Hanberry Corp. v. State Bldg. Commission

• Decision Date: 10 September 1980
• Docket Number: No. 52036,52036
• Parties: HANBERRY CORPORATION v. STATE BUILDING COMMISSION and Aetna Casualty & Surety Company.
• Court: Mississippi Supreme Court

Page 277

390 So.2d 277

HANBERRY CORPORATION v. STATE BUILDING COMMISSION and Aetna Casualty & Surety

Company.

No. 52036.

Supreme Court of Mississippi.

Sept. 10, 1980.

Rehearing Denied Dec. 10, 1980.

George E. Gillespie, Jr., Zachary, Gillespie & Rogers, Hattiesburg, for appellant.

Bill Allain, Atty. Gen. by Donald Clark, Sp. Asst. Atty. Gen., Jackson, Lawrence C. Gunn, Jr., Aultman & Aultman, Hattiesburg, for appellees.

Before ROBERTSON, WALKER and BOWLING, JJ.

BOWLING, Justice, for the Court:

This cause originated in the Circuit Court of Forrest County and involves questions of whether or not demurrers were properly sustained by the lower court.

Appellant, Hanberry Corporation (successor to A. K. McInnis, Jr., Inc.) filed its declaration against Mississippi State Building Commission and Aetna Casualty & Surety Company. The suit grew out of the construction of the Student Union Building on the campus of the University of Southern Mississippi at Hattiesburg. The State Building Commission entered into three separate "co-prime" contracts to perform the work. These contracts were with plaintiff, Hanberry Corporation, for the general building construction, Mechanical Contractors, Inc., for the mechanical installations and construction, and an electrical contracting company that is not a party to this litigation. The separate contracts with each of the contractors contained essentially the same terms, except, of course, for specifications.

Hanberry contends in its declaration that Mississippi Mechanical Contractors, Inc., failed to carry out its contractual obligations and that due to that failure and the manner in which Mechanical performed its work, the entire construction job was delayed; that plaintiff was delayed in doing its work beyond the normal construction time period, and that due to the actions of Mechanical, Hanberry sustained considerable loss in completing its contract with the Commission. The declaration further charged that Mechanical breached its contractual duty to coordinate its operations with that of plaintiff; that the contracts with all three "co-prime" contractors required each to cooperate with the other, and required a mutual responsibility among them and gave each a cause of action if these contractual provisions were not carried out, and a "co-prime" contractor was injured thereby.

Mississippi Mechanical Contractors, Inc., defaulted in the performance of its contract with the Commission. The Mechanical contract was completed by another construction company, secured and paid by appellee, Aetna Casualty & Surety Company. This company had entered into a performance-payment bond as surety for Mississippi Mechanical Contractors, Inc., principal, as required by Mississippi Code Annotated section 31-5-1 (1972).

The charge in the declaration against the Building Commission was that as "owner" it was required by statute to coordinate the work of the three prime contracts and supervise the project, and further that it had an implied contractual duty to see that the three prime contractors cooperated and coordinated their work with each other. The declaration alleged that the Building Commission had failed to carry out these duties.

Hanberry charged that appellee, Aetna Casualty & Surety Company, under the terms of its bond with Mechanical Contractors, Inc., was liable to plaintiff as a third party beneficiary under the bond for plaintiff's alleged damages resulting from the failure of Mechanical to properly perform its contract with the Building Commission. It was charged that the provisions of the bond protected the "co-prime" contractors under the terms of the contracts with the Building Commission as those terms related to the bond provisions.

Aetna filed its demurrer to the original declaration. Its answer and other defenses were filed and its pleading included a counterclaim against plaintiff Hanberry. The counterclaim alleged that if it should be held that Hanberry had a claim against Aetna, then Aetna had a counterclaim against Hanberry. The counterclaim alleged that after the new mechanical contractor was employed by Aetna and entered into completion of the work, Hanberry had been guilty of wrongful acts that delayed that completion. Aetna requested in its counterclaim a judgment against Hanberry for the amount it paid for completion of the work in excess of the original contract amount.

