Foster v. Kerr & Houston, Inc.

• Decision Date: 03 May 1935
• Court: Maine Supreme Court
• Parties: FOSTER, State Treasurer v. KERR & HOUSTON, Inc., et al.

179 A. 297

FOSTER, State Treasurer

v. KERR & HOUSTON, Inc., et al.

Supreme Judicial Court of Maine.

May 3, 1935.

Report from Superior Court, Kennebec County.

Action of debt by George S. Foster, Treasurer of the State of Maine, against Kerr & Houston, Incorporated, and Standard Surety & Casualty Company of New York, wherein first-named defendant was dismissed on account of bankruptcy. On report from the superior court.

Case remanded, to be disposed of in accordance with opinion.

Argued before PATTANGALL, C. J., and DUNN, STURGIS, BARNES, THAXTER, and HUDSON, JJ.

Verrill, Hale, Booth & Ives, of Portland, and Clyde R. Chapman, of Belfast, Atty. Gen., for plaintiff.

Cook, Hutchinson, Pierce & Connell, Skillin, Dyer & Payson, and J. W. Hill, all of Portland, for defendant.

BARNES, Justice.

This is an action of debt brought by George S. Foster, Treasurer of the State of Maine, against the Standard Surety & Casualty Company of New York, and comes forward on report, with an agreed statement of facts.

It is founded on a surety bond on which Kerr & Houston, Inc., appears as principal, the defendant as surety, and the plaintiff as obligee, and is brought in the name of the obligee for the benefit or to the use of the American Bridge Company, Charles R. Bailey, and the Augusta Lumber Company, as to each of whom it is admitted that he furnished labor or materials, or both, to the contractor, for use in construction of a highway bridge, and for the same has not been fully paid.

Kerr & Houston, Inc., the principal contractor, was originally joined as a defendant, but the action was dismissed as to it on account of bankruptcy.

It is agreed by the parties that, if the defendant surety company is found liable, damages on the claim of the American Bridge Company shall be assessed at $17,955.68, with interest from such date as the court shall determine the same is recoverable; on the claim of Charles R. Bailey at $648, with interest as above; and in the claim of Augusta Lumber Company, if this court finds liability, judgment is to be assessed in the court below with interest from such date as this court shall fix, the case to be remanded to the superior court for the purpose of assessing damages.

On July 17, 1931, the state entered into a written contract with Kerr & Houston, Inc., a Maine corporation, for the construction of the Wiscasset and Edgcomb highway bridge.

The bond, executed two days later, contained the following provisions: "The condition of this obligation is such that if the said Principal, Kerr & Houston, Inc., shall faithfully perform the contract entered into between said State of Maine and said Principal on the 19th day of June, A. D. 1931, for the construction and completion of the bridge structure * * * on its part and satisfy all claims and demands incurred for same and shall pay all bills for labor, material, equipment, and for all other things contracted for or used by it in connection with the work contemplated by the contract, and shall fully reimburse the obligee for all outlay and expense which the obligee may incur in making good any default of said principal, then this obligation shall be null and void; otherwise it shall remain in full force and effect."

It must be conceded that the surety, guaranteeing that its principal would "faithfully perform the contract entered into between said State of Maine and said Principal," had fully informed itself of the provisions and conditions of the contract, faithful performance of which is guaranteed.

The contract, by certain definitions and provisions here quoted, gave definite information as to the obligations of both contractor and surety.

Most important are the following:

"Surety. The corporate body, individual, or body of individuals bound with and for the Contractor, who is previously liable, which corporate body, individual, or body of individuals engages to be responsible for his payment of all debts pertaining to and for his acceptable performance of the work for which he has contracted."

"Contract Bond. The approved form of security furnished by the Contractor and his Surety as a guarantee of good faith on the part of the Contractor to execute the work in accordance with the terms of the Contract."

