Indiana Carpenters Cent. and Western Indiana Pension Fund v. Seaboard Sur. Co.

• Decision Date: 19 October 1992
• Docket Number: No. 49A02-9111-CV-510,49A02-9111-CV-510
• Citation: 601 N.E.2d 352
• Court: Indiana Appellate Court
• Parties: INDIANA CARPENTERS CENTRAL AND WESTERN INDIANA PENSION FUND, Appellant-Plaintiff, v. SEABOARD SURETY COMPANY, Appellee-Defendant.

Page 352

601 N.E.2d 352

INDIANA CARPENTERS CENTRAL AND WESTERN INDIANA PENSION FUND, Appellant-Plaintiff, v. SEABOARD SURETY COMPANY, Appellee-Defendant.

No. 49A02-9111-CV-510.

Court of Appeals of Indiana,

Second District.

Oct. 19, 1992.

Karl L. Mulvaney, Thomas C. Scherer, Nana Quay-Smith, and Gerard L. Gregerson, Bingham Summers Welsh & Spilman, Indianapolis, for appellant-plaintiff.

Theodore J. Nowacki and V. Samuel Laurin, III, Bose McKinney & Evans, Indianapolis, for appellee-defendant.

SHIELDS, Judge.

Indiana Carpenters Central and Western Pension Fund (Carpenters) appeals the trial court's dismissal of its complaint pursuant to Ind.Trial Rule 12(B)(6).

We reverse and remand for further proceedings.

ISSUES

1. Whether a pension and benefit plan has standing to file a claim against a statutorily-required payment bond for unpaid fringe benefits owed to the plan's members for work performed on a public works project.

2. Whether a pension and benefit plan has stated a claim upon which relief can be granted when its complaint fails to allege compliance with the notice provisions of IC 36-1-12-13.1(d) and (e) (1988).

FACTS

The City of Indianapolis (City) contracted with BMW Constructor, Inc. (BMW) to construct an odor control system at the Belmont and Southport Advanced Wastewater Treatment Plants (Construction Contract). BMW obtained a payment bond (Bond) from Seaboard Surety Company (Seaboard) pursuant to IC 36-1-12-13.1. BMW subcontracted with J. Chris Construction, a/k/a J. Chris Corporation (Chris), to perform work related to the Construction Contract. A collective bargaining agreement between Chris and its employees union obligated Chris to pay fringe benefits to Carpenters Carpenters is an employee welfare benefit plan which receives contributions from employers on behalf of employee-members. Carpenters filed an action against Seaboard's bond to recover fringe benefit contributions that Chris failed to pay from September 1988 through November 1988. Seaboard moved to dismiss Carpenters' claim pursuant to T.R. 12(B)(6). The trial court sustained Seaboard's motion and entered a final judgment as provided in Ind.Trial Rule 54(B), finding that Carpenters was not within the class of persons entitled to recover on the Bond and that it did not plead compliance with all conditions precedent.

as a portion of the employees' wages.

Carpenters appeals.

DISCUSSION

The purpose of a T.R. 12(B)(6) motion is to test the legal sufficiency of the claim, not the facts that support it. Bowman v. Bowman (1991), Ind.App., 567 N.E.2d 828, 830. We review a dismissal to determine whether the complaint states any allegations upon which the trial court could have granted relief. Id. A complaint need not state all elements of a cause of action. Rasp v. Hidden Valley Lake, Inc. (1986), Ind.App., 487 N.E.2d 1338. Rather, the facts alleged in the complaint are taken as true, and dismissal is appropriate only where it appears the plaintiff could not be granted any relief. Thiele v. Indiana Dept. of Highways (1985), Ind.App., 472 N.E.2d 1274, 1275.

I.

Carpenters argues the trial court erred when it dismissed Carpenters' claim because Carpenters lacked standing. We agree and hold that, under the facts before us, Carpenters is within the class of person covered by the Bond.

This question came before the United States Supreme Court in United States v. Carter (1957), 353 U.S. 210, 77 S.Ct. 793, 1 L.Ed.2d 776. In Carter, the trustees of a health and welfare fund sued a surety company on the contractor's payment bond required by the Miller Act (Act). ¹ The contractor was obligated by a collective bargaining agreement to pay the laborers' wages plus a small hourly rate to the trustees of an employment benefit fund. Id. at 213, 77 S.Ct. at 795. However, payment to the benefit fund was not deemed wages under the terms of the employment contract. ² Id. at 214, 77 S.Ct. at 795. When the contractor failed to make payments to the fund, the trustee sued the surety on the bond to recover the balance due the fund. Id. at 215, 77 S.Ct. at 796. The Court of Appeals held that the trustees could not sue on the bond because they were not the persons who had furnished labor or material, nor were they seeking sums "justly due" such persons. United States v. Carter (9th Cir.1956), 229 F.2d 645. The Supreme Court reversed the Court of Appeals and held the trustees of the benefit fund had standing to sue the surety for the omitted contributions. Carter, 353 U.S. at 220, 77 S.Ct. at 798.

