Byram Lumber & Supply Co. v. Page

• Decision Date: 21 May 1929
• Citation: 109 Conn. 256,146 A. 293
• Parties: BYRAM LUMBER & SUPPLY CO. v. PAGE ET AL.
• Court: Connecticut Supreme Court

146 A. 293

109 Conn. 256

BYRAM LUMBER & SUPPLY CO. v. PAGE ET AL.

Supreme Court of Errors of Connecticut.

May 21, 1929

Appeal from Superior Court, Fairfield County; Earnest C. Simpson Judge.

Action by the Byram Lumber & Supply Company against Mary Zehnder Page and others to foreclose a mechanic's lien and recover on a contractor's bond. On trial to the court there was judgment for plaintiff, and defendant AEtna Casualty & Surety Company appeals. No error.

Henry E. Shannon, of Bridgeport, and W. Braxton Dew, of Hartford, for appellant Æ tna Casualty & Surety Co.

Raymond E. Hackett and John D. Walker, both of Stamford, for appellee.

Argued before WHEELER, C.J., and MALTBIE, HAINES, HINMAN, and BANKS JJ.

MALTBIE, J.

George H. Warhurst, Incorporated, was general contractor for the construction of a dwelling at Greenwich for one of the defendants in this action, Mary Zehnder Page. On July 12 1927, the Warhurst corporation, as principal, and the defendant surety company, as surety, executed a bond in favor of the defendant Page to assure the performance of the provisions of the contract. The condition of this bond runs as follows: " Now therefore, the Condition of this Obligation is such that if the Principal shall faithfully perform the Contract on his part, and satisfy all claims and demands, incurred for the same, and shall fully indemnify and save harmless the Owner from all cost and damage which he may suffer by reason of failure so to do, and shall fully reimburse and repay the owner all outlay and expense which the Owner may incur in making good any such default, and shall pay all persons who have contracts directly with the Principal for labor or materials, then this obligation shall be null and void; otherwise it shall remain in full force and effect."

Subsequent to the execution of the bond the plaintiff entered into a contract with the Warhurst corporation to furnish materials for the building, and thereafter did furnish such materials to a considerable amount. Before the plaintiff entered into its contract with the Warhurst corporation it was informed that there was a bond on the job, but it never saw the bond or knew its terms. On October 1, 1927, the Warhurst corporation abandoned its contract, and the defendant Page thereafter completed it, at a cost in excess of the contract price, and was reimbursed by the defendant surety company for this excess cost. The plaintiff has not been paid for the materials it furnished. It duly notified the defendant Page of its intention to claim a mechanic's lien upon the premises, and did lodge with the town clerk at Greenwich a proper certificate of lien. By its complaint in this action it seeks in its first count a foreclosure of this lien, but the trial court's conclusion that nothing was secured by the lien stands unquestioned, and this count may be disregarded. In the second count it seeks to recover the value of the materials furnished by it from the defendant surety company, relying upon the condition of the bond we have quoted, and particularly upon the clause reading as follows: " and shall pay all persons who have contracts directly with the principal for labor or materials." From a judgment in favor of the plaintiff, the surety company has appealed.

