Middle-West Concrete Forming and Equipment Co. v. General Ins. Co. of America

Decision Date10 July 1980
Docket NumberNo. 14027,MIDDLE-WEST,14027
Citation267 S.E.2d 742,165 W.Va. 280
CourtWest Virginia Supreme Court
PartiesCONCRETE FORMING AND EQUIPMENT COMPANY v. GENERAL INSURANCE COMPANY OF AMERICA et al.

Syllabus by the Court

The terms of a labor and materials payment bond guaranteeing payment by the surety "for all . . . materials used or reasonably required for use in the performance of the Contract," contemplate materials necessary to maintain the structural integrity of construction left uncompleted by a defaulting contractor and the surety is liable for payment for materials so used.

William D. Levine, Marshall & St. Clair, Huntington, for appellant.

Wilson Anderson, Steptoe & Johnson, Charleston, for appellees.

McGRAW, Justice.

Middle-West Concrete Forming and Equipment Company appeals from an order of the Circuit Court of Cabell County which set aside a jury verdict in its favor and awarded a new trial to appellee, General Insurance Company of America. Appellant contends that the trial court erred in not considering the evidence in the light most favorable to appellant and asks us to reverse the order of the lower court and reinstate the jury verdict. We agree and reverse the lower court's ruling.

Appellant is a small construction company located in Cincinnati, Ohio, and engaged in the business of renting materials and equipment used in the fabrication of poured concrete structures. In 1971, appellant leased to Oakridge Construction Company (hereinafter Oakridge), a general contractor with headquarters in California, certain equipment to be used in the construction of a Holiday Inn hotel in Huntington. Under the terms of the leasing agreement, Oakridge agreed to pay monthly rental on the equipment and to be responsible for returning it to the point of shipment upon completion of the work. Appellee was engaged by the owner of the project, Continental Realty, as a surety company and executed a labor and material payment bond on Oakridge, guaranteeing payment "for all labor and material used or reasonably required for use in the performance of the Contract."

On June 6, 1973, Oakridge ceased work on the project prior to its completion. Oakridge did not notify appellant of the work stoppage, nor did it return the materials as required under the terms of the agreement. No further work was done on the structure until November, 1974, when the owner engaged another contractor, the Schurman Construction Company (hereinafter Schurman) to complete the hotel. Much of appellants' material remained on the job site until January or February of 1975, at which time appellant shipped the equipment from the job site at its own expense. Appellant maintains that some of the forms were still in use on the construction project at the time of trial in July 1976. Under Oakridge's labor and materials payment bond, appellee paid all rentals due appellant up to July 1, 1973, but refused to pay any sums claimed by appellant after that date. Appellant instituted this action in the Circuit Court of Cabell County to recover unpaid rental on the equipment and interest on the accrued installments.

At trial, appellee contended that the labor and materials payment bond covering Oakridge was in effect only during the time Oakridge was actively involved in construction and that it was not obligated to pay rental accruing after the contractor walked off the job. Appellee also maintained that appellant was under a duty to mitigate its damages by removing its equipment from the job site once it learned of the work stoppage. Appellant introduced evidence showing that the building in its unfinished state was structurally unsound and prone to collapse upon removal of the equipment. Appellant also introduced evidence to show that appellee's own engineers had forbidden removal of the rented forms. Appellee countered this showing by introducing evidence that, with minor exceptions, the equipment could have been removed within a month after the concrete structures had been poured without endangering the soundness of the building.

The jury returned a verdict in favor of appellant in the amount of $50,000. Upon motion of appellee, the trial court concluded that the verdict was contrary to the law and ordered a new trial. Appellant contends that the trial court did not consider the evidence in the light most favorable to appellant but rather re-evaluated the evidence and ordered the verdict set aside upon reaching a conclusion different from that of the jury. Appellant also contends that the verdict was not contrary to the law and asks us to reverse the order of the trial court and reinstate the verdict. We grant appellant relief.

Appellant's first contention is that trial court should not have set aside the jury's verdict based on the jury's failure to follow the Defendant's Instruction No. 9 1 since that instruction incorrectly states the law. The instruction informed the jury that appellant's claim depended upon the use of the materials in the prosecution of the construction under the terms of the payment bond without regard to the terms of the rental contract between the parties. We find no merit in appellant's contention.

