Fitzgerald v. Neal

• Decision Date: 23 December 1924
• Citation: 113 Or. 103,231 P. 645
• Parties: FITZGERALD v. NEAL ET AL.
• Court: Oregon Supreme Court

231 P. 645

113 Or. 103

FITZGERALD v. NEAL ET AL.

Supreme Court of Oregon, En Banc.

December 23, 1924

Appeal from Circuit Court, Union County; J. W. Knowles, Judge.

Action by D. Fitzgerald, doing business as the La Grande Iron Works against Roscoe Neal and Fred D. Gaskell, doing business under firm name of Neal & Gaskell, the Security Construction Company, and the National Surety Company of New York. Judgment for plaintiff, and the corporate defendants appeal. Reversed and remanded, with directions.

F. S. Ivanhoe and Robert Eakin, both of La Grande (Crawford & Eakin, of La Grande, on the brief), for appellants.

H. E Dixon and George T. Cochran, both of La Grande (Cochran &amp Eberhard, of La Grande, on the brief), for respondent.

RAND J.

The plaintiff commenced this action against the defendants, Neal & Gaskell, copartners, Security Construction Company, and National Surety Company of New York, to recover the balance of an account for labor and material furnished by plaintiff to Neal & Gaskell.

The material facts are: The defendant Security Construction Company entered into a contract with the state to construct a certain state highway in Baker county, Or., known as the Baker-Nelson section of the old Oregon Trail, and executed an undertaking to the state with the defendant National Surety Company of New York, as surety, conditioned on faithful performance of its contract. Subsequently, and on May 5, 1922, the Security Construction Company entered into a subcontract with the firm of Neal & Gaskell for the performance of a part of the work. Under this contract Neal & Gaskell undertook to furnish and haul the crushed gravel for the surfacing of certain designated portions of said highway, and to incorporate the same into said highway, and, by the terms of the contract itself, Neal & Gaskell expressly undertook to furnish the gravel pits and any and all trucks and machinery necessary to carry out the contract on their part.

The complaint alleges that the plaintiff "performed work, labor, and services, and furnished material for the repair and repairing of certain trucks and a car, and on machinery, for the said defendants Neal & Gaskell, and which were used by them in carrying out their contract as hereinbefore set forth, and all of which was a necessary part for the carrying out of the said contract by Neal & Gaskell." The defendants Security Construction Company and National Surety Company of New York filed an answer denying said allegation, and alleging, in effect, among other things, that whatever labor and material was furnished by the plaintiff to Neal & Gaskell, it was furnished to them alone and not to the other defendants, and went into and became a part of the road construction plant of Neal & Gaskell; that none of said labor and material entered into the highway then being constructed by the defendant Security Construction Company, that no part thereof was included or intended to be included in said contract and bond given to the state, and that the charge for the same does not constitute a just debt or demand incurred in the performance of the work under their said contract. These allegations were put in issue by the reply. The cause was tried to a jury, and plaintiff had judgment, from which the construction company and the surety company have appealed.

Testimony was given upon the trial, and it appears therefrom that, as alleged in the complaint, the labor and material for which recovery is sought was performed and furnished in the repair of the automobile, trucks, and machinery described in the complaint, and not for any other purpose. It also appears from the testimony that, in performing their contract, some use was occasionally made by Neal & Gaskell of the automobile in conveying laborers and supplies to the place of work, and that the trucks were used for hauling crushed gravel from the plant for distribution upon the highway, and that the machinery was used in the operation of the plant. There is no pretense in the testimony that Neal & Gaskell have not been paid all that they were entitled to be paid under their contract.

The Security Construction Company, hereinafter referred to as construction company, and the National Surety Company, hereinafter referred to as surety company, assign as error the refusal of the court to grant a nonsuit; its refusal to direct a verdict; the giving of certain instructions, and its refusal to give other instructions requested by the defendants. These assignments present for decision the question of whether the original contractor and his surety are liable for material entering into and labor performed in the repair of a part of a subcontractor's plant which such subcontractor is using in the performance of his contract, and which he has contracted to furnish for the doing of the work.

