Blyth-Fargo Co. v. Free

• Decision Date: 22 January 1915
• Docket Number: 2673
• Citation: 148 P. 427,46 Utah 233
• Court: Utah Supreme Court
• Parties: BLYTH-FARCO CO. v. FREE et al

148 P. 427

46 Utah 233

BLYTH-FARCO CO. v. FREE et al

No. 2673

Supreme Court of Utah

January 22, 1915

Rehearing Denied May 8, 1915.

Appeal from District Court, Fourth District; Hon. A. B. Morgan Judge.

Action by the Blyth-Fargo Company against J. S. Free and others.

Judgment for plaintiff. Defendants appeal.

REVERSED AND CAUSE REMANDED, with directions to dismiss.

King Nibley & Farnsworth and T. Marioneaux for appeallants.

Snyder & Snyder for respondent.

FRICK, J. McCARTY, J., STRAUP, C. J., concurring.

OPINION

FRICK, J.

The Blyth-Fargo Company, a corporation, hereafter called "respondent," commenced this action in the District Court of Wasatch County against Free & Taylor, a co-partnership, hereafter styled "contractor," and against the Guardian Casualty & Guarantee Company, hereafter called "appellant," to recover upon a bond given by said contractor as principal and appellant as surety to the Snake Creek Mining & Tunnel Company, hereafter designated "company." The bond was given pursuant to a certain contract by the terms of which said contractor agreed to construct a certain tunnel to be used for drainage and other purposes and for the construction of which respondent furnished the material sued for in this action. The respondent recovered judgment against the contractor and also against the appellant upon the bond aforesaid for the value of said material, and the latter alone appeals.

The appellant insists that the court erred in entering judgment upon the bond against it for the reason that under the terms and conditions thereof the "respondent has no right to maintain an action thereon." Upon the other hand, respondent contends that the bond was given for the benefit of all those who may have furnished labor or material to the contractor for the construction of the tunnel aforesaid. The record discloses that the contractor entered into a contract with said company to construct said tunnel, which was to be about 14,350 feet in length, and for the construction of which the contractor was to receive $ 25.16 per linear foot. Under the contract and specifications, which were made a part thereof, the contractor was to furnish all the material and perform all the labor necessary to construct and complete said tunnel, and the company was to provide the power and machinery specified in the bond, which we will set forth hereafter. The specifications are made a part of the contract, and hereafter we shall refer to the contract only, although the particular provision referred to may be a part of the specifications.

It was provided in the contract that:

"The contractor shall be required to furnish a satisfactory bond in the sum of twenty thousand ($ 20,000.00) dollars to insure the payment of all contracts or liabilities and expenses growing out of the construction of said tunnel under the contract, repairs, machinery, maintenance, electric energy, etc."

Also that:

"The contractor shall promptly pay all sub-contractors, materialmen, laborers and other employees as often as payments are made to it by the company, and in the event at any time of its failure so to do, the company may retain from all subsequent estimates and pay over to said sub-contractors, materialmen, laborers and other employees such sums as may from time to time be due to them respectively. Before final settlement is made between the parties hereto for work done and material furnished under this contract, and before any right of action shall accrue to the contractor against the company therefor, the said contractor shall furnish evidence satisfactory to the engineer of the company that the work covered by this contract is free and clear from all liens for labor and materials and that no claim then exists against the same for which any lien could be enforced."

Pursuant to the contract, the appellant entered into a bond which contained the following provisions:

"Whereas, the firm of Free & Taylor, co-partnership, entered into a certain contract with specifications thereto attached and marked 'Exhibit A,' said specifications being made a part of said contract, with the Snake Creek Mining & Tunnel Company for the construction of the Snake Creek Drainage and Transportation Tunnel, which said contract and specifications bears date of 12th day of April, 1910, and contains the following clauses and conditions, to wit:

"Clause 8 (of specifications) General: The company will furnish:

"(a) One five-drill Sullivan air compressor and receiver, with compressor house, and the necessary electrical equipment for operating said compressor.

