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7. MUNICIPAL CORPORATIONS

TO SUE.

348-PUBLIC a contract price of $48,000. The building was to be completed in the fall of 1916. It was not so completed, and in March, 1917, it was alleged that Bostwick abandoned the job. It was averred that he had executed the bond heretofore referred to, which will be more particularly mentioned later, and that this bond was conditioned to pay for all labor and materials furnished, as well as for the indemnity of the city of Bristol. It was stated

BUILDINGS-CONTRACTOR'S BONDS - RIGHT Though the city had in its hands and due the contractor more than enough money to pay, all labor and material claims, its suit on the contractor's bond, securing both performance and payment of claims, setting up his abandonment of the contract and the additional cost of completion and the liens and claims of labor and materialmen, was not premature. 8. MUNICIPAL CORPORATIONS

348-PUBLIC BUILDINGS-CONTRACTOR'S BONDS-ACTIONS -RIGHT TO SUE.

Where contractor gave single bond securing performance and also payment of labor and material claims and the city sued the surety for the additional cost of completion after the contractor abandoned the work, also setting up the claims of materialmen and laborers, demurrers to the separate petitions of the various laborers and materialmen should have been sustained, since the bill was not one of interpleader nor a general creditor's suit.

9. MUNICIPAL CORPORATIONS

348-PUBLIO BUILDINGS-ACTIONS-QUESTIONS FOR JURY. Where the city sued on a contractor's bond for his failure to complete the building, it was for the jury whether the city could recover liquidated damages for failure to complete the building.

Appeal from Chancery Court, Sullivan County; Hal H. Haynes, Chancellor.

Bill by the City of Bristol and others against William H. Bostwick and the United States Fidelity & Guaranty Company and oth

ers.

From a decree overruling demurrers to the bill, defendants appeal. Affirmed in part

and remanded.

St. John & Gore, of Bristol, for City of Bristol. Charles C. Trabue, of Nashville, and St. John & Gore, of Bristol, for E. & N. Lmbr. & Mfg. Co. Henry Roberts, of Bristol, Va., for Henry Hayes. J. H. Bundren, of Jefferson City, for Trussed Concrete Steel Co. J.

Carl Lambdin, of Jefferson City, and Rufus M. Hickey, of Morristown, for Citizens' Savings Bank & Trust Co. H. T. Campbell, of Bristol, for Mitchell-Powers Hardware Co. Park & Park, of Jefferson, Chas. T. Cates, Jr., of Knoxville, and Wm. M. Hall, of Memphis, for Wm. H. Bostwick and U. S. Fidelity & Guaranty Co. Heazel & Camblos, of Kingsport, for Kingsport Brick Corporation. O. L. White, of Knoxville, for S. B. White.

GREEN, J. This bill was filed by the city of Bristol and the city board of high school commissioners against William H. Bostwick, the contractor who had undertaken to erect a

new high school building for the city, and against the United States Fidelity & Guaranty Company, surety on Bostwick's bond, and against several laborers and materialmen.

The bill averred that, in pursuance of chapter 192, of the Acts of 1915, which authorized the city of Bristol to erect a high school and issue bonds for that purpose, the high school commissioners created by the act had entered into a contract with Bostwick, whereby he was to erect the said building at

in the bill that there were numerous laborers and materialmen who had filed claims with the high school commissioners, as provided by chapter 182 of the Acts of 1899, and that there were other laborers and materialmen whose claims would be filed in due season, and a recovery on the bond was sought for the benefit of such laborers and materialmen. The bill also sought a recovery against the surety of liquidated damages stipulated in the contract for the benefit of the city for the delay in completing the school building. It appeared from the allegations of the bill that a sum of money was still in the hands of the city, not yet paid out on account of the contract, and the city declared its willingness to appropriate this fund as the court might decree according to the equities of the case. The bill was thus exhibited both for the city and on behalf of the laborers and material

men

to recover from the bondsman the

amount that might be due after proper appli

cation of the funds retained and in the hands of the city. The city's claims were more fully set out in an amended bill that was later

filed.

