Haskell Lemon Const. Co. v. Independent School Dist. No. 12 of Edmond

• Decision Date: 09 January 1979
• Docket Number: No. 49646,49646
• Citation: 589 P.2d 677,1979 OK 5
• Parties: HASKELL LEMON CONSTRUCTION COMPANY, a corporation, Appellant, v. INDEPENDENT SCHOOL DISTRICT NUMBER 12 OF EDMOND, Oklahoma, and Bill Chitwood, Charles Suenram, Jeanne Cole, Bob Rudkin, and Mary Clyde Flesher, and George Rowley, and Vibra Whirl and Company, Inc., a corporation, Appellees.
• Court: Oklahoma Supreme Court

Page 677

589 P.2d 677

HASKELL LEMON CONSTRUCTION COMPANY, a corporation, Appellant, v. INDEPENDENT SCHOOL DISTRICT NUMBER 12 OF EDMOND, Oklahoma and Bill Chitwood, Charles Suenram, Jeanne Cole, Bob Rudkin and Mary Clyde Flesher, and George Rowley, and Vibra Whirl and Company, Inc., a corporation, Appellees.

No. 49646.

Supreme Court of Oklahoma.

Jan. 9, 1979.

Appeal from the District Court of Oklahoma County; Joe Cannon, district judge.

Action by materialman subcontractor on a public works project, Haskell Lemon Construction Company (appellant), against the public agency letting the construction contract, Independent School District Number 12, its Board of Education, the members of the Board individually, the Superintendent of the School District individually, and the successor prime contractor (appellees). Appellant appeals from sustention of various demurrers on the part of all appellees contending provisions of the Public Competitive Bidding Act of 1974 (61 O.S.1974 Supp., §§ 101-136) permit recovery against School District where proper performance bonds are not required of and given by prime contractor. AFFIRMED IN PART AND REVERSED IN PART.

LeRoy A. Powers, Oklahoma City, for appellant.

Robert T. Rice, Rice & West, Edmond, Leslie L. Conner, Jr., Oklahoma City, for appellees.

IRWIN, Justice:

Haskell Lemon Construction Company (appellant) commenced proceedings to recover $10,340.81 for materials furnished to a contractor on a public works contract let by Independent School District No. 12, Edmond, Oklahoma. School District, its superintendent, the individual members of its board, and Vibra Whirl (appellees) were joined as defendants. The trial court sustained the demurrers of the defendants and dismissed the action. Appellant appealed.

The allegations of appellant's petition are deemed admitted for the purposes of this appeal and stated most favorably for appellant are: School District awarded to McBride Paving Company a contract for the construction of an athletic track at Edmond High School. McBride failed to give and School District through its officers failed to require McBride to obtain a statutory payment bond. 61 O.S.1971, §§ 1 & 2 and 61 O.S.1974 Supp., § 113. Appellant furnished materials and supplies to McBride for the project. Before the project was completed, McBride sustained financial difficulties, did not complete the contract, and subsequently filed bankruptcy proceedings. The contract was abandoned by the trustee in bankruptcy as a burdensome asset of the debtor. Appellee Vibra Whirl was selected as the new contractor and it completed the project.

Appellant alleged that School District and the individual defendants concealed from it the fact no bond had been given. Demand was made for payment and assurances were made allegedly by School District's superintendent that appellant would be paid. Demand was also made for payment from funds on hand which had been earned by McBride under the contract but had not been paid to McBride.

The individual members of the school board were joined as defendants for willful failure to comply with the statutory provisions requiring posting of the statutory bond. The superintendent of schools was joined as a defendant on the theory that he had, by his assurance that appellant would be paid for materials supplied, assumed personal liability for the debt. Vibra Whirl was joined as a defendant on the grounds that School District had paid funds to Vibra Whirl which had been earned by McBride prior to default and that appellant had equitable lien against the funds and Vibra Whirl held such funds as a constructive trustee.

The failure of the original contractor (McBride) to furnish and School District to require the statutory bond prescribed by 61 O.S.1971, § 1, constitutes the basis for appellant's action. Appellant admits that prior to the enactment of the Public Competitive Bidding Act of 1974 (61 O.S.1974 Supp., §§ 101-134) public agencies or officers were not liable for the failure to require the statutory bond, but contends that the 1974 enactment changed the public policy and that all the appellees "are liable for the failure to perform the duties imposed by the 1974 enactment, or by reason of their abuse and transgression of authority in connection therewith."

