Hydro Conduit Corp. v. American-First Title & Trust Co.

• Citation: 808 F.2d 712
• Decision Date: 19 December 1986
• Docket Number: AMERICAN-FIRST,No. 84-2680,84-2680
• Parties: HYDRO CONDUIT CORPORATION, Plaintiff-Appellant, v.TITLE & TRUST COMPANY, Hudiburg Investments, Inc., Wood & Sons Paving, Inc., Males Brothers Paving, Inc., and the Ohio Casualty Insurance Company, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

Page 712

808 F.2d 712

HYDRO CONDUIT CORPORATION, Plaintiff-Appellant, v. AMERICAN-FIRST TITLE & TRUST COMPANY, Hudiburg Investments Inc., Wood & Sons Paving, Inc., Males Brothers Paving, Inc., and the Ohio Casualty Insurance Company, Defendants-Appellees.

No. 84-2680.

United States Court of Appeals Tenth Circuit.

Dec. 19, 1986.

Opinion on Rehearing Jan. 16, 1987.

Terry Guy Shipley, Noble, Okla., for plaintiff-appellant.

Warren L. Griffin, Midwest City, Okla., for defendant-appellee Hudiburg Investments, Inc.

Paul Walters (Cary S. Smith with him on the brief) of Spradling, Alpern, Friot & Gum, Oklahoma City, Okla., for defendant-appellee American-First Title & Trust Co.

Robert Earl Savage (Jack T. Agosta on the brief), Oklahoma City, Okla., for defendants-appellees Wood & Sons Paving, Inc., Males Bros. Paving, Inc., and The Ohio Cas. Ins. Co.

Before McKAY and MOORE, Circuit Judges, and SAM, District Judge ^*.

McKAY, Circuit Judge.

The undisputed facts establish that defendant Hudiburg Investments, Inc. (Developer) submitted a final plat for a new subdivision to the City of Oklahoma City for approval. The plat contained specifications for improvements, including the installation of sanitary and storm sewers. Pursuant to state law and local regulations, Developer was allowed to post a bond instead of actually completing the improvements provided for in the plat. Accordingly, it executed a bond in favor of Oklahoma City with American-First Title & Trust Co. (American-First Title) as surety. The bond guaranteed completion of the improvements and utilities as well as payment of all bills for contractors, subcontractors, labor and materials incurred in completing the project.

Developer contracted with Wood & Sons Paving (General Contractor) to construct the street and storm sewer for the subdivision. General Contractor executed a performance bond and a labor and material payment bond in favor of Developer with the Ohio Casualty Insurance Co. (Ohio Casualty) as surety. The labor and material bond guaranteed payment by General Contractor to all claimants for labor and materials used to perform its contract.

General Contractor then subcontracted with Males Brothers Paving (Males) to complete a paving plan. (This relationship is unclear, but the parties seem to agree that Males was a subcontractor to General Contractor.) Males, in turn, subcontracted with Lynch Construction, Inc. (Lynch) to provide reinforced concrete pipe as provided in the paving plan. Lynch verbally offered to buy the reinforced pipe from Hydro Conduit Corporation (Hydro Conduit) who accepted by written acknowledgment. Hydro Conduit delivered the pipe to Lynch but never received payment. Lynch was adjudged bankrupt, leaving Hydro Conduit with an unpaid balance of $25,627.43. It sued as a third-party beneficiary under both Developer's bond and General Contractor's bond.

The trial judge granted summary judgment for Developer, General Contractor, and their sureties. The district court found that Developer's bond only covered debts of General Contractor, its immediate subcontractors, and the costs of labor and materials incurred by them. Since Hydro Conduit supplied materials to a subcontractor of a subcontractor of General Contractor, it was not a third-party beneficiary of Developer's bond and could not recover under it. Order, record, vol. 2, at 260-61. The court found that Oklahoma law does not require Developer's bond to cover payment to all remote parties, and even if the bond in issue could be interpreted broadly so as to reach those parties, "it is presumed that the parties intended to execute such a bond as the law required and, the liability of the sureties will be confined to the measure of liability contemplated by the law permitting such bond." Id. at 262-63. With respect to General Contractor's bond, the court found that Hydro Conduit fell outside its express terms. Id. at 263-64.

Hydro Conduit appeals from the district court decision. The primary issue on this appeal is whether Okla.Stat.Ann. tit. 11, Sec. 47-114 (West 1978) requires a bond to secure payment of all construction costs and, if so, whether the coverage of such a bond extends to remote parties.

I.