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most of which the assignee of the contractor The grounds of the surety's demurrer, in has joined, are too numerous to permit of detailed discussion in a judicial opinion. Three or four general questions are raised, and in

disposing of such questions the reasons of our ruling on each ground of the demurrer will be apparent. The chancellor overruled the demurrers in toto, and the surety and the contractor's assignee have appealed.

The first question made is upon the right of the city of Bristol and its high school commissioners to bring this suit. It is said that this is not a bill of interpleader, and, inasmuch as the city cannot be held responsible for these claims of laborers and materialmen, it has no right to bring a suit of the character which a property owner may bring when his property is threatened with the liens of subcontractors. Perkins Oil Co. v. Eberhart, 107 Tenn. 409, 64 S. W. 760. Both of these objections are doubtless well taken.

[1] However, the fact remains that the city has a right to bring suit on its own claim, and we think there can be no doubt that it has a right to bring suit in behalf of the laborers and materialmen if these parties are protected by the bond which the surety company executed. The bond runs in the name of the city, and though it be for the benefit of other parties according to the best practice, an action is properly brought in the name of the nominal party for the use of the real beneficiary.

It seems never to have been doubted that the obligee of such bonds might bring a suit for the benefit of laborers and materialmen intended to be protected by the bond. The serious question has been whether such third parties had a right themselves to sue in the absence of statutory authority. This is a question on which the courts are divided. It is not doubted, however, in any jurisdiction where common-law practice prevails, that the obligee of a bond given to secure laborers on public works may bring suit for the use of such laborers. Many cases are collected and discussed in a note to Knight & Jillson Co. v. Castle, as reported in 27 L. R. A. (N. S.) 573. See concluding paragraph of note on page 601.

[2, 3] It is next contended for the surety that the bond sued on is not a statutory bond

which secures the claims of laborers and ma

materials and labor used in said contract in lawful money of the United States."

Sheen & Co., the local agents of the guaranty company, inserted the words authorized in the bond. These are the exact words required by chapter 182 of the Acts of 1899, which act makes it the duty of those who let contracts for any public building to take a bond so conditioned for the protection of laborers and materialmen.

The telegrams quoted are just as much a part of the contract entered into by the Guaranty Company as is the printed form which it executed first. The company was asked to make a bond which would comply with the provisions of the Acts of 1899, and the very language of the act was authorized by the company to be inserted in the bond already sent down. The attention of the company was called to the statute and to the decision of this court construing the statute, and it is idle to say that it was not intended by the parties to make the bond include the requirements of said statute.

When this bond was taken, there were two statutes affecting the duties of the high ises. The act of 1915 required them to take school commissioners of Bristol in the prema bond for the indemnity of the city; the act of 1899 required them to take a bond for the protection of the laborers and material

men.

terialmen, but a bond given only for the in- the attempt to take one bond embodying the There can be no objection fairly urged to demnity or protection of the city of Bristol. provisions of both statutes. The act of ConIt is accordingly urged that neither the sub-gress respecting contracts for public buildcontractors, nor the city suing for them, can have any right of action on the bond for labor and material furnished. Hardison v. Yeaman, 115 Tenn. 639, 91 S. W. 1111.

This bond as first executed was a mere indemnity bond for the protection of the city of Bristol, with certain restrictive clauses. Such a bond was required by chapter 192 of the Acts of 1915, which authorized the city to construct this building.

Before the bond was accepted by the city, however, its attorney advised that there be inserted therein a clause protecting laborers and materialmen, as required by chapter 182 of the Acts of 1899. Accordingly a telegram was sent by the contractor to the home office of the guaranty company in the following language:

"City attorney of Bristol wants inserted in bond executed for me to building commission, April 25th, page two, line three after word fulfilled, following, quote. And pay for all materials and labor used in said contract in lawful money of the United States. Being language required by chapter 182, Acts 1899. See Hardison against Yeaman, one hundred and fifteen Tennessee, page six thirty nine. Wire authority to W. G. Sheen and Co., here to insert clause."

