Glens Falls Indem. Co. v. Am. Awning & Tent Co.

• Decision Date: 29 July 1935
• Docket Number: No. 1224.,1224.
• Parties: GLENS FALLS INDEMNITY CO. v. AMERICAN AWNING & TENT CO. et al.
• Court: Rhode Island Supreme Court

180 A. 367

GLENS FALLS INDEMNITY CO.

v. AMERICAN AWNING & TENT CO. et al.^*

No. 1224.

Supreme Court of Rhode Island.

July 29, 1935.

"Specifications" refer to written or printed description of work to be done, forming part of contract and describing qualities of material and mode of construction, and also giving dimension and other information not shown in drawings.

Questions certified from Superior Court, Providence and Bristol Counties.

Bill by the Glens Falls Indemnity Company against the American Awning & Tent Company and others. Questions were certified by the superior court to the Supreme Court.

Questions answered.

George Paul Slade, Paul R. McIntyre, Greenough, Lyman & Cross, Fred B. Perkins, and McGovern & Slattery, all of Providence, for complainants.

Francis I. McCanna, and Edward M. McEntee, both of Providence, for Standard Oil Co. of New York.

John J. Cooney, Asst. Atty. Gen., for the State.

Walter I. Sundlun, Baker & Spicer. Moss, Haslam & Arnold, Charles R. Haslam, Harry A. Tuell, A. Truman Patterson, and Roger L. McCarthy, all of Providence, for various respondents.

CONDON, Justice.

This is a bill of complaint in the nature of a bill of peace brought to determine certain controversial questions and to prevent a multiplicity of suits. The questions raised have been certified by the superior court to this court in accordance with section 36 of chapter 339 of General Laws 1923.

The case arises out of three bonds executed by the Sherry Construction Company, Inc., as principal, and the Glens Falls Indemnity Company, as surety. These bonds were given to the state of Rhode Island in connection with three certain road construction contracts between the state, through the state board of public roads, and the said construction company. The three jobs under these contracts were known as the Newport avenue job in Pawtucket and East Providence, the Danielson Pike job in Scituate and Foster, and the Main street job in Warren and Bristol. The Newport avenue job was completed by the construction company to the satisfaction of the state. The other two jobs were completed to the satisfaction of the state by the surety company after the state had declared the construction company in default. The surety company claims it suffered a loss of $22,987.19 on the Danielson Pike job, and $6,866.50 on the Main street job.

Certain creditors of the construction company on each of the jobs, who are made parties to this proceeding, remain unpaid. No creditors of the surety company on either of the jobs completed by it are unpaid. In accordance with division I of the general provisions, section 1.69, of the Standard Specifications for Road Construction, the state board of public roads is withholding the sum of $18,500, earned by the construction company on the three jobs. This sum represents what are called the "retained percentages" on the jobs, and is claimed by the surety company under an assignment made to it by the construction company in connection with the execution of each bond to indemnify the surety company against liability for loss on such bonds, and independently of this assignment by operation of law and by subrogation, at least as to the last two jobs.

There have been certified to us three questions as follows:

"1. Is the complainant, as surety on the contractor's bond for each contract of those involved in this cause, under any liability to any of the persons who have furnished labor or materials or both which have been used in the performance of any such contract?

"2. If the answer to '1.' be in the affirmative, then is complainant liable under any such bond—(then follows a long list of claims against said construction company which need not be set out here because of our answer to question 1) ?

"3. If the complainant has sustained the losses set forth in its bill of complaint in performing the completion contracts G and H which are referred to in its bill of complaint, is it entitled, by reason of such losses, to recover the amounts of money retained by the State Board of Public Roads and referred to in paragraph 13 of said bill of complaint and described in paragraphs 3, 6 and 9 thereof as 'retained percentages', or to recover any of said amounts?"

