Fogarty v. Davis

This cause was certified to this court by the Springfield Court of Appeals, because of conflict of its decision herein with a decision of the Kansas City Court of Appeals.

Appellants are co-partners and began this action against respondents, who constitute the board of directors of the Cabool School District, to recover $2988.87, for which they allege the directors are personally liable on account of their failure to take the contractor's bond required by Section 1040, Revised Statutes 1919.

In May, 1918, the respondents, in their official capacity, entered into a contract with Howard A. Mann, whereby, among other things, he agreed to install a heating plant and plumbing system in a school building in course of construction for the district. Thereafter appellants, by sub-contract, agreed with Mann that they would furnish and install the plumbing and heating plant. This they did. They allege they relied upon the assumption that Mann had given bond as the statute required. It is alleged Mann is insolvent and that respondents failed to require him to give bond as provided by the statute, and they ask damages as for neglect of a ministerial duty by respondents. They pray judgment for $2988.87, and interest.

The contract with Mann contains no express provision that the contractor shall pay for all materials and labor. It does provide that "the contractor shall and will provide all materials and perform all the work for the erection and completion of a high school building, and such other work as set forth in the specifications for same," etc. It also authorizes respondents to provide labor or materials or take over the construction of the building in case of certain defaults of the contractor. The evidence shows the heating plant installed is not of the kind prescribed by the contract. Evidence was offered tending to show this was due to conditions which rendered it impossible to comply with the contract in this respect. The bond was duly executed by the contractor, as principal, and the United States Fidelity Guaranty Company as surety. It is conditioned that Mann shall perform all his contract obligations and shall keep the "obligee harmless and indemnified from and against all and every claim, demand, judgment, lien, cost and fee of every description, . . . and shall re-pay said obligee all sums of money said obligee may pay to other persons on account of work and labor done or materials furnished on or for said contract" and shall pay all damages or forfeitures sustained for any reason by the principal's failure properly to execute his contract. These conditions are long, but this is a sufficient epitome for present purposes.

It will be noted, as the Court of Appeals points out, that this bond is in a form appropriate for use to secure the performance of a building contract between a contractor and a private individual. It is headed "Statutory Bond," and the obligee is the "Cabool School District." It is not and could not well be contended that the purpose of the parties was other than to give a bond under the statute to which reference has been made. The use of the wrong printed form seems to have been an inadvertence.

I. The statute (Secs. 1040, 1041, R.S. 1919) provides that school boards in contracting for public work shall require the contractor, with sufficient sureties, to execute a bond in sufficient amount, which, among other conditions, "shall be conditioned for the payment of material used in such work and for all labor performed in such work, whether by subcontractor or otherwise." Sub-contractors are expressly given a right of action on the bond.