The determination of this question depends upon the construction of the statute under which the contract of the construction company with the state and its undertaking were given, and also upon the determination of the question of whether the terms of the undertaking itself are such as to enlarge the obligations of the surety beyond those directly required by statute. For the law is settled in this state that the state highway commission, who was empowered to enter into the contract and to accept the undertaking on behalf of the state, may, like other municipal bodies of the state, require a public contractor to execute a bond containing provisions making it responsible for the payment of claims in excess of those provided for by statute, in order that those who aid in the public work shall be protected in the payment of their claims. Multnomah County v. United States F. & G. Co., 87 Or. 198, 208, 170 P. 525, L. R. A. 1918C, 685; Clatsop County v. Feldschau, 101 Or. 369, 199 P. 935, 18 A. L. R. 1221. It is also settled in this jurisdiction that if the conditions written into an undertaking executed by a public contractor enlarge those directly required by statute, the undertaking as to such conditions is a common-law obligation, which, having been voluntarily assumed, is valid if in harmony with and not prohibited by statute. Clatsop County v. Feldschau, supra.

Section 6718, Or. L., both before and after the amendment by chapter 24, Laws 1923, provided that:

"Every contract made with the state * * * shall contain a condition that the contractor shall promptly, as due, make payment to all persons supplying to such contractor labor or material for the prosecution of the work provided for in such contract. * * *"

And where contracts for the improvement of state highways are entered into, section 4435, Or. L., provides that the contract shall be made in the name of the state, and that "a satisfactory bond shall be required of the contractor of not less than 50 per cent. of the total amount of his bid, for the faithful performance of his contract." Section 2991, Or. L., provides that:

Any person, firm or corporation entering into a formal contract with the state "shall be required before commencing such work to execute the usual penal bond with good and sufficient sureties, with the additional obligations that such contractor or contractors shall promptly make payments to all persons supplying him or them labor or materials for any prosecution of the work provided for in such contracts."

Under these provisions every contract to which the state is a party for the improvement of a public highway must contain a stipulation binding the contractor to pay promptly, as due, every person supplying him with labor or material for the prosecution of the work provided for in the contract, and before commencing the work he is required to execute a bond or undertaking to the state conditioned for the faithful performance of his contract, and that he will promptly pay all persons supplying him with labor or material for the prosecution of the work provided for in the contract.

In construing these statutes and applying them to the question involved, it is proper to consider the object the Legislature intended to accomplish by their enactment. It is clear that the Legislature intended to insure the payment of every person who should supply labor or material for the prosecution of any public work, and to render it impossible for any contractor performing such work, whether insolvent or dishonest, to fail to pay for the labor and material supplied for the prosecution of the work, and for which the contractor has himself been paid. To accomplish that end the statute requires the contractor not only himself to contract for the payment of all such claims, but also requires him to provide a good and sufficient undertaking which shall guarantee the faithful performance of his contract and also guarantee that upon his default the surety will pay for all labor and material supplied for the prosecution of the work. As these statutes were enacted for the benefit of the public, they should be liberally construed to effectuate the purpose for which they were enacted. Portland v. New England Casualty Co., 78 Or. 195, 200, 152 P. 253; Multnomah County v. United States F. & G. Co., supra.

But it is equally clear that the Legislature did not intend to require such contractor, before commencing work, to contract for, or to execute an undertaking guaranteeing the payment of any claim for labor or material which was not supplied for the prosecution of the work which the contractor had undertaken to perform. "It is the labor and material supplied for the prosecution of the work which is protected, and not some obligation incurred by the contractor which does not approximate the construction contracted to be done." Portland v. O'Neill, 98 Or. 162, 167, 192 P. 909, 910.

Hence if the claim is one which comes...