Minneapolis Steel & Machinery Co. v. Federal Surety Co.

• Citation: 34 F.2d 270
• Decision Date: 23 July 1929
• Docket Number: No. 8237.,8237.
• Court: U.S. Court of Appeals — Eighth Circuit
• Parties: MINNEAPOLIS STEEL & MACHINERY CO. v. FEDERAL SURETY CO.

34 F.2d 270 (1929)

MINNEAPOLIS STEEL & MACHINERY CO. v. FEDERAL SURETY CO.^*

No. 8237.

Circuit Court of Appeals, Eighth Circuit.

July 23, 1929.

C. P. Randall, of Minneapolis, Minn. (Claude G. Krause and Cobb, Hoke, Benson, Krause & Faegre, all of Minneapolis, Minn., on the brief), for appellant.

Phillip F. Sherman, of Minneapolis, Minn. (L. E. Melrin and Ware & Melrin, all of Minneapolis, Minn., on the brief), for appellee.

Before KENYON and VAN VALKENBURGH, Circuit Judges, and OTIS, District Judge.

OTIS, District Judge.

This case is here on a second appeal. The facts are these:

H. M. Buell, doing business under the firm name of Buell Bridge Company, on the 16th day of September, 1921, signed and entered into a contract with the state highway department of the state of Montana for the construction of a bridge on a highway in that state. To insure the faithful performance of that contract, Buell as principal, and the appellee as surety, on the 16th day of September, 1921, executed to the state highway department for the state of Montana a surety bond. This was in accordance with a requirement of the laws of Montana that the contractor, upon being awarded a contract by the highway department, should execute to the state a bond conditioned for the faithful discharge of the contractor's duties under its contract. The bond in this case named the state of Montana as obligee, and, in addition to specifying that it was given for the faithful discharge of the contractor's duties under the contract, also contained the provision that the bond would be void if the contractor paid all claims for labor performed or material furnished in connection with the construction called for in the contract, otherwise to remain in full force and effect.

The contract between Buell and the state highway commission contained no promise on the part of Buell in so many words that he would pay for labor and material furnished. But it did provide that the "contractor shall furnish at his own expense all materials to be used on the project."

In the course of the construction, and after the date of the execution and delivery of the bond, the appellant furnished Buell structural steel on which there was due at the time of the trial $7,031.61, plus accrued interest. An action was brought by the appellant to recover from the appellee as surety on the bond this amount. On the first trial of the case the appellant recovered. That judgment was reversed and the case remanded by this court Federal Surety Co. v. Minneapolis Steel & Machinery Co., 17 F. (2d) 242, 246, on the ground "that the bond interpreted in accordance with the statutory provisions and the decisions of the state of Montana created no obligation in favor of the Minneapolis Steel and Machinery Company which it may enforce in its own name in an action either at law or in equity." The case was submitted to the District Court a second time on precisely the same record as was made at the first trial. The trial court, deeming itself bound by the decision of this court on the first appeal, found generally for the appellee. The case is here now on an appeal from that judgment.

It is urged by the appellant that since on the first appeal the decision of this court was based upon a construction of Montana law, particularly of section 7472, Revised Codes of Montana 1921, and since, subsequent to that decision, the Supreme Court of Montana has, as is contended, in the case of Gary Hay & Grain Co. v. Carlson, 79 Mont. 111, 255 P. 722, announced an interpretation of the Montana law in question directly opposite to that made by this court, this court should now adopt and follow the construction of the Montana law adopted by the Supreme Court of that state. It is contended that, if that is done, the appellants must prevail and the judgment of the district court in the last trial be reversed.

The questions to be decided on this appeal are these: First, will this court reconsider its former opinion, if it appears that the Montana court has, since the first decision herein, settled the question of substantive law on which the first decision rested in a manner at variance with this court's interpretation of that law on the former appeal? Second, does the Montana law, as interpreted by the latest decisions of its courts, require a judgment for plaintiff under the circumstances of this case?

