Bourrett v. W. M. Bride Const. Co., 49178
| Decision Date | 26 June 1957 |
| Docket Number | No. 49178,49178 |
| Citation | 84 N.W.2d 4,248 Iowa 1080 |
| Parties | Charles BOURRETT, d/b/a Bourrett Tin and Furnace Shop, Appellant, v. W. M. BRIDE CONSTRUCTION CO., Inc., Continental Casualty Company, and Sunnyside Investment, Inc., Appellees. |
| Court | Iowa Supreme Court |
Hutchison, Hurst & Duggan, Sioux City, for appellant.
Harper, Gleysteen & Nelson, Sioux City, for appellee Continental Casualty Co.
This appeal by plaintiff involves the liability to it, a subcontractor, of defendant Continental Casualty Co., surety on a private building bond of the principal contractor. The trial court held there was no liability and sustained the Casualty company's motion to dismiss plaintiff's petition. We affirm the decision.
Plaintiff Bourrett's petition is in two counts. Defendants to Count I are W. M. Bride Construction Co., Inc., principal contractor, Continental Casualty Co. and Sunnyside Investment, Inc., owner. Count II is against the Casualty company only. Liability of the principal contractor and owner has not been adjudicated and is not now before us.
Count I of the petition alleges: Sunnyside owns certain lots in Sioux City, plaintiff orally contracted with Bride to furnish heating equipment for erection of a service station thereon and performed his contract, $911.86 is owing plaintiff thereon, plaintiff field his claim for a mechanic's lien with the clerk of the district court and gave written notice thereof to Sunnyside three months and 26 days after the last material was furnished and labor performed, Bride as general contractor had a written contract with Sunnyside to erect the service station and gave it a bond for the performance of the contract signed by the Casualty company as surety. Judgment for $911.86 is asked against Bridge, the Casualty company and Sunnyside, together with foreclosure of plaintiff's mechanic's lien.
Count II of the petition incorporates the allegations of Count I and also alleges the bond was given in conformance with rule 3, Rules of Civil Procedure. It asks only a money judgment against the Casualty company.
Copies of the principal contract and bond are attached to and made part of the petition. The contract provides Bridge shall furnish all materials and perform all labor necessary for the service station and is to furnish a satisfactory bond guaranteeing performance of contract and payment for labor and material.
The bond provides Bride, as principal, and the Casualty company, as surety, are bound unto Sunnyside in the sum of $23,051 (the contract price) and: 'Whereas, the Principal has entered into a written contract * * * with the Obligee (Sunnyside) for erection of new service station * * * which contract is hereby referred to and made a part hereof, * * *
'Now, Therefore, the Condition of this obligation is such, that if the Principal shall indemnify the Obligee against any 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.
'Provided, however, and upon the express conditions, the performance of each of which shall be a condition precedent to any right to recovery hereon: * * *
'Sixth: That no right of action shall accrue upon or by reason hereof, to or for the use or benefit of any one other than the Obligee herein named; and that the obligation of the Surety is, and shall be construed strictly as, one of suretyship only * * *.'
The Casualty company's motion to dismiss each count of the petition is based on the ground its liability is as surety only to Sunnyside and under the sixth paragraph of the bond no right of action under it accrues to any other party. By resistance to the motion plaintiff alleges the Casualty company's liability is that of surety and guarantor of the rights of materialmen and laborers and its contract is a third party beneficiary one upon which plaintiff has a direct cause of action against the Casualty company. As stated, the trial court sustained the motion to dismiss.
Plaintiff's desire to recover on the bond of the Casualty company is understandable in view of the fact his claim for mechanic's lien was not filed within 60 days from the date the last material was furnished or labor performed as provided by section 572.9, Code 1954, I.C.A. Liens, like plaintiff's, filed after the 60-day period are enforceable 'only to the extent of the balance due from the owner to the contractor at the time of the service of such notice; * * *.' Code section 572.11, I.C.A. Apparently the balance due from Sunnyside to Bride (alleged to be insolvent) is insufficient to pay claims of subcontractors filed prior to plaintiff's and also his claim. See section 572.17.
The liability of a surety is to be determined by the specified conditions of the bond and cannot be enlarged beyond them. Hay v. Hassett, 174 Iowa 601, 603, 156 N.W. 734, and citation; Carr & Baal Co. v. Consolidated Independent Dist., 187 Iowa 930, 939, 174 N.W. 780; Lamson v. Maryland Cas. Co., 196 Iowa 1185, 1191, 194 N.W. 70; 72 C.J.S. Principal and Surety § 91.
