McElhose v. Universal Sur. Co.

• Citation: 158 N.W.2d 228,182 Neb. 847
• Decision Date: 29 March 1968
• Docket Number: No. 36767,36767
• Parties: Gordon McELHOSE, Appellee, v. UNIVERSAL SURETY CO., a Corporation, Appellant.
• Court: Supreme Court of Nebraska

Page 228

158 N.W.2d 228

182 Neb. 847

Gordon McELHOSE, Appellee, v. UNIVERSAL SURETY CO., a Corporation, Appellant.

No. 36767.

Supreme Court of Nebraska.

March 29, 1968.

Syllabus by the Court

1. The purpose of section 52--118, R.S.Supp., 1965, and sections 52--118.01 and 52--118.02, R.R.S.1943, is to give those supplying labor and materials for construction of improvements for the state protection comparable to that furnished by mechanics' and materialmen's liens where private construction is involved.

2. Such statutes are remedial in nature and are to be liberally construed to effectuate the legislative purpose.

3. The proviso contained in section 52--118.01, R.R.S.1943, limits the right to bring suit on the payment bond required by section 52--118, R.S.Supp., 1965, to those materialmen, laborers, and subcontractors who deal directly with the prime contractor and those materialmen, laborers, and subcontractors who, lacking express or implied contractual relationship with the prime contractor, have direct contractual relationship with a subcontractor and who give the statutory notice of their claims to the prime contractor.

4. A materialman or supplier, according to the general usage of the terms, can be and often is a subcontractor. Under the statute a more restrictive definition of these terms is required.

5. The distinction between a subcontractor and a materialman or supplier turns on the substantiality and importance of the relationship between the middle party and the prime contractor. If the middle party has taken responsibility for a large and definable part of the construction project, he is a subcontractor, otherwise he is a materialman or supplier.

6. The ultimate determination of whether a supplier of material is a materialman or subcontractor within the meaning of the statute governing payment bonds of contractors for public improvements depends upon a consideration of the extent to which, in matters of substance, the prime contractor delegates to the supplier, and the supplier undertakes to perform for the prime contractor, a specific part of the labor or material requirements of the prime contract.

7. In determining if a party is a subcontractor within the meaning of the act, the determination is not dependent on how the parties designate themselves. The question is one of fact.

8. While the labor or materials furnished must be used and consumed in the prosecution of the prime contract, it is not required that the subcontractor install his product or do any on-site work.

9. Rental charges for equipment furnished to perform work on the contract are recoverable under a contractor's payment bond if such equipment is not a capital asset of the user.

10. Where it appears that a claimant furnished equipment to a subcontractor within the meaning of the statute, he is within the class of suppliers or materialmen protected by the prime contractor's payment bond.

Sidner, Gunderson, Svoboda & Schilke, Fremont, for appellant.

Rice, Rice & Roubicek, Creighton, George Johnson, Gregory, S.D., for appellee.

Woods, Aitken & Aitken, Richard W. Smith, Richard L. Spangler, Jr., Lincoln, for amicus curiae.

Heard before WHITE, C.J., and CARTER, SPENCER, BOSLAUGH, SMITH and McCOWN, JJ.

CARTER, Justice.

This is an action by Gordon McElhose against Universal Surety Company to recover the rental due for the use of two caterpillar tractors under the provisions of a public works bond furnished by Universal. On a trial to the court, a jury having been waived, the trial court found for the plaintiff in the amount of $7,500 and costs, including an attorney's fee of $1,500. Universal has appealed to this court.

The evidence shows that from May to August 1965, Blacktop, Inc., was a general contractor with the State of Nebraska on a road construction project in Cedar County. The project undertaken by Blacktop was for the construction of the base and the asphalt and concrete surfacing work to the shoulders of the road. Universal executed a public works contract bond as required by section 52--118, R.S.Supp., 1965, which in its over-all effect is '* * * conditioned for the payment of all laborers and mechanics for labor that shall be performed and for the payment for material and equipment rental which is actually used or rented in the erecting, furnishing, or repairing of the public structure or improvement or in performing the contract.'

