Bristol Steel & Iron Works Inc v. Plank *

• Decision Date: 17 January 1935
• Court: Virginia Supreme Court
• Parties: BRISTOL STEEL & IRON WORKS, Inc. v. PLANK et al.*

178 S.E. 58

BRISTOL STEEL & IRON WORKS, Inc.

v.PLANK et al.^*

Supreme Court of Appeals of Virginia.

Jan. 17, 1935.

Error to Circuit Court, Montgomery County.

Action by the Bristol Steel & Iron Works against R. Floyd Plank and others. Judgment for defendants, and plaintiff brings error.

Reversed and rendered.

Argued before CAMPBELL, C. J., and HOLT, EPES, HUDGINS, BROWNING, and CHINN, JJ.

S. Bruce Jones and Wm. H. Woodward, both of Bristol, for plaintiff in error.

John P. Saul, Jr., and Robert C. Jackson, both of Roanoke, for defendants in error.

BROWNING, Justice.

This case was submitted to the court for its judgment, upon an agreed statement of facts which is as follows:

"1. On or about the 23rd day of April, 1929, Morris C. Miller and H. Andrew Miller, his son, doing business as Morris C. Miller and Son, entered into an agreement for the construction of a theatre and store building for the Blacksburg Realty Corp. in Blacksburg, Virginia, which agreement is on the standard form of agreement between the contractor and owner, issued by the American Institute of Architects.* * *

"2. Morris C. Miller and Son purchased from the plaintiff structural and reinforcingsteel, material and supplies in the amount of $7,424.17, on which nothing whatever has been paid, and the amount due by the said Morris C. Miller and Son to the Plaintiff is $7,424.17, with interest from the first day of January, 1030, until paid. The articles were purchased under an agreement made between Morris O. Miller and Son and the Plaintiff after the agreement of April 23rd, 1929, and were installed and used in the construction of said building.

"3. On the 13th day of December, 1929, the defendants executed and delivered to the Virginia Trust Co. in Richmond, Virginia, the bond described in the Notice of Motion. * * *

"4. No payment for the materials and supplies furnished was made by Morris C. Miller and Son to the plaintiff, and nothing has been, or will be realized from the Mechanic's Lien filed by the plaintiff against the real estate of the Blacksburg Realty Corp. The Blacks-burg Realty Corp., however, paid the contractor, Miller, in full. The Virginia Trust Co. has made and is not now making any claim against the sureties on said bond.

"5. The contractor made application for payments, as required by article 24 of the contract, and the architect issued certificates therefor covering the installation of all of the structural and reinforcing steel, and all other materials, which was sold and furnished to the said Morris C. Miller and Son by the plaintiff at the price of $7,424.17.

"6. The four defendants have been from the beginning and are now, the principal stockholders of the Blacksburg Realty Corp.

"7. The claim of the plaintiff is a part of its capital, and as such is not required to be listed for taxation in the State of Virginia."

The court dismissed the plaintiffs notice of motion, and entered judgment for the defendants.

In April, 1929, Morris C. Miller & Son entered into a contract with the Blacksburg Realty Corporation for the construction of a theater and store building in Blacksburg, Va., and in December, 1929, the defendants, who are the defendants in error here, and who are the principal stockholders and owners of the Blacksburg Realty Corporation, and Morris C. Miller, as principals and sureties, entered into a bond with the Virginia Trust Company of Richmond, Va., by which they guaranteed the faithful performance of the contract

The conditions of the bond are as follows: "The conditions of this obligation are such that, Whereas, the said Morris C. Miller, by a certain contract bearing date of April 23, 1929, hath contracted and agreed with the Blacksburg Realty Corp., for the consideration therein expressed, to erect and build on a piece of ground situated on College Avenue, Blacksburg, Virginia, a certain theatre and Store building therein described, in such manner and form, and at or within such time, as in said articles of agreement and in the specifications thereto annexed, and certain plans, elevations, and sections, in the said specifications and articles referred to are particularly mentioned and set forth, and whereas it was and is agreed that the said Morris C. Miller, as principal and sureties whose names are signed hereto, should enter into the above written bond or obligation to the end that the Virginia Trust Co. might be secure in placing a First Mortgage Lien on said premises, thereby advancing money to be used in financing said building: Now, the condition of the above written bond or obligation is such that if the above bounden principal, his executors, and administrators, do and shall erect and build, complete and finish, the said building herein described in and by the said articles of agreement contracted to be erected and built at or within the time therein expressed for completion, and also do, and well and truly observe, perform, fulfil and keep, all and every the covenants, contracts, clauses, articles, and agreements, contained in the said agreement and which, by or on the part of the said Morris C. Miller, principal, his executors, or administrators, are or ought to be observed, performed fulfilled, and kept, within such times and in such manner in all respects as in the said articles of agreement are mentioned or required according to the true intent and meaning of the said articles of agreement, and according to the aforesaid specifications, plans, elevations, sections and drawings therein referred to, then the above written bond or obligation shall be void and of no effect; but otherwise shall be and remain in full force and virtue."

