City of St. Louis v. Kaplan-McGowan Co.

• Decision Date: 05 October 1937
• Docket Number: No. 24336.,24336.
• Citation: 108 S.W.2d 987
• Parties: THE CITY OF ST. LOUIS TO THE USE OF THE STONE CREEK BRICK COMPANY, A CORPORATION (PLAINTIFF), APPELLANT, v. KAPLAN-McGOWAN COMPANY, A CORPORATION, AND UNITED STATES FIDELITY AND GUARANTY COMPANY, A CORPORATION (DEFENDANTS), RESPONDENTS.
• Court: Missouri Court of Appeals

108 S.W.2d 987

THE CITY OF ST. LOUIS TO THE USE OF THE STONE CREEK BRICK COMPANY, A CORPORATION (PLAINTIFF), APPELLANT, v. KAPLAN-McGOWAN COMPANY, A CORPORATION, AND UNITED STATES FIDELITY AND GUARANTY COMPANY, A CORPORATION (DEFENDANTS), RESPONDENTS.

No. 24336.

St. Louis Court of Appeals. Missouri.

Opinion filed October 5, 1937.

Appeal from the Circuit Court of City of St. Louis. — Hon. Frank Landwehr, Judge.

AFFIRMED.

Edwin C. Luedde for appellant.

(1) The bond in this case should be liberally construed to carry out its purpose of protecting everyone who furnishes labor or material in the construction of a building to secure payment therefor. The rule of construction in favor of the surety does not apply to a surety for hire. State ex rel. Weinbrenner v. Detroit F. & S. Co., 326 Mo. 684, 32 S.W. (2d) 572; Sgilagyi v. City of Bethlehem, 312 Pa. 260, 167 Atl. 782; City of St. Louis ex rel. Sears v. Southern Surety Company, 62 S.W. (2d) 432; City of St. Louis to use v. Von Phul, 133 Mo. 561, 34 S.W. 843. (2) R.S. Mo. 1929, Sec. 2890, and as amended in Laws Mo. 1933, pp. 179-180; Sgilagyi v. City of Bethlehem, 312 Pa. 260, 167 Atl. 782; N.L. Cas. Co. v. Wallace & Tiernan, 50 Pac. (2d) 176; Mitchell v. Berline McNitt Co., 91 Wash. 582, 158 Pac. 264; City of Springfield for use etc. v. Koch, 72 S.W. (2d) 191; Hilton v. Universal Construction Company, 202 Mo. App. 672, 216 S.W. 1034; Board of Education ex rel. Johnson v. Fidelity & Casualty Company, 166 Mo. App. 410, 149 S.W. 46; Butts v. Randall, 260 N.Y.S. 213, 145 Misc. 708; Trap v. Seaboard Surety Co., 292 N.Y.S. 260, 161 Misc. 428; Sherman M. & I. Works v. Iverson Specialty Co. (Okla.), 43 P. (2d) 1044; U.S.F. & G. v. California-Ariz. Const. Co., 21 Ariz. 172, 186 Pac. 502. (3) R.S. Mo. 1929, Sec. 2890, and as amended in Laws Mo. 1933, pp. 179-180; R.R. Co. v. Southern Strg. Co., 203 Mo. App. 148, 219 S.W. 727; State ex rel. Kingsley v. Carterville Construction Company et al., 220 Mo. App. 244, 284 S.W. 150; City of St. Louis to use v. Hill-O'Meara Construction Company, 175 Mo. App. 555, 158 S.W. 98; Jackson County ex rel. Clow v. Freeborn Engineering and Construction Company, 174 Mo. App. 28, 160 S.W. 271; Board of Education ex rel. Johnson v. Fidelity & Casualty Company, 166 Mo. App. 410, 149 S.W. 46; Hilton v. Universal Construction Company, 202 Mo. App. 672, 216 S.W. 1034; Butts v. Randall, 260 N.Y.S. 713, 145 Misc. 708; Trap v. Seaboard Surety Co., 292 N.Y.S. 260, 161 Misc. 428; United States Fidelity & G. Company v. Cal.-Ariz. Cons. Co., 21 Ariz. 172, 186 Pac. 502; Camdenton Consol. S. Dist. v. N.Y. Cas. Co. (Mo.), 104 S.W. (2d) 319.

Carter & Jones and James E. Garstang for respondent, United States Fidelity and Guaranty Company.

(1) The purpose of the statute requiring bond from contractors upon public works projects is to afford similar protection to laborers and materialmen to that afforded by mechanic's lien laws on account of the public works projects not being subject to such liens. Sections 2890 and 2891, R.S. Mo. 1919, as amended in 1925; Hilton v. Construction Co., 202 Mo. App. 672; Potts v. Davis, 24 S.W. (2d) 1047; State ex rel. Hernleben v. Detroit Fidelity & Surety Co., 21 S.W. (2d) 494. (2) Before there can be a recovery by materialmen against principal or surety upon public works bond there must be privity of contract. Board of Education ex rel. Johnson Heat Regulating Co. v. United States Fidelity & Guaranty Co., 166 Mo. App. 410; City of St. Louis to the use of Contracting & Supply Co. v. Hill & O'Mara Construction Co., 175 Mo. App. 555; Berger Mfg. Co. v. Hiram Lloyd et al., 209 Mo. 681. (3) One in a position so remote from the contract as the relator is not in privity and cannot recover upon bond from principal or surety. Berger Mfg. Co. v. Hiram Lloyd et al., 209 Mo. 681.

