Gill v. Paysee

This is an action brought by a materialman against a contractor and the surety on the latter's bond. The action was commenced on February 24, 1923. The contractor was not served with summons and never appeared in the action. It is alleged in the complaint that the contractor, Robert Paysee, on January 5, 1922, entered into a written agreement with the board of county commissioners of Lander County, Nevada, acting as the board of education under the provisions of chapter 35 of the Statutes of 1921, for the construction of a high school building at Battle Mountain, in said county. It is also alleged in the complaint that, before letting the contract to the said contractor and pursuant to an act of the legislature of Nevada entitled "An act requiring bonds for the protection of subcontractors, laborers and materialmen on public buildings," etc., approved March 26, 1913, the said board of education obtained from the contractor a bond, conditioned, among other things, to the effect that the said contractor would, at his own cost and expense, furnish and provide all material and perform all work in the construction of said building pursuant to said contract; and that the said contractor as principal, and the United States Fidelity and Guaranty Company as sole surety, duly executed and delivered said bond to said board of county commissioners. It is further alleged in the complaint that the contractor entered upon the construction of the building in accordance with the plans and specifications of the architect, and that on or about May 27, 1922, plaintiff, respondent here, entered into a contract with the said principal, according to the terms of which plaintiff was to furnish the material and do the work of wiring said high school building according to the plans and specifications, for the contract price of $3,400; that plaintiff completed the work on or about December 24, 1922; that a balance of $2,900 was due him from said Paysee; and that demand has been made by plaintiff upon Paysee and his said surety, for the payment of such balance, which they have neglected and refused to pay, and are therefore in default upon said bond. Plaintiff further alleges that there remains unpaid to said Paysee by the county on said contract the sum of $10,150, which is in the possession of the board; that Paysee has assigned, or attempted to assign, such moneys, or a portion thereof to the Battle Mountain State Bank, a banking corporation; and that the board of county commissioners has ordered said money to be paid to said United States Fidelity and Guaranty Company, and that the Battle Mountain bank has commenced an action enjoining the county and its officers from paying out said money, and that said suit is still pending. It is further alleged that the building was constructed in conformity with the plans and specifications; that it was completed on December 4, 1922, and in a condition for acceptance; and that it was accepted by the board of county commissioners on January 2, 1923.

A general demurrer to the complaint was overruled, and from the judgment rendered the United States Fidelity and Guaranty Company has taken this appeal.

Appellant contends that the complaint does not state a cause of action. The contract, a copy of which is annexed to the complaint, recites that —

"This agreement made the 5th day of January, 1922, by and between Robert Paysee, of Twin Falls, Idaho, party of the first part (hereinafter designated the contractor), and the board of county commissioners of Lander County, Nevada, acting as the board of education under the provisions of chapter 35 of Session Laws of Nevada, 1921, party of the second part (hereinafter designated the owner)."

It provides, among other things, that —

"The contractor shall and will provide all the materials and perform all the work for the erection and construction of the high school building."

A copy of the bond is also annexed to the complaint and the provisions of the bond necessary to be considered are as follows:

"Know all men by these presents, that Robert Paysee, of Twin Falls, Idaho (hereinafter called the principal), and the United States Fidelity and Guaranty Company, a corporation created and existing under the laws of the State of Maryland, and whose principal office is located in Baltimore City, Maryland (hereinafter called the surety), are held and firmly bound unto board of county commissioners of Lander County, Nevada, acting as board of education under provisions of chapter 35 of Session Laws of Nevada, 1921 (hereinafter called the obligee), in the full and just sum of thirty-one thousand dollars, lawful money of the United States, to the payment of which sum, well and truly to be made, the said principal binds himself, his heirs, executors and administrators, and the said surety binds itself, its successors and assigns, jointly and severally, firmly by these presents.

"Signed, sealed and delivered this 5th day of January, A.D. 1922.

