Boise-Payette Lumber Co. v. Phoenix Indem. Co., BOISE-PAYETTE

• Decision Date: 25 February 1955
• Docket Number: No. 8115,BOISE-PAYETTE,8115
• Citation: 3 Utah 2d 150,280 P.2d 448
• Parties: d 150 LUMBER COMPANY, a corporation, Plaintiff and Appellant, v. PHOENIX INDEMNITY COMPANY, a corporation, Byron J. Darley and Bonnie H. Darley, Defendants and Respondents.
• Court: Utah Supreme Court

Page 448

280 P.2d 448

3 Utah 2d 150

BOISE-PAYETTE LUMBER COMPANY, a corporation, Plaintiff and Appellant, v. PHOENIX INDEMNITY COMPANY, a corporation, Byron J. Darley and Bonnie H. Darley, Defendants and Respondents.

No. 8115.

Supreme Court of Utah.

Feb. 25, 1955.

Irving H. Biele, Salt Lake City, for appellant.

Ray, Quinney & Nebeker, W. O. Darley, Salt Lake City, for respondent.

WORTHEN, Justice.

This is an interlocutory appeal from a summary judgment entered upon motion of the individual defendants.

In August, 1951, defendant Byron J. Darley entered into an agreement with one Stanley H. Pickles for the construction of a residence on property owned by Darley. The agreement provided:

'2. The Contractor agrees to provide all of the materials and perform all of the work herein specified, and in the attached plans and specifications (if any).

'8. Contractor agrees * * * to save the owner harmless from any lien or claims arising out of the work herein agreed to be performed.'

The undertaking of defendant surety was as follows:

'Now, therefore, the condition of this obligation is such, That, if the Principal shall indemnify the Owner against any and all loss or damage directly arising by reason of the failure of the Principal to faithfully perform said contract, then this obligation shall be void; otherwise to remain in full force and effect.'

Plaintiff furnished building materials to the contractor Pickles for use in the construction of the Darley residence. Pickles refused to pay for the building material and this suit was brought against the owners and Pickles' bondsman, the corporate defendant.

The trial court granted the motion of defendants Darley for summary judgment on the ground that a good and sufficient bond had been written by defendant Phoenix Indemnity Company to protect materialmen and laborers on claims against the contractors as required by law and that such undertaking having been furnished, plaintiff had no cause of action against the Darleys.

The matter before us is the sufficiency of the bond under our statutes to relieve the Darleys from the claim of plaintiff for materials furnished by plaintiff and used in the construction of Darley's home. We are called on to construe and apply sections 14-2-1 and 14-2-2. Those sections provide:

'14-2-1. Bond to protect mechanics and materialmen.--The owner of any interest in land entering into a contract, involving $500 or more, for the construction, addition to, or alteration or repair of, any building, structure or improvement upon land shall, before any such work is commenced, obtain from the contractor a bond in a sum equal to the contract price, with good and sufficient sureties, conditioned for the faithful performance of the contract and prompt payment for material furnished and labor performed under the contract. Such bond shall run to the owner and to all other persons as their interest may appear; and any person who has furnished materials or performed labor for or upon any such building, structure or improvement, payment for which has not been made, shall have a direct right of action against the sureties upon such bond for the reasonable value of the materials furnished or labor performed, not exceeding, however, in any case the prices agreed upon; which right of action shall accrue forty days after the completion, or abandonment, or default in the performance, of the work provided for in the contract.

'The bond herein provided for shall be exhibited to any person interested, upon request.' (Italics added.)

'14-2-2. Failure to require bond--Direct liability.--Any person subject to the provisions of this chapter, who shall fail to obtain such good and sufficient bond, or to exhibit the same, as herein required, shall be personally liable to all persons who have furnished materials or performed labor under the contract for the reasonable value of such materials furnished or labor performed, not exceeding, however, in any case the prices agreed upon.'

Appellant contends that the bond of the defendant Phoenix Indemnity Company does not substantially comply with the requirements of section 14-2-1, U.C.A.1953, referred to herein; and that the Darleys have not by the bond furnished, relieved themselves from liability to appellant.

We are of the opinion that the bond furnished by the defendant indemnity company did not comply with section 14-2-1, supra, and that the individual defendants were not relieved from the obligation to materialmen furnishing material used in the construction of the residence in question.

The latest expression of this Court on the rights of materialmen to proceed directly against the surety of a building contractor is DeLuxe Glass Co. v. Martin, 116 Utah 144, 208 P.2d 1127, 1129.

In that case the contract between the owner and the contractor provided: "Unless otherwise stipulated, the Contractor shall provide and pay for all materials, labor, water, tools, equipment, light, power, transportation and other facilities necessary for the execution and completion of the work." The contract further provided: "Before issuance of final certificate the Contractor shall submit evidence satisfactory to the architect that all payrolls, material bills, and other indebtedness connected with the work have been paid." [Italics ours.]

By the terms of the bond in the DeLuxe Glass Co. case, supra, the surety undertook, and agreed that its principal should, "perform and fulfill all the undertakings, covenants, terms, conditions, and agreements of said contract."

As heretofore observed, the contractor in that case agreed to pay for all materials, and perform all of the work and agreed to save the owner harmless from any lien or claim arising out of the work.

The Court in the DeLuxe Glass Co. case, supra, observed at page 151 of 116 Utah, at page 1131 of 208 P.2d: 'The payment of [sic] the contractor (principal on the bond) of all of those items is required by the 'covenants, terms, conditions, and agreements of said contract."

In the instant case the contract contains no provision for the contractor to pay for all materials.

In the DeLuxe Glass Co. case, supra, this Court used this language at page 151 of 116 Utah, at page 1131 of 208 P.2d:

'Defendant surety guaranteed that such payments would be made by its principal.'

No such provision is found in the bond in the instant case. It is not conditioned that the principal shall perform and fulfill all the covenants, terms, conditions and agreements of the contract. The surety agreed only to indemnify the owner against any loss or damage arising by reason of the failure of the Principal to faithfully perform the contract. It did not agree that the Principal would perform his contract.

Specifically the bond failed to comply with the provisions of section 14-2-1.

The bond is not 'conditioned for the faithful performance of the contract and prompt payment for material furnished and labor performed under the contract. * * *' Rather it undertakes only to indemnify the owner if the contractor fails to pay for material and labor. It is not a promise that the contractor will pay for the same.

Let it be assumed that this bond is such that plaintiff has a right against the surety as a common law obligation, and that if and when a judgment is obtained against the Darleys they could ask that the surety be required to satisfy the judgment without the circuity of a separate action, nevertheless we believe and hold that the bond in this case is not sufficient under our statute to exonerate the owner of liability and permit the suit...