The articles of the agreement, which are incorporated in the bond by reference, provide in part as follows:

"Article 37. The Contractor agrees:

"(e) to pay the Sub-contractor, upon the issuance of certificates, if issued under the schedule of values, described in Article 24 of the General Conditions, the amount allowed to the contractor on account of the sub-contractor's work to the extent of the sub-contractor's interest therein."

"Article 1(e). The term 'work' of the contractor or sub-contractor includes labor or materials or both."

In the determination of this case we are confronted by a single question of law.

Are the defendants, as sureties on the bond, liable to the plaintiff for materials furnished by it, and used in the construction of the building?

The bond and the contract must be read and considered together in solving this legal problem. The contract by very definite and explicit terms is referred to in the bond, and by its intendment and words is a part thereof.

The defendants urge that the bond creates no liability upon them to the plaintiff because it was a transaction between themselves and the Virginia Trust Company, executed months after the construction of the building had begun, and that its purpose was to secure to the Virginia Trust Company, as a first lien, a large sum of money furnished by it to be used in financing the building; that it was aimed to insure to the trust company the completion of the building within the time specified and protect it from the annoyance and expense from the filing of mechanics' liens against the building, and not to in any way inure to the benefit of materialmen.

Litigation involving the solution of legal questions similar to the one here has long vexed the courts. The volumes of reports of the courts of last resort teem with cases, varying in form and circumstance, but some of them similar enough to the present case to furnish a safe guide to its correct decision.

The decisions present a conflict of authority, and there has been a decided contrariety of judicial expression.

We quote the following from the learned annotation appended to the case of Fidelity & D. Co. v. Rainer for Use of Mfrs.' Warehouse Co., 220 Ala. 262, 125 So. 55, in 77 A. L. R. p. 13:

"The theory on which laborers, materialmen, and subcontractors are permitted to sue the surety on a contractor's bond conditioned for their benefit is based upon the principle of modern American jurisprudence that, when a promise is made to one, upon a sufficient consideration, for the benefit of another, the latter may sue the promisor for a breach of his promise. Leslie Lumber & Supply Co. v. Lawrence (1928) 178 Ark. 573, 11 S.W.(2d) 458.

"This doctrine has been the subject of much controversy; but, after three quarters of a century of development and extension, it is now recognized by the overwhelming weight of authority in the United States."

And from the same annotation, quoting from Street's Foundations of Legal Liability, vol. 2, p. 152 et seq.:

"The controversy over the right of a stranger to the consideration to sue upon a promise made for his benefit involves, perhaps the most momentous issue raised in the law of contract since the decision of Slade's Case (1602) 4 Coke, 94, 76 Eng. Reprint, 1076. The fact that the battle is still going on renders it of surpassing interest. On the one side is the theory on which assumpsit was originally based. On the other is the consciousness that the legal remedy upon a simple contract should be as broad as the contractual obligation. Around these two standards the contending forces are marshaled. It is not difficult, we believe, to indicate the side to which victory inclines. The common-law theorist may, in a few words, dispose of the right of the stranger to sue upon a contract made for his benefit. Legal evolution is, however, against him. The introduction of the civil action as the sufficient remedy in all cases where the facts show legal liability has determined the issue."

The following taken from the annotator's notes, 77 A. L. R., supra, are in point and are sustained by the cases cited:

"Where the public contractor's bond is conditioned for the benefit of laborers and materialmen, 'the third party need not be ascertained or known at its inception to entitle him to the benefits thereof. The third party...