT OF THE UNITED S¥ATES.

| JAN 2 19%

OCTOBER TERM, 1931 — an anne +

No. 333

HARTFORD ACCIDENT & INDEMNITY

COMPANY, Arpaitanr,

VS.

O. L. BUNN, Dotne Busryess as Bunn ELeEctric

* ComPANY, ET AL., APPELLEES.

BRIEF ON THE MERITS FOR APPELLEES

NAMED WITHIN.

’ 1, T: KENNEDY,

W. A. GEISENBERGER,

¥GERARD BRANDON,

G. H. BRANDON,

C. F. ENGLE,

S. B. LAUB,

/E. H. RATCLIFF,

‘ JOSEPH E. BROWN,

W. C. MARTIN,

‘ MARCELLUS GREEN,

J GARNER W. GREEN,

| Attorneys for Appellees.

Of Counsel:

BRADLEY, BALDWIN, ‘ALL & WHITE.

‘INDEX.

SUBJECT INDEX.

Express reservation......... eeccce bepenee oc ceccceecccoce seoe

Statement of the case............... eer vineeie Sannowa

The pleadings and evidence.............- ce eesecnencesaneee

‘Summary of argument........ enweaae cededeneere eeakeebyx

SNE. KAR owe kckdans end endases eased coke siolssaaiaieversieielere

Point I.Appellant, doing an insurance business, ond

thereby subject to plenary State jurisdiction, having

been paid a premium for the obligation as enforced by

the State court is not, on this record, entitled to raise a

Federal question, with this premium in its pocket.......

Point II.—Section 3, Chapter 128, Laws of 1918, does not

violate the Federal Constitution, in that, appellees, ma-

terialmen, having placed their property—material—in .a

building upon the land of the owner, for whose -construc-

tion, including both material and labor, appellant, surety

company, had become ‘responsible, the State can, in

virtue thereof, impose liability upon such paid corporate

surety, voluntarily executing a performance bond......

Point III.—Said Chapter 128, Laws. of Mississippi, 1918

Secs. 2274-2281, Code ene does not violate the Geach

CR Cc 0 kc nnvcdacdadsviosecs Re re ree

Point I¥.—Should the court determine Section 3 aforesaid

to be unconstitutional, yet notwithstandirg, the bond

executed may be sustained as a valid common law obliga-

tion and the judgment of the Supreme Court of Missis-

sippi cannot be reversed, as an adequate obligation ex-

isted under this common law obligation for judgment

NE ob av Oeidakd ded eixeresecadeccisss i betese

Point V... Ks eeeeeetesecas sdegs cdanvoseress weessees eeeeens

TABLE oF Cases CITED.

” Accident & Indemnity Om ¥. Knox Co., 132 Atl. 261 (Ky. 1926).

“Adams v. Williams, 97 Miss: 113, 52 So. 865...... Ve dl imwiwes's

#tna Ins. Co. v. Cowan, 111 “Miss. 473, 71 So. 746............

_#tna Casualty. & Surety Co. y. U. 8. Gypsum Co., 39 S. W.

~ (Ry. ) (2d) (1931) ee pee rere ececccceececepecsesesoes

—1495

a . pa Cate Se

PASAT LIE ROIS Bettie Nile sms, se) Vz Fal apart eel ies 7 “ST

il INDEX.

Algoni.e Stone Mfg. Co. v. F. & Pep. Co. of Maryland (Kans.

1917), 163 Pac. 1076, 44 PMNS PUNE acai cay eters ctare oinre se aiereieie (ois

Alabama Marble Co. v. U.S. FL & G. Co., 111 So. 573, 146 ‘Miss.

Od cea ake tadeh Seem A Oe e Ces sede en eene staiihi

Algonite Stone Mfg. Co. v. F. & Dep. Co. of Maryland (Kan.

1017), 168 Pac. 1076,.100 Kans. 28. .....ccccccccccccscccees

Allen vy. State of Ga., 166 U. S. 138, 41 L. Ed. 951.............-

Amariang, Surety Co. v. Pangburn, 182 Ind. 116, 105 N. E. 769,

a Pe a Rae Meh eae ae

‘eaten Indemnity Co. v. Burrows Hardware ™ (Tex. Civ.

App.), 191 - We. O74. cc i elateals mieredare ieee’ a

American Bond & Sposa “i v. United *tates, 282 Us S. 374.

75 L. Ed. 395...... db dbésbddetubianetedsbenceemmtanereebes

American Surety Co. vy. Small Quarries, 120 S. E. 617 (1923 Ga.)

American Indemnity Co. y. Burrows Hardware Co. = Civ.

App.), 101 B. W.BE4... cvcrcccccccccccccccccccccsccccccces

American Fidelity Co. vy. State, 109 A. 99, 135 Md. 396.....2..

American Fidelity Co. v. State, 97 A. 12, 126 Md. 50..........

Association v. Morrison, 39 Md. 281..........0ececeeeeeeeeees

Asheville Supply & Foundry Co. v. Catawba Const. Co. (N. C.

1980), 251 GB. TE. GB. 0c cccsccccccceccsccccccccess sp ecceces .

12,

33, a

Asberg v. Ass’ ny 143 Minn. 354, 173 N. W. 708..... inae fain

Atlantic Trust & Dep. Co: vy. Laurinburg, 163 Fed. 690; 695...

Atlas Assurance Co. v. Lawrence, 34 Fed. (2d) 401, 404........

Bacot v. Phenix Ins. Co., 96 Miss. 223, 60 So. 729...... ams Oe

Bain Peanut Co. v. Pinson, 282 U.,S. 499, 75 L.. Ed. 482......

Bank v. Casualty Co., 161 P. 475. 93 Wash. 635, Ann. Cas. vou

D, 645...... SOOPER Ae OR en OES Ry ,

Baltimore v. Casualty Co., 126 A. 880, 146 Md. 508, 513........

Baton Rouge Sash, ete., Co. v. Deceur, 2 La. App. 129........

Bacon vy. Callender, 6 Mass. 303........--ceeeeeees sia aie dil

Ross v. Irving, 14 TU.171........-.ecerecccceccccccsscceeets

Bright v. Boyd, 1 Story, 478, Fed. Cas. No. 1875 Pe Pere or

1 rrr Oe OE, ., ncccctberssensrssenlecososenes oer

Blake v. McClung, 172 U. S. 239, 43 L. Ed. 432...........-.+--

Boisot, Mech. Liens, Sections 22, 23......-..-.seeeeeeeeeees

’ Baton Rouge Sash & Door Co. v. Deceur, 2 L. App. 129.......

Builders’ L. & S. Co. v. Chicago, B. & 8S. Co., 167 Wis. 167, 170,

SEE TE, SE, cccncvcdecsetersccosdsasesesconssevesvesoes

Building Cont. L. M. L. Ins. Co. v. Southern S. Co., 185 Wis.

83, 200 N. W. T70....-- cece cece cece ere eetenereereees ndtande

Bunting v. Oregon, 242 U. S. 426, 61 L. Ed. 830...........-.. a

Byram Lumber & Supply Co. v. Page, 109 Conn, (129) 256,

146 A. 293...... Cocercooes CREP er ee see eeeccceerseeeceesees

INDEX. lll

: « Page

Cantwell vy. Mo. 199 U. 8. 602, 50 L. Ed. 829..... hi neeeehiehaaiia 56

Caldwell v. Sioux Falls Stock Yards, 242 U. S. 559; 61 L. Ed.

DE Gambon adauudeeuviued «eee cebeel ee ec: Patnemew ss 51

Chicago, Burlington & anton R. R. Co. v. McGuire, 219 U. S.

Pe hee Unaedb wasn s bide Pend oaebe we a bekekocidens 44

City of Topeka v. Federal Union Surety Co., 213 Fed. 958, 963. . 68

City of Montpelier v. National Surety Co., 97 Vt. 111, 122 Ati. 488 58

City of Philadelphia v. Fidelity & Deposit Co., 231 Pa. 208, 80

EC ida nous sdct bee os > ad ox aaewen se peccereedan eieaeee. ae

Commercial Bank y. Evans, 145 Miss. 643, 112 So. 482......... re

Commonwealth v. Hock Age Mutual Benefit ’ Association, 31

‘Leg, Int. 245; 10 Phila. B54... . oo. ccc cece tA CME S446 Ga sk 50

Cooley, Const Lim I nit il 6 NA eel oi a . * &

Cole Manf. Co. vy. Falls (1891), 80 Tenn., 16 8. W. 1045........ 73

‘ Concrete Steei Co. v. Ill. Surety Co., 163 Wis. 41, 47,157 N. W.

_ Cae. ainsi MaaRincn bainh HA eihehh<tkedilahkan cies 78

Conn. v. State, Bem GO. BEG Te OE GE, Gn gon ccccccccccmesc<. d7

Concrete Steel Co. v. Mnois Surety Co. om. 1916), 157 N.

GMS (Aaah enancanckaceiks a ee ee eee eer ee ee tise 80

Cox v. Ross, 56 Miss. Eee ee LT Te ae es 72

Daniels v. Tierny, 102 U. S. 415, 26 L. Ed. 187............. ‘ 85

Davis Co. v. D’Lo Guaranty Bank, 133 So. oe 1931), po 16

forme, TUE, BD GI BI ccs noc cna wdc cc cawisicdace 30

Dickson v. U.S. F. & G. Co., 117 So. 248, 150 Miss. 864... ree 15.

Dickson v. U. S. F. & G. Co., 117 So. 248, 150 Miss. 864....... : 69

Denny v. Bennett, 128 U. S. 489, 9 Sup. Oe ree 38

So eS Ge eee geecesecees DT

Doll v. Crume, 59 N. W. 806, 41 Neb. RRS HYs

Doll v. Crume,.41 Neb. 655, 59 N. W. 806..... Reema eee 57

Domat Civ. Law (by Strahon) G81...........ccccccccccwcecs 36

Dominion Hotel Co. v. Ontario, 249 U. 8S. 266 ; 62 L. Ed. 597.1... 56

Douglass v. Unmark, 77 Conn. 181, 107 A. S. R. 25........... 85

Dupree v. State, 102 Texas 455, 471; rrr ‘ 83

Eagle Ins. Co. v. Ohio, 153 65 S. 446; 38 L. Ed. 779..... pawn 50°

Edwards‘v. Kearney, 9 U. S. 505. ........ ccc cucu ccccccce on Je

Elec. A. Co. v. United coc F. & G. Co., 110 Wis. 434, 85 N. W.

i Aachen awed Redeem 78

Erie R. R. v. Williams, 233 U.S. 685....; anja Re Raden bikwaie 44

Erie v. Williams, 233.U. S. (1914) 685 at 699, 58 L. Ed. 1155.. 54

Equitable Life'Ins. Co. v. Stemmons (Tex. Civ. App.), 239 S. W.

PP Cis ehidinceetnbaddahuinkadih Git unedhiecete ect. . 22

Equitable Surety Company v. Stemmons, 239 S. W. 1037...... 83

Equitable Insurance Co. v. Stemmons, 239°S. W. 1039......... 24

s ; * 2 UREN Shey

Pierre. PERS OP GIMENO AARNE PRISE LTR NESE DOE GEL IRS IESE ETI s

iv” INDEX.

Falbrook Irrigation District v. Bradley, 164 U. S. 112 at 160:

A I a ee RRR ae

Farmers’ & Merchants’ Ins. Co. v. Dobney, 189 U. S. 301-.....

Farmers & Merchants Bank v. Federal Reserve Bank, 262 U.S

660, 67 WSU, NOCD celine as 60.06 s.60 400 08008 008 Saigthcis due aie

Faurote v. State, 110 Ind. 463, 11 N. E. 472...........000% aig he

Fidelity, etc., Co. v. Miazza, 98 Miss. 18, 46 So. 817...... vor

Fidelity Mut. Life Ins. Co. v. Mettler, 185 U. S. 308..........

Fidelity Homestead Assn. v. Kennedy, 158 La. 1059, 105 So. 64.

Fife v. Indemnity Ins. Co., 283 S. W. 64......cc..ceceeceees

_ Frost v. Corporation Commission, 278 U. 8. 531, 73 L. Ed: 492..

Federal Union Surety Co. v. Commonwealth, 129 S. W. 335,

he <A Server ee eeT Er CL Ree EEL ERE Co ee ee

Frowert v.-Blank, 205 Pa. 290, 54 Atl. 1000. ........0. 2... ee eee

Porburger Stone Co. v. Lion Bonding & Surety Co., 170 N. W.

as, OG ROS ES 66.8.6 6554 0N ON 5456566994500 S HOSA EWS

German Alliance Ins. Co. v. Lewis, 233 U. 8. 389, 58 L. Ed.

SE Sige ChGdbs +0Gks EbUe Ee Shied shat neeie ctebkekonds ar

_ Graphic Arts Bldg. Co. v. Uniion Indemnity 7s 163 La. 1, we

Guaranty Co. v. Pressed Brick Co., 191 U. S. 416, 24 Sup. Ct.

BOE, GE Bs. TE. Bis nscevcssevasevescns oo eeevessegessceeses

Green v. Frazier, 253 U. S. 233 at 242; 64 L. Ed. 878.........

' Graphic Arts Bldg. Co. y. Union Indemnity Co., 163 La. 1, 111

. Ns a ie a ie ee Se wen hwe che is

Griffith v. Rundle, 23 Wash. 453, 55 L. R. A. 381, 63 Pac. 199..

German Alliance Ins. Co. v. Lewis, 233 U. 8S. 380, 58 L. Ed. 1011,

—) = we UGE Re PPVTTCTITeTT Tere rrr ey

Gill.v. Paysee (Nev.) 206 P. SOB... ccccsccccccccccces Roem

Griswold v. Bragg, 48 Fed. 519..............0.00-- Ceeetevede

ee OB Oe IS Be Wi ck iv ckacecccnc diva necsecneecsses

German Alliance Insurance Co. v. Kansas, 283 U. S. 389......

Gibbs v. Tally, 133 Cal. 373, 65 P. 970. ....-..- eee eee eeeeeeres

Greenwood v. Freight Co., 105 U. S. 18. ....ccccccccsccscccee

Great Southern Fireproof Hotel Co. v. Jones, 193 U. S. 582,

ee Se, ee A is a I ne ah ew abieeccccteds see gaceass

Great Southern Fire Proof Hotel Co. v. —_— 193 U. S. 547,

Ree ee ee re Perr rT rr Ter

Hall v. Geiger Jones Co., 242 U. S. 539; 61 L. Ed. 480...... ea%

- Hardware Dealers Mut. Fire Ins. Co. v. Glidden, Oetober Tern ni,

1931,,U. S. Supreme Court Advance Opinions No. 3, page 65.:

Hardware Dealers, etc., Co. v, Glidden, U. S. Supreme Court

Advance Opinions No. 3, page 65, October Term, 1931........

Hatcher Gi I, Fs bec oscss ccacvevacesicescsssecnences

be Bs so Nm hs sd te 68

10.

REPPIN GA PL ELLIE So a SE ee ab

. Page

INDEX,

Hartford ‘Accident & Indemnity Company v. Natchez Invest-

ment Company, Inc., et als., 155 Miss. 31, 119 So. 366, page

Dic cnaeies do bie ees ba eae ne eacewac AOE RTD,

Hess v. Denman Co. (Tex. Civ. App.), 218 S. W. 162.........

Hess v. Denman on Co. (Tex. Civ. App.), 218 S. W. 162...

Herbring v. Lee, 280 U. S. 116, 74 L. Ed. 221...... SeGe aka :

-Hunt’s’ Lessee v. McMahon, 5 Ohio, 132................ poeeeee

Hutchinson Ice Cream Company vy. State,-242 U. S. 158, 61 L.

ee Peorerrery Ts errr re rrr ee yer ne re OP Ee

Hightower v. Bailey, 108 Ky. 198, 56 S. W. 147, 22 Ky. Law Rep.

88, 49 L. R.A. 255, 94 Am. St. Rep. 350..:......... dabei she

Hormel v. American Bonding Co., 35 L. R. A. (N.S.) 513.....

Home Insurance Co. of N. Y. v. Moore, 151 Miss. 189, 117 So.

Pe COROMRE SEES EGO s SDN ROK éean Nabe edeede senate edsdcees

Hebe Co. v. Shaw, 248 U. 8. 207, 63°L. Ed. 256..........000.

Hooper v. People, 155: U. S. 648; 39 L. Ed. | | Pe pooet

Hollenbeck v. Amweg, 170 Pac. 148 (1917, isvé Cal. 169)...

Insurance Co. v. Yates, 214 Ill. 272, 73 N. EB. 423.......000..

Insurance Company vy. Shlenker, 80 Miss. 667, 32 So. 155......

In U.S. F. & G. Co. v. United States, m U. S. 246, 48 L. Ed.

Illinois Surety Co. v. Davis Co., 244 U. . 380, 61 L. Ed. 1211.

Iddings Co. v. Construction Co., 104 Neb. 124, 175 N. W. 643..

Se OE Pi ivisecdscednnasdecdeveneeceas cance

‘Independence Trust Co. v. Porter, 132 S. E. 806 (N. C. 1926).

Jones v. Great Southern Fireproof Hotel sei 86 F. 371, 30 C. C.

Re Te. keh heh eck ch curear ei entedeceasebehedsbavourseseeve

Joues v. Great Southern Fire Proof Hotel Co., 30 C. C: A. 108,

58 U. S. mg Se Reker Awedesend oeetdrndededss

soumart v. U. &. F. & G. Ca, 3 Lae. App. GOB. oc cccciccveccsccs

Johnson sian Co. v.. Columbia Casualty Co., 133 So. 851.

Johnson v. Casualty Co., 1383 So. (Fla.) 850............ 0.006.

John Hancock Life Ins. Co. v. Warren, 181 U. S. 73, 45 L. Ed. 755

Johnson Electric Co. v. Columbia Casualty Co., 183 So. ( Fla.)

DL, i6ndddecesecedevnaes SRD eis Vas Gbahs Oioea Geapea 2 6x6

Jones v. Portland, 245 U. S. 217 at 221, 62 L. Ed. 252........

sareart v. U. 8. F. & G. Co., 3 La. App. GES... oiccccceccccces

Kansas Code of 1925, Section 1401...............0000. rere

Knight & Jellison Co. v. Castle,, 27 L. R. a). ES: 2 Sr

Kaufmann y. Cooper, 46 Neb. 644, 65 N. W: TOG. oc rccsseccccces

Keokee Cons. Coke Co. v. Py Te Ge BF cecccccessnes

Kelly v. Johnson, 251 Ill. 135, 95 N.-E. 1068, 36 L..R. A. (N.S.)

573 rer iritT Te rer Tere CU Oe Re ED CeCe eCoeeeDegeeeeees

TRESS ORAL ELS.

" Si ee Mgt SE SNA DEEL AAO GLE IVD INE BEAD

AAO ALE ESO, Fe 2 valet ba ie hat oe

2 ri

vi INDEX,

Page

La Tourette v. McMaster, 248 U. S. 465, 63 L. Ed. 362, 39

S. GE Bs scodese puesbeUsedabewnces ve oceebenccvecceececes 66

See B.S, S Goes ts OS Pe BOs ccsctecceccccnsccscscssss 71

Leona Irr. Man. & Canal: Co. v. Roberts, 52 Texas 615, 622... S83

Lockland Lumber Co. v. Robinson, 157 N. E. (Ohio) 376...... G4

Leslie Luinber & Supply Co, v. Lawrence eee 1928), 11 S. W.

Se EE oD cba a AeERERSR KeGs ROKaaR ewan ee ndheKacdescanane G1

Lasky v. Southern Express Co., 92 Miss. 268, 45. Oi RIOD sn ccs D8 ©

Lackland v. Renshaw, 165 S. W. 314, 315..............cce00. 4)

Leonard y. Vicksburg, ete., R. Co., 198 U. S. 416, 49 L. Ed. 1108. 12

- Murray City v. Banks, 219 Pac. iin dua the nds Sa ohne 133

BECSrOTe ©, Te, TO BIB. SI. wns ns ccccccccccscncccccegsssees 3

Murray v. wiaieieanetais Life Ins. Co., 145 Miss. 266, 110 So.

