Webb v. Crane Co.

Decision Date27 June 1938
Docket NumberCivil 3913
Citation52 Ariz. 299,80 P.2d 698
PartiesDEL E. WEBB, Doing Business as DEL E. WEBB CONSTRUCTION COMPANY, Appellant, v. CRANE COMPANY, a Corporation, Appellee
CourtArizona Supreme Court

[Copyrighted Material Omitted]

APPEAL from a judgment of the Superior Court of the County of Maricopa. M. T. Phelps, Judge. Judgment modified and affirmed.

Messrs Snell, Strouss & Salmon, for Appellant.

Mr. L J. Cox, for Appellee.

OPINION

McALISTER, C.J.

In October, 1935, Del E. Webb, doing business as Del E. Webb Construction Company, entered into a contract with the Arizona State Teachers College at Flagstaff to construct an addition to Taylor Hall located on the campus of that institution. At the same time Webb, as principal, and the Massachusetts Bonding and Insurance Company, as surety, executed two bonds to the school, one in the principal sum of $120,609.18, and referred to as the performance bond, and the other in the principal sum of $9,000 and referred to as the labor bond. Fred Langston, a subcontractor, did the plumbing work on the building and the plaintiff, Crane Company, furnished him the material for the job. Some time after the work was completed Crane Company, claiming that Langston owed it $6,093.84 for the plumbing fixtures, brought an action for this sum on the performance bond against Del E. Webb and his surety, the Massachusetts Bonding and Insurance Company, and Langston, upon the theory that that bond was a third party bond and that all persons who had furnished material for the building were protected by it. A trial before the court resulted in a judgment in favor of the plaintiff for the full amount asked for, and it is from this judgment that the defendant, Del E. Webb, appeals.

Appellant advances two propositions in support of his appeal. The first is that the performance bond is not a third party bond and, therefore, gave the Crane Company no right of action on it, and the second is that $4,454.96 of the $6,093.84 sued for had been paid by Langston to appellee, and that even if the latter could sue on the bond, it should recover only the difference between these amounts, namely, $1,638.88.

Appellant rests his contention that the performance bond gave no one but the school the right to sue on it upon the language of the bond itself and the wording of the statutes relating to such bonds.

One of the conditions of this bond is:

"That if the principal herein . . . shall promptly pay all laborers, mechanics, subcontractors and materialmen, and all persons who shall supply such laborers, mechanics or subcontractors, with material, supplies or provisions for carrying on such work, all just debts, dues and demands incurred in the performance of such work (which shall not be construed to include money borrowed from third parties) . . . . ."

Neither the contract nor the performance bond itself gives in express terms a direct right of action on the bond to materialmen, and since this condition deals with the payment to laborers, mechanics, subcontractors and materialmen, appellant contends that it must be given the meaning it would have if applied to any one of these four groups. For instance, if it were not the purpose of this provision to give a direct right of action on the bond to laborers, clearly it was not intended that materialmen should have that right either. This being true, he argues that the circumstances attending the execution of the bond show that it was not intended by the parties that any one of the four groups of third persons -- laborers, mechanics, subcontractors and materialmen -- should have this right, and the particular circumstance upon which he relies to establish this is that at the time the contract and the performance bond were executed another bond, commonly referred to as the labor bond, was signed by the same parties and delivered. That bond contained but one condition, namely, that if the principal and all subcontractors or their assignees

"shall promptly make payment for all labor performed and services rendered in the prosecution of the work, . . . then the above obligation shall be void; otherwise to remain in full force and effect,"

but this language was followed by this proviso:

" . . . Provided, however, that this bond is subject to the following conditions and limitations:

"(a) All persons who have performed labor or rendered services as aforesaid shall have a direct right of action against the Principal and Surety on this bond, which right of action shall be asserted in proceedings instituted in the State in which such labor was performed or services rendered (or where labor has been performed or services rendered under said Contract in more than one State, then in any such state) . . . . ."

It will be observed that under a condition in both bonds it was the duty of the principal to pay for all labor performed, but in the labor bond only was there a provision giving "persons who have performed labor" in the prosecution of the work a direct right of action on the bond against the principal and surety, and because of this appellant contends that it was not the purpose of the parties, by including in the performance bond the provision quoted above, to give a right of action on that bond also to laborers; otherwise, there would have been no reason for executing the labor bond. The correctness of this contention is, he claims, further indicated by the fact that the right to sue under the labor bond is expressly limited to six months from the completion of the work, while this right, under the performance bond, is extended to one year thereafter, the result being that if third parties may sue directly under the performance bond any time within that period, it would render meaningless the six months' limitation of the labor bond. We are unable, however, to see wherein the fact that at the time appellant executed a performance bond, he also signed a labor bond expressly giving those who performed work on the job a direct right of action thereon, has any bearing on the materialman's right to sue on the performance bond, provided it would have had this right in the absence of a labor bond. The materialman's right to bring such an action could not have been affected by the fact that those who performed the labor were given the right to sue on a labor bond. The mere fact that it was one of the four groups of third persons mentioned in the performance bond who must be treated alike -- laborers, mechanics, subcontractors and materialmen -- does not lead to this result. The materialman and those who performed the labor would have had the same treatment only if a separate bond had been given for the protection of the former also, and in the absence of one executed for that purpose the question of a second bond for labor had no bearing whatever on its rights. And even if one had been executed for the materialman's special benefit, it would have been necessary that the statute required it before it would have had the effect of limiting one to it in seeking to recover for materials furnished. In fact, the principal authority cited by appellant in support of his contention on this point, Maryland Casualty Co. v. Shafer, 57 Cal.App. 580, 208 P. 192, is a case in which a highway contractor had executed a performance bond and also a separate bond to secure the payment of claims of the character of those involved in that action, the giving of the latter being required by statute. In holding that a suit on the performance bond for the payment of those claims would not lie after the time for completing his claim under the statutory bond had expired, the court said (p. 193):

"Here, in compliance with the contract and the statute, a separate bond was given to secure payment of claims of the character under consideration, and it would be unreasonable to hold that the parties intended the faithful performance bond to secure the same claims." (Italics ours.)

The other reason urged by appellant why a third party may not sue directly on the performance bond is that the statute requiring such a bond, section 2605, Revised Code of 1928, does not provide that anyone, except the obligees in the bond, may have this right. The pertinent parts of that section read as follows:

" . . . A surety company bond for not less than twenty-five per cent of the full amount of the proposal shall be filed with and become a part of the contract, to be approved by an authorized or appointed attorney-at-law of the agent; . . . twenty-five per cent of all estimates shall be retained by the agent as guarantee of the complete performance of the contract, to be paid to the contractor within sixty-five days after completion, or filing of notice of completion, of the contract, provided the contractor has duly furnished the agent satisfactory receipts for all labor and material bills and waivers of liens from any and all persons holding claims against the work . . . . "

This language does not say, except in one particular, just what terms the bond to be given by the contractor shall contain, but undoubtedly they are those usual in such cases, and because one cannot gain from it either an express or implied legislative intent to require a bond granting any one other than the state agency to which it was given a right to sue on it, appellant takes the position that it was intended to indemnify that agency only and that the giving of a right of action to third persons was not included. But, notwithstanding this, he points out that there are some authorities which hold that a right of action on performance bonds similar to the one here involved is given to claimants on the theory that the mechanics' lien law does not apply to public buildings and that it is necessary under such circumstances...

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