J.F. Tolton Inv. Co. v. Maryland Casualty Co.

• Citation: 293 P. 611,77 Utah 226
• Decision Date: 04 December 1930
• Docket Number: 4909
• Parties: J. F. TOLTON INV. CO. v. MARYLAND CASUALTY CO. et al. INDEPENDENT GAS & OIL CO. v. MARYLAND CASUALTY CO. et al
• Court: Supreme Court of Utah

293 P. 611

77 Utah 226

J. F. TOLTON INV. CO. v. MARYLAND CASUALTY CO. et al.

INDEPENDENT GAS & OIL CO. v. MARYLAND CASUALTY CO. et al

No. 4909

Supreme Court of Utah

December 4, 1930

Appeal from District Court, Third District, Salt Lake County; David W. Moffat, Judge.

Separate actions by the J. F. Tolton Investment Company and by the Independent Gas & Oil Company against the Maryland Casualty Company and others. Judgment for plaintiffs, and defendants appeal.

AFFIRMED.

Bagley Judd & Ray, of Salt Lake City, for appellants.

Wm Story, Jr., and Benjamin Crow, both of Salt Lake City, for respondents.

CHERRY C. J. ELIAS HANSEN, EPHRAIM HANSON, and FOLLAND, JJ., concur. STRAUP, J. concur in part and dissent in part.

OPINION

CHERRY, C. J.

These actions are to recover upon certain accounts incurred by the subcontractor during the course of certain highway construction work which it failed to pay and for which the plaintiffs seek to charge the surety upon the subcontractor's bond. Below the plaintiffs had judgment, from which the surety has appealed. There are two actions tried together in this court by stipulation of the parties.

Farr, Lashus & Farr subcontracted with the general contractor for the construction of about eight miles of public highway in Beaver and Millard counties for $ 26,620.50. To secure the performance of the contract, etc., the appellant Maryland Casualty Company, as surety, for compensation, executed a bond conditioned that the subcontractor "shall well and truly pay all and every person furnishing material or performing labor in and about the construction of said roadway all and every sum or sums of money due him, them or any of them for all such labor and materials for which the subcontractor is liable."

The appeals present the questions whether certain disputed items for which plaintiffs had judgment against the surety are within the obligation of the surety's undertaking. These disputed items are grouped as follows: (1) Food and supplies furnished and used in a boarding house conducted by the subcontractor for the benefit of laborers on the work; (2) money and merchandise paid and delivered to workmen in payment of their wages on the order of the subcontractor; (3) labor and repairs and sundry small parts and accessories for autos and trucks used in the work; bolts, nuts, belt, wire rope, steel bars, etc., used in the work; (4) gasoline, oil, and grease used on the subcontractor's machinery; (5) hauling coal from railroad to construction camp, and drayage on oil and grease; (6) rental for engine use on job.

The extent of the surety's liability in cases of this kind has been before the American courts in many cases. The decisions are conflicting and are too numerous to be reviewed here. A recent case in the Supreme Court of Wyoming contains an able and exhaustive review of the cases on the subject with conclusions that meet with our approval. Franzen v. Southern Surety Co., 35 Wyo. 15, 246 P. 30, 46 A.L.R. 496. It may be added that the conflict of opinion in a great measure is due to the different standards of interpretation applied to the contract of the surety. Some courts have construed the contract strictly in favor of the surety, others have applied the rule appropriate to mechanic's lien statutes, while a greater number, especially in later cases, have adopted the rule that such contracts should be liberally construed in favor of the persons for whose benefit the bond was given. United States, for Use of Hill, v. American Surety Co., 200 U.S. 197, 26 S.Ct. 168, 50 L.Ed. 437; Brogan v. National Surety Co., 246 U.S. 257, 38 S.Ct. 250, 62 L.Ed. 703, L.R.A. 1918D, 776; Illinois Surety Co. v. John Davis Co., 244 U.S. 376, 37 S.Ct. 614, 61 L.Ed. 1206; United States F. & G. Co. v. California-Arizona Const. Co., 21 Ariz. 172, 186 P. 502; Wiseman v. Lacy, 193 N.C. 751, 138 S.E. 121; United States F. & G. Co. v. Henderson County (Tex. Com. App.) 276 S.W. 203; Franzen v. Southern Surety Co., supra; Clatsop County v. Fidelity & Deposit Co., 96 Ore. 2, 189 P. 207.