660 Dette eesdareesaeeeeateeseneerenseecanes sa gia Gada ia ate 8

McCarter v. Firemen’s Ins. Co. N. J. Eq. 372, 382, 20 L. R. A. ~

_QN. 8.) 1194, 135 Am. St. Reep: 708, 73 Atl. 80, 414,.18 Ann..

Cas RE So CARAT A KS AA RANMANAAR AN ORESOR OKA GS 40a cae ae 66

Mankin y. United States, 215 U. 8. 536,54 L. Ed. $17........ 68

Moses ¥. U. S., 166 U. S. 571, 586; 17 Sup. €t. 682; 41 L. Ed.

Ee Shee REOh NNER PUREE RS RASS RROE EO e Rad enescnneesnee 86

Mcoy v. Grandy, 3 Ohio Oe Mech stains cdecaginnsscesecn's 35

Mackeldy, Rom. Law, 280, 281..........cceccccccccccccccees 36

McLean v. Arkanuas, 211 U. S. 530......ccccccccvccses aes 44

McElrath v. Kimmons, 146 Miss. 775, 112 So. 164............... 0. «17

Montague & Co. v. Furness, 145 Cal. 205, 78 P. 640.........- —

Maryland Casualty Co. v. Fowler, 31 F. (2d) 881, SS4........ 58

McDonald v. H. Gas & Oil Co., 2 La. App. 241.............00. 73

McDonald v. H. Gas & Oil Co., 2 La. App. 241................ 10

> Murphy v. California, 225 U. 8. 623; 56 L.-Ed. 1229........... BB

Morris v: Columbus, 102 Ga. 792, 30 S. E. 850................ 53

McGoon v. Scales, 9 Wall. 23; 19 L, Ed. 545........ Keakasaes "$l

Merrick v. Halsey, 242 U. S. 568; 61 L. Ed. 498............... 51

eS rrr errr bekeane 36

Nye-Schnelder-Fowler Co. v. Roeser, 103 Neb. » 614, 173 N. W.

» GF RaeubeesasncGds c4p000d00 MeCenGhee che ahakes<aetiande ss 70

- Northern Pacific R. Co. ' ¥. Wall, 241 U. S. St 36 5S. Ct. 493, 60

L. Ed. 906....0000.. LACE RE ROOK Gn ONS S0dN4e 46 ¥.0b a O06s 06s 71

National Surety Co. v. Lee, 125 Miss. 517, 88 So. Cisvcecasnsn 60

Northwestern Mutual Life Ins. Co. v. Riggs, 203 U. 8. 243; 51 L.

Sy Me Pe R See ROR hee dhonn b44de 60000490004 00606040% é 50

N. Y. Life Ins. Co. v. Cramer, 178 U. S. 389; 44 L. Ed. 1116.... 50

N. Y. ex rel McCall, 245 U. S. 345, 62 L. Ed. 387............... 55

N. Y. ex rel v. Hesterberg, 211 U. S. 31; 53 L. Ed. 75....... aan *

O’Gorman v. Hartford F. Ins. Co., 282 U..S. 251, 75 L. Ed. 324,

te A. Ee BR. BOG, GE Gen. Ct. 180... ccccceces oe eccccccces 9

“

o °

: . : *.

; ; ! > .

2 ¥ evar LHS TRENT SEI, DEEN SARA AG TB a

INDEX,

Ohio Oil Co, v. Conway, 281 U. 8S. 46, 74 L. Ed. 775............

O'Gorman & Young, Inc., y. Hartford Fire Ins. Co., 282 U. S.

BEE 4o0cesecesnesceeenusedseeseedl cucsevaws peseceeesccecee

Ohio ex rel. Clarke v. Deckebach, 274 U. 8. 392, 397........

.O’Gorman v. Hartford Fire Ins. Co., 282 U. S. 257, 75 L. Ed. -

SHAS L 6 sU Kaa akeeeRueees Cau beneebascetneeeaeuesessnseen

_ Orient Ins. Co. v. Daggs, 172 U. S. 557, 48 L. Ed. 552.......... °

Ogden v. Saunders, 12 Wheat. 213, © Bh Ge Ges aw cavancees's

Phil. Mech. Sy OI WA wee san cednwnceadeseeseteces co’ x

larsons v. U. S. F. & G. Co,, 112 So. 469, 147 Miss. 335.;.....

Provident Inst. for Savings v. Jersey City, 113 U. 8S: 506-514,

Se Ph a nev dene 6oninsneDRcadskbbeannccaean’ 10045 .

Parsons y. U. S. F. & G. Co., 112 So. 469, 147 Miss. 335........

‘Palmer v. Tingle, 45 Ohio St. 423, 45 N. BE. 313....: eekuheas

Philip Carey Co. v. Maryland Casualty Co., 206 N. W. 808

Ce Serer rer er eer sacndenes OSes eeseveeeseces

People vy. Surety Co., 211 N. Y. 107, 105 NE. 99.............

l’eoples v. Metropolitan Surety Co.,,105 N. E. 99 (1914 N. Y. iF 2

People v. Smith, 108 Mich. 527; 66 N. W. 382.......... faekene

People v. pig crae 214 N. Y. 395 ; 108 N. by ee

Philadelphia v. Fid. & Dep. Co., 80 Atl. 62, 63, 231 Pa. 208...

People v. Traves, 154 N. W. 130, 188 Mich. 415......:........

Parsons, etc., v. Furr, 110 Miss. 795, 70 So. 895...........e000-

, Pennsylvania, etc., Co. v. Gold Issue, etec., @o., 243 U_-8. -

Se Se, RGA Soden aN Swe bes Obahe 460k8s eb bae bbe rnte

Plyler-v. Elliott, 131 S. FE. 306, 101 ie i ks Kbene te tennnee

Paul v. Virginia, 8 Wallace (U. S. 1869) 168; 19 L. Ed. 35

Roystone v. Darling, 171 Cal. 526, 154 BP. 15..........cccceeees

Rio Grande Lumuber. Co. vy. Darke, 50 Utah, 114, 167 P. 241,

° | Ren i iy Bs FE in hbo ches cy nnn cca wedecncentesens é<aes

Ramsey v. Vincennes Bridge Co., 283 U. S. 796, 75 L. Ed, 1420..

Rio Grande Lumber Coe. ¥. Darke, 167 Pac. 241, 1918 L. R. A.

AES) Sanne weassecuuan as « $554 5098.5 00 Wh 085 00s kbd AD Oa ewes

ioystone Co. v. Darling, 171 Cal. 526, 154 Pac. 15 (1915).

Roberts v. Spires, 232 Pac. 708, 195 Cal. | ES ta eee

R. Connor Co. vy. tna Indemnity Co., 138 ‘Wis. 13, 18, 115

Wits. A ccdedenciex Lace iedusseninne seshdeedtseessaaees

Rio Grande Lumber Co. v. Darke, 50 Utah 414..............

Miuking Fund cases, 99 U"S. 700 at 721; 25 L.Ed. 496.........

]

r Ls ; ; 4

[iiiitisseiissiiiniiininieasanieaiesitiaata nen ia iaeanlacieaaiitationntin

° P P \

a . INDEX,

Page

See Blake v. McClung, 172 U. 8. 239 at 260, 261; 43 L. Ed. 432. . a |

Seely +. American National Bank, 178 U.S. 280...... 56.000 000 5

State v. Main, 69 Conn. 123, 37 Atl. 86..... Cnmeenescevbasdee 53

Superior Lumber Co. y. South Dakota, 226 U. S, 157; 57 L. Ed.

- aererr rete CTT TT ROCCE TTC ULE TTT ETT OLE 53

State v. Cantwell, 179 Mo. 245; 78 S. W. 569..........0005 wine * 56

State v. Pitney, 79 Wash. 608 at 612 of. SS re 56

Securities Savings Bank v. California, 263 U. S. 282; 68 L. Ed.

Oe sirens Spach nies bavbevebonneks SE ery Pepe 56°

Steffes v. Lemke, 40 Minn. 27, 41 N. W. 302..............0054. 57

Standard Sait & Cement Co., v. National Surety Co., 158 N; W.

802, 134 Minn. 121...... OS Oe EE ee eee eee eT err , ° 58

Standard, ete., v. Broom, 111 Miss. 409, 71 So. 653.....0...... 58

Sovereign Camp, etc.,.v. Miller, 125 Miss. 502, 87 So. 892..... 58

Stuyvesant v. Smith, 135 Miss. 585, 99 So. 575................ 58

State Board of Tax Comrs. v. manent: 283 U. S. 527, 75 L. Ed

OTE ee eT ere UTEP ELT PTC TTE TT ETO T Tee 65

Smith v. Cahoon, 283 U. 8. 553, 75 L. Ed. 1264..... chnckwan ve 66

~ $tipeich v. Metropolitan L. Ins. Co., 277 U. S. 311, 320, 72 L. Ed.

ee ey ee ey OE 0 0s hn vos 50s 6b emcees ceeeecnes errr 66

Staten Island Rapid, etec., v. Phenix 1. Co, 74 L. Ed. 126, 281

i MCL cch ee teeihhe aweheaks 6 dan wkend eeneaun ese <heueeen 67

Section 2, Chapter 128, Lav MAMI vin aise. bet Eb r518 Sole ei eS SLE ‘ Of «

School District v. Construction Co., 87 Or. 132, 169 P. 507 ‘ 788... 70 .

Section 2888 of Code Mississippi, 1980. ...... 000. cece et eeeeees «2 *

State v. Smith, 87 Miss. 551, 40 So. ene i 12.

SE BO os vee cevessesesecscscccsseescces 72

' Section 5129, Code of 1930......... Ree 73

Stenson Mill Co. y. Nolan, 5 Cal. App. 754, 91 Pac: 262........ 75

Stewart v.. Brewster, 284 S. W. 53. (1926 Ark.).............. 75

Surety Co. v..Hall Miller Co., 104 Miss. 626, 61 So. 700........ 79

state v.. Stanton, © Wall. GO, 18 Us, Tid. TBl...cccccccccccccces 81

Sully v. American Natl. Bank, 178 U. 8. 289; ph L. Ed. 1072.. 81°

Southerly Surety Company y. Malle & Co., 242 S. W. (Texas)

‘CT - MAREE ERAERDESERERA EERE ES HERE CREED ANAS LOCO RSS ER ES 82

Stevengon v. Morgan; 67 Neb 207; 93'N. W 180; 108 A. S. R

Sr iivenuesuiscraseyucnee Wa iukevapuiie’ Baten ses eg aa hand > «85

Standard Oil Co. v. Marysville, 279 U. S. 582, 584 niet ce rorsve vers locos - 44

Stowell v. Clark, 152 Miss. 32,.118 So. 370.......0...2cc000. es i

Standard Oil Co. v. National Surety Co., 143 Miss. 841, 107 So.

PET bs dated one henbhes bats bs tar neevenes (Psi exegsus eee 17

Shaughnessy v. American Surety Co., 188 Cal. 5438, 69 P. 250,

71 P. 701 See e eee e eee e eet ee ence teen et eee eeeeseeseeesecess 22

nid

! aaeeunee

INDEX, epee ix

Page

‘San Francisco Lumber Co. v. Bibb, 139 Cal. 192, 72 P. 964;

id., 139 Cal. 325, 78 P. 864....... ‘ccteseneedsttausnees nee 22

Spry Lumber Co. v. Murphy, 148 Pa. St. 337, 23 A. 1184..... . 30

Scott v. Mather, 14 Tex. 235............... Seeevoes Jscecccees os)

Smith v. Parsons, 2 Oi, TE... cc oeee peeaneusseéesdveedere . 38

Schmidinger v. Chicago, 226 U. S. 578............600. Seskeeee 44

Stewart v. Segal, 126 So. 718, 13 La. App. 359....... rer Tr ee } 10

Standard Salt & Cement Co, v. Nat. Surety Co., 134 Minn, 121," ©

TTT Tee TTT ETT TUTTI TTC TTT TTT 13...

Spengler v. Lumber Co., 94 Miss. 780, 48 So. 966...........2.. 15

’ Troy, etc., R. Co. v. Kerr, 17 Barb. (N. Y. 1854) 581.......... 49

Thornton v. Duffy, 254 U. S. 361; 65 L. Ed. 304..... pieeeeress 51

Thomas Cusack v. Chicago, 242 U. S. 526, 61 L. Ed. 472....... _ 54

’. Tagg Bros. v. United States, 280 U. S. 420, 74 LE. Ed. 524...... 67°

Town of Cornelius v. Lampton, 128 S. E. 334, 189 N. C. 714.. 77

Title Guaranty & T. Co. v. Crane, 31 S. Ct. 140, 319 U S. 24,

i) Oc issaueeseseNiens suede enaeey aes evevecceces 77

U. S. F. & G. Co. v. United States, 178 Fed. 692. . eek kee 58

Union Indemnity Co. v. Forgey & ies 174 Ark. 1110, 1115,

PE EE nandbiedd onan den Gee see VAG beededaeeeseduss 61

U. S. v. Standard Brewery, 251 U. 8. 210, 64 L. Ba. 208...... 56

United States use of Heise v. American Bonding & T. Co., 89 | :

__ +» Fed. 921, 925......... ee ye eer rT ere ree eT eer ere 57

United States use of ote: v. Hazard, 53 App: Div. 410, 65

N. Y. Supp. 1051. ..... ccc ccececcececccsccncecccccscceees 57

United States Vv. American Surety Co., 200 U. 8S. 200, 50 L. Ed. ,

rT EET e ee ee TE Tee Pet er eee E rT rene Fe 68

s United etetee « ex rel. Hoffman Vv. Quincy, 4 Wall. (71 U. S. 535,

18 L. Ed. 403)..... EOE OE ee eee ee TCT ETT ee TT Te 70, 71

U. S. F. & G. Co. v. Ettenheimer, 70 Neb. saheed 07 N. W. 227;

We: ie Ws Es RDN GD onc nakusdwdus seo ceusesasins odnan eke 85

U.S. F. & G. Co. v. Yazoo County, 110 So. 780, 145 Miss. 378... 79

United States Gypsum Co. v. Gleason, 135 Wis. 539, 543, 116°

ee A eee ee ee eT TTT eer Tee Tee eee 78

United States v. Natl. Surety Co., 92 F. 549, 34 ©. C., 526... 77, 78

U. S. Fe& G. Co. v. Citizens State Bank, 150 Miss. 386, 116 So.

Se SNPh she sO0Na wdc ecb een eedhethadnn cabbesaed tebereas 8

United States, etc., Co. v. United States, 191 U: . 422, 48

L, Bt. B65. .00. Sin caeheeesiceeessennanaek Seccveeeteyssé% 8

United States Fidelity & Guranaty Co. v. Hood, 124 Miss. 548,

a eS re re rmnpene 8

United States ed & Guaranty Co. v. Poetker, 180 Ind. 2s,

Se Ws i Ws 66.6 664 08 kee 08000008 scbabeeeneeesceses eee 9

: " NPAC AC ASIA

eRe ENON IE NEN DY AT PRAE RI INE NT STE ATR NOR IME ONE Ee en iy ite od ee ;

wap oe t Pitre aid. tales Semel i ee

"Act No. 298, Laws of 1926, of Louisiana :

RO ts. oS,

United Fuel Gas Co. vy. Railroad Comaiaten, 278 U. S. _807,

U. S. F. & Co. v. United States, 191 U. S. 416, 24. S. Ct: 142,

48 L. Ed. 242, REA SCNT EES RTS HEE NRE Do a

* United States v. U. S. F. & G: Co. (C. C.), 178 Fed. 721......

Tyson v. Banton. 273 U..S. 418, 484, 71 L.-Ed. 718,-724........

Valles’ Heirs v. Fleming’s Heirs, 29 Mo. "152.....-2.0... ppatabonee

Winder v. Caldwell, 14 How. 434.............4 isieans canbe

» Welch v. Wodsworth, 30 Conn: 149....2.......... picclinceniate

. Whitney vy, Richardson, 31 Vt. 300.%.°........ _ RR rere

" Weil v. State, 46 Ohio St. 450, 21 N. E. 648...............2..

Williams v. Riley, 980 U. 8. 78,°80, 74 L. Ed: 175, 178......... ha

White v, Johnson, 282 U. S. 367, 75 L. Ed. 388.......... nena

Warren Webste® & Co. v. Beaumont~Hotel Co., 151 Wis. 1, 10,

JE Es le dct ds Landadbendauaekanddéecsineettaadcens

West v. Detroit Fid. & Surety Co., 225 N. W. 675, de Neb.

MES ome ones Tiel ise sok cals sion east ae lian sc Si tk a aba cde Bama oe atlas

Wall v. Parrott Silver g Copper Co., 244 B. $. 407, 61 L. ‘Ed.

VEE ketievee04és¢hdeasesanadedion een tdeetbannadene nee

Young Co. _y. McNeal- Eqwards Co., 283 U, 8. 398, 75 L.Ed.

Ee ste cdasndogens ound seeeinesateandsantokecatdonanaucnas

Yawkey-Crowley Lumber Co. ve iesnaaats 206 W., 976 (Wis.

1926) se Pere seer secseresesece’ ee ee SEER ae

OTHER AUTHORITIES. _

Section 3 of Act No. 298..... Gui aiaidaedas kt daneaaianeinek:

Te Be, iin eid nttonsncecccnnesenscatiic a

Section 8 of Act No. 298..... Ria wings eubianie ce Oe ee

~Seetion 10 of Act No. 298............ Menon akeniegine

_ 9C. J. pages 28 and 29, paragraphs 43 SN Acivadsednebeus

io C. L. page 55, paragraph 15..............005- ialcererari eal laretans

2°Story, Eq. Jur., Sections 799a, ‘799, am | PA ctntdamanwe °

2 Jones, el ea a atta nics oie ated a

Heutagway's Code, 1927, Section 2617............: ehh iars

Pingrey on Suretyship.& Guaranty, Sec. 112, p. 139. bsolniibte teas

Section 758, Code 1930...... Sereeeer errr rere reer Tree ee Jenne

Section 3074, Code of 1906...:........ se dhpiein aeeeeewnwwes

Section 5131, Code of 1930 (Section 2563, Code 1906)........

Section 5129, Code of Miss., 1930 (Sections 2550, 2587, Code of

te .

SUPREME COURT OF THE UNITED STATES.

OCTOBER TERM, 1931 7

_No. 333

_ HARTFORD CCIDENT & INDEMNITY

coM ANY, Appetiant, os

vs.

0. L.. BUNN, Doine Business as Bunn ELEctric

. CoMPANY, ET aL.,. APPELLEES.

BRIEF ON THE MERITS FOR ©

. Enochs —o & Manufacturing Company, Ingalls _

Iron Works, 0: L. ‘Bunn, Doing Business as Bunn

Electric Co.; Coburn Trolley Track Mfg. Co., Gibbens

& Gordon, Inc., Hockaday, Inc., The R. CG. Lieb Co.,

Natchez Drug Co., National Show Case Co., Schwartz

& Stewart, Walter C. Schultz, Doing Business as

Schultz Cabinet Works; Southern Cement Co.: , “Trus-

con Steel Co., ‘White Stone Co., Woodward, Wight &

Co., R. Lee Parker, Jr., R. Scudamore, Jr. R. Lee —

Parker, Jr.4ind R. Hicks. Parker, Copartners, Doing

Business as Natchez Brick Co.; C. R. Burkett, Doing

Business as Burkett Sheet Metal Works; W. A.

J acobie, Geisenberger Bros. Drug Co., M. P. Phelan,

Mosler Safe & Lock Co., N atchez Investment Co., and =

_— & Laub, Appellees.

‘i

seoagiales a

Express Reservation.

These appellees, having filed Motions to Dismiss

and/or affirm, reserve, expressly, in this Brief upon

_ the merits; all of the rights therein claimed, and first

: Meneny insist upon said motion.

Statement of the Case.

_ This case involves the liability, in equity, of the

surety, appellant, on a building contractor’s bond for

materials furnished to the contractor for the building

“of the Eola Hotel, at Natchez, Mississippi, by the

Natchez Investment Company, the owner, appellee.

The questions arising are:

(1) The construction of the bond and the measure of

liability of-the surety thereon for materials furnished

- the contractor; principal in the bond, as a common _—

obligation.