"Requirements of Contract Bond. The successful Bidder, at the time of the execution of the contract, must furnish a bond payable to the Treasurer of State of Maine, or his successors in office, in the sum of seventy-five (75) per cent. of the amount of the contract awarded. The form of bond shall be that provided by the Commission and the Surety shall be acceptable to the Commission. This bond shall guarantee due execution and faithful performance and completion of the work to be done under the contract, and the payment in full of all bills and accounts for material and labor used in the work, and for all other things contracted for or used in connection with the contract."

"Responsibility for Damage Claims. The Contractor shall assume the defense of, and indemnify and save harmless the State and the Commission and their officers and agents from all claims, suits or actions of any character, name and description on account of injuries to any person, persons, property, firm or corporation, received or sustained by reason of any act of the Contractor or his employees or resulting from the prosecution of the works, or any of its operations, or caused by reason of the existence or location or condition of the works or of any materials, plant or machinery used thereon or therein, or which may have been produced by reason of any failure, neglect or omission on the part of the Contractor or any of his agents, servants or employees who shall be engaged in any capacity in or about the work to be performed under this contract.

"The Contractor shall promptly pay all bills for labor, materials, machinery, board of workmen, water, tools, equipment, teams, trucks, automobiles, freight, fuel, light and power and for all other things, contracted for or used by him on account of the work herein contemplated, and if at any time during the progress of the work or before final payment of any money due the Contractor under the terms of this contract, any claim for labor, materials, board of workmen, water, tools, equipment, teams, trucks, automobiles, freight, fuel, light and power, or for any other things specified as aforesaid, or for damages by reason of any acts, omissions or neglect of said Contractor in the prosecution of the work, shall be presented to said Commission, the Commission may retain such sum or sums from the moneys due the Contractor under this contract as would be necessary to discharge all such claims whether for labor or materials or for damages as aforesaid."

In the construction of highway bridges, it is, and has been continuously since enactment of chapter 202, § 4, Public Laws 1909, now R. S. c. 27, § 117, the public policy of this state that performance of all contracts shall be secured by bond.

By provision of statute, chapter 28, § 64, R. S., the state highway commission "shall have full power in all matters relating to the furnishing of bonds by the successful bidders for the completion of their work and fulfilling of their contracts. These bonds shall protect fully the state, county, and town from all liability arising from damage or injury to persons or property as a result of the contractor's operations."

The bond herein is a statutory bond. But it is argued by defendant that because their claims are not specifically mentioned in the bond, materialmen and laborers are not protected under it.

And further that the inclusion in a bridge contractor's bond of a requirement to protect materialmen and laborers would not furnish protection because there is no statute authorizing such requirement.

Decision on the force and meaning of the contract and bond, in these particulars, and the date when interest, if any, begins to run is the burden on the court.

The intent of the parties to the bond must be determined from expressions therein, inevitable implications, and conclusions of law.

Unless the language of specifications of performance required of the contractor is to be disregarded as mere surplusage, contract and bond are indissolubly tied together.

Before any bond was drafted the contract of construction was drawn up, expressing what the state, through the agency of the highway commission, would require of the contractor, and hence what the surety would bind himself to secure.

The statute does not prescribe the form of construction contracts. It does make the requirement of a bond mandatory, and contains nothing to negative in its agent the power to provide such other safeguards as may be deemed proper in the protection of all parties connected with the construction.

It gives, as above quoted, full powers in all matters relating to the furnishing of bonds.

The condition of the bond that the principal shall faithfully perform the contract is very general. It does not stand alone, but incorporates the contract in the bond.

In the orderly course of business, before the bond was drafted, the contract was drawn up, expressing what the state, through the agency of the highway commission, would require of the contractor, and hence what the surety must be held to have bound himself to secure.

It is not claimed that the surety did not know the requirements of the contract, and we find in this case the same requirements in both contract and bond.

This court has never before had to construe an exactly similar contract.

But the rights and obligations of contractors on public works in most states of the Union have been discussed in opinions interpreting similar agreements.

First it may be said that a bonding company agreeing for a consideration is a surety, and that its guaranty is not to be interpreted under the rule strictissimi juris. We quote with approval the following: "The law of suretyship has undergone a...