Our review of the applicable case law in this area reveals that the purpose of the labor and materials payment bond is to protect the owner of the structure from liens levied against the building by creditors of the contractor who supplied labor and materials actually used by the contractor in furtherance of the contracted construction. Standard Accident Ins. Co. v. Rose, 314 Ky. 233, 234 S.W.2d 728 (1950); Portland v. O'Neill, 98 Or. 162, 192 P. 909 (1920). 2 It is the labor and material supplied for the prosecution of the work which is protected by the bond and not obligations incurred by the contractor which do not approximate the construction contracted to be done. Fitzgerald v. Neal, 113 Or. 103, 231 P. 645 (1924). Cf., Chief Industries, Inc. v. Schwendiman, 99 Idaho 682, 587 P.2d 823 [165 W.Va. 284] (1978). The surety is not liable for damages resulting from the breach of the rental agreement by the contractor which are not covered by the payment bond. The remedy of the supplier of labor or materials for such damages is a breach of contract action. Olive v. U. S., 297 F.2d 70 (5th Cir. 1961); Lucas v. Western Cas. & Sur. Co., 176 F.2d 506 (10th Cir. 1949); Friestedt Co. v. U. S. Fireproofing Co., 125 F.2d 1010 (10th Cir. 1942); American Surety Co. v. Wheeling Structural Steel Co., 114 F.2d 237 (4th Cir. 1940). The trial court correctly instructed the jury that appellee's liability in this case was limited to the time the materials were actually used in furtherance of the construction without regard to the rental agreement between appellant and Oakridge. 3

The trial court determined, however, that the jury verdict was contrary to the law as stated in Defendant's Instruction No. 9 and concluded that the jury disregarded that instruction in reaching its verdict. The trial court's reasoning, as stated in its memorandum opinion, which was incorporated by reference in the final order, 4 was that the evidence in the case was insufficient to show that appellant's equipment was being used in the construction of the building after July 1, 1973, the date of the last payment by appellee. Appellant insists, however, that the trial court actually re-evaluated the evidence and upon reaching a conclusion different from that arrived at by the jury, ordered that the verdict be set aside.

At the outset, we note that the rule in this state is that in determining whether a jury verdict is supported by the evidence, every reasonable and legitimate inference fairly arising from the evidence in favor of the party for whom the verdict is returned must be considered, and those facts which the jury might properly find under the evidence must be assumed to be true. Bates v. Sirk, W.Va., 230 S.E.2d 738 (1976); Cook v. Harris, W.Va., 225 S.E.2d 676 (1976); Yeager v. Stevenson, 155 W.Va., 16, 180 S.E.2d 214 (1971). The action of the trial court in setting aside a verdict for the plaintiff, while entitled to peculiar weight on appeal, will nonetheless be reversed by this Court where a consideration of all the evidence clearly shows a proper case for jury determination. Utter v. United Hospital Center, Inc., W.Va., 236 S.E.2d 213 (1977); Jones, Inc. v. W. A. Wiedebusch Plumbing & Heating Co., W.Va., 201 S.E.2d 248 (1973). These are the principles that guide us in our determination of the issue.

As we have already noted, the surety is not liable on its bond for materials not used by the contractor in the performance of his contract. State v. Trojan Powder Co., 253 P. 520 (Or.1927). This has been held to be the case where materials were rented but not used by the contractor, Oregon v. Security Const. Co., 3 F.2d 274 (D.C.Or.1925); Portland v. O'Neill, supra ; where materials were ordered by the contractor but were then diverted for use on another project, State v. Trojan Powder Co., supra ; where, through no fault of the contractor, work ceased and rented equipment remained idle, U. S. v. Maryland Casualty Co., 147 F.2d 423 (5th Cir. 1945). Appellant contended at trial, however that its materials were required to remain in place in order to prevent structural failure of that portion of the structure completed by Oakridge before its walkout, and were thus actually in use during the work shutdown.

Appellee does not argue, and we do not think it can be maintained, that when materials are necessary to prevent the structural failure or collapse of a half-completed structure, those materials are not being used in performance of the contract. We think that the terms of a labor and materials payment bond guaranteeing payment by the surety "for all . . . materials used or reasonably required for use in the performance of the Contract," contemplate materials necessary to maintain the structural integrity of construction left uncompleted by...

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