This proposition has been fully briefed in our Mo-

~ tions to Dismiss or affirm, whieh i is hereby adopted to

save iteration.

(2) Whether appellant, a wich surety, doing an in-

surance business, and receiving compensation for.such

suretyship admeasured by the risk assumed, can ques-

tion the constitutionality of the statutes of Mississippi,

Section 3674, Code 1906, as amended by Chapter 128, ~

Laws of 1918 (now Sections 2274-2281, Code 1930),

even if the nd was executed under said gtatutes.

(3) Said Chapter 128, Laws of Mississippi, 1918 |

(Sections 2274-2281, Code of sala does not violate

the Federal Constitution.

Pay Pen e oene i we pele ee a a fod)

(4) The application of Atna Casualty & Surety.

| Company, surety of appellant on appeal bond to the

Supreme Court of Mississippi, to become an appellant

herein cannot be allowed. °

The Pleadings and Evidence.

The Natchez Investment Company, the owner of the

hotel constructed, obligee-of the bond of the contrac-

tors, Burkes, filed its original bill in equity against

(a) Burkes, the contractor; (b) appellant, the surety

‘on the contractor’s bond; (c) the materialmen and

laborers who furnished the labor and materials to the

contractor for the construction of the hotel; (d) and

New Orleans Canal Bank & Trust Company, assignee

_of certain proceeds arising from the contract of con-

struction, defendaats to the bill.

The bill averred that the owner (Sig entitled to — ,

it ascertained and determined whether said Bond”’ (of

appellant)- ‘‘in connectién with said contract - and

specification is a bond for the faithful performance of

said contract or simply a bond of indemnity’’ (Tr., 8).

Reference is made specifically in the bond to concursus

proceedings and the plans are made part thereof.

The prayer was to adjudicate whetlier this bond was

for the faithful performance and thereby superior to

all liabilities provided by Section 2, Chapter 128, Laws

1918, or subject thereto (Tr., 9).

The agreement, Exhibit ‘‘A’’ (Tr., 10), is. “‘the

standard form of agreement between contractors and

owner for construction of buildings, issued by Ameri-

can Institute of Architects: for use when a stipulated

“sum forms the basis of payment.’’. Johnson Electric

- eniatiaitinbees sncenmanc-putete, NS AER BES Pho BE Oe te ee Oe

Sa CNA TINH ED EN FEO EOIN COALITION II FE LOR SENET, ENS ey 1

~ pact . ES esata tne ONG .

ape aoe foe

sil

Co. v. Columbia Casualty Co., 133 So. (Fla.) 851, shows

it slightly modified, but the Supreme Court of Missis-

sippi held its obligation the same.

‘Article 6: The Contract lilies: Nitin

general conditions of the contract, the specifica-

tions, the drawings, together with this agree-

ment, form the contract, and they are as fully

a part of the contract as if hereto or herein

repeated’’ (R. 12).

By the terms of the contract documents the Con-

tractor obligated itself to give a bond to secure the

Owner the faithful performance. of the contract ‘in

strict accordance with the plans and specifications.

Amongst the obligations thereby intended to be

secured were.the obligations of the contractor to pay -

laborers, materialmen and sub-contractors for all work,

labor and material that should go into the building.

It was further provided in the contract documents

that the contractor’s bondsmen should obligate them-

.selves to all the terms and covenants of the specifica-

tions ‘and of the contracts and contract documents, and

amongst these ‘obligations of the contract so to be

guaranteed was the contractor’s obligation to pay

for all labor and material that should go into -

~ building.

. Furthermore, by the contract decuments it was pro-

vided ‘that the sureties of the various contractors

(which necessarily included the principal contractors, .

J. V. & BR. T. Burkes) should be, and they thereby de-

clared and acknowledged themselves to be, bound to

the Owner as guarantors separately and in solido with -

the contractors for the fulfillment of the terms of the

contract documents. |

This, necessarily, made the sureties assume all the

obligations of the contractor under the ¢ontract docu-

ments and made such sureties liable for said obliga-

tions separately and in solido and, therefore, to all

intents‘and purposes, as principals.

Amongst the obligations thereby intended to be cov-

_.ered was the obligation of the-contractor to pay for

labor and material (R. 3, 4). When this Appellant,

Hartford Accident & Indemnity Company, execnted its

bond at the solicitation of J. V. & R. T. Burkes, and

- in pursuance of the contract made between Burkes and

the Owner, the Hartford Accident & Indemnity Com-

pany on the face of its bond referred to the plans and

specifications and contract documents, and by specific

reference made the same in all their parts and clauses _

a part and parcel of the bond itself (R. 18).

We submit in the first instance that these obliga-

tions so specifically undertaken by Hartford Accident

' & Indemnity Company were undertaken by it solely

and in consideration of the premium paid to it by the

contractors. °

Under local. practice, upon demurrer, exhibits con- .

trol the averments of the pleading. McNeill.v. Lee, 79

Miss., 455.

The specifications appear, Exhibit ‘“‘B” (Tr., 14);

the bond, Exhibit ‘*C’’ (Tr., 17).

The appellant demurred Gr, BW, assigning,

roughly, first, the bond was not a performance bond |

under Chapter 128, Laws 1918, but if the Court should

hold otherwise, then, in virtue thereof, the constitu-

tional rights of appellant were violated. 2

Oy ahaa ages

The petitions of appellees, materialmen, in said suit

do not appear in the record. |

The demurrer was overruled (Tr., 41), with an ap-

peal allowed to the Supreme Conrt to settle principles ©

of the case (Tr., 41); with the judgment thereon (Tr.,

57). Then, as to these materialmen appellees, noth-

ing further appears as having been done in the Chan-

cery Court, save the rendition, on January 10, 1930,

of final decree (Tr., 57), upon a full hearing on the .-

merits. |

Upon appeal therefr: om to the Mississippi Simeone

Court, the opinion was filed February 23, 1931 (Tr.,

67) and judgment entered (Tr., 80, 81); a suggestion

of error (under local practice, a petition for rehear-

ing), was filed by appellant, and the opinion of the

Supreme Court thereon appears (Tr., 86), with the

appeal. to this Court by the appellant alone. The

‘tna Casualty & Surety Company, surety on the

‘appeal bond, did not join therein. On December 8,

1931, after-motion filed in this Court by materialmen

to dismiss, Aitna Casualty & Surety Company seeks,

without application to the Supreme Court of Missis-

sippi, an appeal, and to join herein, the time for ap-

peal having long since expired. Thereto these iil

lees object.

Point I.

Appellant, doing an insurance business, and thereby

subject to plenary State jurisdiction, having been paid

@ premium for the obligation as enforced by the State

Court is not, on this record, entitled to raise a Federal °

" question with this premium in its pocket.

2 ROLE TR LN A III ER TT PT San tit lah al aad

eid I.

Section 3, Chapter 128, Laws of 1918, does not violate

the Federal Constitution, in that, Appellees, material-

, men, having placed their personalty—material—in a

building upon the land of the owner, for whose ‘con-

struction, including both material and labor, appellant,

surety company, had become responsible, the State can,

in virtue thereof, impose liability upon such paid cor-

porate surety, voluntarily executing @& performance

bond. ;.

Point III.

Said Chapter 128, Laws of Mississippi, 1918 (Secs.

2274. 2281, Code en does not violate the Federal

Constitution.

— IV.

Should the Court determine Section 3 aforesaid to be

unconstitutional, yet notwithstanding, the bond exe-

cuted may be sustained as a valid common law obliga-

tion and the judgment of the Supreme Court of Missis-

sippi cannot be reversed, as an adequate obligation ex-

isted under this common law obligation for judgment

rendered.

Point V.

The application of Aitna Casualty & Surety Com-

pany, Surety of appellant on appeal bond to the Su-

. preme Court of Mississippi, to join in | this appeal can-

not be allowed.

8 :

Point I.

ineteen, doing an insurance business, and thereby

subject to plenary State jurisdiction, having been paid

_a@ premium for the obligation as enforced by.the State

_ Court is not, on this record, entitled to raise a Federal

question, with this premium in its pocket.

Section 5129, Code of Miss., 1930 (Sections 2550,

_ 2557, Code of 1906), makes Surety Companies trans-

acting business in Mississippi, insurauce companies.

Section 5131, Code 1930 (Section 2563, Code 1906),

gives all such contracts a Mississippi situs. Fidelity,

etc., Co. v. ffiazea, 93 Miss. 18, 46 So. 817. |

As ‘said in weacrtanicel Co. v. Yates, 214 Ill. 272, 73

N. E. 423: 9

ead ¥ > (insurance) ‘‘t3 a welithe necessity that

deals: in its own credit for a cash consideration

from the assured, and is stamped with public

interest, and must yield obedience to the neces-

sary and proper regulations by the State. im

- the exercise of its police power.’

In U.S. F. & G, Co. v. Citizens. State Bank, 150 Miss.

386,.116 So. 608, Mr. J ustice. Pack said:

s* * * This being a fidelity bond, it is now

well settled that such contracts are to be con--

strued by the same principles of laws applicable

to contracts of i insurance.’

_ United States, etc., Co. v. United States, 191 U. S.

; 422, 48 L. Ed 245; Home Insuramwe Co.. of Wi: Y.

Moore, 151 Miss. 189, 117 So. 524; United Siotes

Fidelity € Guaranty Co. v. Hood, 124 Mise. 548, 87 So.

"115; 15 A. L. R. 605; Murray v. Metropolitan Life Ins.

Co., 145 Miss. 266, 110° So. 660; Hormel v. American |

inti Co., 35 L. R. A. a ‘S8.) 013 (monographic

‘note). ;

The rule is thus stated in Atmerican Surety Co: v.

Pangburn, 182 Ind. 116, 105 N. E. 769, 770:

6o* + *

The overwhelming weight of recent

American authority does notaccord such surety

' the right to javoke: the rule of .strictissimi juris,

but places such contract in the insurance class

and measures the right of such surety by the

law applicable to insurance contracts. United

States Fidelity & Guaranty Co. v. Poetker, 180°

Ind. 255, 102 N. E. 372, and authorities, cited;

Monographic note to Hormel & Co. v. American

Bonding Co., 33 L. R. A. (N. S.) 513.”

In Lackland v. Renshaw, 165 S. W. 314, 315, the

Court said:

a re ee suchgporporations may: call

themselves ‘surety companies’, their business .

is in all essential particulars that of insurance. ° .

Their contracts are usually in terms prescribed

by themselves. * * *”’

Therefore, being engaged in the business of insur-

ance, as to appellant, the Legislative power is admeas-

ured by German Alliance Ins. Co.-v. Lewis, 233 U. S.

389, .58 L. Ed. 1011; O’Gorman v. Hartford F. Ins.

. Co., 282 U. S. 251, 75 L. Ed. 324; 72 A. L. R. 1163, 51

Sup. Ct. 130; Tyson v. Banton, 273 U.S. 418, 434, 71°

L. Ed.-718, 724; Hardware Dealers Mut.’Fire Ins. Co.

_ vy. Glidden, October Term, 193Y, U. S, Supreme Court

Advance Opinions No. 3, page 65; Herbring v. Lee,

280 U.S. 111, 74 L. Ed. 217.

As was said by Mr. Justice McKenna. j in the Lewis

Case, supra:

atid aliledl Sa alas

‘‘We may venture to observe that the price

of insurance is not fixed oyer the counters of

the companies by what Adam Smith calls the

higgling of the market, but formed in the coun-

cils of the underwriters, promulgatéd in sched-

ules of practically coritrolling constancy which

the applicant for insurance. is powerless to op-

pose, and which, therefore, has led to the asser- *

tion that the business of insurance is of monopo-

listie character and that ‘it is illusory to speak

of a liberty of contract.’ It is in the alternative

presented of accepting the rates of the com-

panies or refraining from insurance, business

necessity impelling, if not compelling it.’’

~The appellant does not show what premium it ex-

acted from the owner for the obligation hereunder

assumed, that is to say, whether this premium received

covered compensation exacted by appellant for the

‘payment to the subcontractors, as by the. Mississippi

court held; or did not. The form was taken from

‘Louisiana (Opinion of Ethridge, P. J., Tr., 88). In

' Louisiana, the obligation to give a bond for payment

to subcontractors is compulsory. Act 298, Laws of:

1926. Without question, recovery to subcontractors >

therein have been in all instances, vouchsafed. Stewart

v. Segal, 126 So. 718, 13 La. App. 359; McDonald v.

H. Gas & Oil Co., 2 La. App. 241; Baton Rouge Sash,

. etc., Co. v. Deceur, 2 La. App. 129; Jarbart v. U.S. F.

& G. Co., 3 La. App. 525. . a

' And the surety under the Louisiana law knew that

claims of materialmen against the surety on the con-

tractor’s bond were not affected by a breach of con-

tract by the owner. Fidelity Homestead Assn. Vv.

Peaches nN RL RR AE ERAN ORAS 1 CNN eH TARR SR Eee BENNIE ST 4 ree _—

Kennedy, 158 dya. 1059, 105 So. 64. And further well

knew when using this form that the ‘surety on a con- |

tractor’s bond is limited to defenses that can ‘be made

by the contractor in a suit for materials furnished to

contractor. Graphic Arts Bldg. Co. v. Union Indemnity

Co., 163 La. 1, 111 So. 470.

’ The appellant well knew the contrariety of judicial

opinion, and being an insurance company did not dis-

regard the possibility of this imposition and, with

deference, exacted a prethium therefor which having

been collected imposed this liability to subcontractors.

Johnson Electric go. v. Columbia Casualty Co., 133

So. (Fla.) 851.

Thus, so knowing, appellant computed the premium

exacted. It is not herein shown that the premium

~. herein exacted for the covenant undertaken was not

the full. premium requisite under the Louisiana law

to make payment to all subcontractors and as enforced

by the Mississippi court. If so, then, when in virtue

of this payment, so thus exacted to cover this obliga-

tion to subcontractors as to materialmen, precisely as

in case: of Government contracts, the appellant is es-

topped to raise the Federal question, when it has in

its pocket the premium requisite to pay therefor ; to

allow it to escape the payment would be to donate to

the appellant, an insurance company, something to

which it was not entitled. Having received the bene-

fit in the form of this premium for the assumption, of

the obligation, it may not contest it. Frost v. Corpora-

tion Commission, 278.U. S. 531, 73 L. Ed. 492; United

Fuel Gas Co. v. Railroad Commission, 278 U. S. 30Z,

73 L. Ed. 395; Wall v. Parrott Silver € Copper Co.,

- .

‘

‘ : eat Ng ETRE Ee

» Te er ee Sag ARV 4

aR amen * ’ owt song eo PMN . 5 - .

. . ’ ed en et

244 U. S. 407-61 L. Ed. 1229; Leonard v. Vicksburg,

ete.,,.R. Co., 198 U. S. 416, 49 L. Ed. 1108.

Being: a paid surety, engaged ji in-the insurance basi-

ness, and its obligation to the materialmen being con-

ditioned by its exaction of the owner for the un

taking had, the right of such appellant to urge *

unconstitutionality must be admeasured by the pre-

mium exaction, whether, irrespective of the constitu-

tionality « or unconstitutionality, it exacted of the owner

the full premium covering the unconditional payment

as above delineated, it may not, having so thus ex-

~ acted, complain of the act. being unconstitutional, espe-

[el

cially as it assumed to make the bond conditioned a&

by law required, which might well be valid as a com-

mon law obligation independently of ‘the statute.

American Indemnity’ Co. v. Burrows Hardware Co.

(Tex. Civ. App.), 191 S. W. 574. .

In Byram Lumber & Supply Co. v. . Page, 109 Conn.

(1929) 256, 146 A. 293, it is said:

“Tt. would be to close our.eyes to the ordinary

. methods of such a business as it was conduct-

ing to doubt that it knew of the diverse views

taken in regard to the construction of such

bonds in different: states; that it did not stand

‘ready to accept a construction favorable to a

~ direct action by persons situated like the plain-

' tiff, tf we should so construe the bond, and did

oi not fix its premium accordingly. In that con-

struction there can be no injustice’ to the appel-

lant, and we can recognize the sound policy

which it will serve.’’. -

U.S. F. € Co. v. United States, 191 U. 8. 416, 24 S. Ct.

142, 48 L. Ed. 242, 246; Algonite Stone Mfg. Co. v.

° * ‘>

ws - P

; : . ‘ pe A

ry speenanneeas —— gyre amen . - ‘ pws 2 a

1 PD pA of 558 LOTMA ET

F. & Dep. Co. of Maihiad (Kans. 1917), 163 se,

1076, 100 Kans. 28.-

. There is no pretense here that the amount paid by

the owner for this bond was any different from what |

would have been exacted for a contract in behalf of the

United States Government «whereunder this precise

obligation here enforced was inherent. The surety

company, thus doing business for profit, must have

admeasured its premium so as to cover the contingency

- for satisfaction. of subcontractors, and having thus re-

ceived a premium therefor, may not under Mississippi

decisions pay losses.upon a differ ent basis. Insurance

Company vy. Shlenker, he Miss. 667, 32 So. 198, where

- it iS declared: ~

‘It might decline the insurance if it did ani

wish to rtn the moral risk in such a case, The

very life of the statute:is that:the company shall

fot receive premiums oi one basis, and pay

losses on another,’?

And it not being shown that the premium exacted did

not cover the payment to ‘subcontractors, this - ‘paid

surety may not be discharged because proof of damage

were release generally. Compare. Guaranty Co,

. Pressed Brick Co., 191 U.S. 416, 24 Sup. Ct. 142,

. a L. Kd. 242; City of Philadelphia v. Fidelity € De- |

posit Co., 231 Pa. 208, 80 Atl. 62; Murray City ve Baiks,

* 219 Pae. 246, 248; Standard Salt & Cement Co. v. Nat.

Surety Co., 134 Minn. 121, 158 N. W. 802; United States -

v.U. 8. F. €.4. Co(C. C.), 178 Fed. 721.

So, where appellant, as an insurance company, con-

tracted, as it did, fora consideration to it paid, know-

pee 1%

) Ld , ;

ing the contrari¢ty of judicial decisions upon this sub-

' ject, and knowing that the form utilized from Louisi-

ana required the payment specifically, it may not as a

paid surety seek exculpation without a demonstration *

that the premium exacted did not cover the risk in-

herent to payment of the, subcontractors precisely as.

was contemplated by the’ Louisiana statute whereon .

_ the bond was drawn, and as held by the Mississippi

' Court. It not.appearing, therefore, that. appellant is

now required to do other than that wherefore it ex-

acted premium, it, as an insurance company, may not

herein complain. The rights that appertain to a pri-.

vate individual may not be claimed by a corporation

when dealing in a business affected with a public use.

Compare Blake v. McClung, 172 U. S.-239, 43 L. Ed.

432; Herbring v.’ Lee, 280 U. S. 116, 74 L. Ed.-221;.

Hardware Dealers-Mut. Fire“Ins. Co. v. Glidden, :

supra. ;

Pot’ T IL

Section 3, Chapter 128, Laws of 1918, does not violate

the Federal Constitution, in that, Appellees, material-

‘men, having placed their property—material—in a _

building upon the land of the owner, for whose con-

struction, including both material and labor, appellant,

surety company, had become responsible, the State can,

’ in virtue thereof, impose liability upon such paid cor-

porate surety, cai ted executing a performance

bond,

We advert to, hy illite, that appellant was in

the’insurance business for a consideration pursuant to

: ‘ he

ON Me de eek a a a Sse eager MONET ; . Petia ee

15 3

perinission therefor granted by Mississippi under its

plenary power.’ Unless appellees receive from appel-

lant pay for their material integrated into a structure

wherefor appellant was responsible—bound to deliver® .

it as an entity' free of liens—they will go uripaid.

_ In Mississippi, initially, the sole protection provided

materialmen was found 4m Section 3074, Code of 1906,

‘whereunder immediately, when the contract was made

the contractor might assign and defeat. all rights of

the materialmen. Spengler v.. Lumber Co., 94 Miss.

780, 48 So. 966. And therein the differentiation was

made between the New York theory of subcontractors’

rights and the Pennsylvania theory, and with refer-

ence to said section, it was remarked:

_ “This section might have provided, if the

legislature had preferred the Pennsylvania sys-

tem, that no assignment should be made by the.