When a district court has granted summary judgment, the court of appeals applies a de novo standard of review. Morgan v. Mobil Oil Corp., 726 F.2d 1474, 1477 (10th Cir.1984); Luckett v. Bethlehem Steel Corp., 618 F.2d 1373, 1377 (10th Cir.1980). This court, therefore, must examine the issues anew.

II.

Oklahoma law permits a local planning commission to require that certain improvements be completed in subdivisions before the commission approves the plat. Okla.Stat.Ann. tit. 11, Sec. 47-114(B) (West 1978). The statute also allows a commission to accept a bond guaranteeing completion instead of requiring actual completion. Id.

Developer's bond was intended to comply with statutory requirements and local regulations. Although the language of the bond does not replicate the statute's language, the bond states: "Principal has pursuant to 11 Oklahoma Statutes Annotated, Section 47.114, and the rules and regulations of the City Planning Commission elected to file this bond in lieu of actual completion of improvements and utilities in the above subdivision." Subdivision Bond, record, vol. 2, at 158.

The Oklahoma Supreme Court has held that the coverage of a statutory bond is no greater than that required by law. Clauses which purport to extend coverage beyond the statutory requirements are invalid and mere surplusage. W.S. Dickey Clay Mfg. Co. v. Ferguson Inv. Co., 388 P.2d 300, 304 (Okla.1963) (citing Lowe v. City of Guthrie, 4 Okla. 287, 290, 44 P. 198, 200 (1896)). Developer's bond, therefore, covers only what the statute requires and no more. Even if the terms of Developer's bond could be interpreted to cover payment for the cost of materials purchased by remote subcontractors, such an interpretation must be rejected if not contemplated by the statute. Therefore, to determine whether Hydro Conduit may recover under the bond, we must decide whether the statute was intended to protect someone in Hydro Conduit's position.

Section 47-114 provides in pertinent part:

In lieu of the completion of any improvements and utilities prior to the final approval of the plat, the commission may accept an adequate bond satisfactory to the commission, with surety, to secure to the municipality the actual construction and installation of the improvements or utilities at a time and according to specifications fixed by or in accordance with the regulations of the commission, and further conditioned that the developer will pay for all material and labor entering into the construction of the improvements.

The italicized words indicate a 1967 amendment to the statute. Act approved May 1, 1967, ch. 200, Sec. 1425, 1967 Okla.Sess.Laws 300. Hydro Conduit argues that this amendment mandates that Developer's bond cover the cost of the pipe supplied. The Oklahoma Supreme Court has interpreted only the preamendment statute; ¹ therefore, our interpretation of the amendment is a case of first impression. ²

Both the district court opinion and the defendant's brief emphasize that the Commission has a choice under the statute; it can either require completion or accept a subdivision bond. That the Commission has such a choice is not at issue. The question is, once a commission decides to accept a bond, what does the statute require the bond to guarantee? The district court held that a planning commission has two choices under the amended statute: it may accept a bond guaranteeing only completion, or it may accept a bond guaranteeing both completion and payment. Order, record, vol. 2 at 262. We must determine whether the statute provides for such a choice or whether it mandates that all bonds must guarantee payment.

In the absence of any contrary legislative intent, statutes should be interpreted according to the ordinary meaning of the language. See, e.g., Perrin v. United States, 444 U.S. 37, 42, 100 S.Ct. 311, 314, 62 L.Ed.2d 199 (1979). In this case the statute's meaning is clear. There would be no reason to look to the legislative history, even if such a history existed. We hold that if a commission decides to accept a subdivision bond in lieu of completion of the improvements, the bond not only secures completion but also guarantees payment by the developer for all labor and material used in constructing the improvements. ³

III.

American-First Title argues that, even if the statute requires a payment bond, the payment provision does not extend to Hydro Conduit. Rather, the bond obligates Developer to pay only the debts of General Contractor and its immediate subcontractors. American-First Title reasons that if the legislature had intended the developer to pay all subcontractors and materialmen, section 47-114 would have been more explicit, articulating specifically which labor and material costs the developer must pay.

We conclude that the language in section 47-114 is sufficiently clear: "[T]he Commission may accept an adequate bond ... conditioned that the developer will pay for all material and labor entering into the construction of the improvements." "All" is not modified and so means all costs for material and labor, regardless of where they arose in the chain of construction. The Oklahoma Supreme Court has interpreted a similar statute in a similar fashion. The statute

provide[d] that where a contract is made by a public officer of this state for any public project that the person with whom the contract is made shall provide a surety bond, "in a sum not less than the sum total in the contract, conditioned that such contractor or contractors shall pay all indebtedness incurred for labor or material furnished in the construction of said public building or in making said public improvements."

The words "all indebtedness incurred for labor or...