J. T. Weybrecht's Sons Co. v. Hartford Acc. & Indem. Co.

• Decision Date: 19 May 1954
• Docket Number: No. 33781,33781
• Citation: 161 Ohio St. 436,53 O.O. 345,119 N.E.2d 836
• Parties: , 53 O.O. 345 J. T. WEYBRECHT'S SONS CO. v. HARTFORD ACCIDENT & INDEMNITY CO. et al.
• Court: Ohio Supreme Court

Page 436

161 Ohio St. 436

119 N.E.2d 836, 53 O.O. 345

J. T. WEYBRECHT'S SONS CO. v. HARTFORD ACCIDENT & INDEMNITY CO. et al.

No. 33781.

Supreme Court of Ohio.

May 19, 1954.

Syllabus by the Court.

As used in Sections 2365-1 to 2365-4, inclusive, General Code, the word 'subcontractor' will be given its ordinary meaning so that it may include one who, under a contract with the general contractor, merely furnishes material for use in performance of the general contract, but so that it will exclude a subcontractor of a subcontractor of the general contractor.

This action was instituted by plaintiff against the bonding company to recover $8,517.54 on a performance bond in the form required by Section 2365-4, General Code, and executed by a general contractor as principal and the bonding company as surety in connection with a contract with the Youngstown City Board of Education for erection of a school building. In carrying out that contract, the general contractor awarded a contract for the mill work required to the Carver-Behan Company, which company purchased portions of the mill work from the plaintiff and others. In paying invoices as submitted by the Carver-Behan Company, the general contractor paid said company all the amount due said company except $1,535.18. Subsequent to said payments and to completion of its contract with the general contractor, the Carver-Behan Company went into bankruptcy. At the time of the bankruptcy, the Carver-Behan Company owed $8,517.54 to plaintiff for materials furnished to the Carver-Behan Company and delivered by that company under its contract with the general contractor.

So far as material to this case, the applicable sections of the General Code are as follows:

Section 2365-1, Section 153.54, Revised Code. 'That when public buildings * * * are about to be constructed * * * under contract, at the expense of * * * any * * * school district * * * it shall be the duty of the board * * * contracting on behalf of the * * * school district, to require the usual bond as provided for in statute with good and sufficient sureties, which an additional obligation for the payment by the contractor, and by all sub-contractors, for all labor performed or materials and tools furnished and for the use of and repairs to equipment used in connection with the construction * * * of such building * * *.'

Section 2365-2, Section 153.55, Revised Code. 'Such bond shall be executed by such contractor with such sureties as shall be approved by the board * * * in an amount equal to at least fifty per cent. (50%) of the contract price, and conditioned for the payment by the contractor and by all sub-contractors, of all indebtedness which may accrue to any person, firm or corporation, on account of any labor performed or materials furnished in the construction * * * of such building * * *. Such bond shall be * * * held * * * for the use of any party interested therein.'

Section 2365-3, Section 153.56, Revised Code. 'Any person, firm or corporation to whom any money shall be due on account of having performed any labor, or furnished any material in the construction * * * of any such building * * * shall furnish the sureties on said bond, a statement of the amount due * * *.

'* * * If said indebtedness shall not be paid * * * said person, firm or corporation may bring an action in his own name upon such bond * * *.'

Section 2365-4, Section 153.57, Revised Code. 'The

bond hereinbefore provided for shall be in substantially the following form, and recovery of any claimant thereunder shall be subject to the conditions and provisions of this act to the same extent as if such conditions and provisions were fully incorporated in said bond form:

'Know all men by these presents, that we, the undersigned ..... as principal and ..... as sureties, are hereby held and firmly bound unto ..... in the penal sum of ... dollars, for the payment of which well and truly to be made, we hereby jointly and severally bind ourselves, our heirs, executors, administrators, successors and assigns.

* * *

* * *

'The condition of the above obligation is such, that whereas the above named principal did on the ... day of ..., 19.., enter into a contract with ....., which said contract is made a part of this bond the same as though set forth herein;

'Now, if the said ..... shall well and faithfully do and perform the things agreed by ..... to be done and performed according to the terms of said contract; and shall pay all lawful claims of sub-contractors, material men and laborers, for labor performed and materials furnished in the carrying forward, performing or completing of said contract; we agreeing and assenting that this undertaking shall be for the benefit of any material man or laborer having a just claim, as well as for the obligee herein; then this obligation shall be void; otherwise the same shall remain in full force and effect; it being expressly understood and agreed that the liability of the surety for any and all claims hereunder shall in no event exceed the penal amount of this obligation as herein stated. * * *.' (Emphasis added.)