* contractor which would be good against the ma-

terialmen; but it did not so provide. It might

have expressly given the materialmen and the -

subcontractors, as the Pennsylvania ‘system

‘does, ditect liens, equal in all respécts to the

_lien of the original contractor; but it expressly

~ refused to do that.’’

In Diékson vy. U. S. F. d& G. Co., 117 So. 248, 150 -

Miss. 864, Mr. Justice Anderson said:

. ‘Prior to the adoption of chapter 128, Laws

of 1918, Hemingway’s Code 1927, Sections 2596

to 2603, inclusive, money due a contractor under.

‘a building coritract was not impressed with any

trust or equity in favor of materialmen and

laborers furnishing materials and labor going’ .

» into the construction of a building. Such funds,

; 16 °.

under the. contract, belonged to the contractor

absolutely, who had the right to assign or other-

wise dispose of them as he saw fit, although to

the_prejudice of such Jaborers' and material-

men. * * * But that Is not true now since

the adoption of that statute unless the contrac-

tor gives the bond provided by section 3 of the

statute (section 2598, Hemingway’s Code 1927),

“quoted*above.. If the contractor does not give

the bond provided by the statute, laborers. and ~

materialmen have an equity under section 1 of

the statute, , Hemingway’s.Code 1927, Section

2596, in the funds due the contractor by the.

owner of the building, But where the bond is

given as provided by the statute, such funds are

released from such Jequity or trust in favor of

materialmen and laborers and go into the hands

of the contractor untrammeled. The purpose of

the bond section of the’ statute was to provide

for the protection of materialmen and laborers,

the bond being in lien of their equity in the

funds arising out of the building contract. The

bond provided by the statute has the same pur-

pose and effect as the bond required of a ‘con-

tractor doing public work by section 1, chapter

217, Laws of 1918 (Hemingway’: * Code. 1927, °

Section 2617), *’ (Ttalies ours.)

This is a direct decision putting this bond upon ~

the precise basis made available by Congress and uni-

formly. enforced without question by ‘this Court. |

See, also, Davis Co. v. D’Lo Giiaranty Bank, 133 So.

(Miss.-1931), 223. | ,

At the same session of the toatiieiuns: Chapter 217, .

Laws 1918, was enacted imposing precisely the same

obligation in favor of material on public work—the

validity of which. appellant here concedes. :

TEI a oN tae ee

* ya

MERE VOLE OL AT OL oe La fertive toe Se Sol ‘ We Sa

McElrath v. Kimmons, 146 Miss. 775, 112 So. “164;

Compare Commercial Bank v. Evans, 145 Mies. 643,

112 So. 482, where the Court said:

‘‘The statute wrote into Owen’s bond the con-

‘dition it required to be in there. The statute is

mandatory. The obligor and the obligee, as well

as the sureties on the bond are presumed to have

known what the statute requires when the bond ::

was executed. The bond having been executed,

and having accomplished its purpose, the law -

will write into the bond what it requires should’

‘be written. In other words, in the execution of

a bond .by a @ontractor to ‘do public work, so

far as the conditian of the bond: is conéerned,

the law takes care of that, and makes it what

it should be.’’

Stowell y. Clark, 152 Miss. - 32, 118 So. 370.

In- Standard Oil Co. v. National Surety Co., 143°

~ Miss. 841, 107 So. 559, My. Chief Justice Smith oud:

Tt j is true that the bond here in question does’.

not provide on its face that the Clark-Hunt Con-

tracting Company shall promptly make payment

to all persons supplying laber or, material: for

the work to be done by it for the drainage dis- °

trict, but it does expressly provide for the per-

formance by. the Clark-Hunt Contraeting Com-

pany of all ‘the matters and things’ contained,

set out, or referred to in its contract with the

drainage district, one of which is that it ‘shall

discharge all anims for work done and ma.

terials furnished in the prosecution of the work’,..

and shall furnish the drainage district with evi-

dence that ‘all persons who have done work or

furnished material under this contract have °

been fully paid for such work or material.’ The

performance of this stipulation of the contraet

is, therefore, one of-the obligations of the bond.

. executed’ ‘by the Clark-Hunt Contracting Com-

-pany to insure the performance by it of its con-

tract. The statute does not require the obliga-—

tion that such contractor shail promptly 7

payments, ete., to be written yn the, bond.

simply requires such payments’ to be one of a

obligations. of the bond.’’ (Italics ,ours.)

So when the bond here sued. on was thus executed, .

making reference specifically to “the obligations re-

quired by the vontract, under this decision, these con-

tractual obligations were integrated into the bond as

definitely‘as if there placed at length. Insofar as a

paid surety is eoncerned there is, with deference, by

‘*counsel’s concession of the i of such a law as

to public contracts, an end of this

the paid surety, the subcontractors in each case; with

deference, from -a constitutional ‘viewpoint, occupy

precisely the same position. ,

Further, this statute has been in effect nearly 15

years and has been so frequently enforced in Missis-

sippi as to make-a conscious disregard there

contracting insurance company an .impossibili

| cially, when it came to fixing the premium

' supra. .

As above pointed out, by Section 30 of Specifications

(Tr., 16-17), dealing with the obligation of contractors

and subcontractors, it was declared that he should

igation, for quoad

& , espe-

Point I,

‘“pay the eeat of any required recordation of

. the contract and bond and the cost of any re-

_ quired cancellation of the same. He shall also

secure and pay for lien and privilege certificate

which will be required of him before ‘final pay-

ment is made under this vontract.’’ .

‘‘The bond shall also secure the Owner the

faithful performance of the contract, in stri¢t

accordance with plans and specifications; it

shall protect the Owner. against all liens. or

claims that may be filed against the building ac-

cording to the Laws of the State of Mississippi,

and shall provide for the payment of reason-

ablé attorney’s fees for the enforcemenof the

contract and the institution of eoncursus pro-

ceedings, if such proceedings “ecome’ neces-

sary’’ (Tr., 22). (Italies ours.)

Of course tlie. Louisiana Statute, as law, had no

extra-territorial effect, but privileges, as such, con-

cursus proceedings, as such, and recordation, both of -

the band and the contract, especially to ‘‘secure and

pay for lien and privilege certificate * * * before

final payment * " -under this contract,’’ im-

ported, by agree ent of the surety, that obligation im-

posed by law in Louisiana, which.in Mississippi be-

ame a contractual obligation. Thereasto, Act No.

298, Laws of 1926, of Lotisiana, specifically provided

by Section 2 that the owner was required to have a

good and solvent surety and ‘‘the bond shall be at-

tached to and recorded with the contract’, providing

therefore, |

Section 3 of said Act No, 298 provides:

) “Where the owner has required the bond

herein provided, the said surety thereon shall

be liable in solido with the contractor for all

labor and materials used in said work of im-

provements and the cost of recording valid liens

. e,

up to the amount of the bond, and the-cancella-

tion and erasare of the inscription: of said con-

tract, as hereinabove provided, shall not effect

the liability of the said surety on said contract

3 ‘for such labor and materials, as to which labor.

. dnd material-said surety shall be bound to the

same extent as the said contractor, undertaker,

master-mechanic, or engineer, or other person

undertaking such work.’’

~ Again, by Section 6, of said Act No. 298, in ease of

an insvfficient bond, the owner was personally liable.

Under Section 8 of*said Act No. 298—

‘*A building contract may provide for ‘partial

payments asthe work progresses and any pay-

ment made by the owner strictly in accordance

with the contract shall absolve: him from fyr-

ther liability, provided that he has exacted the

hond and has recorded the contract and bond

as required by this act.’’

Under Section 10 of said Act No. 298 the coneursus

proceedings are provided for and thereunder. the at- -

torney’s fee is fixed, but thereasto the subcontractors

. are givén preference, it being provided:

‘‘Any surety so desiring may invoke the con-

cursus proceedings herein authorized by proper

proceeding in court andby depositing in court

at the time of the filing of the proceeding the full

amount of the bond, provided that after the case

is at issue such surety may withdraw with the

permission of the court all of the deposit made

except sufficient to cover the claims made in the

concursus and twenty-five per cent additional

thereto. vin

So, when appellant, a paid surety, had this contract

executed in Mississippi, imported from Louisiana, he

So iaaiea aici adeiidiatinasicaiatelendibal erent ey a mM ow . . ’ og

. , ‘ .

“

{ 21.

’

was well acquainted -with that thereunder required,

and this Section, 30 (Tr., 17), in addition to the unan-

swerable position taken by our own Supreme Court,

and pointed out in our Motion to dismiss this appeal,

demonstrating that appellant knew the possible lia-

bility, and knowing, contr acted with reference thereto.

Therefore, that here in issue is Section 3 of said

Act (Code 1930, 29 76), whereunder:

‘‘TIn the event such bond does not contain any

such provisions for the pay ment of the elaims

of persons furnishing labor or material under

said contract, such bond shall nevertheless inure

to the benefit of such person furnishing labor

or material under said contract, the same as

if’ such stipulation had been incorporated in

said bond,’’ &

namely, a provision,

“. ° **for tha payment of the claims af persons fur-

nishing labor or material. "

Pot rv III.

Said Chapter 128, Laws of Mississippi, 1918 reo

2274-2281, Code 1930), does not violate the Federal Con-

stitution.

In ia, ‘2, S. F. & G. Co., 112°So. 469, 147

Miks. 335, MeGiow an, J.. reviewed the decisions, say-

ing: }

| ‘Counsel for appeHant really bases his con-

tention that the statute is unconstitutional upon

the theory that section 3 of the act (chapter 128,

Laws of masietess of 1918), abridges liberty

22 =

of contract, aml cites Gibbs v. Talli ¥;. 133 Cal.

373, 635° P.-970, and the cases from that .court

Ww hich follow it, to wit, Shaughnessy y. Ameri-:

can Surety Co., 138 Cal. 043, 69 P. 250, 71 P.

701; Montague & Co: v. Furness, 145 Cal. 203,

78 P. 640; San Francisco Liimber Co. v. Bibb,

139 Cal? 192, 72 P.-964; id., 139 Cal. 325, 73 P.

864; Equitable. Lif Ins. Co: v. Stemmons (Tex.

Civ. App.), 239 S. W. 1039; and he also relies ©

on Hess v. Deninan Co.. (Tex. Civ. App.); + 218

S. W. 162, from the Texas court... _

- “The Gibbs v. Tally Case, supra, is the lead-

ing-case relied upon and urged by couppel for

the position that the act here in question in un-

constitutional. In that case there was a claim’

of materialmen against the owner. The statute

applied alike to the contractor,and owner. The

court said that it compelled the ovener to become -

responsible for a liability he had not incurred,

and whigh was not for his benefit; that it prac-

tically Orbade him from improfing his prop-..

erty by letting a eontract unless he became liable

therefor or furnished sureties who w ould be so

liable.

‘The California statute above “cited required .

that the contract, if rot filed, was. void, and the

effect of the statute was to make the contractor *

the agent of the owner, Counsel says this Calli-

fornia statute is very similar to ours, but we

are unable to trace any essential similarity save

that it-requires-a bond to be taken, whereas our

statute permits a bond to be taken by the owner. |

‘“‘The statute we have. under’ review does not

require the owner to protect himself witli a

bond. It only provides that, if- he takes bond,

having put‘all the stipulations in the contract.

he desjres, that the bond must-inure to the bene-

- 23 | \/

_—. fit of the laborers and materialmen, not ih viola-

tion ef the obligee’ s rights, but subservient

thereto,. and we are ile to perceive’ that the .

reqidiring of this stipulation in this bond. is

~ other than for the benefit of the.owner and _re-

. quireg the contractor to do that which he was

legally ‘and morally required: to do, pay his

debts, and the surety, with the law staring him

in the face, may or may not thus undertake the

indemnity of his principal, for the surety’ 8

right to contract > not impaired nor is his

liberty to contract abridged or interfered with.

‘“In the’ case of Hess v. Denman Lumber Co.

(Tex. Civ. Apps, 218 S. W. 162, a Texas stat-

ute providing for and requiring a bond to be

taken by the ownet. from a contractor to secure

performance of a building contract was declared

unconstitutional, the court saying, m effect, in.

that case, that the provisions of the Revised

. Statute of 1911, art. 5623, as amended py Acts’:

1915, c. 143, requiring owner to contract with

builder to give a bond conditioned as required

by article 5623a as added by Acts of 1915, e. 143,

was held void, being an inferference with con-.

stitutional liberty of contract. Said statute spe-

cifically. provided that the owner shall cause to:

_be.executed a written contract for the erection,

ete., and shall also cause to be executed and

filed ‘with the county clerk, before the work is

begun, a good and sufficient bond; and further

provides that said bond shall inure to the bene-

fit o aterialmen, laborers, and ‘the subcon-

ag. regardless of whether or not they, are

se@tred by | any lien. The court said:

‘« “But the law requires the owner -to contract

with the contractor to give a bond. It is com-

pulsory eontract purely. We think that it is

; . a

‘ - ;

; “PRIAR NE 28 TANS ty OS BCE ELLIE MINI 9 pix: Spee sone

beyond the power of the Legislature to require .

an owner to contract with the contractor to give

a bend, as done in this very act, because it is

interference with the law of the liberty of con-

.tract.. If the owner does contract to have the

contractor give a bond, he is at liberty to do so

‘as a subject-matter of contract; but if* the

owner does not so contract, a personal judgment

cannot be rendered against him for not iat ao

ing the bond of the contractor.’

“rt will be observed that this opinion is from

the Court of Civil Appeals of Texas,.'Texarkana,

and in the case of Equitable Insurance Co. v.

Stemmons, 239°S. W. 1039, the Supreme Court

of Texas denied a writ of error‘ to the Court of

Civil Appeals, which had followed the Tex-*

arkana court in Hess v. Denman in holding that

the statute requiring the owner of the property

to execute a bond was unconstitutional, and the

declination by that court of the writ of error

_ was tantamount to the approval of the decision

rendered by the Court of Appeals in Fess v.

Denman, supra, that the statute was void.

* “The obvious distinction between‘our statute,

section 3, and the. Texas statute, is that our

Statute does not undertake, in any wise, to re-

quire’ the owner to demand and receive-a bond

for the performance of his contract, so that we

-do‘not think the Texas ‘cases are authority upon

which we could rely in this case.

‘‘On the other hand, the w lait of authority

sustains the validity of this statute. In the case

of Roystane y. Darling, 171 Cal. 526, 154 P. 15,

an act, very much more similar to ours than’

the one considered in the Tally Case, was very

‘vigorously challenged and held to be constitu-

_ tional by the California court, with the Tally

_ Case, the Shaughnessy: Case, and the other cases _

: « RIAA REEL SRE RELL ONE EL OLDIE ELDEST ET LS ALI I EIS —

- EB ~ °

29 °

following the ‘Tally Case in mind,.and with ex-

press reference thereto, and the statute of 1911,

considered in the Roystone Case, contained. a

provision for a bond to be furnished by the con-.

tractor. to the owner. The court, speaking of

this latter statute, says: aan

‘“<<«The law of 1911 here involved does nut

deprive the owner of the right to contract for

the improvement of his property. It allows him’

to contract freely for such improvement and

upon such terms as he may deem for his best

interests. All it exacts from him, as a condi- -

tion of such exemption from liability, and in

order to make his contract effective, is that he

shall provide a reasohable security for the con-

stitutional lien given for labor and materials

furnished to his contractor. It is not an un-

reasonable burden. It -is one which we think

the people have the power to’ impose and which

we believe to be within the scope of the consti-

{utional mandate im the section conferring such

liens, and of the police power..* * *

‘¢ “We are unable to perceive any constitu-

tional objection to the expedient of providing

that by the execution and filing of such bond the

owner may be. protected against the, delinquen-

_ cies of his contractor while, at the. same time,

lien claimants are afforded a security for .the

payment of -their claims. We therefore hold:

that the foregoing decisions are not applicable,

‘and that the provision for requiring .this bond

is not unconstitutional or invalid.’

‘*So that, the last utterance from the Cali-

fornia court would be authority for upholding

the constitutionality of this act, upon a statute.

more clearly like ours than the one declared un-

constitutional in the Tally Case.

Fuk eee

. **Qur investigation leads us to the conclusion

that most of the appellate courts of this country,

including the Supreme Court -of the United”

States, have held that the liens granted by the

Legisature to subcontractors, mechanics, and

-materialmen, upon the land of the owner, are

LSE L TOLLE OOLR NEA LG a a a

valid although the owner had no contractual re-

lations with this class, and.we think these are

persuasive to sustain us. im our view that the

classification of mechanics, materialmen, and

laborers. as a class to be favored by the Legis-

lature is not an arbitrary classification, but is

reasonable, and has for its object the welfare of

the country at large, and quite generally. recog-

- nized as valid. Especially is that true when we

- eonsider that°on every hand by the thousands ©

these contracts ‘are multiplying, and such a vast

number of our citizens are engaged as subcon-

tractors, materialmen, and mechanics, and this

class has been greatly augmented within the

past decade. And especially i is this true of our

own state, where the sovereign itself is engaged

in greater building enterprises than, perhaps,

ever before in any one period, and from every

hamlet, city, and town there comes the ring of

the anvil, the tap of the hammer, and the music

of the saw, as they vie with each other in gen-

eral construction and improvement work. —

‘‘Building and construction is an essential

under modern progressive conditions to the

maintenance of commerce. Credit.is as essen-

tial here in this line of endeavor as in other ave-

nues of commerce. If the master workman or

contractor were not assured of credit, then the

surety would be called on in many instances to.

extend the credit so necessary to continued pro-

gressive movement or else complete the con-

tract.

‘‘A review of the authorities on the validity

of the mechanics’ and materialmen’s lien would

seem to be unnecessary. The essence of these

decisions is to the effect, first,.that ‘the labor

and material used in building are for the direct

benefit of the owner for which the property im-

proved should be liable; second, that he is pre-

sumed to contract with full knowledge of. the

law, and he has the power to protect himself

against loss by safeguarding the fund necessary

to pay for the labor and materials. These ex-

pressions of the courts generally answer every

attack made upon the constitutionality of these -

laws respetting a lien upon the land of the

owner. It is difficult to differentiate a statute

giving a lien 6n property of the owner and a

statute providing that the owner may, if he sces .

proper, take security -by requiring a bond for.

the faithful _performance_of-the-contract, and

that when such bond is taken (he may. take it.

or not as he pleases), such bond shall stand as

security for the paynient of: the materialmen

and mechanies and an action be brought thereon

inuring to the benefit of this class. :

“In the case of Great Southern Fireproof

Hotel Co. v. Jones, 193 U. 8. 532, 24 8. Ct. O77,

48 L. Ed. 778, the Supremie Court of the United

States held that liberty of contract is. not un-

reasonably interfered with, nor is property

taken without due process of law, by the pro-

visions of Ohio Rev. Stat. Séctions 3184, 3185,

and 3185a, giving a lien on the property of the .

owner to subcontractors, laborers, and those

who furnish materials to be used by the contrac-

tor in the execution of his contract with the

owner; and this, too, at.a time when the Su-

preme Court of the United.States was advised

that the Ohio Supreme Court had declared

‘

these statutes to be invalid and unconstitutional.

The court devoted but little space to that ques-

tion, but expressly appreved the opinion of the

Circuit Court of Appeals in the case then under

review and the opinion written by Judge Lur- *

don, who cogently stated the reasons in support

of the constitutionality of this statute, and cited

Jones v. Great Southern Fireproof Hotel Co.,

86 F. 371, 30 C. C. A: 108. We also cite that case

as being in favor of the constitutionality of. the

statute. hos under review, there being no such . .

interference with ‘liberty of contract’ contem-

plated by the Fourteenth Amendment in the

statute here under review as to warrant this

court, in declaring it invalid. The reasoning’.

and logic 1 in sppport of the mechanics’ lien stat-

ute is just as strong, just as cogent, just as

powerful, and just as applicable to the statute

here requiring that if a bond be taken by the

“owner to secure performance of the building

contract, that it shall contained a stipulation

protecting the’ materialmen and laborers sub-

ordinate to the rights of the obligee in the bond.

