American Savings Bank & Trust Co. v. National Surety Co.

Tolman, J.

This action was instituted by appellant for the purpose of recovering money loaned to the defendant Lane for use in prosecuting his work under a highway.contract, and respondent is sought to be held by reason of its being surety upon the bond given in accordance with the terms of that contract. From a judgment denying a recovery against the bond, this appeal is taken.

The facts pleaded and proved, so far as necessary to be here set forth, are substantially as follows: In April, 1914, the board of county commissioners of King county let a contract to Lane for the construction and improvement of what is known as the O. L. Morris Road. This was the usual lump sum contract, providing for the payment in monthly estimates as the work progressed, of seventy-five per cent of the contract price, and the retention of twenty-five per cent to be paid thirty days after the completion of the work, upon a showing by the contractor “that all just debts due all laborers, mechanics, materialmen and persons who have supplied such contractor, or sub-contractor, with material or goods of any kind for this work have been paid.” The contract further required the furnishing of a corporate surety bond “conditioned as required by law for the payment of all laborers, mechanics, subcontractors and materialmen, and all persons who shall supply such person or persons or subcontractors with provisions or supplies for the carrying on of such work, all just debts, dues and demands incurred in the performance of such work.” In due course the bond was furnished, upon which the respondent was bound as surety, conditioned in the exact words of the contract which have just been quoted.

It is not necessary to set out here the various transactions which took place between the appellant and the contractor, but for present purposes it is sufficient to say that the appellant loaned the contractor a large sum of money, and he assigned the proceeds of the contract to the appellant as security for such loan. Appellant received the several payments made by King county during the progress of the work, and, by stipulation, afterwards, and after crediting all of such payments, filed its lien claim, and now seeks judgment against the bond for upwards of $16,000.

It will be observed tbat tbe language of tbe contract and the conditions of tbe bond are tbe exact language of tbe act of 1909 (Laws of 1909, p. 716; Rem. & Bal. Code, §1159). And tbe appellant argues tbat tbe language of this act should be construed as though tbe last clause thereof was preceded by tbe words “and will pay,” so tbat tbe clause would read, “and will pay all just debts, dues and demands incurred in tbe performance of such work,” contending tbat we have so construed tbe law in effect by our bolding in Title Guaranty & Surety Co. v. Coffman, Dobson & Co., 97 Wash. 211, 166 Pac. 620. A reading of tbat case without an examination of tbe record and without reference to tbe cases on which it is based might lead to tbat conclusion, but when tbe record is examined it will be found tbat tbe bond there sued upon, in lieu of tbe last clause of tbe statutory condition, contained tbe words “and shall well and truly and faithfully pay all just debts, dues and demands incurred in tbe performance of said contract,” making it clear tbat tbe surety bad thus contracted to pay all such debts, dues and demands without reference to tbe requirements of tbe statute; and since money loaned is a just debt, tbe court was bound tp permit a recovery wholly as a matter of contract and without reference to tbe language of tbe statute upon which tbe present case turns.

It becomes necessary then to inquire tbe meaning of tbe statutory language which is incorporated in tbe bond in this case and in tbe contract in pursuance of which tbe bond was given. In Puget Sound State Bank v. Gallucci, 82 Wash. 445, 144 Pac. 698, Ann. Cas. 1916A 767, which like Title Guaranty & Surety Co. v. First Nat. Bank of Hoquiam, 94 Wash. 55, 162 Pac. 23, turned upon tbe language of tbe contracts and bonds, just as did tbe Coffman-Dobson case, and in none of which, the language of the statute was controlling, Mr. Justice Parker, speaking for the court, said:

“If the solution of this problem rested alone upon the language of the bond and statute, there would be fair ground upon which to rest the argument that the words ‘all just debts, dues and demands incurred in the performance of the work,’ not being preceded by the conjunctive ‘and,’ related to debts, dues'and demands incurred and payable from Gallucci to the persons specifically named therein, to wit, ‘laborers,’ ‘mechanics,’ ‘subcontractors,’ ‘materialmen,’ and persons furnishing ‘supplies for carrying on of said work.’ ”

And again:

“We cannot escape the conclusion that this provision of the contracts includes debts incurred by Gallucci of the nature here involved; that is, that he incurred such debts to the bank ‘in the performance of said work,’ though this conclusion might not be correct where the bank’s right rested alone upon the language of the bonds and statute.”

We are convinced, by a careful reading of the act of 1909 as a whole, that the legislature intended it to mean just what Judge Parker said there were fair grounds for holding it to mean, i. e., that the words ‘‘‘all just debts, dues and demands” refer to the classes of persons immediately thereinbefore named, so that the only logical construction is that quoted from the Gallucci case. If the legislature intended otherwise, why did it, throughout the entire act, refer to the persons mentioned in § 1, namely, laborers, mechanics, subcontractors, materialmen, and those who furnished supplies, and nowhere mention creditors, or use any term which would cover those holding claims other than for labor, materials or supplies ? The form of the notice provided in § 3 of the act should not, of course, be permitted to override or modify any express provisions which precede it, and yet this form is eloquent in expressing that the legislature had only in mind the classes specifically mentioned in § 1 of the act.

It should he borne in mind that the legislature had in view here public works and buildings and was providing security and protection only to those who, if the work were private in its nature, would be protected by the lien laws. In other words, the bond given under this statute and in the statutory language becomes a substitute for the right of lien which would exist were the work private. And, therefore, looking to analogous lien cases for a rule as to who may claim under the bond, we find the prevailing doctrine to be that one who loans money is entitled to no lien therefor. Lawson v. Higgins, 1 Mich. 225; Steamboat James Battle v. Waring, 39 Ala. 180; Dart v. Mayhew & Co., 60 Ga. 104; Cadenasso v. Antonelle, 127 Cal. 382, 59 Pac. 765; Lion Bonding & Surety Co. v. First State Bank (Tex. Civ. App.), 194 S. W. 1012.

Hence it logically follows that one who loans money to a contractor on public work cannot claim under the statutory bond.

Nor are we impressed by the argument that the legislature in 1915 (Laws of 1915, p. 61; Rem. Code, § 1159), when it amended the act of 1909 (Laws of 1909, p. 716; Rem. & Bal. Code, § 1159), by leaving out all reference to debts, dues and demands, and by adding a proviso to the effect that the provisions of the act shall not apply to any money loaned or advanced, thereby construed the former act as appellant would have it. It seems to us more logical to say that the legislature of 1915 for some reason feared that this court or some other court might so construe the act against its intent, and by amendment it made haste to remove all possibility of such a construction beyond any question or doubt.

Our conclusions upon this branch of the case make it impossible for the appellant to recover in any event, and it is therefore unnecessary to discuss the other questions raised.

The judgment of the court below is right, and is therefore affirmed.

Main, C. J., Mitchell, Mount, and Chadwick, JJ., concur.