BENNICK, C.

This is an action brought by or to the use of plaintiff, The Stone Creek Brick Company, an alleged materialman, upon a certain public works bond which was furnished by defendant Kaplan-McGowan Company as general contractor, with defendant United States Fidelity and Guaranty Company as surety, conditioned upon the performance by said Kaplan-McGowan Company as general contractor of the terms of a contract entered into between it and the City of St. Louis for the construction of the Service Building of the Homer G. Phillips Memorial Hospital for Colored.

A jury was waived and the cause tried before the court alone, resulting in a finding in favor of defendants. Judgment was rendered accordingly, and plaintiff's appeal to this court has followed in the usual course.

The controlling facts of the case are simple and undisputed.

Under the terms of the contract in question it was provided that in making payment for the work done the city might retain certain percentages from the sums due the general contractor from time to time, the evident purpose of such provision being to protect laborers and materialmen and those having claims of a lienable nature, and also to protect the surety on the bond. Indeed the bond was conditioned upon the fact that Kaplan-McGowan Company, the general contractor, should faithfully and properly perform the contract according to its terms, and, upon the completion of the work, pay the proper parties all amounts due for material and labor used and employed in the performance of the same, to which end it was provided that the bond might be sued on at the instance and to the use of any materialman, laboring man, or mechanic for any breach of the conditions thereof.

In the course of the construction of the building Kaplan-McGowan Company, the general contractor, sublet the brick work to Parker and Sloss as subcontractors. Parker and Sloss purchased the brick used on the job from one Stocke, doing business as Progress Press Brick and Machine Company, and later as Progress Press Brick and Sales Company. However Stocke did not himself manufacture the bricks so sold by him to the subcontractors, but purchased the same instead from plaintiff, The Stone Creek Brick Company, an Ohio corporation having its plant or place of business at Stone Creek in that state.

While it is true that Stocke, before entering into a contract with plaintiff for the purchase of the brick, submitted samples of the brick to the city engineer and secured his official approval of the same, the important thing is that neither the city, the general contractor, nor the subcontractors knew of the source from which Stocke intended to and did afterwards obtain the brick, or that the same was not being manufactured by Stocke himself.

After the city engineer's approval of the brick had been secured Stocke contracted with plaintiff for the purchase and delivery of such brick as he might thereafter desire from time to time. There seems to be no doubt that in the course of the negotiations Stocke informed plaintiff that the brick was to be used in the construction of a hospital by the city, but there was some disagreement as to whether plaintiff was advised that a bond would be given by the general contractor. However there is no claim made that plaintiff at any time had any direct dealings with either the city, the general contractor, or the subcontractors, and indeed it appears that it was with the question of Stocke's personal credit that plaintiff was primarily concerned, its own evidence having disclosed that the contract was not entered into until after it had investigated Stocke's credit and had discussed the matter with him.

Thereafter as shipments of brick would be ordered by Stocke from plaintiff the same would be loaded and consigned directly to him at his plant or place of business in the City of St. Louis, and, upon arrival at their destination, would be unloaded by Stocke and then be delivered by him in trucks to the subcontractors on the job. All of the bricks when shipped were of course fully manufactured and ready for use in the building under construction, though none of the invoices or bills of lading accompanying the shipments bore any designation that the bricks were to be used on any particular job. To the contrary, the account for the purchase price was carried purely between plaintiff and Stocke, and the necessary credit was extended to Stocke by plaintiff as the respective purchases were made.

Upon the completion of the work the subcontractors were paid in full by the general contractor, and Stocke in turn was paid in full by the subcontractors. However, as between plaintiff and Stocke there was a balance of $1,165.02 remaining due on account at the conclusion of all shipments, and upon plaintiff's inability to obtain payment of the same from Stocke, it brought this action on the bond upon the theory that its failure to have received payment for the bricks going into the building constituted a breach of the condition of bond so as to entitle it as a materialman to maintain this action upon it. Defendants, the general contractor and the surety, contend that for want of privity of contract plaintiff has no right of action on the bond, and upon the issue thus joined the finding and judgment of the lower court has been for defendants as has already been indicated.

Now the bond was concededly executed conformably with the requirements of Section 2890, Revised Statutes 1929 (Mo. St. Ann., sec. 2890, p. 744), which makes it the duty of all officials of any city, in making contracts for public work of any kind to be performed for such city, to require every contractor for such work to execute a bond to the city, conditioned upon the payment for all labor performed and material used or consumed in the construction of the work, whether by subcontractor or otherwise.

Then follows Section 2891, Revised Statutes, Missouri, 1929 (Mo. St. Ann., sec. 2891, p. 748), which provides that every person furnishing material or performing labor, either as an individual or as a subcontractor for any contractor with such city or other political subdivision,...