In the spring of 1965, the Laurel Sand and Gravel Company, a trade name under which John Calcavechia operated as sole owner, entered into a written agreement to furnish Blacktop with about 33,424 cubic yards of gravel in accordance with state specifications at the site of the road construction project at specified prices at a total cost of $92,708.50. This gravel was to be delivered at the rate of 800 cubic yards per day for each working day as counted by the state. Calcavechia conducted his business at three different gravel pits which were 14, 16, and 28 miles from the project. He ordinarily sold gravel to anyone desiring the product. He testified that during the period of his contract with Blacktop he sold no gravel except rejected gravel other than a quantity sold to Dobson Brothers, another road contractor.

Calcavechia owned one caterpillar tractor which he found inadequate in fulfilling his contract with Blacktop. In May, Calcavechia rented a tractor from McElhose at a rental of $14 per hour. In June he rented a second tractor from McElhose at the same rental. Under the agreement, Calcavechia was to pay for the gas, oil, upkeep, and minor repairs. McElhose was to make all major repairs. Due to bad weather and breakdowns some question arose as to the amount of rental due McElhose which was amicably fixed in the total amount of $7,500. The furnishing of gravel was completed in August. McElhose estimated the completion date as August 15, 1965. The two rented tractors were used only at the gravel pits, a minimum of 14 miles from the road construction project. Neither of the rented tractors was ever at the site of the project.

On or about July 1, 1965, McElhose told Calcavechia he could use some money. He was told by Calcavechia that he had received no money from Blacktop who was waiting for money from the state in order to pay Calcavechia. About 3 weeks later, McElhose talked to L. R. Harpstreith, president of Blacktop, about being paid for the rental of his tractors. Harpstreith stated that not enough work had been done to submit an estimate. McElhose had a subsequent conversation with Ron Keefer, an officer of Blacktop, in which Keefer said when they got some money from the state for Calcavechia, they would see that he got his money; that he was not to worry. McElhose said he told Keefer he would pull the tractors off the job unless he got some money and Keefer said not to do that as it would paralyze the operation; that they would see that he got his money. McElhose said he talked to Harpstreith after the job was completed. Harpstreith wanted a copy of the bill to use in settling with Calcavechia. On or about August 20, 1965, McElhose called at the gravel pit to make a final settlement with Calcavechia of the amount due. At this time, they agreed on the amount due as being $7,500. McElhose made up a final bill for the $7,500 and sent it to Calcavechia. He also sent a copy of the bill to Blacktop by registered mail which was receipted for on October 19, 1965. He never talked with a representative of Blacktop after sending it a copy of the bill by registered mail.

Armond Kuehn, project engineer for the state, testified that by virtue of his position he was required to supervise the work and see that all statutory requirements as to insurance, bonds, pay scales, and the like were met. He saw to it that Blacktop had insurance but not as to subcontractors who were not approved as such. He did not check Calcavechia in this respect as he considered him a supplier of materials and not a subcontractor within the meaning of the law. He testified he had no control over Calcavechia, that he had seen the tractors working in the gravel pits, but did not know that they were leased equipment. He said the rented tractors did no work on the job and, in fact, there were no such tractors used on the site of the project. Harpstreith testified that McElhose called him on the telephone in August and told him that Calcavechia owed him $7,500 in rentals which Harpstreith said he would pay if an assignment to McElhose was presented. He said McElhose called him later at a time when he had money belonging to Calcavechia available, that Calcavechia was contending he owed only $4,000 to McElhose, and that he would pay it over only on an assignment by Calcavechia, which was never produced. He said he told McElhose that Calcavechia was a supplier and not a subcontractor, that Blacktop was not liable, and for that reason he would pay McElhose's claim only if an assignment from Calcavechia was presented. Harpstreith stated that he contracted for the gravel delivered on the job, that he had no control over Calcavechia, and that his only concern was that Calcavechia deliver the gravel on the job site pursuant to their agreement.

It was upon this evidence that the trial court found that Universal was liable on its bond for the payment of the tractor rentals in the amount of $7,500 and denied Universal's contention that Calcavechia was a supplier of materials to Blacktop without a right of recovery against Blacktop or its contract bondsman, Universal.

Insofar as applicable to the parties in this case, section 52--118, R.S.Supp., 1965, provides in part as follows: 'It shall be the duty of the State of Nebraska, * * * empowered by law to enter into a contract for the erecting and furnishing, or the repairing of any * * * highway * * * to enter into such contract, to which the general provisions of the mechanics' lien laws do not apply, and where the mechanics and laborers have no lien to...