To this telegram the guaranty company replied:

"Upon request of William H. Bostwick, insert in bond number two five five three five four dash sixteen on page two line three after

ings generally, and the act of Congress respecting contracts for public buildings in the District of Columbia, both require bonds for the protection of the government and bonds for the protection of subcontractors. It has been repeatedly held by the lower federal courts, and finally held by the United States Supreme Court, that one bond may be made to protect both the subcontractor and the government, that there is no obstacle to the assumption by a surety of such a dual obligation, and that such obligation will be enforced in favor of the several beneficiaries according to their respective rights. Equitable Surety Co. v. U. S., for Use, etc., 234 U. S. 448, 34 Sup. Ct. 803, 58 L. Ed. 1394, and cases therein reviewed.

We are accordingly of opinion that the surety here intended to execute a bond which would comply with the provisions both of the act of 1899 and of the act of 1915, the bond protecting laborers and materialmen as well as the city of Bristol. It was so designed by the parties, and it is the duty of the court primarily to construe every contract to effectuate the intention of those contracting. This will be done even though it be necessary to ignore certain apparently inconsistent language contained in the instrument.

[4] The circumstance that the bond was in a penalty larger than that required by the

were unmindful of that statute. The bond, being intended to comply with the provisions of the act of 1915 as well as the act of 1899, would naturally be in a larger sum than compliance with the earlier act alone would have required.

It is again insisted that the claims of these materialmen and laborers cannot be allowed because seasonable notice was not given by them to the proper authority, as required by the act of 1899.

Section 4 of said act provides: "That the laborer or furnisher of materials, to secure advantage of this act, shall file with the public officer who has charge of the letting of any contract, an itemized statement of the amount owed by the contractor for materials and labor used, within thirty days after the contract is completed."

It is averred in the bill, with respect to

the claims of those subcontractors for whom

tice must be given within 30 days from completion of the principal contract, not from completion of the subcontract.

So we must hold that notice given within 30 days from the principal contractor's default perfects the subcontractor's claim on the bond under the act of 1899. This is the only chance of the subcontractor to obtain the benefit of a statute peculiarly designed for his protection under just such conditions. See Basham v. Toors, 51 Ark. 309, 11 S. W. 282, construing provision of mechanic's lien statute as to notice somewhat similar to such provision in Act of 1899.

[6] The city of Bristol made an allegation of compliance with the statute for the subcontractors in whose behalf it sued. Other subcontractors who came into the case later

alleged compliance with the statute on their own behalf. All these averments must, of course, be taken as true on demurrer.

suit is brought, that notice was filed with the officers having this contract in charge, [7] It is also urged by the surety that this as required by law, within 30 days after the proceeding on the part of the city was premacontractor abandoned work on this building. ture. The ground of the objection is that it It appears that in another litigation a re-appeared from the original bill that the city ceiver was appointed for this contractor, and he was enjoined by the court from further proceeding with any of his contracts, including the one at Bristol, and work there was accordingly abandoned by him. Within 30 days from this time, according to the averments of the bill, itemized statements of these claims were duly filed, by certain la

borers and materialmen mentioned.

had enough funds in its hands to pay all claims and something over, and that it did not appear that there would be any deficiency or lack of funds to pay subcontractors. This construction of the bill is not sound, however, if the city should be allowed anything like so much as it claims in the way of liquidated damages. In the latter event, there would be a very considerable shortage, manifestly.