It is frequently stated by courts that the intention of the parties to a contractor's bond is the controlling factor in determining the right of laborers and materialmen to recover thereon. 9 Am.Jur., Building and Construction Contracts, section 96; Annotation, 77 A.L.R. 21, 28.
This intention is to be gathered from the nature of the instrument, fairly read in the light of all the circumstances attending its making and the apparent purpose it was designed to serve. Hay v. Hassett, supra, and citations at pages 603-604 of 174 Iowa, 156 N.W. 734. As stated in somewhat different language it is a question of intention, to be derived from the language used, the situation of the parties, and legal principles they are presumed to know and have in mind. Fidelity & Deposit Co. of Baltimore, Md. v. Rainer , 220 Ala. 262, 125 So. 55, 77 A.L.R. 13, 17.
Although there are a few outside decisions to the contrary it is well settled in Iowa and is the weight of authority generally that laborers and materialmen may recover on a contractor's bond conditioned that the contractor shall pay all claims for labor and material, or shall faithfully perform a contract providing for such payment, although the owner alone is named as obligee of the bond. Haakinson & Beaty Co. v. McPherson, 182 Iowa 476, 166 N.W. 60, and citations; Johnson Electric Co. v. Columbia Casualty Co., 101 Fla. 186, 133 So. 850, 77 A.L.R. 1, 3; 9 Am.Jur., Building and Construction Contracts, section 97; Annotations, 77 A.L.R. 21, 56, 118 A.L.R. 57, 65.
On the other hand where a bond runs only to a named party and undertakes no more than to indemnify him against breaches of the contract no one else may recover on the bond. Haakinson & Beaty Co. v. McPherson, supra, and citations, at page 477 of 182 Iowa, 166 N.W. 60. This is especially true where the bond contains an express provision limiting its benefits or right of action thereon to the obligee. 9 Am.Jur., Building and Construction Contracts, section 97, page 63; Annotations, 77 A.L.R. 21, 77-78; 118 A.L.R. 57, 71.
Our inquiry here seems reduced to whether this bond was intended merely to indemnify the owner-obligee Sunnyside or to indemnify it and also pay laborers and materialmen, including plaintiff.
The contract is referred to in the bond and made part of it. Thus there can be no doubt the terms of the contract as well as the bond should be considered in determining the Casualty company's liability under the bond. The contract provides Bride shall furnish all materials and perform all labor necessary for the service station. We have held such a provision is not equivalent to a promise by the contractor to pay for labor and material. Green Bay Lumber Co. v. School District, 121 Iowa 663, 665, 97 N.W. 72; Id., 125 Iowa 227, 101 N.W. 84; Carr & Baal Co. v. Consolidated Independent Dist., supra, 187 Iowa 930, 938-939, 174 N.W. 780.
Since it may reasonably be argued a promise to furnish materials and perform labor implies a promise to pay therefor we prefer not to rest our decision on the narrow ground this contract does not expressly obligate Bride to pay for material and labor. The result here would be the same if the contract contained such an express promise.
The other provision of the contract now important is that Bride is to furnish a satisfactory bond guaranteeing performance of contract and payment for labor and material. It is this provision, together with that of the bond which makes the contract part of it, upon which plaintiff mainly relies. This contract provision does not aid plaintiff. It gave Sunnyside the right to demand from Bride a bond guaranteeing performance of the contract and payment for labor and material. But Sunnyside evidently did not require such a bond. At least this bond contains no such stipulation.
The main condition of the bond is to 'indemnify the Obligee against any loss or damage * * * by reason of the failure of the Principal to faithfully perform said contract * * *.' It is not contended Sunnyside has sustained any such loss or damage in a legal sense. So far as appears cost to it of the service station has not exceeded the contract price and it makes no claim on the bond.
That this bond was intended only to indemnify Sunnyside is made doubly clear by the sixth 'express condition' contained in it, 'That no right of action shall accrue upon or by reason hereof, to or for the use or benefit of any one other than the Obligee herein named; * * *.'
The fact that Sunnyside could have required a bond guaranteeing payment for labor and material does not have the effect of altering the terms of the bond it chose to accept. It had a right to waive the provision of the contract as to the condition of the bond and must be held to have done so. Plaintiff is in no position to insist that the bond is...
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