Nelson v. Hagen

• Court: North Dakota Supreme Court
• Writing for the Court: ERICKSTAD; TEIGEN
• Citation: Nelson v. Hagen, 146 N.W.2d 873 (N.D. 1966)
• Decision Date: 08 December 1966
• Docket Number: No. 8348,8348
• Parties: George NELSON, Plaintiff and Respondent, v. Lawrence HAGEN, d.b.a. Hagen Construction Company, Defendant, and Tri-State Insurance Company of Tulsa, Oklahoma, Defendant and Appellant.

Page 873

146 N.W.2d 873

George NELSON, Plaintiff and Respondent, v. Lawrence HAGEN, d.b.a. Hagen Construction Company, Defendant and Tri-State Insurance Company of Tulsa, Oklahoma, Defendant and Appellant.

No. 8348.

Supreme Court of North Dakota.

Dec. 8, 1966.

Syllabus by the Court

1. Every public officer or board authorized to enter into a contract for the construction of a public improvement except a municipal improvement made under special assessment statutes, before permitting any work to be done on such contract, shall take from the contractor a good and sufficient bond for an amount equal at least to the price stated in the contract, conditioned to be void if the contractor and all subcontractors shall fully perform all terms, conditions, and provisions of the contract and shall pay all bills or claims on account of labor and materials, including supplies used for machinery and motor power equipment, performed, furnished, and used in and about the performance of said contract, including all demands of subcontractors. § 48--01--01, N.D.C.C.

2. In a case in which a prime contractor's bond obligated the bonding company in event of the contractor's default to pay claims arising directly or indirectly out of the performance of the contract, a claim for labor performed during a shut-down on a construction project in making repairs on a subcontractor's equipment (the claim being for the most part for labor performed in repair or replacement of inexpensive minor parts which ordinarily wear out quickly and thus would normally be substantially consumed in projects of this sort) was recoverable under the provisions of the contractor's bond, even though some of the interim repairs involved replacement of major parts.

3. Under a public construction contract a claim for miscellaneous small and inexpensive parts used in the minor repair of a subcontractor's equipment during the progress of the work is within the subcontractor's bond.

4. Under a public construction contract a claim for labor performed in repair of a subcontractor's equipment to keep it operating, if the repair is only minor, inexpensive, and incidental, so that it is substantially exhausted in the performance of the contract, is within the subcontractor's bond.

McGee, Van Sickle, Hankla & Backes, Minot, for appellant.

Walter O. Burk, Williston, for respondent.

ERICKSTAD, Judge.

This is an appeal by the defendant Tri-State Insurance Company of Tulsa, Oklahoma, a foreign corporation, from a judgment of the District Court of Williams County entered on October 6, 1965, in favor of the plaintiff, George Nelson, against the defendants, Lawrence Hagen, d.b.a. Hagen Construction Company, and Tri-State, in the amount of $3,235.74. Trial de novo is demanded.

Mr. Nelson initiated this action against his employer, Mr. Hagen, and Tri-State, which was the bondsman on three North Dakota highway construction projects on which Mr. Hagen was a subcontractor. The dates of the contracts, the names of the prime contractors, and locations of the projects are as follows:

On July 22, 1959, Struksnes Construction Company of Minot, North Dakota, and David & Rix of Bismarck, North Dakota, entered into a contract with the State of North Dakota for the construction and completion of certain federal aid projects on U.S. Highways 2 and 52 in Ward County.

On September 29, 1959, Coghlan Construction Company, Inc., of Minot, North Dakota, entered into a contract with the State of North Dakota, for construction and improvement in connection with a federal aid secondary highway project in Sheridan and Burleigh Counties.

On July 2, 1960, Arne Anderson & Company of Ada, Minnesota, entered into a contract with the State of North Dakota for construction and completion of a federal aid secondary project on State Highway 30 in Wells County.

Tri-State executed three separate contract bonds whereby it bound itself in connection with each of the three projects. We have before us a copy of the subcontractor's bond for the Ward and Wells Counties projects and a copy of the prime contractor's bond for the Sheridan and Burleigh Counties project.

The pertinent part of the prime contractor's bond executed in connection with the Sheridan and Burleigh Counties project obligated the bonding company, if the principal or any subcontractor failed, to 'pay or cause to be paid all bills and claims against the Principal or any subcontractor on account of labor or services performed and all materials, equipment or supplies furnished, whether directly or indirectly arising out of the performance of said contract.'