““The case most nearly in point is that of Rio

Grande Lumber Co. v. Darke, 50 Utah, 114, 167

P,. 241, L. A. A. 1918A, 1193. Passing upon the

validity of the-Utah statute which requires the

property owner when contracting for the -erec-

tion of a building to take a bond to himself for

‘the benefit of every person interested, and the

Supreme Court of Utah stated that it was un-

able to find any reason for declaring the stat-

ute in question unconstitutional; they reviewed

at-length the California cases, and, quoting

from the main California case, the Utah court

_ said:

' €¢The statute does not say who shall cause

_ this bond to be executed, nor to whom it, shall,

. = Pe, ‘

in form be made payable. It does not under-

take that the contractor shall faithfully perform

his contract. In short, there is in it nothing

which can be of advantage to the owner in any -

possible event.’ a

“‘And the Utah court proceeds to say, in

effect, that the points made in the above quota-

yon constitute the principal objection of the —

\-—-< alifornia court to the statute, and called ‘at-

\ tention to the fact that no portion of the above

| criticism could be justly applied to the Utah

statutes. The court discussed the Roystone

Case, a later California case, and, after compar-

ing’ and conceding the analogy between the ma-

terialmen’ s statute and the bond statute, the

court comes to a conclusion in the following 7

language:

i “The bond, as in this case, is conditioned

for the faithful performance of the contract

and securing the payment of laborers and ma-

terialmen. If the owner reqnires the contractor

to procure the statutory bond, he is protected

against loss. If he does not, he becomes liable

to laborers and materialmen if the contrac-

tor fails to pay them, even though he may have

paid the contractor in full. He has his remedy

in his own hands. Under the Mechanic’s Lien

Law, if he fails to hold the fund for the pay-

ment of laborers and me -seidmemag the same

misfortune may occur. To use the epigram-

matic expression of nomads’ s brief: ‘Under

the. bond statute he must take care to exact the

bond, and under the lien statute he must take

eare to hold the fund.’ We are unable to find

any reason for declaring the statute in question

unconstitutional. Certainly, to say the least,

reasonable, doubts as to its -unconstitutionality,

’ .

casa ettaiadiacie GPF ETI EAGLE SPL LI IIL LP FOG IE IE GS M8 8 SRT ONE

vo idadlal Sioa ali . Ne BS a AK eA NE 0d hw ea - ais —

‘Me

after thoroughly considering the question, are

such as to render it the imperative duty of the

- court to declare the statute valid as against the

objections made. It is ordered by ‘the court:

that the judgment be affirmed.’ ;

‘When we consider that in the instant case

this last-mentioned ruie of construction must *

control where the constitutionality or validity of

' the statute is involved, then it is just as binding

upon us as any other rule; and after fully and

fairly considering the powers of legislative

bodies, and the limitation of their power under

the Constitution, if there is a reasonable doubt .

in the mind of the court, then that doubt must

be cast int favor of the validity of the act.”’

And citing to approve Ogden Vv. Saunders, 12 Wheat.

213, 6 L. Ed. 606. | ay ‘

The only case cited by opposite counsel not spe-

cifically reviewed in Parsons v. U. S. Fy &-G. Co, 2°

So. 469,°147 Miss. 335, supra, is Kélly v. Johnson, 251

Ill. 135, 95 N. FE. 1068, 36. L. R. A. (N. S.) 573; but that

decision assumed only to follow a prior decision of

' Ohio, in Palmer v. Tingle, 45 Ohio St. 423, 45 N. E.

313; a Michigan case, Spry Lumber. Co. v., Murphy,

148 Pa. St.-337, 23 A. 1134.

Mr. Justice Harlan, in Great Southern Pie Proof.

Hotel Co. v. Jones, 193 U.S. 547, 48 L.-Ed. 788, deal-

ing with the precise question said:

‘‘We are constrained to withhold our assent

to the views expressed by the Supremé Court

of Ohio, and to express our concurrence with

the circuit court: of appeals. ,The great weight

of authority in this country as to the. meaning

and scope af constitutional provisions substan-

ON, ee = ae

_ 31

tially like those to be found in the Constitution

_ of Ohio is, in our opinion, against the conclu-

sion reached by the learned state court. Exer-

cising an independent judgment on the subject,

we are obliged to so declare. The reasons in

support of the constitutionality of the statute

are cogently stated in the able and elaborate

opinion of Judge Lurton, speaking for the cir-

cuit court of appeals in this case. Jones v.

Great Southern Fire Proof Hotel Co., 30 C.

C. A. 108, 58 U. S. App. 397, 86 Fed. 371. As

the reports of the decisions of the circuit court

of appeals-are accessible to all, we will not: en-

cumber this opinion with a restatement of the

grounds, so fully set forth by that court, on

which the validity of the statute must be sus-

tained. We content ourselves. with referring to

its opinion, and with citing in the margin some

authorities which, in our judgment support the

_ views expressed by the circuit court of appeals.

It results that the decree must be affirmed.’’

(Italics ours. )}

Therefore, dealing with the Federal Constitution—

the State. Constitution being here eliminated, we have |

the decision of this Court condemning the reasoning of

the Illinois Court as to Section 21 of the Act there

involved. The proper rule being declared in the case

of Great Southern Fire Proof Hotel Co. v. Jones, 193

U. S. 532,, 48 L. Ed. 778, approving an opinion by Mr.

Justice Lurton in Jones v. Great Southern Fire Proof

~ Hotel Co., 30 C. C. A. 108, 58 U. S. App. 397, 86 Fed.

371, which case, especially the opinion in the Court of

Appeals, adopted by this Court, is conclusive: of ‘the

point here at issue.

: EIEN TNR A RY RNR IE oho Sicteaiahh kasha ARM ea Kah alas iach Sibi Aiea calle lla aa

- vin aatoe'>-+) oor oa

After a thorough réview of all cognate cases, Judge

Lurton, later Mr. Justice Lurton, laid down the

theories whereunder this legislation might ke constitu-

tional thus: .

‘*Tn neither of these cases, though the amounts

involved were great, was any constifutional ob-

jection to the statutes giving the lien suggested,

though very eminent counsel appeared in each.

case. The constitutional validity of statutes giv-

ing an independent lien has the support of most

of the text writers. 2 Jones, Liens 286; Phil.

Mech. Liens, See. 30; Boisot, Mech. Liens, Sec-

tions 22, 23. Overton on Liens (section 553)

has been cited as advancing a contrary. view.

If we had doubt as to whether such statute was

‘due process. of law,’ or violated the funda-

mental right of owning and enjoying property,

or unreasonably restrained liberty of contract,

we should be disposed .to yield to the current

and weight of authority upholding such acts as

valid and constitutional. .No court is justified

in striking down an act of legislation, unless it

is clearly satisfied that the act is in conflict with _

the organic law limiting the power of the legisla- .

_ tive branch of governmert. Such statutes have

met with the approval of. the legislative bodies

of nearly’ every state in the Union, as well as of

Congress, as indicated by the Act of 1833, con-

strued in Winder v. Caldwell, 14 How. 434.

They have survived assault whenever the ques-.

tion has arisen, save in Ohio and Michigan, and

' to,a limited degree in Pennsylvania, and in a

still larger number of instances have been en-. -

- forced without question as to their validity.

~ “But the validity of-such statutes, need not

“be rested upon mere authority. They find

, ‘

PEPIN LI ae I I eI Te ee

sanction in the dictates of natura] justice, and

‘most often administer an equity which has

recognitign under every system of law. That

principle;is that every one: who, by his labor

or -materials, has contributed to the’ preserva-:

tion or enhancement of the property of another,

thereby acquires a right to coimponsation. This

strong natural justice has given rise to a va-

_ riety of liens recognized by the- “common. law.

Thus, without any agreement the common Taw

gave to one who, by. his labor or expense, has _

made, preserved, enlarfed, or repaired a chat-

tel, a lien thereon for his security,. which he

may, however, lose if he surrender possession.

So,. we find another illustration in “the lien

given one who,-in the exercise of a quasi pub-

a employment, is required to receive or per-

form some service in respect te the thing upon

which the lien is given. That the-owner who

sells his ehattel shall not be required to part

with it until the price is paid rests’ upon the

justice of the matter, .and'‘not upon any agree-

‘ment. Sut the remedies prescribed by the

comme. law by no means embrace the number-

Jess instances i in which the inherent rigut of the

matter requires that -a charge or lien should

be recognized as arising out of the nature of

the transaction, independently of any agree- ~

ment. That wide class of trusts arising out

of the conduct of the parties, either with or

without intention, but without express words

of creation, which we eall constructive or im-

plied trusts, rest upon the natural justice .

_whjch will not permit one to retain that. which.

in justice does not belong to him, and there-

fore fastens upon the thing, or that into which

. ° y

: ; ; a

——_—_ SLAM RATES PT Bn in, be ae NS aad aan iain QA PENI NA IB

e ‘ ‘

34 | oar

it is traced, a. charge or lien in favor of the

equitable owner. So, the vendor of realty may-

ordinarily, without any express agreement, ap,

ply the property sold to the payment. of the‘

os price. There are a large variety of cases

where a lien has. been recognized as~arising

out of the nature of the frangaction, although -

there was no direct contractual relatidn be-

tween the payties affected. ‘Thus, in-the mari-

time law the last lien created by the master of

. 9 a ship for supplies or repairs is entitled to

& _ preference over prior liens; the principle being

° ‘that the common pledge has thereby been pre-

served for the common benefit. So, he who

rescues goods from capture or the perils of the

sea has a lien thereon for his compensation.

’ . The meritorious character of“a claim often dis- . .

places prior burdens, as in-the case of supplies

>and labor furnished by a mortgaged railway

company to keep it in operation, and preserve’

the property- for the benefit of. all interested.

_ ¢©Whoever takes and holds possession of land. -

- to which another has the better title is liable

ner 5 ’ to the true owner for the rents and profits, and

ro - no distinetion is recognizéd between a bona fide.

ec : and mala fide possession. Greet v. Bidle, 8

"eee Wheat. 1, 74. But this was a harsh rule when

_- applied to a case where. the rents and profits

) had been offset by lasting improvements, which

had actually increased the value of. the land.

ia dhe Courts of equity,’ therefore, soon applied the

. ' principle that, where the owner..resorted to a

- gourt:of equity: for an accgunt of rents and |

; ‘ profits, the permanent improvements should |

_*. * “+ * offset the liability of the possessor if his posses- ~

| sion and improvements were in good faith, 2

Story, Eq. Jur., Sections 799a, 799b, 1237, 1239. ©

: 3 : 4

a ® ‘ r . : >

os ‘

& -

35 ,

-“€In Bright v. Boyd, 1 Story, 478, Fed. Cas.

No. 1,875, and same case in 2 Story, 605, Fed.

Cas. No. 1,876, Justice Story laid down the

broad doctrine that a bona fide purchaser, with-

‘out notice of defect in his title, who makes

improvements upon the estate, has a lien upon

the. estate for. the increased value, after ‘de-

. ducting rents and profits; and a court of equity

will enforce this,lien against the true owner

who recovers the estate at law against such a .

purchaser. This case has been adopted and ap-

proved in Valles’ Heirs v. Pteming’s Heirs, 29

Mo.. 152, Associatton v. Morrison, 39 Md. 281;

and Hatcher v. Briggs, 6 Or. 31, though it ‘can-

_not be sdid to have received any very general .

support, though often cited. The reason is

doubtless found in the fact thatthe equities of

bona fide purchasers of defective titles were so

generally recognized as to result in statutes in _

most of the states, called ‘betterment’ or ‘occu-

pant’ statutes, which provide that a bona fide

occupant making lasting improvements in good —

faith shall have a lien upon the estate recovered

by the true owner to the extent that his im

provements have increased the value of the\

‘land. Though the operation of these statutes

is to make the true owner pay for improve-

ments made against his will, and -which he

might not desire, the courts have sustained

their. constitutionality, as giving remedy where

before there had been none, thougk a strong

equity existed. Cooley, Const. Lim. 486 et seq.;

Brown v. Storm, 4 Vt. 37; Ross v: Irving, 14 IIt.

171; Griswold v. Bragg, 48 Fed. 519; Hunt’s

Léssee- v. McMahan,,5 Ohio, 132;. Scott’ v..

. Mather, 14 Tex.,235; Davis v. Powell, 13 Ohio

308; McCoy v. Grandy, 3 Ohio St. 463; Bacon

“oe ~

- 36

v. Cailender, 6 Mass. 303; Welch v. Wodsworth,

30 Conn. 149; Whitney .v. Richardson, 31: Vt.

300. The constitutionality of a similar Tennes-

see act was denied in Nelson v. Allen, 1 Yerg.

376, but Chief Justice Catron, in a note says

the question did not arise.

‘‘Not only was the equity so broadly dedlaved |

and enforced by the civil law, but in that sys-

tem of law very‘high consideration was given

to all who had, by their contributions, benefited,

- preserved, or enlarged the estate or property

of anothe”; and, among creditors secured by a

~ common pledge or mortgage, those whose con-

tributions were given and uséd for the benefit

of the thing hypothecated were privileged,

and, among this class, those whose contribu- .

tions were last given and used had .the prefer-

_ ence. Mackeldy, Rom. Law, 280, 281.

‘<Domat says:

‘¢¢Among creditors who are privileged, it

does not matter which of them, is first or last

in. order of time; for they are di Mnguished only

- ‘by the nature of their privileges.’ “Domat Civ.

Law (by Strahon) 681.

‘‘Thus, he who had sold‘an immovable thing

was privileged for the price, béfore the cred-

-itors of the purchaser and all others, as to the.

thing. sold. So, he who loaned money to a pur-

chaser to. pay the purchase price had the same

privilege as the seller would have had till he

had been paid.. He who. loaned money to pre-

serve the thing, or to make an improvement of

an estate, had a like privilege. Id. 682, 683.

-- This equity was, by the tivil law, ‘extended to

all who had contributed to the preservation,

repair, énlargement, or creation of~an improve-

ment on land. / This privilege is thus stated in

Domat (page 683, Section 1744): —

ee : Milliaaiiee and other undertakers, work-

men and artificers, who bestow their labor on

buildings or other works, and who furnish

materials, and in general all those who employ

their. time, their labor, their care, or furnish

any materials, whether it be to make a thing,

or to repair, it, or to preserve it, have the same ..

privilege for their salaries, and for what they

furnish, as those who have advanced money for

these kinds of works, and -which the seller has

for the price of the thing sold.’

‘‘None of these- instances, from either the

civil or common law, of a charge of preference,

are dependent upon an express agreement for

such privilege over other creditors: They have -

their basis in the nature of the ‘transaction..

Statutes which give to a contractor or material

man, dealing directly with the owner, a lien on

the building or land, do so independently of

any agreement for a lien, but their validity has

never “been doubted. Yet the basis for the in- ©

terposition of a lien is'the mere equity in favor

of him who, by his labor or materials, has bene-

fited the owner, and has acquired, therefore, an

interest in the property benefited, to secure his

just compensation. In most instances it is

well understood that the contractor will employ

others tc aid in or do the work and to furnish -

the materials necessary. The earlier statutes

did not extend any protection to those who

should be thus employed by the contractor.

To remedy this, some statutes gave to such

subcontractors, ‘workmen, or furnishers of

__ materials a mere derivative lien, by which they

might be-substituted to the lien’ and claim of

the contractor. In others. an independent lien

was given. to all who should, at the instance of

the owner or his contyactor, contribute towards

the completion of the work either labor or ma-

terials. Of this character is the Ohio statute

under consideration. .Such statutes rest upon

-the principle. of natural justice -which lies at

the foundation of the many liens or prefer-

encés among creditors which we have cited

from both the common and civil law. It is true

that a lien is created in favor of one with whom

‘the owner has no direct contractual relations.

But, if the owner makes the contract with the

law -before him, the law enters into and be-

comes a part. of the contract. The legal effect

of the contract is to give a lien to all who, at

.the instance of his contractor, shall be employed

to furnish labor or materials for the work

which he has let out. So far as such a statute ©

is limited to future contrauts, it cannot be said

to impair the obligation of a contract. If the

law be subject to no other objections, it impairs

” no contract, for all thereafter made are entered

into upon the basis of the law. ‘The inhibition

- of the constitution ‘is wholly prospective. The

states may legislate as to contracts thereafter

made as they see fit. It is only those in ex-

istence when the hostile law is passed that are

protected from its effect.’ Edwards v. Kearney,

96 U. S. 595; Greenwood v. Freight Co., 100 .

U.S. 13; Denny v. Bennett, 128 U. S. 489, 9

Sup: Ct. 134; Smith v. Parsons, 1 Ohio, 236;

Weil v. State, 46 Ohio St. 450, 21 N: EK. 643.

Neither can the owner be said to. be thereby

deprived of his property without due process

of law. He has voluntarily made a contract

with, the law before a ae He has thereby sub-

jected his property to liability for certain debts

of the contractor. His own voluntary consent

is an’ element in the transaction. He knows

what the law is, and makes a contract under that

law. It is idle to say that under such circum-

stances he is deprived of his property without

due process of law. Provident Inst. for

Savings v. Jersey City, 113 U. S. 506-514, 5

Sup. Ct. 612. ,

‘Tf, then, this statute does not unduly re-

strain the owner’s liberty of contract, consid-

ered as an incident to the right of owning,

possessing and enjoying property, the law must

be constitutionally unobjectionable. If, ‘how-

ever, this legislation is the mere arbitrary exer-

cise of the powers of government, unauthor-

ized by .the established principles of private

right, and not having the sanction of natural

" justice, it is not the law of the land. But we

have already seen that the underlying purpose

of. the act is not to arbitrarily and unneces-

sarily oppress the owner in any incident of, his.

right as owner, but to secure those who, by.

their labor or materials, have contributed to

_ the improvement of the owner’s property.

That the liens under consideration are given

to secure debts which are primarily the debts

of another would be fatal to the legislation, as

taking the property of one‘to pay the ‘debts

of another, but for the equity arising from the

use of the labor and materials by the owner.

. It is in this connection of the owner with such

debts that the justice of the statute is found. |

In paying off such claims, the owner may, if

he exercise proper precaution, pay only his

own debt to the contractor. If he be required

to pay such subcontractors when nothing is due

the principal contractor, it is his own fault.

That the liability of the owner in.respect to

building contracts is restrained in some degree

by this statute must be admitted. If he pay-~+-f-

in advance, or contract to pay in property, or

by an exchange of paper, and his contractor

be dishonest or insolvent, he may firid himself

involved by the contractor’s debts for labor or

‘supplies. This contingency he may not always

-be able to guard against. But as much may be

said of those who furnish labor or materials at

the instance of the contractor. Without the

lien they must look alone to the contractor, and

may not always be able to protect themselves.

Inasmuch as the owner actually gets the bene-

fit of their contributions to his property, their

equity is a strong one, and the legislature has,

in its discretion, det ermined to cast upon the

owner the responsibility of guarding against

the defaults of a contractor ‘selected by him-

self. To protect the class having this equity,

the making of building contracts has been regu-

lated. The restraints upon the owner. are

neither arbitrary nor oppressive; nor are they,

under this Ohio statute, any more onerous than

required by the necessity of protecting those

who. actually do the work or furnish the ma- *

_terials by which the owner is benefited. To

-permit such persons to foltow and recover their

contributions in kind would be futile to them,

-and disastrous to the owner. A law which has

for its basis equitable principles, which in all

times and in all ages have had recognition,

cannot ‘be arbitrary and oppressive to the

straints upon liberty of contract are constantly

met with in the legislation of every -state.

Statutes requiring certain contracts to be in

writing or to be witnessed or acknowledged

or registered, statutes regulating interest or

the time within which rights. may be enforced,

and statutes exempting property from ‘liability

to execution, are notablé examples of statutes

regulating and limiting contracts. No more

striking example of interference with liberty

of contracts is afforded than the statute up-

held by the Ohio Court in Weil v. State, 46

Ohio St. 450, 21 N. E. 643. The statute there’

declared valid was one which regulated con-

ditional sales of personal property, or sales

upon the installment plan, and made the viola-

tion of one of its: sections a misdemeanor.