We first consider the original declaration as to Aetna and whether or not the lower court was correct in sustaining Aetna's demurrer. We hold that this was error.

The contract between the Building Commission and Mississippi Mechanical Contractors, Inc., as well as the other two contractors, included the following provision:

If, through acts of neglect on the part of the contractor, any other contractor or any subcontractor shall suffer loss or damage on the work, the contractor agrees to settle with such other contractor or subcontractor by agreement or arbitration if such other contractor or subcontractor will so settle. If such other contractor or subcontractor shall assert any claim against the owner on account of any damage alleged to have been sustained, the owner shall notify the contractor, who shall indemnify and save harmless the owner against any such claim.

The contractor shall coordinate his operations with those of other contractors. Cooperation will be required in the arrangement for the storage of materials, and in the detailed execution of the work. The contractor, including his subcontractors, shall keep informed of the progress and the detailed work of other contractors and shall notify the architect-engineer immediately of lack of progress or defective workmanship on the part of other contractors. Failure of a contractor to keep informed of the work progressing on the site and failure to give notice of lack of progress or defective workmanship by others shall be construed as acceptance by him of the status of the work as being satisfactory for proper coordination with his own work.

A provision of the performance bond between Aetna and Mechanical provided as follows:

If the principal (Miss. Mechanical) shall well, truly and faithfully perform its duties, all the undertakings, covenants, terms, conditions, and agreements of said contract (with the State Building Commission) . . . and shall promptly make payment to all persons, firms, subcontractors, and corporations furnishing materials for or performing labor in the prosecution of the work provided for in such contract . . . then this obligation shall be void; otherwise, to remain in full force and effect. (Emphasis supplied).

It is recognized that the provisions of most construction contracts and performance bonds are different under various situations. It is, therefore, required that we interpret the particular contracts in question to determine whether or not this particular bond written by Aetna for Mechanical covers Hanberry's alleged claim. In Burns v. Washington Savings, 251 Miss. 789, 171 So.2d 322 (1965), this Court had the following to say:

In order for the third person beneficiary to have a cause of action, the contracts between the original parties must have been entered into for his benefit, or at least such benefit must be the direct result of the performance within the contemplation of the parties as shown by its terms. There must have been a legal obligation or duty on the part of the promisee to such third person beneficiary. This obligation must have a legal duty which connects the beneficiary with the contract. In other words, the right (of action) of the third party beneficiary to maintain an action on the contract must spring from the terms of the contract itself. 17A C.J.S., Contracts § 519(4) (1963).

In Burns, the Court further stated:

(1) When the terms of the contract are expressly broad enough to include the third party either by name as (sic) one of a specified class, and (2) the said third party was evidently within the intent of the term so used, the said third party will be within its benefits, if (3) the promisee had, in fact, a substantial and articulate interest in the welfare of the said third party in respect to the subject of the contract. Cf. 17 Am.Jur.2d, Contracts § 308 (1964). Accord, Engle Acoustic & Tile, Inc. v. Grenfell, 223 So.2d 613 (Miss.1969).

The United States Court of Appeals for the Fifth Circuit had a similar question before it in the case of M. T. Reed Construction Co. v. Virginia Metal Products Corp., 213 F.2d 337 (5th Cir. 1954). There the Federal appellate court said the following:

These contractors agreed in their respective contracts to coordinate their work and cooperate with each other so as to facilitate and expedite the completion of the building . . . (W)e agree with the appellant (the general contractor) that it was a direct beneficiary of the contract of appellee (a "co-prime" contractor) with the state building commission, which obligated the appellee to cooperate with appellant and coordinate its work with that of appellant so as to enable both of them to complete their respective jobs on time. The building could not have been completed without such mutual obligation on the part of each of the contractors, and...