Bristol Steel Works v. Plank

• Decision Date: 17 January 1935
• Citation: 163 Va. 819
• Court: Virginia Supreme Court
• Parties: BRISTOL STEEL AND IRON WORKS, INCORPORATED, v. R. FLOYD PLANK, B. W. WHITSETT, MRS. ELIZABETH TEMPLE PLANK AND RUTH C. WHITSETT.

Page 819

163 Va. 819

BRISTOL STEEL AND IRON WORKS, INCORPORATED, v. R. FLOYD PLANK, B. W. WHITSETT, MRS. ELIZABETH TEMPLE PLANK AND RUTH C. WHITSETT.

Supreme Court of Virginia, Richmond.

January 17, 1935.

Present, Campbell, C.J., and Holt, Epes, Hudgins, Browning and Chinn, JJ.

1. BONDS — Bond of Building Contractor — Action by Materialman against Sureties — Bond and Building Contract to Be Considered Together — Case at Bar. — The instant case was an action by a materialman against the sureties on the bond of a building contractor.

Held: That the bond and the building contract must be read and considered together in deciding whether the sureties on the bond were liable for the materials furnished. The contract by very definite and explicit terms was referred to in the bond and by its intendment and words was a part thereof.

2. BONDS — Bond of Building Contractor — Execution for Protection of Bank — Rights of Materialman — Case at Bar. — In the instant case, an action on a building contractor's bond to recover for materials furnished, the bond was executed by the contractor as principal and defendants, stockholders of the realty company for whom he was constructing the building, as sureties, and was in favor of a certain trust company to secure it for money advanced to construct the building and to protect it from mechanics' liens against the building. The bond, executed after construction had begun, guaranteed faithful performance of the building agreement, and the agreement, which was incorporated in the bond by reference, provided for payment by the contractor for labor or materials. Defendants denied liability on the ground that the bond was a transaction between them and the trust company; that its purpose was to secure to the trust company a sum of money advanced for financing the building and to insure to the trust company the completion of the building within specified time, and not to in any way inure to the benefit of materialmen.

Held: That when the bond and contract were read and considered together as they must be, the bond embodied a two-fold purpose, the protection of the trust company to the extent provided and the benefit and protection of materialmen, and that therefore plaintiff was entitled to recover.

Error to a judgment of the Circuit Court of Montgomery county in a proceeding by motion for a judgment for money. Judgment for defendants. Plaintiff assigns error.

The opinion states the case.

S. Bruce Jones and Wm. H. Woodward, for the plaintiff in error.

John P. Saul, Jr., and Robert C. Jackson, for the defendants in error.

BROWNING, J., delivered the opinion of the court.

This case was submitted to the court for its judgment upon an agreed statement of facts, which are 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 Corporation 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 reinforcing steel, 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, 1930, until paid. The articles were purchased under an agreement made between Morris C. Miller and Son and the plaintiff after the agreement of April 23, 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 Company 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 Corporation. The Blacksburg Realty Corporation, however, paid the contractor, Miller, in full. The Virginia Trust Company 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 plaintiff's notice of motion and entered judgment for the defendants.

In April, 1929, Morris C. Miller and Son entered into a contract with the Blacksburg Realty Corporation for the construction of a theatre and store building in Blacksburg, Virginia, 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, Virginia, 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 Corporation, 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 Company 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 articles of 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 difinite 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. Rainer for Use of...