‘‘The equity in favor of those to whom the

benefit of the Ohio lien law is: extended is in

its nature comparable to many equities recog-

nized by courts of chancery -and in other sys-

tems of law. But it was an equity upon, which °

there was no remedy. The statute gives one

in respect to, future contracts. We cannot say

that the remedy is so arbitrary or oppressive,

‘or so unreasonable, as to be an act in excess

of legislative power. The right of him who,

by his labor and materials, had contributed to

the betterment of another’s estate, was an im-

perfect right, because it had not been done at

the instance of the owner, though presumably

with his knowledge and at the instance of his

contractor. At’ the cOmmon law neither the

owner nor his building was chargeable, there

being. no contractual relation. ,The statute

' recognizes the equity of such eontr ibutors, and

has turned the imperfect into a perfect right, —

by prescribing the consequences of a’ building

contract, and giving a remedy to all who, at the

instance be the contractor,. shall contribute to

the performance of his contract. with the owner.

That legislation which is sanctioned by the dic-

_ tates of natural justice can only be avoided by

pointing out some specific provision in the

organic law which has been violated by its en-

fy 42°

actment. Neither upon reason nor authority

are we able to come to an agreement with the-™

‘Ohio court. In the exercise of our independent

* constitutional jurisdiction, we must declare our

conscientious judgment to be that the Ohio

statute was not void, and that complainants

are entitled to relief thereunder. The decree

of the circuit court must be reversed. The

demurrer will be overruled, and ‘the cause re-

manded for answer and further proceedings

not inconsistent with this opinion.’’

This reasoning has the approval of this Court, and

this case not adverted to by opposite counsel is con-

clusive of the validity—of-that-hereunder assailed.

The owner was the Natchez Investment Company;

it was the obligee in the bond. As such, it filed the

original bill, wherein it averred this obligation upon

the part ci the appellant to pay, or; if it were mis-

taken in this obligation-of the appellant, then to have

adjudged invalid the assignment made by the principal

contractor to the New Orleans Bank & Trust Co.

The owner required this bond from Burkes, wherefor

appellant was paid, and whereby. appellant became

bound unto the owner for the construction of‘a build-

ing containing the precise material furnished by ap-

-pellees. Had Burkes, the principal contractor, de-

faulted the first day after the bond was signed, then

thereunder appellant was obligated to complete pre-

cisely as Burkes has done, and in completing it would

_ have incurred the obligation for this precise property .

now therein which was obtained therefor from appel-

less, and appellant would have been compelled to pay

therefor in cash. Each brick laid by these appellees

| pro tanto lightened .appellant’s burden and thereby

was a pro tanto equitable consideration for payment. .

There can be no question as to Burkes and his re-~

sponsibility when the owner wa’ at pains to see that

the contractor and this surety, appellant, were to pay

for the reco¥dation of the lien privilege certificate

as well as:the required recordation of the contract

and bond and its release (Tr. 16-17), imported from

the Louisiana law. It is but proper to assume that |

the more important obligation to pay subcontractors

thereunder to be \obtained were specifically under-

taken, especially in| view of those conditions in the

~~. bond whereby appellant was at pains to escape re-

sponsibility for (5) destruction by fire, riot, mob, ete. ;

(6) guarantees of the work specified in the contract,

and of its efficiency, its wearing qualities and for

maintenance of or repairs thereto; and the payment:

of any damages or..compensation either at common

law or under any statute, Federal or’ State, arising .

from or growing out of injuries to persons or prop-_

erty; and for failure to procure insurance; and for

(7) infringement of patents (Tr., 19, 20). -

Where, as: here, there is to be the placing by ma-

terialmen of their goods upon thé land of another, at

-acontractor’s instance, the law has almost universally

stepped in and. prescribed rights to materialmen.

_ Dealing with the alleged liberty of contract, this

Court in Hardware Dealers, etc., Co. v. Glidden, U.S.

Supreme Court Advance ——— No. 3, page 65,

October Term, 1931, said:

«Without stopping to’¢ examine these conten- ;

tions, we assume that appellant’s freedom of

«44

contract was restricted by operation of the ©

statute, and pass directly to the question de-

cided by the State Court; whether the Four-

teenth Amendment precludes the exercise of

such compulsion by the legislative power. .

Pr ct right to make contracts embraced in

thé-soncept of liberty quaranteed by the Four-

teenth Amendment is not unlimited. Liberty im-

plies only freedom.from arbitrary restraint, not

immunity. from reasonable regulations and

prohibitions imposed in the interests of the com. | --

munity. Chicago, Burlington € Quincy R. R. .

Co. v. McGuire, 219 U. S. 549, 567: Hence,

legislation otherwise within the scope of

acknowledged ‘state. power, and unreasonably or

. arbitrarily exercised, can’ ‘notsbe condemned be- .

_ cause it curtails the power of the individual to

- contract. McLean v. Arkansas, 211 U. 8S. 539;

Schmidinger v., Chicago, 226 U. '8.°578; ‘German .

Alliance Insurance €0. v. Kansas, 233 U. S. 389;

_Erie R. R. v. Williams, 233 U. S. 685; Keokee

Cons. Coke Co, 7. Taylor, 234 U. S. 224.

Further, he said:

‘‘The records and briefs present no facts dis-

closing the reasons for the enactment of the

present legislation or the effects of its opera- |

tion, but as it deals with a subject within the

scope of the legislative power, the presumption ,

of constitutionality is to be indulged. O’Gorman

& Y.oung, Inc. v. Hartford Fire Ins. Co., 282 U. ’

S. 251; see Standard Oil Co. v. Marysville, 279

U. 8. 582, 584; Ohio ex rel Clarke v. Deckebach,

274 U. S. 392, 397. We cannot’ assume that. the

ic Minnesota Legislature did not have knowledge + *

of conditions supporting its mews: that the.

legislation was in "the public interest, and it is

enough that, when the statute is read in the’

light .of circumstances generally known to at-

tend the recovery of fire insurance losses, the

possibility of a rational basis for the legislative

judgment ‘is not excluded.

_ ‘Without the aid of the presumption, we /

know that ‘the arbitration clause has long been

voluntarily inserted by imsurers in fire policies,

and we share in the common knowledge that the

amount of loss is a fruitful and often the only

subject of controversy between insured ‘and in-

surer; that speedy determination of the policy

liability such as may be secured. by arbitration

of this issue is a matter of wide concern. See

Fidelity Mut. Life Ins. Co. v. Mettler, 185 U.S.

. 308; Farmers’ & Merchants’ Ins. Co. v. Dobney,

189 U. S. 301; that in the appraisal of the loss

by arbitration expert knowledge and prompt in-

spection of the damaged property may be

availed of to‘an extent not ordinarily possible

in ‘the course of the more deliberate processes of

a judicial proceeding.

‘‘These considerations are sufficient to sup-

port the exercise of the legislative judgment in

) requiring a more summary method of determin-

ing the amount of the loss than that afforded by

- traditional forms. Hence the requirement that

disputes of this type arising under this special

class of insurance contracts be submitted to

arbitrators cannot be deemed to be a denial of

either due process or equal protection of the

laws.’’

This wiatube has been in effect in, Mississippi since

1918, and has been integrated consistently into the

)

' sobligations assumed by these companies in their deal- .

ings: with the public, and’ when, as here, in order ‘to

obtain for Burkes, the contractor, the right to assign,

transfer or otherwise dispose of in any way, the con-

‘tract or the proceeds thereof, to the detriment or pre-.

| -judice. of the subcontractors and materialmen, and to

‘discharge’ the- equity ‘against the owner Dickson v.

U.S. F. & G. Co., infra, this bond was executed, the

_ surety théreon having, under our decisions, a es

safed to Burkes this right to assign to the New Orleans

Bank, may not, having thus obtained. from Burkes this

right, now. assert that thereby this right did not SO

thus exist. a

_ The holding of the Supreme Court of Mississippi - +

under S¢ction’3, Chapter-128, Laws of Miss. 1918, is,

that when the owner and/or materialman are deprived -

of the rights given by Section 2, which are conceded to

be valid, thattherefor and thereunder, Section 3 makes

- guch bond so thus-given, available. By. such holding

there ‘is no deprivation of poopeny without due

process. |

.. There are no factual &iementa presented . this

record as to any of these appellees. The decisions of '

the’ Supreme Court of Missis ifi are here, but it does

not appear but that b oan the alleged defaults, - .

whereby a discharge Linseed. the material had. been

in good faith delivered, and that sought by appellant |

is as to these materialmen an ex post facto deprivation

“by ‘an act of: the contractor or owner. Appellees are

sought to have their rights taken away by defaults,

“wherefor appellees are not responsible.

Bonds of this character contain two several separate - :

obligations :. One to the obligee, and the other ta those

who are thereunder to be protected.

In considering this cause on the first appeal, on de-

inurrer, the Supreme Court of the State of Mississippi

in Hartford Accident & I: ndemnity Company v. Natchez

Investment Company, Inc., et als., 155 Miss. 31, 119 So.

366, page 369, held:

“oe * *

Section 2. of the Act i is altinand

as: impairing the Tight of s contractor to make |

contracts and to receive the price therefor, and

dispose of it, as he sees proper, as a necessary

incident. to the protection of his business.. Of:

course the Section . does not prohibit the sub-

contractors, Journeymen, laborers and material-

men from waiving such right or entering into’

contracts by which such rights are waived or

otherwise- provided for, but it does give rights

to the subcontractors, journeymen, and laborers

‘ and materialmen against the funds due :the

principal contractorefor the protection. of their

contracts with him, and in furnishing labor and

material in carrying out his contract. The

Legislature has the power to regulate the right

i aes" ‘in a reasonable manner, so long as

the right to contract is not destroyed or_seri-

ously impaired. . The effect of the statute. be-

fore us in the case named is similar to impound-

ing money due to gne person by. a process of

garnishment to the satisfaction of the clainis

of another person against the owner of such

funds, and it has always been, as wé understand

it, permissible for -the Legislature to provide

‘ gemedies to parties furnishing labor and ma-

terial, or in selling property, by providing liens

or other proceedings. impounding the, property oi

or its proceeds. es

- As reasoned by the Court, the Legislature, having

created a lien on right to lien in favor of materialmen

and subcontractors, as ‘it had a right to do, the Legis-

lature then proceeded in Section 3 of the Act to provide

for the benefit of the principal contractor a means and

method by which the principal contractor could re:

lease and obtain the discharge of the proceeds of his

contract from the effects of that lien.

The Act does not require the owner of the building,*

the contractor, or any surety to enter into and make

‘the bond previded for in Section 3 of the Act, but does

provide that if a bond be given, conditioned to guar-

antee the faithful performance of the contract, then,

- in that event, and under those conditions, the lien and

lien rights of-subcontractors oad materialmen are dis.

charged; but in the opel such lien or lien rights

the subcontractors and materialmen are given another

remedy for the enforcement of the payment to them

for material and labor which have gone into the con-

struction of the building, and, being so incorporated

in the building, cannot be taken or otherwise charged

with any other lien or lien right:

The Bond being given, the subcontractors and ma- —

terialmen are, willy-nilly, deprived of ‘ie substantial

and substantive right conferred upon them by Sections

1 and 2 of the Act, and, the Bond being given, such sub-

contractors and materialmen cannot complain of any:

disposition that may be made by the principal contrac-

tor of any of the proceeds of his contract. This being

i i i i il a tit

so, a surety who enters into a bond under the provi-

sions of Section 3 of the Act of its own volition and by

the terms of the Act incorporated into its contract,

takes from subcontractors and materialmen those sub-

stantive rights conferred ‘by Sections 1 and 2 of the

_ Act and offers its own faith and credit to the sub-

contractors and materialmen in lieu thereof.

Therefore, as the Mississippi Supreme Court has |

held in this and other cases, Section 3 of the Act is

not ‘unconstitutional, because the Act first does not

require the Bond to be given in any event, and secondly,

does not deprive any contracting party of the right to

incorporate in the contract and bond such conditions

and provisions as it may see proper—subject, how-

ever, to the one condition that, of course, there may

not be incorporated i in the Bond such conditions, terms .

and provisions as would nullify the bond as to the

rights of subcontractors, laborers and materialmen.’

Thus to do would be to enable the contractor and

surety to gain the advantage of releasing the pro-

ceeds of the contract from the effects of Sections 1

and 2 of the Act without in turn conferring upon sub-

contractors. and materialmen the none of Section

3 of the Act.

‘‘The regulations of corporations for the pub-

lie interest under the police power are valid

whether the power to alter the. char ter has been

reserved or not.’’.

(Troy, etc. R. Co. v. Kerr, 17 Barb.

(N. Y. 1854) 581.)

Very. stringent regulations of insurance companies

have been supported under the police power, although

ip a re i a i

in such ease'the Court relied on the theory that, since

the insurance company might have been excluded en-

tirely, it could be allowed to write contracts only on .

such terms as the State might impose, even though

they contained an element of hardship.

& ‘“Thus the state may require a deposit of se-_

curities (Paul v. -Virginia, 8 Wallace (U. S.

1869) 168; 19 L. Ed. 357); may force them to

comply with the State laws in detail (Héoper v.

(e People, 155 U. S. 648; 39 L. Ed. 297) ; may com-

pel.them to settle on fhe basis of the value of

the policy rather than on the actual loss (Orient

Ins. Co.-v. Daggs, 172 U.S. 557, 43 L. Ed. 552) ;

mégy make policies valid even if erroneous an-

_ swers were given, if not fraudulently given

(John Hancock Life Ins. Co. v. Warren, 181.

U. S.'73, 45 L. Ed. 755; Northwestern Mutual

Life Ins. Co. v. Riggs, 203 U. S. 243; 51 L. Ed.

168); .can regulate the forfeiture of policies for

the non-payment of premiums (N. Y. Life Ins.

Co. v. Cramer, 178 U. S. 389; 44 L. Ed. 1116) ;

and can compel an insurance company to file a

certificate before contracts. (Commonwéaith v.

Hock Age Mutual Benefit Association, 31 Leg.

Int. 245; 10 Phila. 554. See, also, Eagle Ins. ©

. Co. v. Ohio, 153 U. S. 446; 38 L. Ed. 779.)”’

The statute in question can be further upheld for the :

reason that it is designed to prevent fraud.:

The basis of this law was laid down by the Federal

‘Courts wherein it was decided that the State could

compel foreign corporations to deposit securities be-

fore doing business within the State. (See Paul v. .

Virginia, 8 Wallace 168; 19 L: Ed. 357; Hooper v. Cali-

fornia, 155 U. S. 648, 39 L. Ed. 297.)

Under the same principle residents of a State may

have priority in cases of insolvency and the due pro-

‘cess of law clause’ is not- ‘thereby violated, although

the benefits and immunities of citizens of the United

States are thereby abridged. (See Blgké v. McClung,

"172 U. S. 239 at 260, 261; 43 L. Ed. 432; Seely v.

American National Bank, 178 U. S. 289; McGoon v.

Scales, 9 Wall. 23; 19 L. Ed. 545; Frowert v. Blank,

205 Pa. 299, 54 Atl. 1000.)

So too, it has been upheld that the Legislature has

ample power to prevent fraud by police regulations

in the matter of blue sky laws. (Hall v. Geiger Jones

Co., 242 U. S. 539; 61 L. Ed’ 480; Caldwell v. Sioux

Falls Stock Yards, 242 U. S. 559; 61 L. Ed. 493; Mer-

rick v. Halsey, 242 U. S. 568; 61 L. Ed. 498.)

As stated and dealt with in Mott in his “‘Due Pro-

cess of Law’’—Bobbs-Merrill Company, Publishers:

(1926), the Courts will sanction Legislative interfer-

ence with private riglits when there is a fair balance

between the advantage which the public will derive

from the statute and the degree of interference with

private rights which it involves. _

Where the degree of interference is slight the

Courts, with unerring uniformity, will uphold the law

as’ beneficial to the public, so where there was merely

created a State fund which was held as a protection to

the public against bankruptcy, etc, the Supreme Court

of the United States has pointed‘sut that all that was

taken was the use of the money for a short time, a con-

. sideration which ‘was negligible in view of the great

public convenience. (Sinking Fund cases, 99 U. S.

700 at 721; 25 L. Ed. 496; Thornton v. Duffy, 254 U:S.

361; 65 L. Ed. 304.)

/ é

~. Ws oye A

— LESS AECL NIELSEN LOGE LLL ELLIS AL IOLIED ELVIS ELI LEE INLETS NOG s

ese Se . i lt —

. ¢

= °

Fr. >

52 i

In the instant case the Legislature of Mississippi has

seen fit to enact the legislation ‘here under attack, and

it was more familiar with the facts and circumstances:

which surround the subject of bonds and building con-.

tracts and with the necessities and océasion of the

enactment of the. laws in question than can one be who

- ing building operations in this State under the law

previous to the enactment of the legislation in 1918.

As held in Falbrook Irrigation District v. Bradley,

164 U. S. 112 at 160; 41 L. Ed. 369, this legislative de-

termination of issues in question concerning legitimacy

of the legislative object will not be disturbed by the»

Court unless there has been a great abuse, and such’

determination goes beyond all reason.

‘“‘The people of California and the members

of her Legislature must, in the nature of things,

be more familiar with the facts and circum-

stances which surround the subject, and with

_ the necessities and occasion for the irrigation of

the lands, than can anyone be who is a stranger

to her soil. This knowledge and familiarity |

must have their due weight with the State —

_Courts which are to pass upon the question of

public use in the light of the facts which sur-

round the subject in their own State.

‘‘Mor these reasons, while not regarding the

matter as coneluded by these various decisions,

we yet, in the consideration of the stibject, ac-

cord to and treat them with very great respect,

and we regard the decisions as embodying the

deliberate judgment and matured thoughts of

the Court of that State on this question.”’

Falbrook Irrigation District v. Bradley,

supra. | j ts

53 -

So too, it has been held that the Legislature, in de-

termining upon the passage of a law, may make in-

vestigations which the Court: cannot. (People v.

Smith, 108 Mich. 527; 66 N. W. 382 ; Morris v. Colum-

bus, 102 Ga. 792, 30 S. E. 850; State v. Main, 69 Conn.

123, 37 Atl. 86. ) .A reading of the cases as pointed out

by Mott in his work, supra, is to the effect that, during

the second decade of the Nineteenth Century, the

Courts concluded that if they were to properly judge

the validity of the legislative object they must have

some means of knowing the facts in the situation. Fre-

quently these facts were local, and for the Courts to

have an understanding of local situations was almost

impossible.

For that reason this Court refused to go behind the

legislative determination of pool hall regulations in

the year 1912 in the case of Murphy v. California, 225

U.S. 623; 56 L. Ed. 1229, the Court holding that where

the statute prohibited pool halls this Court would re- .

fuse to take up the question of whether pool halls were

‘detrimental to public morals and that that was for the

Legislature to decide and that this Court cannot go

behind their findings and inquire into local conditions.

And, again, this Court refused to go into the ques-

tion of regulation of competition to prevent unfair

practices where the statute had prohibited sales at one

place at a lower figure than at another where the pur-

pose was to drive out competitors. (Superior Lum-

ber Co. v. South Dakota, 226 U. S. 157; 57 L: Ed. 164.)

| Shortly thereafter this Court laid down the doctrine

that the burden of proof rests. upon those who attack

the validity of the object of a statute, declaring that,

a :

‘*The burden is on him who ateiies the legis-

lation and it is not sustained. by declaring a

liberty of contract. It can only be sustained’

by demonstrating that it conflicts with some con:

_ stitutional restraint or that public welfare is

.not subserved by the legislation.’’ ‘(Erie v.

Wiliams, 233 U.S. (1914) 685 at 699, 58 L. Ed.

1155.) : Zo )

‘‘Where the legislation has usage to support

_ its position it is much stronger’’ (People ex

rel. v. Murry, 149 N. Y. 367 at 376; 44 N. K.

3 —. v. Schweiner, 214 N. Y. 395; 108

N. E. 639). . |

In Mississippi the Legislature had knowledge as to

the abuses which had gone on in the building trade.

and in the matter of the deprivation of rights of la-

borers and materialmen in the assigning of the con-

tract price by the chief contractor.

These abuses were ,corrected by the Legislature in

the legislation here under attack and the public need

will be presumed by this Court, and the frauds which

heretofore ran rampant throughout the State were

blocked by the legislation now being sought. to be over-

hrown. .