Within the time specified in Section 2365-3, General Code, plaintiff duly filed its claim for said $8,517.54 with the bonding company and, on refusal of the bonding company to pay, this action was instituted.

The Common Pleas Court rendered judgment for the plaintiff for the amount claimed. That judgment was affirmed by the Court of Appeals. The cause is now before this court on appeal from the judgment of the Court of Appeals, pursuant to allowance of a motion to certify the record.

Harrington, Huxley & Smith, Robert A. Manchester, II, and W. E. Fowler, Jr., Youngstown, for appellants.

Mitchell, Mitchell & Reed, Youngstown, and Evan W. Morris, Alliance, for appellee.

TAFT, Judge.

If the tests applied by this court under the mechanics' lien law are applicable, Carver-Behan Company was a materialman of the general contractor and not a subcontractor, and plaintiff was a materialman of Carver-Behan Company. It is apparent therefore that, if those tests are applicable, the plaintiff was a materialman of a materialman of the general contractor.

Thus, the question to be determined is whether one who, under the tests applied under the mechanics' lien law in distinguishing between a subcontractor and a materialman, is a materialman of a materialman of a general contractor may recover on a performance bond executed pursuant to the provisions of Sections 2365-1 to 2365-5, inclusive, General Code.

Except for the decision rendered by this court 27 years ago in American Guaranty Co. v. Cincinnati Iron & Steel Co., 115 Ohio St. 626, 155 N.E. 389, the majority of this court might well hold that there could be no such recovery. As stated in paragraph four of the syllabus in Royal Indemnity Co. v. Day & Maddock Co., 114 Ohio St. 58, 150 N.E. 426, 44 A.L.R. 374:

'There is such an analogy between sections 2365-1, 2365-2 and 2365-4, General Code, and sections 8310 and 8311, General Code, that it is apparent that, in the enactment of sections 2365-1, 2365-2 and 2365-4, the Legislature intended to require the surety upon the bond required to be furnished by the contractor for the construction of a public building to be liable for such labor and material furnished for the construction of a public building as would be the subject of a lien under the Mechanic's Lien Law were the building privately owned.'

If a private building were involved, it is doubtful whether plaintiff, as a materialman of a materialman of the general contractor, could acquire a lien under the mechanics' lien statutes. See DeWitt's Ohio Mechanics' Liens (with 1950 Supplement by Holmes), 11, Section 34; Demann's Ohio Mechanic's Lien Law (2 Ed.), 53 Section 3.5.

However, it is fair to assume that many performance bonds are now outstanding which were executed in reliance on the decision made in the American Guaranty Co. case, that surety companies and contractors have based their charges on the obligations which that case indicates will be imposed upon them by execution of performance bonds similar to that involved in the instant case, and that many who have or may have claims under such bonds have acted and their lawyers have advised them in reasonable reliance on the belief that this court would, as the Common Pleas Court and the Court of Appeals in the instant case did, follow that decision. Unlike the General Assembly, this court cannot, when it overrules such a decision, avoid the retroactive effect which such a step will necessarily involve. See 37 Harvard Law Review 409, 426. We believe therefore that, if there is any reasonable basis for the decision rendered in the American Guaranty Co. case, this court should follow that decision and leave it to the General Assembly to effect any change in the law for the future.

As appears from its syllabus, the American Guaranty Co. case allowed recovery on a performance bond 'by a party who furnished to a materialman * * * material * * * which went directly * * * into the construction.' The word 'materialman' was used in the syllabus only to refer to a materialman of the general contractor. The facts of the case indicate that that materialman had contracted with the general contractor to furnish the material involved to the general contractor.

The ordinary meaning of the word 'subcontractor' will include such a materialman who contracts to furnish material to a contractor for use in performing his contract.

Thus, in Ryndak v. Seawell, 13 Okl. 737, 76 P. 170, 173, it is said:

'In this case Matkin had a contract for the construction of the entire building, which included the furnishing of all the material to be used therein. Seawell contracted with Matkin to furnish the material for the building. In doing so, he agreed to perform a part of the contract which Matkin had obligated himself to perform Why, under such circumstances, should not Seawell be held to be a...