Guaranty Co. v. Iron Co.
| Decision Date | 15 January 1927 |
| Docket Number | 19544 |
| Citation | 115 Ohio St. 626,155 N.E. 389 |
| Parties | The American Guaranty Co. v. The Cincinnati Iron & Steel Co. Et Al. |
| Court | Ohio Supreme Court |
Suretyship - Contract for public building or improvement - Section 2865-1 et seq., General Code - Compensated surety liable to party furnishing fabricated steel to materialman, when - Contract for erecting public school building.
A compensated surety executed a bond obligating the surety to indemnify the obligee against any loss or damage directly arising from the failure of the principal to faithfully perform his contract to erect a public school building. The principal contractor having abandoned performance of the contract, suit was brought upon the bond against the surety by a party who furnished to a materialman all the steel building material, cut according to the specifications of the contract, which went directly, substantially without further fabrication, into the construction. Held, that under Sections 2365-1 to 2365-4, inclusive, of the General Code, the plaintiff has an action upon the bond.
The facts are stated in the opinion.
Messrs Williams, Sinks, Gearheart & Williams, and Mr. C. W Faulkner, for plaintiff in error.
Mr. W H. Rucker, Mr. H. C. Busch, Mr. T. R. Hamilton, and Mr. B. E Welty, for defendants in error.
This error proceeding arises under a bond similar to that given by the plaintiff in error in the case of American Guaranty Co. v. Cliff Wood Coal & Supply Co., ante, 524, 155 N. E., 127, recently decided. The case presents facts, however, which differentiate it from the Cliff Wood case, and for that reason the two cases were not consolidated in the courts below.
On the 3d day of July, 1922, a contract was entered into between Potts Bros., one of the defendants herein, a partnership, of Lima, Ohio, as contractor, and the board of education of the Alger village school district, of Alger, Ohio. The board of education, after awarding the contract to Potts Bros. on its bid, demanded from Potts Bros. a bond guaranteeing the faithful performance of the work to be done and the completion of the contract. Thereupon Potts Bros., as principal, with the American Guaranty Company as surety, tendered to the board of education of the Alger village school district, on the 7th day of July, 1922, a bond, the parts of which material for this case are as follows:
Potts Bros., principal contractor, abandoned the contract, and failed to carry the erection of the school building to completion. Later, the Cincinnati Iron & Steel Company, which in the course of this opinion will be called the steel company, brought an action in the court of common pleas of Hardin county upon the bond above quoted. In its amended petition, it prayed that the bond for $33,000 be reformed to comply with Sections 2365-1 to 2365-4, inclusive, General Code, and prayed for recovery upon the bond, as reformed, from the contractor, the subcontractors and the surety, ill the sum of $3,239.81, with interest and costs. The petition further prayed, in case the court refused to reform the contract as prayed for, that the plaintiff have judgment against the individual members of the board of education of Alger village school district in the sum claimed. The principal defense set up by the surety in its answer was that of nonliability upon the bond as against the materialmen. Upon hearing, judgment was rendered for the plaintiff, and against the American Guaranty Company and Potts Bros., for the sum prayed for in the amended petition. The court found that by operation of law the provisions of Sections 2365-1, 2365-2, 2365-3, and 2365-4, General Code of Ohio, are read into and become a part of the terms, provisions, and conditions of the bond ill question, notwithstanding the form in which the same may have been signed and executed by the parties thereto, and refused reformation of the bond as prayed for. The Court of Appeals affirmed the judgment of the court of common pleas, and the case comes before this court upon allowance of motion to certify the record.
A principal contention made by the surety is that under the terms and conditions of the bond the surety bound itself only to secure the school district of Alger, and entered into no obligation for the benefit of or to secure the plaintiff below. This question has been fully considered and decided contrary to the contention of the plaintiff in error in the cases of Southern Surety Co. v. Chambers, ante, 434, 154 N. E., 786, and American Guaranty Co. v. Cliff Wood Coal & Supply Co., ante, 524, 155 N. E., 127, recently decided, to which reference is made for reasoning and authorities. A further contention of the plaintiff in error herein, however, raises a question not disposed of either in the Surety Company ease, supra, or in the Cliff Wood Coal & Supply Company case, supra, namely, that granting that the bond is a bond given in pursuance of statute, into which the provisions of the statute are read so as to make it available for the protection of materialmen and laborers, the steel company is not entitled to recover under the bond, since no contract exists between the original contractor, Potts Bros., and the steel company.
This contention compels us to examine the record. The original contract was between Potts Bros. and the board of education of Alger. The Lima Architectural Iron Works, which hereafter will be called the iron works, agreed with Potts Bros. to furnish all the iron, steel, and ornamental work, according to the plans and specifications for the building. The bid of the iron works contained the following statement:
The steel company furnished all of the steel material required by the contract. This material was cut at the plant of the steel company to the proper size and dimensions required by the specifications, and delivered by that company to the iron works. Holes were bored in some of the beams and girders by the iron works. The iron works also fastened on to the beams and girders angle irons which had been cut and prepared by the steel company. The fastening was done with bolts and rivets furnished by the steel company. After the iron works had bolted together the girders, beams, and angle irons, it delivered them to Potts Bros., at Alger, who in turn used them in the erection of the building. It is conceded that the steel company furnished all the steel materials necessary for the building, that the claim due is properly set out in the petition, and that the steel company has received no part of the amount in question. The record shows that the steel material was sold for the purpose of being used in this particular construction, and that it went directly into the building.
It is evident under this record that the iron works was a materialman and not a subcontractor, for it took no part whatever in the installation into the structure of the materials furnished. Matzinger v. Harvard Lumber Co., ante, 555, 155 N. E., 131. It is not, however, the iron works which brings this action, but the steel company which furnished the material to the iron works; that is, the action is instituted by a materialman which furnished material to a materialman which furnished the material to the principal contractor.
Plaintiff in error, however, claims that inasmuch as the steel company had no contract with the principal contractor, Potts Bros., and furnished the material solely upon the order of the iron works, the steel company is so far removed in mutual or successive relationship from the original contractor that it cannot recover upon the bond for this particular piece of work.
The plaintiff in error urges in this connection that Royal Indemnity...
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American Guar. Co. v. Cincinnati Iron & Steel Co.
...115 Ohio St. 626155 N.E. 389AMERICAN GUARANTY CO.v.CINCINNATI IRON & STEEL CO. et al.No. 19844.Supreme Court of Ohio.Jan. 18, Error to Court of Appeals, Hardin County. Action by the Cincinnati Iron & Steel Company and others against the American Guaranty Company. Judgment for plaintiffs, an......