In Baurer v. Devenis, 99 Conn. 203, 121 A. 566, we re-examined our prior decisions upon the subject and definitely settled it as the law of this state that a third party for whose benefit a provision has been inserted in a contract may sue thereon. Dresser & Son, Inc., v. Insurance Companies, 101 Conn. 626, 646, 126 A. 912; Tuttle v. Jockmus, 106 Conn. 683, 693, 138 A. 804; Levy v. Daniels U-Drive Auto Renting Co., Inc., 108 Conn. 333, 338, 143 A. 163. In Baurer v. Devenis we recognized that the intent which must exist on the part of the parties to the contract in order to permit the third party to sue was not a desire or purpose to confer a particular benefit upon him, but an intent that the promisor should assume a direct obligation to him. Thus we said (page 212 of 99 Conn. %AD 121 A. 569]): " If the parties to the contract did intend to confer upon the third person a right against the promisor, or the promisor intended by such agreement to assume a legal obligation to the third person, these would be indicative of the intent of the parties to benefit the third person. Where the third person knew of the agreement of the promisor, or under the contract he was to be informed of it, it must be found that the parties to the contract did intend to benefit him." That it is in this sense of an intent to create a direct obligation to the third party that we spoke of the intended benefit to him, rather than in the sense of a desire to advance his interests, becomes apparent when we consider our decision in the Daniels Case, supra; for there, having held that the provisions of a statute making any person renting or leasing a motor vehicle to another liable for the damage caused by it became a part of the contract of hiring, we upheld the right of an injured person to sue upon the ground that the provision so read into the contract was one for his benefit within the rule we are considering; and surely it would be a far cry to attribute to the person leasing the motor vehicle a purpose or desire to confer a benefit upon one injured by its operation. This view accords with that adopted by the American Law Institute, where the right of a donee beneficiary to enforce a provision in a contract is recognized " if it appears from the terms of the promise in view of the surrounding circumstances that the purpose of the promisee in obtaining the promise of all or part of the performance thereof is to make a gift to the beneficiary or to confer upon him a right against the promisor to some performance neither due nor supposed or asserted to be due from the promisee to the beneficiary." Amer. Law Institute Restatement, Contracts, § § 133, 135. The Institute also states, in accordance with our ruling in the Daniels Case, supra, that the beneficiary need not be identified at the time the promise is made. Amer. Law Institute Restatement, Contracts, § 139.

The question then is, Does it appear from the terms of the bond viewed in the light of surrounding circumstances that the purpose of the promisee, that is, the defendant Page, was to bestow upon those who had or should thereafter have contracts directly with the Warhurst corporation for labor and materials to be used in the construction of the building a right to proceed directly against the surety upon the bond? In the first place we attach little significance to the fact that the provision here in question is stated in the " condition" of a bond. " An enforceable agreement may be contained in that part of a bond called the condition." New Britain v. New Britain Telephone Co., 74 Conn. 326, 329, 50 A. 881, 883. Of a provision contained in the condition of a bond we said in Tomlinson v. Ousatonic Water Co., 44 Conn. 99, 104: " We think that, taking into consideration the relation of the parties, and the surrounding circumstances to which we have alluded, this clause was intended to create, and did create, an independent, original obligation on the part of the defendant; that is, independent of the rest of the agreement, and original, inasmuch as an obligation of this character had not been previously entered into in writing." If then the provision in the bond we are considering was intended to create an enforceable obligation in those occupying such a relation as did the plaintiff to the principal contractor, that it is contained in the condition is not of consequence. See Corbin, 28 Yale Law Journal, pp. 9, 13.

The question of the right of subcontractors, materialmen, and workmen to recover against the surety in bonds of the general nature of the one before us has been the subject-matter of considerable litigation, and different conclusions have been reached. Typical cases in which a recovery has been allowed are: Algonite Stone Mfg. Co. v. Fidelity & Deposit Co., 100 Kan. 28, 163 P. 1076, L.R.A. 1917D, 722; Knight & Jillson Co. v. Castle, 172 Ind. 97, 87 N.E 976, 27 L.R.A. (N. S.) 573; Gastonia v. McEntee-Peterson Engineering Co., 131 N.C. 363, 42 S.E. 858; Hipwell v. National Surety Co., 130 Iowa, 656, 105 N.W. 318; R. Connor Co. v. AEtna Indemnity Co., 136 Wis. 13, 115 N.W. 811; Concrete Steel Co. v. Illinois Surety Co., 163 Wis. 41, 157 N.W. 543. Among the decisions denying the right of recovery the following may be noted: Fosmire v. National Surety Co., 229 N.Y. 44, 127 N.E. 472; Standard Gas Power Corporation v. New England Casualty Co., 90 N.J.Law, 570, 101 A. 281; Greene County v. Southern Surety Co., 292 Pa. 304, 141 A. 27; ...