"(b) Electric power in quantity sufficient for use in driving the tunnel; the contractor to pay actual cost of the power consumed.

"It being understood that the company does not assume any responsibility in the furnishing of power, but simply agrees to give the contractor the benefit of its contract now in force with the Snake Creek Power Company.

"Clause 10 of (specifications) Other Provisions:

"The contractor shall be required to properly care for and maintain, in first-class condition, all machinery furnished by the company, and all damages thereto, other than ordinary wear, shall be paid for by the contractor.

"The contractor shall be required to furnish a satisfactory bond in the sum of twenty thousand dollars ($ 20,000.00), to insure the payment of all contracts or liabilities (for which the party of the second part the 'Company' shall be liable, with the exception of liability on account of personal injuries to any person or persons), and expenses growing out of the construction of said tunnel under the contract, repairs, machinery, maintenance, electric energy, etc.

"Now the condition of this obligation is such that if the said Free & Taylor, a co-partnership, shall well and truly keep and perform the terms and conditions of the said contract as recited herein, on its part to be kept and performed and shall indemnify and save harmless the said Snake Creek Mining & Tunnel Company as expressly stipulated and limited in said clauses herein recited, then this obligation shall be of no effect, but otherwise, it shall remain in full force and effect. Provided, however, that this obligation shall in no wise be considered or be construed to be a penalty bond for failure of the said firm of Free & Taylor to perform the contract made with Snake Creek Mining & Tunnel Company on the 12th day of April, 1910, nor shall it cover or refer to any matter or thing relating to said contract and specifications except such clauses thereof as are recited in this bond made a part thereof." (Italics ours.)

The clause which we have included within parenthesis is not contained in the contract, although it is incorporated into the bond. It will be observed from that portion of the bond which we have italicized that the obligations assumed by appellant are specifically limited to the provisions of the contract which are set forth in detail in the bond itself, and to no others.

The question which confronts us, therefore, is: What is the scope of the bond entered into by appellant when construed in connection with those portions of the contract which are incorporated into the bond?

Respondent contends that, where a bond is given to insure the performance of a certain contract, in order to determine the scope of the obligation assumed in the bond, the terms and conditions contained in both instruments must be construed and considered together. This, no doubt, is sound doctrine; but it is also true that the obligation assumed by the obligor may, nevertheless, be defined and limited in the bond itself regardless of the provisions of the contract, and, if the party for whose benefit the bond is given is not satisfied with the limitation, he is not bound to accept it, but may insist upon a bond which strictly conforms to the terms of the contract. Where the obligee named in the bond, however, accepts it with all of its limitations and restrictions, he cannot, we apprehend, afterwards insist that the terms of the contract, rather than those of the bond, shall control, but he is bound by the limitations contained in the bond; and this, no doubt, is so also as against one who claims to be a beneficiary under the bond. The authority cited and relied on by the respondent, namely, 5 Cyc. 757, makes it quite clear that, although generally speaking, both the contract and bond must be construed together, yet, when the bond restricts the right to look to certain portions of the contract only, then only those which are thus selected can be considered. It is there said:

"It may be generally stated that a bond may incorporate, by reference expressly made thereto, other contracts, papers, or written instruments, or it may be conditioned for the performance of certain specific agreements set forth in such instruments, so as to embody the same therein as a part of the obligation thereof with all the stipulations, limitations, or restrictions mentioned in the referred-to papers, in which case the bond and the papers referred to should be read together and construed as a whole, although, if only specific parts of another contract be referred to, only so much of said writing is incorporated as is evident the parties intended to embody or rely upon."

If therefore, we have recourse to the terms of the bond given in this case, it is apparent just what part of the provisions of the contract were intended to be made a part of the bond. It is unreasonable therefore to contend that, although certain portions of the contract were eliminated from the bond, yet we must still consider the whole contract for the purpose of determining the scope of the obligations contained in the bond. Appellant, like all others competent to contract, had...