The general rules applicable to the statutory bond prescribed by 61 O.S.1971, §§ 1 & 2, are stated in American Casualty Company v. Town of Shattuck, 228 F.Supp. 834 (W.D.Okl.1964) ¹ thusly:

"* * * these statutes were enacted by the Oklahoma legislature as a matter of public policy to afford protection to laborers and materialmen on public construction projects by giving them a payment bond to look to for their wages and materials since upon default of their contractor they have no contractual rights against the owner and no lien rights against the public land or improvements. Hutchinson v. Krueger, 34 Okl. 23, 124 P. 591, 41 L.R.A., N.S., 315 * * * ".

"* * * if the responsible public official(s) fail to heed the statute and take such a bond in conjunction with a contract for public construction, nevertheless, the unpaid or unsecured laborers and materialmen may not look to or collect from the public entity involved. Frensley Bros. Lumber Company v. Scott, 117 Okl. 133, 245 P. 615; Electric Supply Company v. City of Muskogee, 171 Okl. 130, 42 P.2d 140."

In Clark v. Board of County Commissioners, 62 Okl. 7, 161 P. 791 (1916), the Court said the statutory payment bond was for the protection of materialmen furnishing materials to public contractors, and to allow the county to make settlement with such contractor without becoming embarrassed by, or involved in, the multitude of small disputes which might arise between the contractor and his own creditors. The fundamental purpose of this statute is to save the public from all liability for liens for material and labor furnished on public improvements. Lohr & Trapnell v. H. W. Johns-Manville Co., 77 Okl. 6, 185 P. 526 (1919). See also Tulsa Boiler and Manufacturing Company v. Shaffer, 72 Okl. 235, 180 P. 379 (1919); Reinhart & Donovan Co. v. Board of County Commissioners of Choctaw County, 70 Okl. 127, 173 P. 848 (1918); and Bushnell v. Haynes, 56 Okl. 592, 156 P. 343 (1916). Our Court has consistently held that one who furnishes materials to a contractor which are used for the construction of public projects is charged with knowledge of the statutory duty of the contractor to give a bond pursuant to 61 O.S.1971, §§ 1 & 2. If he furnishes such contractor materials before the bond is given, he does so at his peril, and if he sustains a loss he cannot recover damages from the public entity because the proximate cause of the loss is his own negligence in not ascertaining whether the statutory payment bond had been given. Electric Supply Co. v. City of Muskogee, 171 Okl. 130, 40 P.2d 140 (1935). It was on the basis of the foregoing authorities that the trial court sustained appellees' various demurrers.

Appellant contends that § 103 of the Public Competitive Bidding Act of 1974 (61 O.S.1974 Supp., §§ 101-134) prohibits any work from being commenced on any public construction contract until a written contract is executed and all required bonds and insurance have been provided by the contractor to the awarding public agency. Appellant argues that prior to this enactment and the amendment of 61 O.S.1961, §§ 1 & 2 in 1968, no mandatory duty was imposed upon public officials to require the giving of the proper bond. Appellant contends that the Public Competitive Bidding Act imposes a mandatory ministerial duty on the public entity and its officers not to commence work until compliance has been demonstrated with the mandatory statutory payment bond requirements.

We have examined the Public Competitive Bidding Act and the 1968 amendment of 61 O.S.1961, §§ 1 & 2 (now 61 O.S.1971, §§ 1 & 2 which appellant also argues imposes an affirmative duty on public officials to obtain the statutory payment bond) and neither evidence a legislative intention of modifying our previous decisions or grant to materialmen and laborers greater rights than they previously enjoyed when they furnished materials and labor on a public works project. As noted by appellant, this Court in Carpet City, Inc. v. Stillwater Municipal Hospital Authority, Okl., 536 P.2d 335 (1975), held that the Public Competitive Bidding Act of 1974 is to be strictly followed and its' bond and insurance requirements could not be waived. While failure to strictly comply with the Public Competitive Bidding Act may result in certain adverse consequences for a public agency, there is not numbered among them liability for the losses of materialmen and laborers. Appellant's suggested application of State Board of Affairs v. Principal Funding Corporation, Okl., 542 P.2d 503 (1975), is not tenable for a number of reasons. Primarily, Principal Funding Corporation, supra, involved the enforcement of a contractual obligation with the state and in the case at bar the appellant had no contract with School District or any of the appellees but only with McBride. The situation might be significantly different had appellant contracted with School...