Newport Trust Co. v. Susi
| Decision Date | 30 August 1957 |
| Parties | NEWPORT TRUST COMPANY v. Paul E. SUSI, Frank T. Susi and Guy Susi, d/b/a P. E. Susi & Co., Hartford Accident & Indemnity Company and Frank S. Carpenter, Treasurer of the State of Maine. |
| Court | Maine Supreme Court |
Judson A. Jude, Newport, for Newport Trust Co.
Richard J. Dubord, Waterville, for Susi.
Joseph B. Campbell, Augusta, for Hartford Accident & Indemnity Co.
James G. Frost, Deputy Atty. Gen., for State of Maine.
Before WILLIAMSON, C. J., and WEBBER, BELIVEAU, TAPLEY and SULLIVAN, JJ.
On report. The proceedings are instituted by a petition for declaratory judgment, the plaintiff seeking a determination of the nature and extent of liability, if any, of the defendant, Hartford Accident and Indemnity Company, as surety under a certain contract bond in favor of the Treasurer of the State of Maine. The condition of the bond which is the subject for determination is in the following language:
'The condition of this obligation is such that if the Principal designated as Contractor in the foregoing contract, shall faithfully perform the contract on his part, and satisfy all claims and demands incurred for the same and shall pay all bills for labor, material, equipment and for all other things contracted for or used by him in connection with the work contemplated by said contract, and shall fully reimburse the obligee for all outlay and expense which the obligee may incur in making good any default of said Principal, then this obligation shall be null and void; otherwise it shall remain in full force and effect.'
The parties to the action stipulated certain facts, the material portions of which are substantially these:
P. E. Susi & Co. by contract dated November 5, 1952, agreed with the State of Maine, through its State Highway Commission, to supply all equipment, appliances, tools, labor and materials and to perform all the work required for the construction of a section of bituminous concrete road in Troy, Maine. The contractor, P. E. Susi & Co., furnished a bond in favor of the Treasurer of the State of Maine with itself as principal and Hartford Accident & Indemnity Co. as surety. The contractor entered upon the performance of its contract and obligated itself to pay for labor and materials contracted for in connection with the work. The payrolls for labor were met by checks drawn on the First National Bank of Pittsfield in which bank P. E. Susi & Co. maintained its only bank account. The contractor on May 1, 1953, borrowed from the Newport Trust Company the sum of $3,000 and as evidence of the indebtedness gave the bank its promissory note. This note, incidentally, was renewed on June 1, 1953. The understanding between P. E. Susi & Co. and the Newport Trust Company was that the money borrowed would be used by P. E. Susi & Co. to meet its payroll. This loan was not within contemplation by the bank nor by the parties to the bond at the time of the execution of the bond. The Hartford Accident & Indemnity Company was without knowledge of the loan, never consented to it and never gave the bank any assurance that it was protected by the bond. The renewal note remains unpaid and P. E. Susi & Co. is indebted to the Newport Trust Company for the principal sum of $3,000, with interest. Payment of this note has been demanded of the Hartford Accident & Indemnity Co. and payment has been refused. There have been no assignments to the Newport Trust Company from the laborers employed by P. E. Susi & Co. who have been paid from the proceeds of the money borrowed.
The issue involved, reduced to its simplest terms, is whether, according to the conditions of the bond furnished by the contractor in connection with the construction of the road for the State Highway Commission, the bonding company is liable to the Newport Trust Company for the repayment of money borrowed from it by the contractor and used to pay workmen for labor performed on the job.
According to the stipulation, it was understood and agreed between the contractor and the Newport Trust Company that the proceeds of the loan would be used by the contractor to meet its payroll and that the money should not be used for any other purpose. The evidence shows that a substantial amount of the $3,000 was used for construction payroll purposes.
In considering the question of liability on the part of the Hartford Accident & Indemnity Company to pay the money borrowed by the contractor, it is necessary to consider not only the conditions of the obligation of the bond but also they must be construed in light of the statutory requirements and the contract which occasioned the necessity of the bond. 43 Am.Jur., Sec. 149, Page 892:
See 118 A.L.R., page 62.
The bond was given under authority of R.S.1954, Chap. 23, Sec. 40, the pertinent portion of which read as follows:
'The commission shall have full power in all matters relating to the furnishing of bonds by the successful bidders for the completion of their work an fulfilling of their contracts, and for the protection of the state and town from all liability arising from damage or injury to persons or property.'
The notice to contractors, being the invitation for bids, issued by the State Highway Commission and by reference made a part of the contract contains this provision respecting the bond:
That portion of the written offer of P. E. Susi & Co. concerning the bond which by reference is part of the contract says:
'Within ten (10) days from the date of the notice of acceptance of this Proposal, to execute the Contract, and to furnish to the State Highway Commission a satisfactory Contract Bond in the sum specified by Article 4 of Section 3 of the General Requirements and provisions of said Specifications, guaranteeing the faithful performance of the work and payment of bills.'
The general requirements and provisions of the Standard Specifications of the State Highway Commission which are by reference made a part of the contract provide certain conditions relative to the bond and the obligations of the parties thereunder.
We will not attempt to quote verbatim these requirements as set out in the record but only to the extent that they are pertinent to the problem at hand.
'Surety' The corporate body, individual, or body of individuals bound with and for the contractor who engages to be responsible for the payment of all debts pertaining to, and for his acceptable performance of the work for which he has contracted.
'Contract' The agreement covering the performance of the work and the furnishing of materials for the proposed construction also shall include the proposal, plans, specifications, and contract bond also any supplement agreements which reasonably could be required to complete the construction.
'Contract Bond' This is the approved form of security furnished by the contractor and his Surety as a guarantee of good faith on the part of the contractor to execute the work in accordance with the terms of the contract.
'Requirements of Contract Bond' The successful Bidder must furnish a bond payable to the Treasurer of the State of Maine. The form of bond shall be provided by the Commission and the sureties shall be acceptable to the Commission. The bond shall guarantee the execution and faithful performance and completion of the work to be done under the contract, the payment in full of all bills and accounts for material and labor used in the work, and all other things contracted for or used in connection with the contract.
'Responsibility for Damage Claims' The contractor shall pay all bills for labor, materials, machinery, board of workmen, water, tools, equipment, teams, trucks, automobiles, freight, fuel, light and power and for all other things contracted for or used by him on account...
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