[5] We think such a filing of these statements is a compliance with the provisions of Moreover, in the bond executed by it, the the statute. The statutory provision is that the itemized statements shall be filed "with-guaranty company limited the time in which in thirty days after the contract is complet-and the bill herein was filed April 13, 1917. an action might be brought to April 25, 1917, ed." The contract referred to is the contract It is not necessary to discuss the validity of between the principal contractor and the of- this stipulation in the bond. Inasmuch, however, as such a stipulation is therein contained, the guaranty company is not in a condi

ficers having the public work in charge. When the principal contractor abandons the work, as when his affairs are placed in

the hands of a receiver, so far as he is concerned, he has terminated his contract. He has completed all the work he intends to do

thereunder, and for the purpose of filing laborers' claims such a contract is completed. Another construction would defeat the purpose of the statute in every case of contractor's default.

The act of 1899, in its provision for notice, differs from our mechanic's lien statute. The latter requires that the notice of the subcontractor be served within 30 days after the building is completed, or within 30 days after "the contract of such laborer, mechanic, or workman, shall expire," etc. Thompson'sShannon's Code, § 3540. Under the act of 1899, there is no authority for laborers and materialmen serving notice of their claims after completion of the building, unless that event marks the completion of the principal contract. Nor have such laborers and materialmen an opportunity to secure their demands by giving notice within 30 days from

tion to urge prematurity and charge undue haste against the city.

[8] The guaranty company also insists that the laborers and materialmen had no reason to file petitions or cross-bills or other pleadand it demurred to these pleadings on this ings seeking affirmative relief in this case, ground.

We think this contention is well made as to those subcontractors for whose benefit the suit was brought and whose claims were properly set out in the bill. As said before, this is not a bill of interpleader nor a general creditor's suit nor a property owner's suit to have liens determined and declared. It is merely a suit by the city, a quasi trustee, for the benefit of itself and for certain laborers and materialmen. Under no other theory could the bill be maintained so far as has been suggested to the court.

These subcontractors might, in the first instance, have brought independent suits if they so desired under the statute, but there

occupation.
6. LICENSES

PLOYMENT AGENCIES.

case by petition or cross-bill. This is true | the expense of issuing it, the services of officers as to those in whose behalf suit had been and other expenses directly or indirectly incibrought by the city and as to whose claims dent to supervising the particular business or necessary allegations had been made in the 11(7)-OCCUPATION TAX-EMcity's bill. It follows, therefore, that the demurrers to these petitions and cross-bills should have been sustained except as to those parties who had not filed notice of their claims prior to the bill and whose demands were not included in the bill.

[9] Under the terms of the contract the chancellor was correct in overruling the demurrer challenging the city's right to sue for liquidated damages, on account of the delay in the completion of the building. This is a matter for proof, and should be determined on the remand.

Except as indicated herein, the chancellor's decree will be affirmed. The costs of this court will be divided between the appellants. The costs below will be adjudged by the chancellor, who will tax those filing unnecessary pleadings, as above indicated, with the costs thereof.

MCMILLAN v. CITY OF KNOXVILLE. (Supreme Court of Tennessee. March 1, 1918.) 1. LICENSES 1-NATURE OF "LICENSE" OCCUPATION TAX.

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A "license," in its truer sense is issued under the police power, not for revenue, but for regulation, while a license may be issued on payment of an "occupation tax" levied under Const. art. 2, § 28, conferring power to tax privileges, revenue being its primary object, though regulation may be incidental; power exercised in the first case being to license and in the other to tax and license.

[Ed. Note.-For other definitions, see Words and Phrases, First and Second Series, License.] 2. LICENSES 1-NATURE OF "OCCUPATION TAX."

An "occupation tax" is levied primarily for revenue, and in instances for regulation incidentally.

[Ed. Note.-For other definitions, see Words and Phrases, First and Second Series, Occupation Tax.]

3. LICENSES 8(2)-EMPLOYMENT AGENCIES

-STATUTES-REPEAL.

