Philip Carey Co. v. Md. Cas. Co.

• Decision Date: 12 January 1926
• Docket Number: No. 36904.,36904.
• Citation: Philip Carey Co. v. Md. Cas. Co., 201 Iowa 1063, 206 N.W. 808 (Iowa 1926)
• Parties: PHILIP CAREY CO. v. MARYLAND CASUALTY CO.
• Court: Iowa Supreme Court

201 Iowa 1063

206 N.W. 808

PHILIP CAREY CO.

v.MARYLAND CASUALTY CO.

No. 36904.

Supreme Court of Iowa.

Jan. 12, 1926.

Appeal from District Court, Greene County; E. G. Albert, Judge.

Action by a subcontractor to recover for materials furnished to the contractor for a schoolhouse against the surety on the bond given by the contractor to the school district. On motion of the plaintiff, the court struck out certain allegations of the answer, and from this order the defendant appeals. Affirmed.Miller, Kelly, Shuttleworth & McManus, of Des Moines, and J. A. Henderson, of Jefferson, for appellant.

Graham & Osborn, of Jefferson, for appellee.

VERMILION, J.

It appears from the allegations of the petition that the school district entered into a written contract with L. W. Brown for the construction by the latter of a school building for a contract price of $61,092, and according to plans and specifications which were expressly made a part of the contract. Brown, with appellant as surety, executed a bond to the school district, denominated a “Contractor's Bond,” in the amount of the contract price. The plaintiff furnished material to Brown which was used in the construction of the building to the amount of $561, for which it has not been paid, and brings this action to recover that amount upon the bond. The contract, specifications, and bond are set out in the petition as amended. The bond is, in part, as follows:

“Whereas, the principal has entered into a written contract dated February 5, 1920, with the obligee, for construction of a consolidated school building, excluding plumbing, wiring, heating, and ventilating, according to contract and specifications a copy of which is hereto annexed, and which contract is made a part hereof as fully as if recited at length herein: Now therefore, the condition of this obligation is such that if the principal shall indemnify the obligee against any loss or damage directly arising by reason of the failure of the principal to faithfully perform said contract, then this obligation shall be void; otherwise to remain in full force and effect: Provided, however, that this bond is executed upon the following express conditions, the performance of each of which shall be a condition precedent to any right of recovery hereon; anything in the contract to the contrary notwithstanding.”

Among the conditions so appearing in the bond, the fifth is as follows:

“That no right of action shall accrue upon or by reason hereof, to or for the use or benefit of any one other than the obligee herein named. * * *”

Chapter 347, Acts of the Thirty-Eighth General Assembly, is in part as follows:

“That whenever any public body, board, committee, officer or other public representative now or hereafter empowered by law to enter into a contract, for and on behalf of the public, for the purpose of constructing any public building, or for the purpose of making any public improvement, or for the making of any additions thereto, or for the finishing, furnishing or repairing of any such buildings or public work, such body, board, committee, officer or other public representative, whenever the contract price is in excess of one thousand ($1,000) dollars, shall require as a condition precedent to the making of such contract that the person, firm or corporation to whom the contract is awarded furnish and file a bond, as hereinafter provided, in a sum of not less than the contract price, the amount to be determined by those representing the public, signed by the contractor and a responsible surety company authorized to do business in Iowa, which bond shall run to said body, board, committee, or other public representative, for its use and benefit and for the use and benefit of all persons, firms and corporations who shall perform any labor or furnish any material, including fuel, in the carrying out of such public contract, and shall have as one of its conditions, the following paragraph:

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 so to do, and shall fully reimburse and repay the owner all outlay 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 for subcontractors for labor or materials, then this obligation shall be null and void; otherwise it shall remain in full force and effect. The foregoing condition shall at all times be additional to those conditions and requirements now or hereafter required by statute to be a part of such bonds. The provisions and requirements of this act shall not be modified or annulled by contrary provisions in any such bond or contract.”

The allegations stricken from the answer on motion of the plaintiff are, so far as material on this appeal, to the effect: (1) That the bond was not intended to be and was not a statutory bond; that it was not executed under or by virtue of chapter 347 of the Acts of the Thirty-Eighth General Assembly, and such statute did not become a part of the bond; (2) that the bond was executed and delivered by defendant in the state of Missouri, and the liability of defendant thereon was governed by the laws of that state, and under the laws of Missouri, there was no liability on the bond on the part of defendant to plaintiff for material furnished to the contractor; and (3) that the school district had recovered a judgment for $10,000 against the defendant on the bond, which defendant had paid, and thereby defendant's liability on the bond had been adjudicated, and that defendant had performed all obligations assumed by it by virtue of the bond.

I. It is apparent that the bond does not, in terms, conform to the requirements of the statute. It is the contention of the appellant that the bond itself and the pleaded circumstances show that it was not intended as a statutory bond, and that since, by its terms, it is not conditioned for the payment of persons to whom the contractor may be indebted for labor or material used in carrying out his contract, and expressly provides that no right of action shall accrue upon the bond to, or for the use or benefit of, any one other than the obligee, there is no liability on the bond in favor of appellee. Appellee, on the other hand, contends that it is a statutory bond, that the statute is to be read into it, and that, under the concluding clause of the quoted statute, to the effect that the provisions and requirements of the act shall not be modified or annulled by contrary provisions of any such bond or contract, the limitation of a right of action on the bond to the obligee alone is ineffectual.

The chief reasons advanced in support of the contention that the bond is not a statutory bond are that its terms and conditions do not conform to the statute, and it expressly limits the right to recover thereon to the obligee, in contravention of the statute.

[1] Prior to the enactment of chapter 347, supra, we had held that where a contractor's bond was not conditioned for the payment of those who furnished labor and material, or where it was conditioned for the faithful performance of the contract, but the contract contained no promise on the part of the contractor to pay subcontractors, or those furnishing labor or material, the latterhad no right of action on the bond. Ludowici-Celadon Co. v. School District, 186 Iowa, 730, 172 N. W. 943;Carr & Baal v. School District, 187 Iowa, 930, 174 N. W. 780. The statute was manifestly designed to meet this situation by requiring a bond given by a contractor upon public construction work, where the contract price was in excess of $1,000, to be conditioned for the payment of subcontractors. If the statute went no further than this, there would be authority...