1. The former decisions of this court established the law of the case. As a general rule on a second appeal the law of the case thus established will be adhered to. Clark v. Keith, 106 U. S. 464, 1 S. Ct. 568, 27 L. Ed. 302; Supervisors of Wayne County v. Kennicott, 94 U. S. 498, 24 L. Ed. 260; Guarantee Co. v. Phenix Insurance Co. (C. C. A. 8) 124 F. 170, 174; Whitfield v. Hanges et al. (C. C. A. 8) 266 F. 69. The law of the case, however, "as applied to the effect of previous orders on the later action of the court rendering them in the same case, merely expresses the practice of courts generally to refuse to reopen what has been decided, not a limit to their power." Messinger v. Anderson, 225 U. S. 436, 444, 32 S. Ct. 739, 740 (56 L. Ed. 1152). This court, therefore, has the power to reconsider its construction of the Montana statute as declared on the first appeal, but, in conformity with the general rule, that should not be done unless under exceptional circumstances. Such exceptional circumstances exist where the decision of this court on a first appeal is bottomed on decisions of the Supreme Court of a state construing a statute of that state which, before the second appeal, has been followed by other decisions of the same court placing a different construction on such statute. St. Louis & San Francisco R. Co. v. Quinette (C. C. A. 8) 251 F. 773, 775. In such exceptional circumstances this court will reconsider the conclusion formerly reached, although it may not even then follow the construction last adopted by the Supreme Court of the state. Before, however, even a reconsideration is warranted, it must clearly appear that a different construction has been placed upon the statute involved by the Supreme Court of the state. It is to be determined in this case then, first of all, whether, as is contended by appellant, the Supreme Court of Montana in the Gary Hay & Grain Co. Case did declare the law of Montana differently from the declaration of this court on the first appeal.

2. The facts in the Gary Hay & Grain Co. Case were these: One Carlson entered into a contract with the state highway commission of Montana for the construction of a certain roadway in that state. His contract required him to furnish all equipment, labor, and material necessary for the prosecution of the work, and he was required in the contract to promise to pay for labor and material used. He was required to give a bond which was furnished by the Fidelity & Deposit Company, conditioned upon the faithful performance of his covenants and agreements under his contract. The Gary Hay & Grain Company furnished Carlson, the contractor, various materials used in connection with the work for which Carlson failed to pay that company. Suit was brought by the company against the surety. The Supreme Court of Montana held that the company could recover from the surety by virtue of section 7472 of the Revised Codes of Montana for 1921, which provides that "a contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it."

It was held that the bond in this case was a contract made expressly for the benefit of persons furnishing materials used in the construction involved, and therefore for the benefit of the Gary Hay & Grain Company, and that it might be enforced by that company. The court said:

"Where the bond is given for the performance of a contract, the bond is made with relation to the contract and as a part of it. * * * The two are to be construed together. * * * The obligation of the surety is, therefore, coextensive with and measured by the promises of the principal (the contractor here) to the obligee (the state) appearing in the contract, provided proper expressions are used in the bond, and the surety by the bond binds himself only to the performance of those acts which the principal promises to perform as a part of his contract. * * *

"It is, therefore, apparent that when neither the contract nor the bond contains a promise to pay laborers and materialmen, and the bond is conditioned only for the faithful performance of the work, there is no privity of contract entitling such claimants to sue the surety.

"Again, as in the absence of statutory authority no lien may be filed against public works, the obligee under such a bond cannot be injured by the failure of the contractor to pay for labor and material, and the governmental agency may or may not, at its pleasure, as a part of the contract exact a promise to make such payments; * * * if none is exacted or contained in the contract, but is incorporated in the bond of which the contract is a part, such condition of the bond is unenforceable by laborers and materialmen, as the bond, in this particular, is without consideration. * * *

"Where, however, the governmental agency sees fit to exact a promise to pay laborers and materialmen as a part of the contract and requires the contractor to furnish a bond, which, in addition to assuring the faithful performance of the work, promises that the contractor will pay for labor and material furnished for the prosecution of the work, it must be presumed that it thereby intended to benefit some one, and, as failure could not injure the state to whom the bond runs, the obligee could only be incidentally benefited.

"* * * Where such a situation as is above referred to arises, courts readily find in the provision of the bond an...