It was competent for the Legislature to provide a regulatory license for and also an occupation tax on, employment agencies, the two not being inconsistent or impinging on each other; and hence Pub. Acts 1917, c. 78, providing for the regulation and supervision of "employment agencies," and requiring one engaging in such business to pay a fee and obtain a license, did not repeal Pub. Acts 1917, c. 70, taxing the business of emigrant agents.

4. CONSTITUTIONAL LAW 136 LICENSES 7(1)-OCCUPATIONS-AMENDMENT.

A license issued to an employment agent on payment of an occupation tax under Pub. Acts 1915, c. 101, levied primarily for revenue, did not preclude the state and a city from denying him the privilege of continuing the emigrant feature of his business thereunder until its expiration without payment of the tax on emigrant agents imposed by Pub. Acts 1917, c. 70, and a city ordinance. 7. WORDS AND PHRASES-"EMPLOYMENT AGENCY."

An "employment agency" may be defined to be one for the brokerage of labor for a fee paid by the applicant for employment or by the prospective employer, and any definition thereof would include the employment of laborers to work for another either in or beyond the state, and it does not imply placing of laborers and domestics in the borders of the state only. 8. CONSTITUTIONAL LAW 136 LICENSES 7(1) STATUTES - MODIFICATION OR RE

PEAL.

A licensee is bound to know that his license or permit, issued on payment of a tax primarily for revenue, is held subject to modification or repeal of the law under which it was issued, from the making of which change if the public welfare required it, no incidental inconvenience to him would stay the law.

9. COMMERCE 63-INTERSTATE COMMERCERESTRICTION BY LICENSE TAX.

The tax imposed by Pub. Acts 1917, c. 70, on the business of emigrant agents, is not a restriction on interstate commerce. 10. CONSTITUTIONAL LAW 89(1)-LICENSES 7(1)-FREEDOM OF CONTRACT.

Such tax does not interfere with freedom of contract.

LI

11. CONSTITUTIONAL LAW 230(2)
CENSES 7(6)—EQUAL PROTECTION OF THE
LAWS.

Such tax does not deny equal protection of the laws, because the business of hiring laborers within the state is not subject to a like

tax.

Appeal from Circuit Court, Knox County; Von A. Huffaker, Judge.

Suit by the City of Knoxville against James McMillan. There was a judgment in favor of the City by the city recorder, and from a like judgment on defendant's appeal to the circuit court, he again appeals. Affirmed.

Chas. M. Roberts, of Knoxville, for James McMillan. J. Pike Powers, Jr., of Knoxville, for City of Knoxville.

WILLIAMS, J. This suit involves the liability of plaintiff in error for conducting the business of an emigrant agent without obtaining a license, as required by a city ordi

It was competent for the Legislature to add to whatever regulation was created in the impo-nance. sition of a privilege or occupation tax on employment agencies under Pub. Acts 1915, c. 101, and Pub. Acts 1917, c. 70, by providing for more detailed policing regulation thereof in Pub. Acts 1917, c. 78.

5. LICENSES 1-NATURE OF FEE-DISTINCTION FROM OCCUPATION TAX.

A true license fee, as contradistinguished from an occupation tax, should be fixed to cover

The case was tried upon an agreed statement of facts. McMillan was found guilty by the city recorder and, on appeal, by the circuit judge. He has prosecuted an appeal to this court and assigned error.

The General Assembly of 1917 (Pub. Acts 1917, c. 70) made the conducting of the business of an "emigrant agent" a privilege, and

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

fixed the tax at $500 per annum; and the city, in pursuance of statutory power, subsequently by ordinance made the same a city privilege. The ordinance recites, substantially in the language of the statute:

"Emigrant Agent.

"Each emigrant agent, or person engaged in hiring or soliciting emigrants in this city to be employed or to go beyond the limits of the state, must pay an annual license, each per annum, $500."

Before the passage of the act and ordinance McMillan had paid the privilege tax prescribed for “employment agencies" in Acts 1915, c. 101, and the license issued to him did not expire until October 8, 1917.

