Nebraska Culvert & Manufacturing Company v. Freeman

• Decision Date: 01 April 1924
• Docket Number: 35567
• Citation: 198 N.W. 7,197 Iowa 720
• Parties: NEBRASKA CULVERT & MANUFACTURING COMPANY, Appellant, v. J. A. FREEMAN et al., Appellees
• Court: Iowa Supreme Court

198 N.W. 7

197 Iowa 720

NEBRASKA CULVERT & MANUFACTURING COMPANY, Appellant, v. J. A. FREEMAN et al., Appellees

No. 35567

Supreme Court of Iowa, Des Moines

April 1, 1924

Appeal from Wapello District Court.--F. M. HUNTER, Judge.

ACTION on a bond given by a road contractor, who was not a party to the bond, to recover damages for depreciation in value of machinery purchased from plaintiff by a subcontractor, and used in building a road. Demurrers to the petition as amended were sustained. Plaintiff appeals.

Affirmed.

Chester W. Whitmore, for appellant.

Merrow & Murphy, for appellees.

ARTHUR C. J. EVANS, PRESTON, and FAVILLE, JJ., concur.

OPINION

ARTHUR, C. J.

I.

In April, 1922, defendant Lamoreaux Brothers Company entered into a contract with Wapello County, Iowa, to do the grading on Sections A and B, Federal Aid Project No 159, known as the "Airline Road," running west from Ottumwa to Albia. A bond was given by Lamoreaux Brothers Company, with defendant Fidelity & Deposit Company of Maryland as surety. Lamoreaux Brothers Company sublet a portion of said work to defendant J. A. Freeman, a road contractor. Freeman brought his equipment and began work in June, 1922, and continued working thereon until August 21, 1922, when he quit said work and disappeared from the state, and has not been heard of by parties to this action since. To carry on the work, Freeman purchased from plaintiff, appellant, grading equipment consisting of:

One New Era Sr. Elevating Grader

$ 1,375.00

Eight 1 1/2 yard "Western Contractor's" bottom

dump wagons

1,936.00

Two 4 yard "Western Mogul" dump wagons

1,030.00

Total

$ 4,341.00

Upon the disappearance of Freeman from the state of Iowa, this action was brought, aided by attachment. Freeman paid nothing on the purchase price of the equipment. Notice by publication was made on Freeman. The attachment was levied on the equipment above described. In October, default judgment in rem was entered against Freeman, and the above described tools were sold under special execution on November 25, 1922. The amount realized from said execution sale was $ 1,918. Said grading tools were used only on this job. Thereupon, on November 25, 1922, plaintiff filed an amendment to petition, alleging that $ 1,918 had been realized by sale of the attached property; that the cost, new, and the fair and reasonable value, new, of the equipment purchased by Freeman from plaintiff was $ 4,341, as set forth in the original petition; that the difference between the original cost, the value of the equipment, and the amount realized by sale of said equipment, $ 2,436, "represents the fair and reasonable rental value of said equipment during the time it was used by J. A. Freeman on said 'Airline Road,' and represents the depreciation in value of such equipment during the time it was used on said job, and represents the fair and reasonable value taken out of such equipment and merged into said Airline Road (Federal Aid Project No. 159); and that said road has been enhanced in value to the extent of said $ 2,423, by reason of the rental value and of the depreciation in value of said equipment during the time it was used on said job; that none of said equipment has been used on any work other than said Airline Road in Wapello County; that said $ 2,423 is a just claim and demand, within the covenants of the bond Exhibit B involved."

The demand was for judgment against defendants, and each of them, in the sum of $ 2,423, with interest and costs.

II. The petition sets forth specifications for the work, and the bond given for the performance of the work. The specifications, among other things, provide:

"It is understood that the contractor for all or any part will furnish all labor, materials, tools, transportation and necessary supplies required under the terms of this contract;" and "the contractor guarantees the payment of all just claims for material, supplies, tools, labor, and all other just claims against him, or any subcontractor, in connection with this contract, and his bond will not be released by final acceptance and payment by the board unless all such claims are paid or released."