Mr. Nelson was employed by Mr. Hagen in 1959 as a mechanic in repairing Mr. Hagen's heavy-duty construction equipment. In October 1959 Mr. Hagen commenced work on the project near Denhoff in Sheridan County. The work continued for only three weeks, when it became necessary because of the freeze-up to shut down for the winter. When this happened, all but Mr. Nelson and a helper were laid off. After the shut-down the machines were taken to a hill northeast of Denhoff, where Mr. Nelson and his helper did repair work on them. Mr. Nelson's Exhibit 3 received in evidence indicates that between January 10 and April 9, 1960, he worked a total of 391 1/2 hours at $2.25 per hour on 'general overhaul before starting season.' He testified that the general overhaul included, if necessary, the grinding of valves and the installation of rings, and in one instance involved installing a new crankshaft.

Some pertinent testimony concerning this work was as follows:

Q. Now, during the winter months, when you did this repair work down there, which testimony shows was on a hourly basis, will you tell the Court the nature of the repair work that you did there?

A. Well, I would say it was to go over all the equipment and replace anything, tires, spark plugs, injectors, anything you know. We started each thing up and operated it. Put rings in some outfits, bearings in some outfits and perhaps a gear or sprocket. It is impossible for me to remember, but it was just a general up-keeping of it.

Q. What did you do with reference to taking the heads off and removing carbon, for instance?

A. Oh, yes, I did all that, sure.

Q. In other words, your job was general tune-up for the season?

A. Tune-up for the season, to get the stuff in shape for operating.

Q. And that is the job you did during the winter months?

A. That's correct.

Q. In other words, you went over all the equipment and checked it out and whatever had to be done to tune it up for the season, was the work you did?

A. We ran into a little extra work, too, because somebody stole some tires and we had to replace them.

Mr. Nelson's claims for this period total $880.88.

On or about April 10, 1960, Mr. Hagen recommenced work on the Sheridan County project. Mr. Nelson then worked as a mechanic in keeping the equipment in operating condition. From April 10 through July 15, 1960, he worked on the Sheridan County project at a weekly wage of $150 and was paid that amount for each week except for the two-week period of April 10 through April 23, 1960.

Between July 15 and August 17, 1960, Mr. Nelson worked with Mr. Hagen on the Ward County project. He was paid $150 for each week's work on this project.

Between August 17 and October 29, 1960, Mr. Nelson worked on the project in Wells County. He was paid $150 each week on that project except for the last two weeks, for which he received no pay.

On February 8, 1960, Mr. Nelson made a personal loan to Mr. Hagen of $1,000. At the time this loan was made Mr. Hagen was not performing construction work on any of the projects bonded by Tri-State. Mr. Nelson does not know what Mr. Hagen used the money for, but he understood it was to be used in the business. He testified that he requested Mr. Hagen at the time he lent him the $1,000 to apply the first money paid to him as payment on the loan, and that Mr. Hagen said that he would do so.

It should be noted, however, that when Mr. Nelson wrote to the State Highway Department after the completion of the projects, setting forth his claim against Mr. Hagen, he included in his claim an item entitled 'Cash advanced February 8, $1,000.'

Mr. Nelson also claims the sum of $169.60 for parts he purchased for Mr. Hagen's equipment between March 31, 1960, and September 30, 1960. These parts included various small items, such as spark plugs, gaskets, and fan belts, which he used in making the repairs necessary to keep the equipment going during the construction season.

The total of all claims is $2,650.48, which is the amount of the judgment, not including interest and costs, that the trial court awarded Mr. Nelson.

The first issue with which we are confronted is whether Mr. Nelson is entitled to the $880.88 for labor performed in general overhaul of Mr. Hagen's equipment between the shut-down in 1959 of the Sheridan County project and the starting of the construction season again with that project in 1960 under Tri-State's bond.

Our statute on contractors' bonds reads as follows:

48--01--01. Bonds from contractors for public improvements.--Every public officer or board authorized to enter into a contract for the erection, repair, or alteration of any public building or any other public improvement, except a municipal improvement made under special assessment statutes, before permitting any work to be done on such contract, shall take from the contractor a good and sufficient bond for an amount equal at least to the price stated in the contract, conditioned to be void if the contractor and all subcontractors shall fully perform all terms, conditions, and provisions of the contract And shall pay all bills or claims on account of labor and materials, including supplies used for machinery and motor power equipment, performed, furnished, and used in and about the performance of said contract, including all demands of subcontractors. Such bond shall stand as security for all such ...