_ Mr. Justice Clark :afftrmed the doctrine in the Chi-

cago Billboard case when he declared that the Courts

were disposed to favor the validity of laws relating to

matters completely within the territory of the State

enacting them, and it so reluctantly disagrees with the |

local legislative authority, primarily the judge of the

public welfare, especially when its action is approved

by the high court of the State (Thomas Cusack v.

Chicago, 242 U.S. 526, 61 L. Ed. 472).

ah)

‘> |

The doctrine was again affirmed in Hutchinson Ice

Cream Company v. State, 242 U. 8. 153, 61 L. Ed. 217.

And again in the Queens Gas: Company case, wherein

the Court refused to review the facts, or even the

reasonableness of an administrative order (N. Y. ex

rel McCall, 245 U. S. 345, 62 L. Ed. 337).

The same principle was reaffirmed by this Court by

' Mr. Justice Day in the municipal fuel yard case,

_ Jones v. Portland, 245 U. S. 217 at 221, 62 L. Ed. 252,

wherein he as the organ of the Court said:

‘‘While the ultimate authority to determine

the validity of legislation under the 14th Amend-

ment is rested in this Court, local conditions are

of such varying character that what is or is

not a public use in a particular-state is mani-

festly a matter respecting which local author-

ity, legislative and judicial, has peculiar facili-

fies for securing accurate information.’’

Mr. Justice McKenna rested the case of Bunting v.

Oregon in no-small degree on the same _ principles

(242 U.S. 426, 61-L. Ed. 830).

Mr. Justice Holmes in the case of Hebe Co. v.- Shaw,

248 U.S. 297, 63 L. ia. 256, said:

‘‘Tf the character or effect of the article so

intended to be used be debatable, the Legis-

lature is entitled to its own judgment and that

judgment.is not to be superseded by the verdict

of a jury, or, we may add, by the personal opin- _

ion of the: judges, upon the issue which the

Legislature has decided.”’

The same proposition formed the chief justification

given by Mr. Justice Day in upholding the non-parti-

‘san legislation of North Dakota, wherein the Court: |

says: |

‘*What was’ or was not a public use was a

question concerning which local authorities, leg-

islative and judicial, had special means of secur-

ing information to enable them to form a judg-

ment; and particularly that the judgment of -the

highest court of the State, declaring a given

use to be public in its nature, would be accepted !

by this Court unless clearly unfounded’’ (Green

v. Frazier, 253 U. S. 233 at 242; 64 L, Ed. 878).

It, therefore, must be concluded, that if presumption

is to be engaged in to support the law and only clear

and undemonstrated usurpation of power will author-

ize’ police interference with legislative action (Green v.

Frazier, 253 U. S. 233; 64 L. Kd. 878). Other cases in

which the Courts have defetred to the Legislature are:

Dominion Hotel Co. v. Ontario, 249 U. S. 266; 62 L. Ed.

597 (Mr. Justice Holmes déclared the 14th Amend-

ment is not a pedagogical requirement of the imprac-

ticable) page 268; U. S. v. Standard Brewery, 251

U. 8. 210, 64°L. Ed. 209; State v. Cantwell, 179 Mo. 245;

78 S. W. 569 affirming Cantwell v. Mo. 199 U. S. 602,

50 L. Ed. 329; N. Y. ex rel. v. Hesterberg, 211 U.S. 31;

53 L. Ed. 75; Parrott v. Benson, 114 Wash. 116, 194

Pac. 986; State v. Pitney, 79 Wash. 608 at 612; 140 Pac.

918; Securities Savings Bank v. California, 263 U. S.

982: 68 L. Ed. 301. :

InU.8.F. 4G. Co. v. Celie States, 191 U.S: 246, 45

L. Ed. 246, it is said: .

‘*We find no difficulty whatever in answering

this question in the negative. The rule of

strictissimi juris is a stringent one, and is liable

at times to work a practical injustice. “It is one

which ought not to be extended to contracts not.

;

—

RESET ee ee

57.

within the reason of the rule, particularly when

the bond-is underwrittén by a corporation which

has undertaken for a profit,to insure the obligee

against a failure of performance on the ‘part

of the principal obligor. Such a contract.should

be interpreted liberally in favor of the sub-

contractor, with a view of furthering the benefi-

cent object of the statute. Of course, this rule

would not extend to cases of fraud or unfair.

dealing on the part: of a subcontractor, as was

the case in United States use of Heise v. Ameri-’

can Bonding & T. Co., 89 Fed. 921, 925, or tos

cases not otherwise within the scope of the

undertaking.

‘*Bonds containing the covenant in question -

are not common, though they have sometimes

appeared in the state courts, and the construc-

tion here given them has been getierally adopted

(United States use of Snyder v. Hazard, 53 App.

Div. 410, 65 N. Y. Supp. 1051), although these

cases have generally turned upon the question

whether the rights of the materialmen were

affected by a change made in the contract by the

° principals. Dewey v. State, 91 Ind. 173; Conn v.

State,'125 Ind. 514, 25. N. E. 443; Steffes v.

Lemke, 40 Minn. 27, 41 N. W. 302; Doll. Crume,

‘41 Neb. 695, 09 N. W. 806; Kaufmann v. Cooper,

_ 46 Neb. 644, 65 N. W. 796; Griffith v: Rundle, 23

~ Wash. 453,55 L. R. A. 381, 63 Pae. 199.”

Compare Pingrey on Suretyship & Guaranty, Sec.

112, p. 189; Doll v. Crume, 59 N. W. 806, 41 Neb. 635 ;

Federal Union Surety Co. v. Commonwealth, 129-S. W.

335, 139 Ky. 92; Forburger Stone Co. v. Lion Bonding

€ Surety Co., 170 N. W."897, 103 Neb. 202; Standard

ole 58 2

Salt & Cement Co. v. dies Surety Co., +158 N. W.

. 802, 134 Minn. mi

Further, ‘the Courts have been at pains’ rn hold that, ;

_with a corporate surety, being thus paid, there must

be proof of damage before discharge. Herein hereof”

‘there is none. Atlantic Trust & Dep. Co. v. Laurin-

burg, 163 Fed. 690,695; City of Topeka v. Federal

Union’ Surety Co., 213 Fed..958, 963; Maryland Casu-

alty Co. v. Fowler, 31 F. (2d) 881, 884; Atlas Assurance

Co: v. Lawrence, 34 Fed. (2d) 401, 404; West v. Detroit

Fid. & Surety Co., 225 N. W. 675, 118 Neb. 554 ; Phila-

delphia v. Fid..& Dep. Co., 80 Atl. 62, 63, 231 Pa. 208;

| U.S. F. & G. Co. v. United States, 178 Fed. 692 ; City of

Montpelier v. National Surety Co., 97 Vt..111, 122 Atl. *

_ 488; People v. Traves, 154 N. W. 130, 188 Mich. 415; -

.. American Surety Co. v. Smith, 130 So: (Fla.) 442;

Johnson v. Casualty Co., 1383 So. .(Fla.) 850.

Note that this foreign Company was at pains, directly

in the teeth of our statutes, to stipulate that ‘‘no ac-

tion, suit or proceedings shall be had or maintained

against a surety under this bond ‘unless it shall be —

brought or instituted and process served ‘upon the

surety within six months, after. the contract and i in no

event after six months subsequent to the date, time or .

period fixed in the contract for the completion of the

work specified, therein’’ (Ty. 20, Par. 9). 7

Section 2294, Code 1930; Lasky v. Southern Express:

» Co.492 Miss. 268, 45'So. 869; Standard, etc., v. Broom,

111 * Misa. 409, 71 So. 653 ; Sovereign Camp, etc., V. -

Miller, 125 Miss. 502, 87 So. 892; Sifiyvesant v. Smith,

135 Miss. 585, 99 So. 575.

* Counsel’ s declaration that ‘‘the parties were stadi-

: ously attempting ‘to draw.a special contract which

would not impose upon the surety the liability imposed

under Section 3 of the Statute’’ is not accurate, for

- this bond, as is, with this contract, as is, eomes from

Louisiana where the obligation to pay is as.above i in-,

dicated.

‘If, for the purposes of this argument, we should ad-

mit that the bond here is such a bond as was contem-

plated by the statute, the fallacy in the argument for

appellant is that it fails to note that, quoad the. land-

‘owner, the obligation to pay the materialmen could not

de by the landowner defegted, nor could it be defeated

by the contractor; there Were two independent obliga-

tions, the one to the materialmen that ‘‘such bond shall

also be ‘subject ’ the additional obligation that the

.contractor *** “*- shall promptly make payments to

all persons’ furnishing: labor ‘or. material under said.

contract ; the other, in thé event such.bond does not

contain any such provision for the payment of the

. claims of persons furnishing’ labor or material under

- such contraét, such bond shall nevertheless i inure to the

benefit of such persons furnishing labor. or materials

under said contract, the same as if such stipulation had

been incorporated in said bond,’’ namely, the stipula-

tion to make payment, which stipulation as an inde-

pendent covenant has here been established to. exist_

under the law of the State of Mississippi. .

This statute, as written, was construed in this case

and all herein held was that this particular bond, with

the particular and express provision there inserted did

constitute such a bond as was contemplated whereon

the materialmen might recover. The court has not as

yet denied the right to the landowner to take a bond,

but this particular landowner did take this bond, and

in taking, thought, as his bill averred, that he had that

specifically which the Supreme Court held he had re-’

ceived. The only attempt at denial is as to a surety,

who signed the bond, giving. the wight assumed by the

landowner to be given: ,

* Counsel is beside the mark in claiming that the land-

owner here did not understand that under this bond

‘the obligation to pay existed.

Complainant further averred and charged that the

parties herein named as furnishing material. in con-

nection with said project No. 640 to said contractors

‘chave not been paid and are entitled to recover ‘the

amount owing to them by said contractor and to have

judgment for. said amount\on said bond,’’ but in the

alternative, if the ybond be not such.a performance

bond, then to have the assignments: to the. New

Orleans Bank vacated. The ajfspellant is in serious

error when it seeks to assert that the landowner here

did not intend to contract and did not believe that it -

had contracted for a performance bond for the pay-

ment of the materialmen. The original bill here filed .

so shows. x : |

The amount of the bond in this case is, $316,822.00,

error in asserting that more than the amoynt of this

bord might be recovered. Compare Section 758, Code

1930; Parsons, etc., v. Furr, 110 Miss. 795, 70 So. 895;

National Surety Co. v. Lee, 125 Mé@ss. 517, 88 So. 7.

Counsel's ‘contention that there was an express con-

dition that it should not inure to the Lenefit of mate-

-rialmen, the statute was unconstitutional for its

abridgment of the liberty of contract (Brief 19), is

answered by the observation of Leslie Lumber & Sup-

ply: Co. v. Lawrence (Ark. 1928), 11 8S. W. (2d), 458 :

“This provision is plainly in conflict with the

condition in the bond just discussed and with

the law applicable thereto as stated. By the

first condition the: bond company has provided

- protection for. a class of persons who, under the

law, may sue; yet by the last provision it is pro-

vided they may not sue. Both cannot stand.

Surety contracts of this character, with a paid |

surety, are regarded as in the nature of insur-

ance contracts, and will be most/ strongly: con-

strued against the surety. Union Indemnity Co.

v. Forgey & Hanson, 174 Ark./1110, 1115, 298

. S. W. 1032, and cases cited. Applying this rule

to the contract in question, the third clase in -

the bond must give way to the first and bel even

no force or effect.’’

It is further answered by a correct bikenpsiutiaiiiins of

the bond. The facts presented to the . Supreme

Court of Mississippi are not presented to this Court

insofar as these appellees are concerned; the record,

as now presented, nowhere shows that the owner paid

the contractor in notes instead. of in é¢ash, and that

question cannot ‘be here argued, especially, as no dam-

age was shown to haye therefrom resulted. ,

Counsel is in error in stating the extent to which the

Supreme Court’ of Mississippi has limited the rights

of the respective parties to this litigation. It has gone

+ Rete.

Rec Beste

‘ey, 1%)

NS 62

no further than to determine this particular case un-

‘der this particular bond, and thereby there has been

no ruthless disregard of private rights.

Counsel’s. dissertation as to who can give these

bonds, and the number of contractors, With deference, ,

has no foundation in fact, for that wherein Mississippi

was interested was, when the material of its citizens

was placed upon land, and thereby the value of such

land was enhanced, that the surety for the performance ~

of the eontractor should be responsible to the mate-

rialmen. Being obligated to perform the contract;

should the principal therein fail, each contribution of

material made was an advance to the surety whereby

that for value by the surety guaranteed, was in part

done, and that now herein Sought is the ungracious

contention that, when the materialmen have by, their

- contributions aided the performance of that guaran-

teed by the surety and wherefor the surety was uncon-

ditionally bound, there will be to them no compensa- .

‘tion for that from them thus taken by the surety.

As demonstrated by Mr. Justice Lurton in the Great

“Southern Hotel Company case, supra, approved by

this Court in 193 U. S. 532, 48 L. ed. 778; responsibility

is unquestioned and imposed upon this surety. who thus

used for its exoneration, the material contributed by

these appellees. Had they not. contributed this mate-

rial—this labor, then to perform appellant would of

necessity have been compelled to go elsewhere thus to

-> obtain that so thus requisite, and when under the

agreement appellees had so thus to it furnished value,

it was competent for the Mississippi Legislature un-

der the precise ruling approved by this Court to im-

63 -

pose therefor an obligation on that surety which had

undertaken to do that which was thus aided, abetted—

rendered possible, by the material belonging to —

lees.

‘The statutory requirement existed aren the ay

lant executed this bond and the law of Mississippi, as

thus existent, was thereby thereinto written and not

‘ oly written, but agreed to, and having been agreed

to, no complaint may be thereof made. Farmers &

Merchants Bank v. Federal Reserve Bank, 262 U. S:

- 660, 67. L. ed. 1182; Pennsylvania, etc.; Co. v. Gold

Issue, etc., Co., 248 U. S. 93, 61 L. ed. 610.

Counsel idatun truly: ‘‘The surety had the right to

come in and complete the work.’’? (Brief page 20.)

This was its obligation. When.in order to fulfill that

_ obligation the appellees contributed their material, |

they thereby, quoad the surety furnished value for the

obligation now exacted, and if.it be that at a subse-

quent time, without fault upon the part of these ma-

terialmen, there was a failure by the contractor to do

that which he should quoad the surety, therefore these

appellees are not in any way therefor responsible.

Asheville Supply & Foundry Co. v. Catawba Const.

Co, (N. C. 1930), 151 S. E. 93; Graphic Arts Bldg. Co.

v. Union Indemnity Co., 163 La. 1, 111 So. 470. When

one of two innocent persons must suffer, the law may

direct which will bear the burden, and this election so

thus made in this cause by the Statute of Mississippi

is reasonable. -These appellees are not interested in

anything other or further than that under and with.

the consent of owner, contractor, and appellant, they

furnished material to the extent wherefor a decree

was rendered. That’ material was integrated‘into a

bnilding -which the surety was bound to see completed

and to save harmless the landowner. Therefore, to

the surety that thus done by appellees inured, and the

- point here at issue is may Mississippi exact of the

appellant, thus receiving, value for that thus received.

As said in Lockland Lumber Co. v. Robinson, 157

‘N. E. (Ohio) 376, mechanics lien statutes do not cre-

ate rights but merely afford additional remedies for -

‘rights in equity theretofore existing. ‘‘Natural equi-

ties in favor of materialman as creditor of the con-

: tractor give reason, and. constitutional validity to such

a provision.”? _ ~

This ‘Court cannot consider the cunstitationsl right

of the landowner; he does not complain, but avers the

obligation of the surety to do that by the Supreme

Court. of Mississippi to him adjudged to have been.

done. The surety lias our goods towards the fulfll-

ment:of his contract, rendered immovable and impos- , .

~ agreed as he here did to pay, that the statute make him’

do that which he has covenanted.

' he liberty of contract is not here sought to be

taken away. We subscribe to every decision cited

_, by appellant from this Court; but that which appellant

overlooks is that, while there is a liberty of contract,

_ when a statute, as heré, deals with the doing of jus-

tice, and only vouchsafes, as -against one bound to

construct a building, a decree for that contributed

without fault by the appellees, that thereasto the .

surety so thus giving bond has no cause to complain.

“y

a ee

As pointed out in Williams v. Riley, 280 U. S. 78, 80, |

74 L. ed. 175, 178: | .

«The Federal courts have no power per se

to review and annul acts of state legislatures

-upon the ground that-they conflict with the Fed-

eral or state Constitution. ‘That question may

be considered only when the justification for

, some direct, injury suffered or threatened, pre-

' genting a justiciable issue, is made to rest upon

such an act.’ ”’

Ohio Oil Co. v. Conway, 281 U. S. 46, 74 L. ed, 775;

‘ White v. Johnson, 282 U. 8S. 367, 75 L. ed. 388; -Ameri-

can Bond & Mortgage Co. v. United States, 282 U. S.

374, 75 L..ed. 395; and as. pointed out, constitutional

objections to a statute, which may exist, if given a

wider application than it is necessary to give in the

decision of this particular case, is not open to consid-

eration herein. Young Co. v. McNeal-Edwards Co.,

283 U. S. 398, 75 L. ed. 1140. .As pointed out in State

Board of Tax Comrs. v. Jackson, 283 U. S. 527, 75 L.

ed, 1248, tlie fact that a statute discriminates in favor

of a certain class does not make it arbitrary if the

discrimination is founded upon a reasonable distine- :

tion or if any state. of facts reasonably can be con-

ceived to sustain it. - Here, with the receipt by the

appellant of appellee’s property, donated to perform

its contract, appellant may not, having that property

now’ in its possession, refuse to pay the reasonable

value thereof. The fact that the statute may work a pe-

-culiar personal hardship does not render it unconsti-

\ Fe

simp Dest MAINES ITO ENR BIN ASD ENO A GEL ILE TANT RS ALLEL SLE AEDT ERI

tutional. Bain Peanut Co. v. Pinson, 282 U. S. 499,

75 L. ed. 482. That the State, in the matter of protect-

ing materialmen, has a broad discretion in the exercise

of its power of regulation must be admitted. Smith

v. Cahoon, 283 U. S. 553, 75.L. ed. 1264... — ,

In O’Gorman v. Hartford Fire Ins. Co., 282 U.S.

257, 75 L. ed. 327, the Court declared:

‘‘The business of insurance is so far affected ~

with a public interest that the state may regu- —

late the rates (German Alliance Ins. Co. v.

Lewis, 233 U. S, 389, 58 L. ed. 1011, L. R. A.

1915, 1189, 34 S. Ct. 612), and likewise the

_relations.of those engaged in the ‘business (La

_ Tourette v. McMaster,’ 248 U. S. 465, 63 L. ed.

362, 39 S. Ct. 160; Stipcich v. Metropolitan Le

Ins. Co., 277 U. S. 311, 320, 72 L. ed. 895, 899,

48 S. Ct. 512). Compare McCarter v. Firemen’s

Ins. Co., 74 N. J. Eq. 372, 382, 29 L. R. A. (N.

S.). 1194, 135 Am. St. Rep. 708, 73 Atl. 80, 414,

18 Ann. Cas, oe. ** ”*

‘‘The statute here questioned deals = a

subject ¢learly within the scope of the police

. power. We are asked to declare it void on the

ground that the specific method of regulation

prescribed is unreasonable and hence deprives

the plaintiff of due process of law. As under-

lying questions of fact may condition the con-

stitutionality “of legislation of this character,

the presumption of constitutionality must pre-

‘vail in the absence of some factual foundation

of record for overthrowing the statute: It does

not-appear upon the face of the statute, or from

any facts of which the court must take ‘judicial . °

notice, that in New Jersey. evils did not exist

. % , ee

eR GT a GL Ig Sela Rae eg Wp IRE Fly mL he . hose eu aie : ? ’ x

in the business of fire insurance for which this

_ statutory provision was an appropriate remedy.

The action of the legislature and of the highest

court of the state indicates that such evils. did

exist. The record is barren of any allegation

of facts tending to show, unreasonableness.’’.

The principle here involved, namely, the obligation

of the surety to pay when the property of the appellees

was devoted to that wherefor the surety was bound,

_ was recognized. and held constitutional in Staten Island

Rapid, etc., v. Phenix L, Co., 74 L. ed. 126, 281 U. S.

