Multnomah County v. U.S. Fidelity & Guaranty Co.

• Citation: 170 P. 525,87 Or. 198
• Parties: MULTNOMAH COUNTY v. UNITED STATES FIDELITY & GUARANTY CO. ET AL.
• Decision Date: 22 January 1918
• Court: Oregon Supreme Court

170 P. 525

87 Or. 198

MULTNOMAH COUNTY v. UNITED STATES FIDELITY & GUARANTY CO. ET AL.

Supreme Court of Oregon

January 22, 1918

Department 2.

Appeal from Circuit Court, Multnomah County; R. G. Morrow, Judge.

Action by the County of Multnomah, for use and benefit of L. H McMahan, against the United States Fidelity & Guaranty Company and others. From an adverse judgment, plaintiff appeals. Reversed and remanded.

This is an action by the county of Multnomah for the use and benefit of L. H. McMahan upon a contract and bond executed by the Pacific Bridge Company, a corporation, and its surety. The complaint alleges, in substance, the following facts:

On June 21, 1915, Multnomah county entered into a contract with the defendant Pacific Bridge Company for the improvement of a portion of Columbia River highway, namely, section D from the east end of Oneonta Bridge to the easterly line of the county. The contract and bond are set out in the complaint as exhibits. By the material provisions of the contract the construction company specifically agreed "to furnish all material, tools, and equipment and all labor necessary to complete the above-described work, strictly in accordance with said plans, specifications, and schedule of rates," and before the contract became effective to furnish the county with a bond providing for the faithful performance of the agreement. The contractor agreed "to promptly, as due, make payments to all persons supplying" him with labor or material for the prosecution of the work provided for. Provision was made granting a right of action to persons furnishing material, labor, and supplies to the contract company who were not paid, as follows:

"The contractor further agrees that any person who supplied labor or material for the prosecution of any work provided for under this contract is hereby authorized to institute an action against said contractor or his sureties on his own relation in the name of the county, and to prosecute the same to final judgment for his own use and benefit. The contractor further agrees that all the provisions of the laws of the state of Oregon, applicable to the protection of subcontractors, materialmen, and laborers engaged in carrying out the terms of this contract, are hereby made a part of this contract whether expressly incorporated herein or not."

The construction company filed a bond with the county in accordance with the contract and section 6266, L. O. L., with the defendant United States Fidelity & Guaranty Company as surety. After reciting the contract between Multnomah county and the Pacific Bridge Company, the bond provides:

"Now therefore, if the said principal herein * * * shall faithfully and truly observe and comply with the terms conditions, and provisions of the said contract, in all respects, and shall well and truly and fully do and perform all and singular the covenants, conditions, guaranties matters, and things by it agreed, covenanted, and undertaken to be performed under said contract, plans, and specifications, upon the terms proposed therein, * * * and shall indemnify and save harmless the county of Multnomah * * * and shall promptly pay all laborers, mechanics, subcontractors, and materialmen, and all persons who shall supply such laborers, mechanics, or subcontractors, with materials, supplies, or provisions for carrying on such work, all just debts, dues, and demands incurred in the performance of such work, * * * then this obligation to be void; otherwise to remain in full force and effect."

It will be seen that the contract and bond embraced all the conditions mentioned in the statute, and some specifications in excess of the statutory requirements.

After setting forth the organization of the county, the incorporation of the construction company and the United States Fidelity & Guaranty Company, and the contract and bond, plaintiff's complaint proceeds to allege as follows: The Pacific Bridge Company commenced the construction of the improvement, and during the course thereof entered into an agreement with the defendant T. A. Sweeney for the grading of the highway. In performing this work he used a caterpillar engine which he hired from L. H. McMahan whom he promised and agreed to pay the sum of $10 per day for the use thereof. Between June 21, 1915, and October 24th of that year Sweeney had the use of the caterpillar engine for work on the improvement for a period of 64 days, making an aggregate total of $640 due therefor, no part of which has been paid except $10 and $210 expended in making renewals and repairs on the engine, leaving a balance of $420 unpaid. Prior to the commencement of the action L. H. McMahan made application to the county of Multnomah by affidavit for a certified copy of the bond and contract of the defendant Pacific Bridge Company and was furnished the same. The defendants filed separate demurrers to the complaint upon the ground that that pleading did not state facts sufficient to constitute a cause of action. The demurrer of defendant T. A. Sweeney was on the further ground that there is no basis for the contractual relation set forth in the complaint between himself and the plaintiff. The respective demurrers were sustained by the court, and plaintiff having refused to plead further judgment was entered in favor of the several defendants. Plaintiff appeals.

Wm. P. Lord, of Portland (Arthur I. Moulton, of Portland, on the brief), for appellant. M. H. Clark, of Portland (A. E. Clark and Thomas Mannix, both of Portland, on the brief), for respondents.

BEAN, J. (after stating the facts as above).

In 1903 (L. 1903, p. 256; section 6266, L. O. L.), the Legislature enacted the following:

"Hereafter any person or persons, firm, or corporation, entering into a formal contract with the state of Oregon, or any municipality, county, or school district within said state, for the construction of any buildings, or the prosecution and completion of any work, or for repairs upon any building or work, shall be required, before commencing such work, to execute the usual penal bond with good and sufficient sureties, with the additional obligations that such contractor or contractors shall promptly make payments to all persons supplying him or them labor or materials for any prosecution of the work provided for in such contracts."

The act provides that any person or persons who so furnish labor or material may obtain a copy of the contract and bond, and that such person "shall have a right of action, and shall be authorized to bring suit in the name of the state of Oregon, or any county, municipality, or school district within such state for his or their use and benefit against said contractor and sureties." This act was amended in 1913, but not so as to change the provisions above referred to.

The position taken by the defendants is that the payment for the use of the caterpillar engine is not provided for in the contract and bond under the terms of the statute. In the expression of the statute it is quite likely that the lawmakers, to a certain extent, had in contemplation the various lien statutes providing for liens on buildings and other property, both real and personal, for labor and materials. However, the enactment under consideration has a different purport and broader meaning than the ordinary lien statutes; therefore the construction of the latter affords but little assistance in arriving at the intent of the former. The lien statutes have usually been strictly held to cover only what is incorporated into the building or property against which the lien is claimed. Take for instance our mechanic's lien statute (L. O. L. § 7416), which provides in part that "a person performing labor upon or furnishing material, or transporting or hauling any material of any kind to be used in the construction, alteration, or repair, either in whole or in part, of any building" shall have a lien upon the same. Such lien statutes obviously cover only what goes into the building or structure and adds to the value of the same.

In Amer. Surety Co. v. Lawrenceville Cement Co. (C. C.) 110 F. 721, Judge Putnam states:

"However, this principle of discrimination is so strongly entrenched in the practical rules properly applicable to the construction of this statute that it needs no further exposition. It has, however, no necessary relation to repairs of an incidental and comparatively inexpensive

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