We find the court's reasoning and interpretation of the Act persuasive and applicable to the issue before us. ³

First, the court in Carter examined the purpose of the Act which required payment bonds on public works projects where traditional payment mechanisms for laborers, such as mechanic's liens, are not allowed. The Carter court found that the Act represented a congressional effort to protect laborers and materialmen for the construction of federal buildings and that "[t]he essence of its policy is to provide a surety who, by force of the Act, must make good the obligations of a defaulting contractor to his suppliers of labor and material." Id. at 217, 77 S.Ct. at 797.

Similarly, in Indiana, statutory provisions require payment bonds on public works projects to secure payment for subcontractors, labor, materialmen and those performing any service because mechanic's liens are not available to those who work on public works projects. See MacDonald v. Calumet Supply Co. (1939), 215 Ind. 536, 19 N.E.2d 567, 21 N.E.2d 400; Townsend v. Cleveland Fire-Proofing Co. (1897), 18 Ind.App. 568, 571-72, 47 N.E. 707, 708. Thus, both federal and state law require bonds to protect the otherwise unprotected materialmen and laborers on public projects.

Second, the court in Carter discussed the intended beneficiaries of the Act. Under the federal law, the intended beneficiaries are the laborers and materialmen owed compensation from their employment on public works projects. See 40 U.S.C. Sec. 270b(a). Thus, "[a]s long as [the contractor's] obligations relating to compensation for labor have not been satisfied, his employees will not have been paid in full, and the Miller Act will not have served it purpose." Carter, 353 U.S. at 218, 77 S.Ct. at 797.

Under the Indiana statute, the beneficiaries are the same. The bond secures "the payment of all indebtedness to a person for labor and service performed ... [and t]he payment bond must state that it is for the benefit of the subcontractors, laborers, material suppliers and those performing services." IC 36-1-12-13.1(b).

Third, the court in Carter looked at the relationship between the trustees of the benefit fund and its employee-members.

Assignees of the claims of persons furnishing labor or material come within the protection of the statutory bond.... If the assignee of an employee can sue on the bond, the trustee of the employees' fund should be able to do so.... The trust agreement gives the trustee the exclusive right to enforce payment. The trustees stand in the shoes of the employees and are entitled to enforce their rights.

Moreover, the trustees of the fund have an even better right to sue on the bond than does the usual assignee since they are not seeking to recover on their own account. The trustees are claiming recovery for the sole benefit of the beneficiaries of the fund, and those beneficiaries are the very ones who have performed the labor.

353 U.S. at 219-20, 77 S.Ct. at 798.

In Indiana, assignees of employees have the right to recover under a payment bond. Smiley v. State (1916), 60 Ind.App. 507, 110 N.E. 222. Chris's employees meet the definition of claimants under the Bond because they had a direct contract (collective bargaining agreement) with a subcontractor (Chris) of the contractor (BMW) to furnish labor. See Record at 17 (p 15.1 of the Bond). The collective bargaining agreement obligated Chris to pay Carpenters benefits to be retained in a pension fund as a portion of its employees' wages for work performed by those employees. Following the logic of Carter, Carpenters should be able to recover under the Bond because it stands in a trustee relationship with Chris's employees and seeks recovery for the sole benefit of the employees, who performed the labor and for whose benefit the Bond was given. See also Kennedy v. Connecticut General Life Ins. Co. (1991), 7th Cir., 924 F.2d 698, 700 (Assignees stand in the shoes of the beneficiaries. A provider of medical services could sue a group health insurer for nonpayment of claims as an assignee of the plan participants.).

Finally, Carter notes the lack of equity that would result if the trustees were denied standing to sue on the bond: "[D]enial of an assignee's right to sue on the bond might deprive those for whom the security was intended of a fair chance to realize upon their claims by assignment." 353 U.S. at 219, 77 S.Ct. at 798. The same would be true in the present case. To hold that trustees of a collectively-bargained benefit plan cannot recover unpaid contributions from a surety on an IC 36-1-12-13.1 bond would leave unprotected a large portion of an employee's compensation package. Individual workers are not likely to know if their fringe benefits have been paid by their employer; neither are the benefit funds who are usually charged with the responsibility of collecting the payment from the employers--these funds usually do not get information about contributions until a project is completed. Arizona Laborers, Teamsters and Cement Masons Local 395 Health and Welfare Trust Fund v. New Pueblo Constructors, Inc. (1982), Ariz.App., 131 Ariz. 278, 640 P.2d 209, 210. Permitting Carpenters to recover against the Bond protects the employees and Carpenters, and is the only practical alternative method of enforcing a subcontractor's contributions to benefit funds.

Seaboard further argues that Carpenters could not assert a valid claim against the...