There was also passed in 1917 another act (Pub. Acts 1917, c. 78) providing for the regulation and supervision of “employment agencies," which made it the duty of one engaging in that business to pay a fee and obtain a license from the state to be issued by the department of factory inspection. The act sets forth the details of the regulation by and the reporting to be made to the department, and prescribed a penalty for failure to comply. It is claimed by appellant that the passage of this last act operated to repeal by implication the other act or acts.

A further question is whether McMillan is liable for the emigrant agent's tax of $500; and whether the license that he held as operator of an employment agency protects him in doing the acts complained of, which were done after the passage of the ordinance, but before that license had expired.

The errors assigned are fairly indicated in the discussion which follows, and will not be formally stated.

[1] At the outset it becomes material to determine the nature of the license as employment agent so held by McMillan, and of the one issuable under the regulating statute. Chapter 78 of Acts 1917.

By article 2, § 28, of our Constitution, it is provided that the Legislature shall have power to tax privileges in such manner as they may from time to time direct, thus stamping a privilege to pursue an occupation as a tax-more strictly speaking an “occupation tax," but usually called in this jurisdiction a "privilege tax."

A "license." in its truer sense, is issued under the police power, while a license may be issued on the payment of an "occupation tax," levied under this taxing power embodied in the Constitution, revenue being its primary object, though regulation may be in mind as an incident. The two charges and licenses are distinct things, but confusion of thought arises at times, due to the fact that a license may be issued in either case. In the one case, the power exercised is that to license, and in the other to tax and to li

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nicipal corporation may by ordinance require a license to be first taken out, and charge a reasonable sum for issuing the same, and keeping the necessary record, but it cannot, by virtue of this authority, without more, levy a tax upon an occupation itself." Mayor of Nashville v. Linck, 12 Lea (80 Tenn.) 507. A license in this sense is a permit issued not for revenue, but for regulation. As said, an occupation tax is levied for revenue primarily, and, in instances, for regulation incidentally.

[3] We are of opinion that it was competent for the Legislature to provide a regulatory license for, and also an occupation tax upon, such agencies. The two are not inconsistent; neither impinges on the other. 17 R. C. L. p. 486. Therefore the enactment of chapter 78 did not repeal chapter 70 of the Acts of 1917.

[4] It was competent for the Legislature to add to whatever regulation was manifested in the imposition of the privilege or occupation tax, by providing for the more detailed policing regulation set forth in Acts 1917, c. 78, and to fix a fee therefor.

[5] A true license fee, as contradistinguished from such a tax, should be fixed to cover the expense of issuing it, the service of officers, and other expenses directly or indirectly incident to the supervision of the particular business or vocation. There is no attempt in this case to question the amount of the license fee as being excessive or so unreasonable as to partake of the nature of a tax. Ex parte Cramer, 62 Tex. Cr. R. 11, 136 S. W. 61, 36 L. R. A. (N. S.) 78, Ann. Cas. 1913C, 588.

[6] McMillan also insists that since he had a privilege license to operate an "employment agency" until October 8. 1917 (which license was issued to him under Pub. Acts 1915, c. 101), he could not be required by the city, in order to continue emigrant business, to take out a license under chapter 70 of the act of 1917, which, as stated, together with the ordinance thereunder, was passed while his license was current. The city's counter contention is that, after the passage of the act of 1917 and its own ordinance, McMillan exercised a separate privilege from the one formerly exercised under his license as employment agent.

Did the license held by McMillan when it was originally issued cover the emigrant feature of his business?

[7] We think that an "employment agency" may be defined to be one for the brokerage of labor for a fee paid by the applicant for employment or by the prospective employer, and that any definition of the phrase "employment agency," in the absence of restrictive words, would include the employment of laborers to work for another either in or beyond the state. It is, moreover, made clear that the act of 1915 should be so

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