"Whereas, said principal has entered into a certain written contract with the obligee, dated January 5, 1922, to provide all the materials and perform the work for the erection and construction of building known as `Lander County High School,' at Battle Mountain, Nevada.

"Now, therefore, the condition of the foregoing obligation is such that if the principal shall well and truly indemnify and save harmless the said obligee from any pecuniary loss resulting from the breach of any of the terms, covenants and conditions of the said contract on the part of the said principal to be performed, then this obligation shall be void; otherwise to remain in full force and effect in law."

Respondent contends that the bond was given under the provisions of chapter 264, Stats. 1913, which statute provides that at the time of making any contract for the erection, construction, alteration, or repair of any public building or structure, the contract price of which shall exceed the sum of $500, the party letting the contract shall exact from the contractor a bond conditioned that the contractor shall well and truly pay, or cause to be paid, all just debts contracted by him for labor performed upon and materials furnished for the work provided to be done by said contract (Stats. 1913, p. 407), and that this condition must therefore be read into the bond. The contention that the bond was given under this act is based upon the fact that the bond recites that the board was acting under the provisions of chapter 35 of the Session Laws of Nevada for 1921, which provides that —

"The laws in force governing the letting of contracts by boards of county commissioners are hereby made applicable to and the same shall govern the action of the county board of education in carrying out * * * this act." Stats. 1921, p. 63.

The recital in the bond that the board of county commissioners was acting as a board of education under the provisions of the law last mentioned does not manifest an intention to comply with the act of 1913. It is merely a reference to the statutory authority by which the former board assumed to act as a board of education. There is no express promise by the appellant in the bond to pay the debt of a third party, or any language, viewed in the light of a most liberal rule, from which such a promise can be inferred. The only condition in the bond is, as before set out, namely, that the principal shall indemnify and save harmless the obligee from any pecuniary loss resulting from the breach of any of the terms, covenants, and conditions of the contract. The bond does not fail merely technically to conform to the statutes of 1913, it fails completely in this respect. The only condition required by such statute is not in the bond. Section 5 of the act of 1913 prescribed what shall be the effect if the bond provided for is not taken. The section reads:

"If the party letting such contract shall fail to exact and take the bond herein provided for, or shall knowingly accept insufficient sureties thereon, such party, and the individual officers and agents thereof, by whom such contract was authorized, shall be jointly and severally liable to all who have performed labor upon and to all who have furnished materials for the work provided to be done by such contract, to an amount not exceeding twenty-five (25) per cent of the contract price, but wherever the party itself shall pay, upon default of the contractor, any liability hereby created, it shall have a right of action, jointly and severally, against the individual officers and agents thereof, by which said contract was authorized, and against their bondsmen, if any, for any amount or amounts so paid."

From this it is quite clear that it was not the intention of the legislature that the condition for the benefit of laborers or materialmen, if omitted, should become a part of the bond as if incorporated in it. The case of Acme Brick Co. v. Taylor et al. (Tex.Civ.App.) 223 S.W. 248, is in point. In that case recovery was sought for supplies furnished the contractor against the surety company on a bond, which did not contain the condition required by law, that such contractor "shall promptly make payments to all persons supplying him or them with labor and materials in the prosecution of the work provided for in such contract." The court said:

"The bond here involved contains no such stipulation, and therefore is not the bond required by the statute with reference to public buildings. It may be good as a common-law bond, but does bind the surety further than therein specifically stated, which is that the principal shall faithfully perform his contract with the obligees. This it appears he did, for the building was completed and received by the school trustees, and the full price paid therefor. It is true that a statutory bond will be construed in the light of the statute, and will impose upon the bondsman all of the liabilities required by the statute, where it appears that it was the intention to execute such statutory bond; but no such intention appears from the bond in this case. The trustees failed to discharge their duty in not taking a bond as required by statute, but that cannot make the bondsman liable for something that he did not guarantee."