The bond provides:

"Now, therefore, the condition of this obligation is such that: if the principal shall faithfully perform the contract on his part, and satisfy all claims and demands, incurred for the same, and shall fully indemnify and save harmless the owner from all cost and damage which he may suffer by reason of failure to do so, and shall fully reimburse and repay the owner all outlays and expense which the owner may incur in making good any such default, and shall pay all persons who have contracts directly with the principal or subcontractors for labor or materials, then this obligation shall be null and void; otherwise it shall remain in full force and effect."

Lamoreaux Brothers Company and the Fidelity & Deposit Company of Maryland, defendants, filed separate, but like, demurrers to the petition as amended. In substance, the demurrers stated: (1) That defendants are not liable under the general law of liens or any specific law of liens in the state of Iowa; that, under the specifications and the bond, defendants are not liable; that a cause of action does not exist in favor of plaintiff and against defendants, based upon statute or under the terms of the contract between Lamoreaux Brothers Company and Wapello County; (2) that no privity of contract is pleaded by plaintiff; (3) that defendants are not liable to plaintiff for depreciation in value, wear and tear, repair, or rental value of said equipment used in construction of said road, under the pleadings in this case, under the contract, or under the laws of the state of Iowa.

III. Plaintiff's demand in amendment to petition is based upon and is for "the fair and reasonable value taken out of such equipment and merged into said Airline Road, Federal Aid Project No. 159; and that said road has been enhanced in value to the extent of such $ 2,423 by reason of the rental value and of the depreciation in value of said equipment during the time it was so used on said job."

Plaintiff bases its cause of action upon said claim in connection with a portion of the bond reading:

"If the principal shall faithfully perform the contract on his part, and satisfy all claims and demands, incurred for the same, * * * and shall pay all persons who have contracts directly with the principal or subcontractors for labor or materials, then this obligation shall be null and void; otherwise it shall remain in full force and effect."

It alleges that the contract and bond are those required under Chapter 347, Acts of the Thirty-eighth General Assembly, requiring that a bond be given, covering "all persons who have contracts directly with the principal for [or] subcontractors for labor or materials." The demurrer challenges the plaintiff's right of recovery under the allegations of the petition and the amendment thereto. The question presented by the demurrer is, Do the contract and bond obligate defendants Lamoreaux Brothers Company and its surety, the Fidelity & Deposit Company to pay for, as plaintiff states it, "the fair rental value thereof [the equipment purchased and used by Freeman] represented by the depreciation while used solely on this job in question and covering only the value thus taken out of them and merged into the road?"

IV. Counsel for appellant asserts in argument that plaintiff is not suing under the statute, Code Section 3102, nor does it rely on Chapter 347, Acts of the Thirty-eighth General Assembly, but relies upon the conditions of the bond, which it claims are broader than required by said statutes, requiring Lamoreaux Brothers Company and its surety, the Fidelity & Deposit Company, "to faithfully perform the contract, satisfy all claims and demands for same, * * * and pay all persons who have contracts directly with the principal or subcontractors for labor or materials." It is not claimed by plaintiff that the bond would be liable for the original purchase price of the equipment bought by Freeman from it, because, as plaintiff says, "all their value would not go into this Airline job; after such road is completed, it is probable some or all of these tools can still be used on other jobs. Hence, the reasoning of the case runs, it would not be fair to charge this particular job with all the cost, which in such way spreads over several different undertakings. But to the extent of the $ 2,423 depreciation established by original purchase and by sale, while still in use, under such purchase, on this same job, plaintiff has lost every dollar of the $ 2,423. And every dollar of that value has gone into this Airline Road,--no place else. To such extent the Airline Road has profited by plaintiff's loss; the $ 2,423 is part of the legitimate cost of such road,--a 'just debt,' 'demand,' within the meaning of condition of the bond involved."

V. The demurrers presented the propositions: (1) That neither the purchase price nor the value of the equipment bought by Freeman nor the rental value thereof nor depreciation thereof by use on the job in question comes within the purview of Code Section 3102 or any other statute of Iowa; (2) that the terms of the contract and bond do not confer right of action by plaintiff against defendants; (3) that there is no privity nor contractual relation between plaintiff and defendants upon the bond.

Plaintiff says it is not suing under any statute, but is suing under the condition of the bond requiring Lamoreaux Brothers Company and their surety, Fidelity & Deposit Company "to faithfully perform the contract, satisfy all claims and demands for the same, * * * and to pay all persons who have contracts directly...