Northwest Steel Co. v. School District No. 16, Umatilla County

• Decision Date: 25 May 1915
• Citation: 148 P. 1134,76 Or. 321
• Parties: NORTHWEST STEEL CO. v. SCHOOL DIST. NO. 16, UMATILLA COUNTY.
• Court: Oregon Supreme Court

148 P. 1134

76 Or. 321

NORTHWEST STEEL CO. v. SCHOOL DIST. NO. 16, UMATILLA COUNTY.

Supreme Court of Oregon

May 25, 1915

In Banc.

Appeal from Circuit Court, Umatilla County; L. T. Harris, Judge.

Action by the Northwest Steel Company against School District No. 16 of Umatilla County. Judgment for defendant, and plaintiff appeals. Reversed and remanded.

In January, 1912, the defendant school district entered into a contract with the Advance Construction Company for the erection of a schoolhouse, exacting from the said company a bond for the faithful performance of the terms and conditions of such contract, but failed to require any bond for the protection of materialmen and laborers in the collection of their claims. Plaintiff, a private corporation, furnished certain structural steel to be used in the erection of the building at the agreed price of $3,212. Certain payments were made by the contracting company upon the indebtedness thus incurred, but, while there was still a balance of $810.70 due and unpaid thereon, the construction company became insolvent, and made an assignment for the benefit of its creditors, and is unable to pay this claim. Plaintiff sold and delivered the steel, not upon the credit of the construction company, but relying upon the presumption that the defendant would obey the mandate of section 6266, L. O L., which provides that:

"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 * * * 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 above covers the substance of the allegations of the complaint, except as to certain details unnecessary to this discussion. The prayer of the complaint demands damages in the amount of plaintiff's unpaid claim, with interest. A demurrer to the complaint was sustained, the action dismissed, with judgment in favor of defendant for its costs and disbursements, and plaintiff appeals.

A. R Watzek, of Portland (Platt & Platt, of Portland, and Raley &amp Raley, of Pendleton, on the brief), for appellant. C. H Carter, of Pendleton (Carter & Smythe, of Pendleton, on the brief), for respondent.

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

There is but one question to be determined, and that is: Has the materialman, under the facts stated, a right of action against the school district for damages by reason of the negligence of the defendant in failing to exact a bond such as is required by section 6266, L. O. L.? Defendant contends and the trial court held, that the requirements of the statute create a public, and not a corporate or municipal, liability, and therefore the defendant is not liable in damages for failure to comply therewith. There appear to be but few cases in which the question as applied to statutes similar to ours has been considered, and our attention has been called to the decisions of only three states, which are Michigan, Minnesota, and Kansas. Of these, the Michigan cases support the contention of plaintiff, while those of Minnesota and Kansas maintain an interpretation favorable to the defense.

We shall first consider the Michigan statute (Public Acts 1883, No. 94) and decisions. The title of the act reads:

"An act to insure payment of wages earned, and for materials used in constructing, repairing, or ornamenting public buildings and public works."

Section 1 is as follows:

"That when public buildings, or other public works, are about to be built, repaired, or ornamented under contract, at the expense of this state, or of any county, city, village, township or school district thereof, upon which buildings or works liens might attach for labor or materials if belonging to private persons, it shall be the duty of the board, officers or agents contracting on behalf of the state, county, city, village, township or school district, to require sufficient security, by bond, for the payment by the contractor, and all subcontractors for all labor performed or materials furnished in the erection, repairing, or ornamenting of such building."

Then follow various provisions for making the act effective. The first reported case under this statute is that of Owen v. Hill, 67 Mich. 43, 34 N.W. 649, in which the trustees of a school district were made defendants in an action, similar to the one at bar, to recover damages sustained by the negligence of the defendants to exact the statutory bond. The court held that the act of requiring the bond is a ministerial act, involving no discretion, and consequently no judicial functions. The acts of fixing the amount in which the bond shall be given and of passing upon the sufficiency of the sureties are conceded to be, in a limited measure, judicial, but these acts were not the ones of which complaint was made. The opinion then discusses the question as to whether the requirements of the act constitute a public duty or a corporate one. Upon this point the court says:

"In this case the position was assumed by counsel for defendants that the duty imposed by the statute was a public duty, and the neglect to perform it only affected the public. If this were so, there would be no liability. But the contrary is, to my mind, the object and purpose of the law. The duty was imposed to protect individuals, and for the benefit of individual laborers and materialmen. That this is so is too plain for argument. No person can read the condition of the bond and not be satisfied that it was intended for the protection of the individuals who should furnish to the contractor or subcontractor either labor or material. Express provision of the law is that the bond shall be deposited for the use of any person interested therein, and that it may be prosecuted and recovery had by

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