It is insisted that the provision of the contract that the contractor shall and will provide all the materials, and perform all the work, when liberally construed, shows that it was intended by the parties to include the proposition that the contractor was to pay for the same, and that the recital of this provision of the bond was intended to be a condition of it. To grant this contention would simply result in reading into the bond a supposed intent of the parties, which its language will not bear. Respondent's contention in this respect seems to be sustained by the Nebraska cases cited by him, particularly the case of Nye-Schneider-Fowler Co. v. Roeser, 103 Neb. 614,173 N.W. 605. I do not regard the reasoning of the case as sound, and think, as pointed out in the dissenting opinion, that an intent to provide for the payment of the materialmen was read into the bond contrary to well-recognized canons of construction. The ruling runs counter to the great current of authority. Electric Appliance Co. v. United States Fidelity and Guaranty Co., 110 Wis. 434, 85 N.W. 648, 53 L.R.A. 609; Parker v. Jeffery,26 Or. 186, 37 P. 712; Montgomery v. Rief, 15 Utah, 495,50 P. 623; First Methodist Episcopal Church v. Isenberg, 246 Pa. 221,92 A. 141; Green v. Independent, 121 Iowa, 663,97 N.W. 72; Greenfield v. Parker, 159 Ind. 571, 65 N.E. 747; Spalding v. Brown, 171 Ill. 487, 49 N.E. 725; Townsend v. Cleveland,18 Ind. App. 568, 47 N.E. 707; City of Sterling v. Wolf, 163 Ill. 467,45 N.E. 218; Dunlap v. Eden, 15 Ind. App. 575, 44 N.E. 560; Searles v. City, 225 Ill. 167, 80 N.E. 98; Smith v. Bowman, 32 Utah, 33,88 P. 687, 9 L.R.A. (N.S.) 889; Babcock Wilcox v. American Surety Co. of New York, 236 Fed. 340, 149 C.C.A. 472.

In Babcock Wilcox v. American Surety Co., supra, materialmen brought an action in equity against the contractor and the surety company to recover the value of materials sold to the contractor and used in the construction of a dormitory at an Indian school. An act of Congress required any person or persons entering into a formal contract with the United States for the construction of any public building to execute the usual penal bond, with good and sufficient sureties, with the additional obligations that such contractor or contractors shall promptly make payments to all persons supplying him or them with labor and materials in the prosecution of the work provided for in such contract. The contract made required the contractor to furnish all the materials, but the bond did not contain the obligation required by the statute. It was held that the liability of the surety could not by construction be extended so as to include the materialmen, on the theory that the agreement to furnish materials was equivalent to an agreement to pay therefor. The court said:

"When all is said the case is simply this: That Opdahl by his contract agreed to give a bond obligating himself to pay the claims of materialmen, but he failed to give any such bond. The surety company signed the bond which was executed, and no other. The bond itself did not provide for the payment of materialmen, nor did the contract contain any such provision. The case is not difficult, unless we try to make it different from what it really is."

Mr. Page, in his work on Contracts, says:

"A provision in a contract, by which the contractor agrees to furnish material, cannot impose upon the sureties on his bond the duty of paying for material which he has purchased, if the bond does not purport to include such liability." Page on the Law of Contracts, vol. 4, sec. 2408, p. 4270.

The other cases cited by respondent are not in point. In the Kentucky case cited and quoted from in respondent's supplemental brief, one of the provisions of the contract was that the contract price would be paid by the church to the contractor providing the property was kept free from all liens or rights of liens for debts due or claimed to be due from the contractor, and the bond was conditioned to a faithful compliance with the terms of the contract. After the contractor quit work upon the building, it was ascertained that there were several hundred dollars due from the contractor for material which had been used in the construction of the building, and due laborers for work done in the construction of it. These sums the church was compelled to discharge. It it quite plain that under this state of facts the church had suffered a loss against the guaranty of the bond, and that the surety was liable for it.

The foregoing case is obviously different from the instant case, which I regard as one involving solely the language of the bond. The language does not in my opinion disclose an intent to secure third parties, nor does the bond purport to have been made under the authority of a statute enacted for their benefit.