Our own court is committed to the rule that the contract of a surety, for hire, is to be strictly construed against the surety. Walker Realty Co. v. American Surety Co., 60 Utah 435, 211 P. 998; Murray City v. Banks, 62 Utah 296, 219 P. 246.

The obligation of the bond in question is that the subcontractor "shall well and truly pay * * * every person furnishing material or performing labor in and about the construction of said roadway * * * for which the subcontractor is liable." The questions to be decided are whether persons furnishing particular articles in connection with the construction of the roadway are within the obligation of the bond. The language of the bond clearly imports more than payment for the materials and labor which go directly into the completed work. Its essential representation is that all persons furnishing labor or materials to the subcontractor in connection with the performance of its contract shall be paid. And this contemplates a performance of the contract according to customary practices. Modern construction work is accomplished largely by the use of machinery and mechanical power. In the larger undertakings elaborate organization is required involving much preliminary preparation and expenditure. It is often necessary to construct lines of communication and travel and to establish camps. The assembling of equipment and its maintenance is a common necessity. When engines and motors are employed, fuel and lubrication are indispensable. These and other incidentals go but indirectly into the finished job, but they are all necessary, and are commonly understood to be involved in the usual method of doing such work. And, when men contract concerning the labor and materials furnished "in and about" the construction of particular work, it is vain to say that they did not mean to include all of the preliminary and incidental work necessary to the finished job.

What we think is the correct rule, supported by the great weight of authority, is that such contracts are to be construed with great liberality in favor of the persons dealing with contractors, and that sureties should be held for labor and materials furnished the contractor which proximately relate to the performance of the contract and contribute to, and are reasonably appropriate or necessary to, its completion, even though such labor or materials are not applied directly to the finished job. This does not include liability for money loaned the contractor, nor materials furnished which from their nature and use will not be consumed in the work. But it does include a wide range of incidentals which form no component part of the finished structure, but are commonly understood to be appropriate and necessary when such construction work is carried on according to customary and approved practices.

The first class of items in dispute is groceries and supplies furnished for a boarding house conducted by the subcontractor for which judgment was rendered against the surety. It was stipulated that the construction work referred to in the bond was conducted at a point twenty-two miles distant from any boarding house accommodations and that the subcontractor established and conducted at its camp a boarding house for the use and benefit of the men employed by it on the work; that the groceries and supplies in question were delivered to the subcontractor at the boarding house, where the same were prepared and served to the laborers employed on the work.

There is some conflict in the cases, but the great weight of authority is that such claims are chargeable against the surety. Brogan v. National Surety Co., 246 U.S. 257, 38 S.Ct. 250, 62 L.Ed. 703, L.R.A. 1918D, 776; Overman & Co. v. Maryland Casualty Co., 193 N.C. 86, 136 S.E. 250; National Surety Co. v. Arizona Grocery Co., 32 Ariz. 399, 259 P. 404; Fidelity & Deposit Co. v. Bailey-Pleasants Co., 145 Va. 126, 133 S.E. 797; Clatsop County v. Fidelity & Deposit Co., 96 Ore. 2, 189 P. 207; Southern Surety Co. v. Guaranty State Bank (Tex. Civ. App.) 275 S.W. 436; McPhee v. United States, 64 Colo. 421, 174 P. 808; Bricker v. Rollins & Jarecki, 178 Cal. 347, 173 P. 592; Franzen v. Southern Surety Co., 35 Wyo. 15, 246 P. 30, 46 A.L.R. 496; Union Indemnity Co. v. State (Fla.) 99 Fla. 656, 127 So. 307.

In most of the cases cited it appeared that it was necessary for the contractor to maintain a boarding house for his workmen, and that the cost of their board was deducted from their wages. It is contended by the surety here that, admitting the liberal rule of construction of its liability in favor of the plaintiffs and the validity of the authorities cited, the claim in question for groceries and supplies was not sufficiently proved to establish the liability of the surety. Attention is called to a statement of the court in Brogan v. National Surety Co., supra, to the effect that groceries and supplies furnished to a contractor who operates a commissary or boarding house as an independent enterprise for separate and additional profit would be a matter independent of the contract, and not covered by the bond. And Watkins v. United States F. & G. Co., 138 Miss. 388, 103 So. 224, to the same effect is cited. We agree that a charge for supplies so furnished could not be sustained against the surety. But that is not the case here. The facts stipulated concerning the matter are that there were no boarding house accommodations within less than twenty-two miles from the work, that the subcontractor established and conducted boarding house and other accommodations for the use and benefit of its workmen and that the supplies furnished were actually consumed by the workmen employed. In one of several references to the...