The answer to question 1 is dependent upon the construction given to the series of documents described here as "Standard Specifications for Road Construction, Notice to Contractors, Form for Proposal, Contract, and Contract Bonds." A proper understanding of the scope of the bond, and of the obligation it imposes, cannot be had without reading the contract and the bond, and construing them together. Certainly the bond itself contains no language clearly imposing upon the principal and surety the express obligation to pay for material and labor. The obligation of the bond seems to imply that the contractor and his surety undertake to assure performance of the contract with the state to build the highway in accordance with the plans and specifications. Other matters arc stated in the condition of the bond, but they are not so stated as to clearly express an obligation binding upon either principal or surety. We think a specific undertaking to pay for labor and materials ought to positively appear within the bond itself, or inasmuch as the bond is only one of a series of instruments, in some one of such instruments clearly incorporating by reference such provision as a part of the bond. We must, therefore, look for such a provision in the contract or in other instruments incorporated in it.

The contract does not contain such a provision, but it does provide that: "The said plans, specifications, the notice to contractors, and the proposal are hereby made a part of this agreement as fully and to the same effect as if the same had been set forth at length in the body of this agreement." It also makes the contract bond a "part of this contract." Neither the proposal nor the notice to contractors contains any language expressly and positively obligating the contractor to pay for labor and materials, although the proposal does contain an express agreement of the contractor "to provide all necessary equipment, tools, labor, incidentals, and other means of construction to do all the work, and furnish all the materials of the specified requirements which are necessary to complete the work in accordance with the Proposal, the Plans, and the Specifications. * * *" And this proposal, the plans for the work and the standard specifications are therein made a part of the contract.

The standard specifications are contained in a manual of 145 printed pages issued by the state board of public roads. It is divided into three separate divisions as follows: I, General Provisions; II, Construction Details, Earthwork; III, Material Specifications. Under Division I, General Provisions, Definition of Terms, is the following definition: "Surety. The corporate body which is bound with and for the contractor, who is primarily liable, and which 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." The following numbered paragraphs or sections also appear thereunder:

"1.17 Requirements of Contract Board. The successful Bidder, at the time of the execution of the contract, shall deposit with the Board a surety bond in a sum of not less than fifty (50) percentum of the contract price for the faithful performance of the contract and for the prompt payment in full of all just debts for labor, materials and equipment incurred in the construction or improvement herein contemplated. The form of the bond shall be that required by the Board and the surety shall be acceptable to the Board."

"1.20 Intent of Plans and Specifications. The intent of the plans and specifications is to prescribe a complete work or improvement which the contractor undertakes to do in full compliance with the plans, specifications, special provisions, proposal, and contract.

"The contractor shall do all the work and furnish all the materials, tools and appliances, except as herein otherwise specified, necessary or proper for performing and completing the work required by the contract, in the manner and within the time therein specified. All the work, labor and materials to be done and furnished under the contract shall be done and furnished strictly pursuant to, and in conformity with the specifications, the plan or plans of the work on file in the office of the Board, and in conformity with the directions of the Engineer as given from time to time, during the progress of the work, subject, however, to the right of the Board to change such plans and specifications as provided in Section 1.22 hereof. * * * "

"1.69 Contractor to pay Workmen and Material Men. The contractor shall pay promptly all workmen employed by him upon all work involved in this contract and also all persons furnishing materials thereunder, and also shall pay promptly for the hire of all tools and appliances loaned to said Contractor by any public authority, and will furnish the Board with satisfactory evidence that all persons who have done work or furnished materials or loaned tools and appliances as aforesaid under this contract and shall have filed claims of non-payment therefor with the said Board have been fully paid and are not entitled to any lien under the laws of this State. In case evidence is not furnished as aforesaid, such amount as the Board considers necessary to meet the lawful claims aforesaid shall be deducted from the moneys due said Contractor under this Contract, and such amount shall not be allowed until the liabilities aforesaid shall have been fully discharged and evidence thereof furnished the Board. If such evidence is not furnished the Board before final payment under this contract falls due, said Board may pay such claims in whole or in part to the person or persons, firm or corporation, claiming the same, and...