28. ‘The business of appellant being affected with a

public ‘usg, even under the 5th Amendment, the regu-.

lation of charges did not deprive it of liberty or prop-

erty without due process. Tagg Bros. v. United States,

280 U.S. 420, 74 L. ed, 524.

The landowner may well object to living in a house

which was byilt.with materials that were not paid \..

for. This was recognized by this Court in the Great

Southern Case, and furnishes an additional reason why

this act is constitutional. -

Appellant, having in possession the materials of

appellees in virtue of installation in that wherefor ap-

‘ pellant was normally bound, is estopped, by this ‘con-

structive reeeipt, which in the normal travel advan-

. taged it, to deny therefor responsibility when the ap-

pellees are without fault. Compare Hightower vy. +’

Bailey, 108 Ky. 198, 56 S. W. 147, 22 Ky. Law Rep. 88, .

49 L. R. A. 255, 94 Am. St. Rep. 350.

Under Section 2, Chapter 128, Laws 1918, if the

principal contraetor desires to ‘‘assign, transfer, or

otherWise dispose * * * of the contract or pro-

cee ese thereof, to the detringint or en of: the

subcontractor, materialmen or laborer,’’ then he may

not do so, unless the bond ‘provided is given.

If the master workman or contractor does not assign,

transfer or otherwise dispose of either the contract

or its proceeds to the detriment or prejudice of the

subcontractor, materialman or laborer, he may xon-

tract as often as he pleases, without bond; that is to

say, if he forthwith applies the total proceeds of the

* contract to the liquidation of his individual liability to

subcontractor, laborers, materialmen, the statute does

not affect him in any way.

It is when he desires to exercise a right, viz., to.

assign, transfer, or otherwise dispose of these amounts

to the prejudice or detriment of those justly entitled

thereunto, that the statute says, in order to obtain this

right, he must execute a bond to ‘protect those justly

entitled.

The United States has adopted precisely this same

protection. United States v. American. Surety Co.,

200 U. S. 200, 50 L. ed. 441. The Supreme Court of

Mississippi gives the same effect to our statute. Ala-

bama Marble Co. v. U.S. F. € G.Co., 111 So. 573, 146

Miss, 414.

_ In Mankw v. United States,-215 U. 8. 536, 54 L. ed.

317, it was held, specifically, to be constitutional to im-

pose this. liability in favor of subcontractors, even.

though the full amount due had been paid.

~ In Hlinois Surety Co. v. Davis Co. .. 244 U.S. 380, 61

L. ed. 1211, the Court said:

‘‘As the basis of recovery is supplying labor

and material for work, he who has supplied

, .

es ee ee Sere Co kaa

¥ .

- 5 ,

hs sh: sdenie dkeiemeddcns Wile aati PPP EMT DS . , { Ma

these to a subcontractor may claim under the

bond, even if the subcontractor has been fully

paid. Mankin v. United States, 215 U. S. 533,

54 L. ed. 315, 30 Sup. Ct. Rep. 174..?

‘Counsel ‘seeks to distinguish ihese cases on,--the

ground that the United States, or the state, has plen-

ary power to prescribe conditions of contract when

* the sovereign is contracting; but, insofar as the con-

*tractee is concerned, furnishing materials for the

building where the land is owned by other than the con-

tractor, the right, quoad contractee, is precisely sim-

ilar to.that here involved and here sustained. Dickson:

_v.U. 8S. F. & G. Co., 117 So. 248, 150 Miss. 864, supra.

Compare A’tna Casualty & Surety’ Co. v. U. 8. }

Gypsum Co., 39 8. W. (Ky.) (2d) (1931) 234 (a com-

panion case which was followed in Rafhsey v. Vin-

cennes Bridge Co., 283 U. S. 796, 75 L. ed. 1420), wher@

it was said: °

- “Tt is argued that the distinction in the de-

cisions depends upon.the character of the sub-

ject-matter of the contract, and, when the con- .

tract concerns a public improvement, as here,

it will be presumed that the bond was intended

for the benefit of laborers and materialmen.

It is said that they are unable to assert a lien

on public property, and for that reason the bond

is provided to supply the rights ordinarily given -

by lien laws. In amplification of the argu-

ment, it is insisted that, when the subject-matter

of a contract is a private structure, the lie

laws of the state afford ample remedy, and it

is unnecessary to resort to a bond for their pro-

tection. But such distinction is artificial and

ie Ata tremha accidental etanee of the

‘Cases. ” * ry _ *

. “The same motive that gitinptn’- the pas-

sage of material and labor lien laws is sufficient

‘to suggest the expediency of’a surety contract

~~ for the benefit of those who perform laboror

furnish material. A private owner may well de- -

sire to be free from the vexation of claims or

suits, and to that end may require a bond to

_ protect him against vexation as well as liability.

It is conceivable that. a private owner. might

wish not to have upon his property a structure

composed of materials or erected by labor not -

paid for by the contractor. So, if the contract

is sufficient in its terms to manifest: an intention

that the contractor shall pay for the labor and

material, it is a valid obligation and enforce-

able in favor of any pérson “for whose benefit at

+. may have been executed. as

The rule is ‘that if it were constitutional: to insert

the name of thése appellees as payees, then it would

be constitutional to insert ‘the’ provisions under which

the obligation was to them payable, when, ‘voluntarily,

this corporation made.the obligation for a valuable

. consideration. “Philip Carey Co. v. Maryland Casualty

Co ., 206 N. W. 808 (Iowa, 1926), where the court said:

(3) Where a statutory bond is given, the

’ provisions of the statute will be read into the

“ bond. Asberg v. Ass’n, 143 Minn, 354, -173

N. .W. 708; People v. Surety Co., 211 N. Y. 107,

105 N. E. 99; School District v. Construction

-Co., 87 Or. 132, 169 P. 507, 788; Nye-Schneider-

Fowler.Co. v. Roeser, 103 Neb. 614, 173 N. W.

605; United States ex rel. Hoffman.v. Quincy,

4 Wall (71 U. S. 535, 18 L. ed. 403) ; Northern

Pacific R. Co. v. Wall, 241 U. 8. 87, 36 S. Ct.

493, 60 L. ed. 905; Gill. v. Paysee (Nev.) 266 P.

- 302; Forgarty v. Davis, supra; Faurote v. State,

» 110 Ind. 463, 11.N. E. 472; Lowe v. City, 4 Okla.

287, 44 P. 198; Iddings Co, v. Construction Co.,

104 Neb. 124, 175 N, W. 643, again, and aside:

from this well recognized rule, it is the plain

requirements of the statuté itself that the pro-—

visions and requirements of the act shall not

sions in the bond.”’

Compare Peoples v. Metropolitan Surety Co., 105

be modified and annulled by statutory provi-

NE. 99 (1914, Nu Y.); American Surety Co. v. Small.

Quarries, 120 S. E. 617 (1923 Ga.).

Consider Section 2888 of Code Mississippi 1930, pro- .

. viding :

“<¢Conditions of - Official Bonds.—The bonds ,

_, of all officers required to give bond shall be

conditioned in the following form, to-wit:

‘‘ ‘Whereas, the above bound A B was duly »

elected (or appointed) to the office of

the — day of

. from the — day of ——; therefore, if he shall

faithfully perform all the ‘duties of said office

during his continuance therein, then the above

obligation would be void.’ | co ot

, on

‘‘But the-fatlure to observe the form herein

prescribed shall not vitiate-any official bond;

and all official bonds shall-be valid and binding

for the term of — years, |°

in whatever form they may be taken, except so |

far as they may be conditioned for the per-

formance‘of acts in violation of the laws or

' policy of the state; and whether in the proper

penalty or without any penalty, or whether cor-

rect or incorrect in its recital as to the term of

ae, ee

a ; ‘ °

‘office or otherwise, or whether properly payable

or whether approved by the proper officer or not

‘approved by any, or if irregular in any gther

respect, such bond, if delivered as the official .

' bond of the officer to the full pénalty,-or if it -

has no penalty, to the full penalty: of the bond

which might have been required.’’

This provision has been in effect since the Code of

- 1871, and has been enforced by divers decisions of

the Court, Cox v. Ross, 56 Miss. 481; State v. Smith,

87-Miss. 551, 40 So. 23; Adams v.: Williams, 97 Miss.

113, 52 So. 865.

When, as here, the law. prescribes what the: penalty

shall be, what the conditions shail be, it has been the

holding of our State that a blank piece of paper prop-

erly signed was a valid bond. Furthermore, by Sec-

tion 5185, Code of 1930, the legislature specifically

' provides the form of the ‘‘mortgage clause.’’ Under

Bacot v. Phenix Ins. Co., 96 Miss. 223, 60 So. 729, this

section automatically writes itself into every insurance ~

contract. .Ktna Ins. Co. v. Cowan, 111 Miss. 473, 71

So. 746.

cifically contracted as a surety company doing busi- |

ness in the State of Mississippi, and is there engaged

in this business, as a part and parcel of the modern

proteetion, demanded under 4he name of insurance,

the power of the State has become paramount to regu-

late.and to integrate into this bond as into a policy,

all of those things requisite and necessary to protect

the citizen. This‘s a part of the insurance business,

and this bond is given pursuant to permission granted

to this company when it.came into Mississippi, and it

. ‘ pee

PALESTINE SITE PLN IL MRM pe NT PER AEN ENS iene ? i. a

73 Py

' agreed specifically and definitely that it would be sub-

ject to the Department of. Insurance. Section 5129,

Code of 1930. |

Similar statutes exist elsewhere. Compare Amer- .

ican Indemnity Co. v. Burrows Hardware Co. (Tex.

* Civ. App.), 191 S. W. 574; Bio Grande Lumber Co. v.

Darke, 167 Pac. 241, 19184. R.A. 1199.

A statute requiring the owner to take a bond, and

} making him liable in case one was not. taken, has been

in effect in Louisiana for a long time, and, as pointed.

out in McDonald v. H. Gas & Oil'Co., 2 La. App. 241,

where-the owner, in a contract, does not require a hun-

dred per cent bond, Act No. 139 of 1922 does inot apply.

Bond Act No. 229-of 1916 does.. See, also, Baton Rouge

Sash € Door Co. v. Deceur, 2 L. App. 129; Joubart v.

U.S. F. & G. Co., 3 La. App. 525.

As pointed wah in Tennessee, Cole Manf. oe v. Falls

(1891), 80 Tenn., 16 S. W. 1045, where a-statute re--

- quired the owner to pay a claim, in excess: of the

_ amount due on the contract price, in favor of material-

men, the court, declared : | )

| “Double payment does not follow as a neces-

~ sary legal consequent in any case. In every

instance, the owner may fully protect, himself

by, withholding the whole or a sufficiency, of the ~

price agreed upon, frem the original contract,

uatil after the expiration of thirty days, or he

‘may see. to it, that the subeontractor and ma-

terialmen are paid as the work progresses, or

he may indemnify himself by bond as _ pre-

seribed in the 3rd section of this act.’’

In Kansas, Code of 1925, Section 1401, a lien is

given and in Section 1412 it is provided that the con-

Rigen arp

of all claims which might be a basis for lien

.and whefi same has been filéd, no lien, as herein pro-

74 “

Roe

tractor’ or owner mentioned in this may execute a

bond to the State of Kansas conditioned for payment .

” * %

vided for, shall attach. This statute has been in effect

for many years, and has been treated as ‘valid.

Under the Iowa Code, Section 3093, sailed

similar provisions have been made.

In California, Roystone Co: v. Darling, 171 Cal. 526,

1@ Pac. 15 (1915), approved in Roberts v. Spires, 232

Pac. 708, 195 Cal. 267, construed Section 1163 (1911)

which described two classes of liens. One class con-

‘ sists of liens in éases where the bond has not been

filed, in which case the state of accounts between the

owner and contractor,‘and even the contract price,

are immaterial.to the lien, except. as to the contractor.

‘The other class consists of all cases in which the proper

~ bond and contract-are duly filed.

This Roystone case is reaffirmed in the case of Hol-

lenbeck v. Amweg, 170 Pac. 148 (1917, 177 Cal, 159),

in upholding the constitutionality of the above statute,

wherein the Court said: ~~ f. *e

“It is further urged that the provisions ex- *

empting the owner from liability beyond the :

contract price if he file a bond and making him

. liable for liens to the extent of the valug of labor —

‘and materials if he does not provide such bonds

is in violation of the constitutional inhibitions of

the imposition of penalties by legislative enact-

‘ment. The Constitution (See. 15, Act 22) guar-

‘antees a lien to mechanics and materialmen ex-

tending to the full value of all labor and ma-

terials furnished. But the Legislature may, —

under authority given by. constitution, provide

certain conditions upon companies with which

the owner may restrict recovery to the.sum men-

. tioned in the contract. Such provision does not

impair any existing right of the owner—does

not, in short, penalize him—but- thie effect is to

confer a right not previously existing by which

the liability may, under certain circumstances,

be curtailed. Stenson Mill -Co. v. Nolan; 5 Cal.

App. 754, 91 Pace. 262. sd

There is, ian a similar provision in the Texas con-

stitution. 40 C../., 49. | ad

The rule in California ®oes much further than it is

essential to go in Mississippi. In the instant case, the —

~ bonds specifically provide for a liability, and even in.

the State of Texas they would be perfectly valid. See °

_ Fife v. Indemnity Ins. Co., 283 8. W. 645.”

In ‘Stewart v. Brewster, 284 S. W. 53 (1926 Ark.), .

where it was contended a materialman could not re- -

cover on bond given by contractors to owner, because -

said materialman had not filed his claim for a lien as

Sec. 6922 of C. & M. Digest required, the court held

in overruling objection and construing the statute:

“Tt will be observed that it is not ebligatory

» upon the owner of the improvement to require

the principal contractor to execute a bond. He

may do so or not, as he deems toshis interest.

Likewise, the contractor is not required, by.

virtue of the law, to execute a bond. He may

refuse to. do so. It is entirely a matter between:

the contractor and the owner as to whether the

bond provided by statute shall be executed.

But, where such bond is required by the owner |

and executed by the principal contractor, then

i |

the persons for whose use and benefit the bond is

executed (See 6906, supra) must look to the

bond as their-security for the payment of their

claims and not to’ a lien on the improvement.

In other wards, where the bond provided for

under 6912, of C. & M.-Digest, is not. executed

those. who are given a lien under See. 6906,

supr@, must comply with the provisions of See.

6922, supra, in order to avail/themselves of the

benefit of such lien; but if the bond is executed

as provided by See. 6912, supra, then the parties -

having claims, which might be the basis of liens,

do not have to comply with the provisions of

Sec. 6922, supra; in order that they may estab-

lish and obtain the payment of their claims.

They must resort to the bend. The language

of Sec. 1, of Art. No. 446, of Acts of 1911, See,

6912, sapra, shows that where the bond is exe-

cuted pursuant to that section the persons other-

wise entitled to liens are no longer entitled

thereto, and hence would not have to .comply

with the pr ovisions of Sec. 6922, supra, where

the bond is executed, ipso facto, tiie provisions

relating to liens on improvements are super-

geded and no lien ean ween.

See Accident & Indemnity Co. v. Knox.Co.,32 Atl.

261 (Ky. 1926), where it is said:

“This Court has also decided .of numerous

oceasions that those furnishing labor and ma-

terial could recover on a contractor’s bond

where there was a statute or ordinance requiring

that they should be protected by the bond. So.

‘Md. Bank v. Nat. Surety Co., supra; American

Fidelity Co..v. State, 109 A. 99, 135 Md. 326;

Baltimore v. Casualty Co., 126 A. 880, 146 Md."

508, 523; American Fidelity Co. v. State, 97 A..

717

12, 126 Md.-50. In the ease last cited the Court’

quoted with. approval. the statement found in an

exhaustive note to Knight. d Jellison Co. v.

Castle, 27 L. R.A. (N. S.) 573.

Again, Indepe pdertce Trust Co. v. Porter, 132 8. E.

806 (N. C.. 1926), says:

‘*On these, the facts chiefly relevant, we think

the demurrer as it relates to the second capse of

action was properly. overruled. Undoubtedly,

the laborers, had they not assigned their claims

would have been entitled. to maintai. 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,

31 8. Ct. 140, 319 U.S. 24, 55 L. ed. 72; Bank v.

Casualty Co., 161 P. 475, 93 Wash. 635, Ann.

( Cas, 1918 TP 645.

“Here the bond in suit’ wis intended to per-

form a double purpose: (1) To insure the faith-

ful performance of,all obligations assumed by

the contractor toward, the state highway com-

mission, (2) to protect third persons furnishing.

materials or performing labor in and about the

‘construction of said roadway. Plyler v. Elliott,

131 8. E. 306, 191 N. C. 49; Town of Cornelius

‘v. Lampton, 128 S. KE. 334, 189 N. C. 714. In

‘its second ‘aspect, the: bond contains an agree-

ment between the obligors and such third per-

sons that they shall be paid for whatever labor

or materials they furnish or supply to enable

the principals in the bond to carry out its con-

tract with the state highway commission. United

States v. Natl. Surety Co., 92 F. 549, 34 C. C,

526.’*

Again, in 1 Yawkey- Crowley Lumber Co, v. Sinaiko,

206 N:) W. 976 (Wis. 1926) :

“That the claims of those whom the owner

paid for labor and material did not ripen into

formal mechanics’ liens so as to comply with

the phrase in the contract concerning the bond

and relating to such mechanics’ liens i8 noi at

all material or controlling or in any way limit-

ing the liability of the surety. Upon the pay-

ment by the owner of the obligations of the

contractor for labor and material left unpaid

by him, such contractor, the owner clearly be-

came subrogated to the rights of those whose

labor and’material were thus paid for as against

the contractor and his surety on this bond. That

such a bond ‘does create an obligation in favor

of third persons furnishing labor and material

to such contractor has been too often held to

'.now need discussion. United States Gypsum

Jo. v. Gleason, 135 Wis. 539, 543, 116 N. W.

“238, 17 L. R. A. (N. S.) 906 ; R. Connor Co. Vv.

Etna Indemnity Co., 138 Wis” 13, 18, 115 N. W.

811 (in- which is distinguished the ease relied

upon in the court below ®f Elec. A. Co..v. United

States F. & G. Co., 110 Wis. 424, 85 N. W. 648,

53 L. R, A. 800; Warren Webster € Co. v. Beau-

mont Hotel Co., 151 Wis. 1, 10, 138 N. W. 102;

Concrete Steel Co, v. Ill. Surety Co., 163 Wis.

41, 47, 157 N. W. 543; Builders’ L. & S. Co. v.

Chicago B. € S. Co., 167 Wis. 167, 170, 160 N.

W. 320; Building Cont. L. M. L. Ins. Co, v.

Southern S. Co., 185 Wis. 83, 200 N..W. 770.

PE PENNE ON IT MY EIN Pe HS , ers — 7

‘‘Under the ‘plaig language of the bond, that |

the obligation of the surety is that the contrac-

tor will pay all the amounts due for labor and

materials,..required of him under the contract,

as well as the condition that there shall*be full

and complete performance’ of the contract, which

*by its terms in effect, requires the same thing,

“we can see no escape from liability of the surety

for any amounts, not in excess of the sum of

$8,000,, which were properly paid by the

. owner in excess of the contraet price in the com-

pletion of, the work. ‘That here was a gratui-

tous, as distinguished from a paid, surety, can- “

not’ permit the ignoring of unambiguous lan-

guage such as is’ here presented in the bond

° itself. There is here no opportunity to indulge

— in strict or liberal congtruction ; it permits but

of plain construction.’’

Bee Rio Grande Lumber Co, Vv. Darke, 50 Utah 114,

supra. . ~

Then, so far as this provision of the bond is con-|

_ cerned, substantially similar bonds in public contracts —

have been made effective by the Supreme Court of |

Miss.ssippi in U. S. F. & G. Co. v. Yazoo ii 110

So. 780, 145 Miss. 378.

The case here is supported by the rule of Surety Co.

v. Hall Miller Co., 104 Miss, 626, 61 So, 7007 where the

Court said:

ees’ Taking it as a cold-blooded business prop-

osition, this clause in the bond would naturally

encourage subcontractors of the best sort to .

take contracts to do certain parts

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