The question posed is whether the appellee was entitled to judgment on the indemnity bond signed by appellant. In January 1955, Kelly Engineering Company (hereinafter called "Kelly"), entered into a contract with Flake et al. (hereinafter called "Wallace"), by the terms of which contract Kelly agreed to furnish the materials and labor to completely air-condition the Wallace Building in Little Rock. The contract between Kelly and Wallace contained two paragraphs here germane. They are:
Kelly tendered to Wallace, who accepted it, the bond hereinafter copied, signed by appellant, Employers' Liability Assurance Corporation, Ltd. (hereinafter called "Insurance Company"). Appellee, A. W. Johnson Company (hereinafter called "Johnson"), furnished materials and supplies to Kelly which were used in air-conditioning the Wallace Building; and when Kelly failed to pay in full for such items, Johnson instituted the present action, on the bond, against the Insurance Company, as sole defendant, for the amount due by Kelly to Johnson. The Insurance Company denied liability. Trial to the Circuit Judge without a jury resulted in judgment for Johnson and this appeal ensued in which are presented, inter alia, the matters now discussed.
I. Provisions Of The Bond. The first and vital matter is the wording of the bond which the Insurance Company signed and on which Johnson sought to recover. Omitting only signatures, it reads:
We point out the great difference between the provisions of the contract and the provisions of the bond. The contract provided in Article 21 that Kelly would make a bond "for the faithful performance of the contract, and also for the use and benefit of all parties who may become entitled to liens, under said contract." If the Insurance Company had signed a bond with such provisions in it (i. e., for performance
The bond signed by the Insurance Company in this case is not a performance bond as in the cases last cited above: instead, it is a mere indemnity bond saying that the surety shall indemnify "the Obligee against loss or damage directly arising by reason of the failure of the Principal faithfully to perform the above mentioned contract." The distinction between a performance bond and an indemnity bond is well recognized. In 9 Am.Jur. 64, "Building and Construction Contracts" § 98, the holdings are summarized in this language:
In Pine Bluff Lodge, etc. v. Sanders, 86 Ark. 291, 111 S.W. 255, we recognized this well known distinction between performance bonds and indemnity bonds in this language:
Appellee argues that the bond signed by the Insurance Company incorporated the contract by reference. That contention is true. But such incorporation did not bind the Insurance Company beyond the terms of its signed agreement, because incorporating the contract by reference is one thing and agreeing to guarantee the performance of the contract is quite another; and this bond did not guarantee the performance of the contract. Further, we point out that this was a private bond, as distinguished from a statutory bond. Our cases hold that when a bond is given under the statute, all of the provisions of the statute are incorporated in the bond. New Amsterdam Cas. Co. v. Detroit F. & S. Co., 187 Ark. 97, 58 S.W.2d 418; Union Indemnity Co. v. Forgey & Hanson, 174 Ark. 1110, 298 S.W. 1032. A private bond of indemnity—as distinguished from a performance bond—however, does not extend beyond its own terms. In 9 Am.Jur. 58, "Building and Construction Contracts" § 89, the holdings are summarized:
See also 42 C.J.S. Indemnity § 3 and § 8, pp. 566 and 576. In this case of a private bond of indemnity, the surety had a right to give such bond as it pleased and to limit its
II. Estoppel. The evidence here shows that in December, 1955, while Kelly was in default, Johnson had a meeting with the Claims Superintendent of the Insurance Company, who advised Johnson (according to his testimony) that there was no need for Johnson to file a lien and that the Insurance Company was liable for labor and materials under the bond and, further, that Johnson would have "a year after the job was completed to file suit." It was shown that after this assurance Johnson continued to furnish further supplies, some of which are included in the amounts here sued on. The Circuit Court judgment in favor of Johnson might be affirmed on the theory of estoppel, except for the fact that Johnson not only failed to plead estoppel but further expressly waived it in this language: "* * * this is our approach— not estoppel, but on the theory that the terms of the Contract and the Bond are ambiguous and this is oral testimony introduced for the purpose of explaining the terms of the Bond and Contract." The foregoing statement was made when A. W. Johnson was testifying and constitutes an express disaffirmance of any theory of estoppel. So the Circuit Court judgment cannot be affirmed on any theory of estoppel.
III. Directions On Remand. Since we have concluded that Johnson does not have a direct cause of action against the Insurance Company on the bond under the facts here presented, it follows that the judgment of the Circuit Court in favor of Johnson must be reversed. But there are statements in the record that cause us to remand the case for further proceedings not inconsistent with this opinion. It is stated that Johnson has pending a suit in equity against Wallace, the exact nature of which is not clearly disclosed. The outcome of that suit may have a direct bearing on the liability, if any, of the Insurance Company. Futhermore, additional matters may arise on a new trial. Therefore, the judgment is reversed and the cause remanded.
JOHNSON, J., dissents.