Knuth v. Fidelity & Cas. Co. of N. Y.

• Citation: 275 Wis. 603,83 N.W.2d 126
• Parties: Earl L. KNUTH, d/b/a E. L. Knuth Trucking Service, Appellant, v. The FIDELITY AND CASUALTY COMPANY OF NEW YORK et al., Respondents.
• Decision Date: 07 May 1957
• Court: Wisconsin Supreme Court

Page 126

83 N.W.2d 126

275 Wis. 603

Earl L. KNUTH, d/b/a E. L. Knuth Trucking Service, Appellant, v. The FIDELITY AND CASUALTY COMPANY OF NEW YORK et al., Respondents.

Supreme Court of Wisconsin.

May 7, 1957.

Bendinger, Hayes & Kluwin and Bernard J. Hankin, Milwaukee, for respondents.

WINGERT, Justice.

We are of opinion that the complaint states a cause of action against the surety company.

Section 10 of the three-party contract provides that Fidelity guarantees, covenants and agrees with the city that Donlen will well and truly perform the contract; 'and that the said party or parties of the second party (Fidelity) will well and truly pay on demand to the said City of Milwaukee any and all damages, and sums of money, which the said party of the first part (Donlen) shall be liable to pay to the said city under this contract or any clause or agreement therein; and shall promptly make payment to each and every person or party entitled thereto of all the claims for work or labor performed and material furnished for or in or about this contract.' (Italics ours.)

In the absence of anything to the contrary in the contract, we construe the italicized clause as a promise by Fidelity to pay directly any claim against Donlen for 'work or labor performed and material furnished for or in or about this contract,' if Donlen shall fail to pay the same. It is thus a contract for the benefit of the third persons who furnish work, labor or materials to Donlen 'for or in or about' the contract, and as such is enforceable in an action at law by a third party beneficiary who brings himself within its terms. Concrete Steel Co. v. Illinois Surety Co., 163 Wis. 41, 43, 46, 157 N.W. 543; Theodore J. Molzahn & Sons v. K. W. Construction Co. (Maryland Cas. Co.), 214 Wis. 603, 605, 254 N.W. 101. It is within the city's powers, and proper and commendable, to contract for a performance bond broad enough in terms to protect suppliers of services and materials whose claims are not lienable. R. Connor Co. v. Aetna Indemnity Co., 136 Wis. 13, 17, 115 N.W. 811; Builders Lumber & Supply Co. v. Chicago Bonding & Surety Co. 167 Wis. 167, 172, 166 N.W. 320.

Fidelity argues that the only purpose of section 10 of the contract is to protect the city, and that it should not be construed as a contract for the benefit of third-party suppliers of services or materials for the contract. We think, however, that the express words of section 10, that the defendant shall 'promptly make payment to each and every person or party entitled thereto of all claims for work or labor performed and material furnished' are too clear to admit of any such construction. Ozaukee Sand & Gravel Co. v. City of Milwaukee, 243 Wis. 38, 9 N.W.2d 99, 101, relied on by Fidelity, involved only the interpretation of the very different language of sec. 289.53(4) Stats.1939 and held that a contract to supply gravel unrelated to a specific construction project was not a contract 'for a public improvement' within the meaning of that statute. The case is no authority for denying the quoted words of section 10 their plain meaning as a promise for the benefit of third persons.

It remains to consider whether plaintiff brings himself within the class of persons to whose benefit the quoted promise extends. Does one who performs the service of hauling and delivering the sand and gravel which the principal contractor has contracted to furnish to the city have a claim 'for work or labor performed and material furnished for or in or about this contract'? We think he does.

In our view the transportation of sand and gravel to the buyer is 'work * * * performed for or in or about' the contract to furnish the material; to wit, the work of hauling. 'Work' must mean something other than 'labor', otherwise the expression 'work or labor' is mere tautology. Other things being equal, a construction which gives effect to every word of the contract should be perferred to one which results in surplusage. Dore v. Glenn Rock Mineral Spring Co., 147 Wis. 158, 161, 132 N.W. 906. That the legislature uses 'work' as a much broader term than 'labor' in a somewhat comparable context is illustrated by a comparison of sec. 289.01(2)(a), giving a lien to a principal contractor 'who performs any work' etc. and sec. 289.02(1), providing different lien protection for every person other than a contractor 'who furnishes labor'.

While Fidelity is a surety, it is a paid surety, and hence its obligation is not to receive the strict construction to which gratuitous sureties are entitled, but on the contrary has the essential features of an insurance contract and is subject to the rules of construction applicable to such contracts. Building Contractors Limited Mut. Liability Ins. Co. v. Southern Surety Co., 185 Wis. 83, 87, 200 N.W. 770.

In sustaining Fidelity's demurrer, the circuit court relied on a number of decisions holding that a surety's obligation under a performance bond on a public improvement executed pursuant to the requirement of sec. 289.16(1) (formerly sec. 3327a) and in substantially the statutory language, is limited to payment of such claims as are described in that statute. Wisconsin Brick Co. v. National Surety Co., 164 Wis. 585, 160 N.W. 1044, L.R.A.1917C, 912; Webb v. Freng, 181 Wis. 39, 194 N.W. 155; Southern Surety Co. v. Metropolitan Sewerage Comm., 187 Wis. 206, 201 N.W. 980, 204 N.W. 476. Those cases were decided prior to the extensive amendment of sec. 289.16(1), by Ch. 83 and 316, Laws 1933, and were based on the proposition that the bond, being given pursuant to statutory mandate, was to be construed as covering only claims of the kind mentioned in the...