It is contended the bond given is so far from compliance with this statute that appellants cannot maintain an action on it and, therefore, it is equivalent to the taking of no bond at all, so far as appellants' rights are concerned, and, as a consequence, this action lies. The general rule is that an officer's neglect of a ministerial duty imposed for the benefit of individuals is actionable. There is authority for the proposition that the omission to incorporate in a writing a provision which a statute specifically requires an officer to incorporate, is the failure to perform a ministerial duty. In this case respondents contend the bond taken will support an action by appellants. If this is true, this judgment must be affirmed. The rule in this State is that in construing a statutory bond the provisions of the statutes must be read into it and construed as a part of it. "When parties execute a statutory bond they are chargeable with notice of all provisions of the statute relating to their obligation, and those provisions are to be read into the bond as its terms and conditions. . . . These provisions are a part of the bond of which both principal and surety must take notice." [State ex rel. v. Rubber Mfg. Co., 149 Mo. l.c. 212.] "In order to get at the scope of this bond the statute pertaining to the subject-matter of county depositaries must be read into the bond, and the obligors must be held to contract with a view to those statutes (citing 149 Mo. l.c. 212). This does not strike down the hornbook propositions that the obligation of the surety should not be stretched or swollen by mere implication, and that sureties are faverites of the law and are entitled (subject to some qualifications) to stand on the terms of the bond, construedstrictissimi juris. It merely puts the matter on a common-sense footing as between man and man by reading the written law into the bond, discerning the objects to be subserved by the bond, and getting at the true intent and meaning of the bond by applying its terms to the objects sought. The general language of the bond must be interpreted in the light of these considerations." [Henry County v. Salmon, 201 Mo. l.c. 162, 163.] "All statutory bonds are to be construed as though the law requiring and regulating them was written into them." [Zellars v. Surety Co., 210 Mo. l.c. 92.] This rule has been said to apply to the statutory provisions in Sections 1040, 1041, Revised Statutes 1919, with respect to bonds like that in this case. In Board of Education ex rel. v. Fidelity and Guaranty Co., 155 Mo. App. l.c. 115, it is said of such bond: "The bond in suit is a statutory obligation executed by authority of and in accordance with Sections 6761 and 6762, Revised Statutes 1899 (now Secs. 1040, 1041, R.S. 1919), and there can be no doubt of the proposition that by its execution these statutes became part and parcel of the obligation assumed by the surety" citing cases. The amendments of 1909 and 1911 do not affect the present question. And on the same question (pp. 118, 119) it was said: "But if the statutes so provide, then the obligation is to be enforced notwithstanding the omission to nominate the particular obligation in the written instrument, for of such statutes the parties are deemed to have had notice and to have contracted accordingly." In the following sentence the court suggests the present statute is broader than that before it in the case it was deciding. "The general rule is that, where a contract of suretyship is entered into pursuant to a statute or to a by-law, the statute or by-law forms a part of the contract. If the law has made the instrument necessary, the parties are deemed to have had the law in contemplation when the contract was executed." [Child's Suretyship Guaranty, sec. 91, pp. 122, 123; Pingrey on Suretyship Guaranty (2 Ed.) sec. 321a, pp. 329, 330, citing Henry County v. Salmon, supra; Spencer on Suretyship, sec. 259, pp. 362, 363.] It is obvious the parties were acting under the statute, and it is clear there was no other legal obligation resting upon them which called for a bond of any kind. The cited rule is applicable, and the bond given, when construed in its light, gives appellants an action upon it. It results that there was no actionable neglect on the part of respondents which renders them liable to appellants.

II. The Court of Appeals held that the decision in School District v. McClure, 224 S.W. 831, announced a rule which requires the affirmance of this case, without regard to the principle considered in the preceding paragraph. That case is unlike this. There the court applied certain principles of construction which are applicable here; but in that case the district was obliged to take over the work and, in completing it, to expend sums in excess of the contract price. The contract in terms provided the district, in stated circumstances, might take over the work and complete the building, and the bond expressly secured the re-payment to the district of sums so expended in excess of the contract price. It was for such an excess of expenditures that the action in that case was brought. This court is of the opinion that the McClure case is not in point on the question in this case, to which it was cited by the Court of Appeals.

III. There is persuasive authority for the view that, in circumstances like those in this case, a contract to provide or furnish labor and materials is a contract to provide them at the "proper cost, charge and expense" of the contractor. [MacKenzie v. Board of School Trustees of Edinburg, 72 Ind. l.c. 196: Mayes v. Lane, 116 Ky. l.c. 572, 573.] The United States Circuit Court of Appeals, for this circuit, in an opinion by SANBORN, J., in which Mr. Justice VAN DEVANTER (then circuit judge) and PHILLIPS, J., concurred (American Bonding Co. v. Pueblo Inv. Co., 150 F. 17), ably discussed the question. As was said in that case, it may be said in this that "these parties necessarily intended to provide by these stipulations that either" the school district or the contractor "should pay for the labor and material necessary to make these improvements." In speaking of certain decisions to the effect that a contract to furnish and provide labor and materials did not obligate the contractor to pay therefor, it was said: "The effect of these decisions is that an agreement to furnish work and material to the owner of property for a price which is commensurate with the full value thereof is performed when the contractor furnishes the work and material at the expense of the owner, so that the latter is compelled to pay for them twice while the former gets the price for little or nothing." Decisions are then cited showing that the result just stated "failed to commend itself" to other courts. It is apparent that unless the view of the court in that opinion is adopted, at least as between private individuals, a contract like that in this case would result in an absurdity. The language is susceptible of the reasonable construction given it by the Circuit Court of Appeals, and that construction ought to be adopted. That court also said that no intent to defraud laborers and materialmen ought to be attributed to the parties. In view of our statute and the attempt to comply with it, that suggestion has force in the construction of the contract in this case. When the contract is thus construed, then the sub-contractors have a right of action on the bond in this case for this reason also. The judgment is affirmed. All concur.