Phillips Petroleum Co. v. U.S. Fidelity & Guaranty Co.

• Decision Date: 20 February 1968
• Docket Number: No. 40943,40943
• Citation: 1968 OK 23,442 P.2d 303
• Parties: PHILLIPS PETROLEUM COMPANY, a corporation, Plaintiff in Error, v. UNITED STATES FIDELITY & GUARANTY COMPANY, a corporation, Defendant in Error.
• Court: Oklahoma Supreme Court

Page 303

442 P.2d 303

1968 OK 23

PHILLIPS PETROLEUM COMPANY, a corporation, Plaintiff in Error, v. UNITED STATES FIDELITY & GUARANTY COMPANY, a corporation Defendant in Error.

No. 40943.

Supreme Court of Oklahoma.

Feb. 20, 1968.

Rehearing Denied June 25, 1968.

Syllabus by the Court

1. 61 O.S.1961, §§ 1 and 2, create no rights, liabilities, or cause of action in derogation of the common law; the six (6) month limitation provision contained in 61 O.S.1961, § 2, is an ordinary statute of limitation, not an extinguishment provision of the rights, liabilities and cause of action referred to in 61 O.S.1961, §§ 1 and 2. To the extent that Metropolitan Casualty Ins. Co. v. Dolese Bros. Co., 163 Okl. 36, 20 P.2d 569, is contrary to this holding, the same is hereby overruled.

2. The limitation provision of 61 O.S.1961, § 2, is a bar, to be treated as any ordinary statute of limitation, against any action upon a surety bond executed in compliance with 61 O.S.1961, § 1, unless the acts or conduct of the surety against whom the judgment is sought operates to estop such surety from pleading the limitation.

3. Failure of the trial court to consider the effect of a party's promise, contingent upon ascertainment of facts, to pay a claim in connection with the question of his waiver or estoppel to plead the statute of limitation, is reversible error.

Appeal from District Court of Oklahoma County; Clarence Mills, Judge.

Appeal from judgment for Surety in action on Statutory Contractor's Performance Bond. Reversed and remanded.

Wm. J. Zeman, Lloyd G. Minter, Bartlesvile, Cecil C. Hamilton, Edward J. Fauss, Oklahoma City, for plaintiff in error.

Fenton, Fenton, Smith & McCaleb, Oklahoma City, for defendant in error.

HODGES, Justice.

This is an action by plaintiff Phillips Petroleum Company against defendant United States Fidelity & Guaranty Company to recover on defendant's surety bond guaranteeing payment by W. E. Logan & Sons, a copartnership, hereafter called principal. Plaintiff sued defendant on the bond to recover for materials plaintiff furnished to principal for performance of its contract with the Oklahoma Highway Department on Federal Aid Project No. F--53 (20), in Tulsa and Okmulgee Counties.

Requirement of the bond and procedure for its enforcement, contemporary with the bond and contract here involved, is set forth in 61 O.S.Supp.1955, §§ 1 and 2, as follows:

§ 1. Bond to be taken on public works Whenever any public officer shall, under the laws of the State of Oklahoma, enter into contract in any sum exceeding One Hundred Dollars ($100.00) with any person or persons, for the purpose of making any public improvements or constructing any public building or making repairs on the same, such officer shall take, from the party contracted with, a bond with good and sufficient sureties to the State of Oklahoma, in a sum not less than the sum total in the contract, conditioned that such contractor or contractors shall pay all indebtedness incurred for labor, material, rental or repair of machinery or equipment furnished in the construction of said public building or in making said public improvements.

§ 2. Filing of Bond--Action on bond Such bond shall be filed in the office of the clerk of the district court of the county in which such public improvement is to be made or such public building is to be erected, and any person to whom there is due any sum for labor, material, rental or repairs furnished as stated in the preceding sections, or his assigns may bring an action on said bond for the recovery of said indebtedness; provided, that no action shall be brought on said bond after six (6) months from the completion of said public improvements or public buildings.'

The principal has been fully paid for its work by virtue of its contract with the Oklahoma Highway Department. Delivery by plaintiff of the materials involved to principal and its use of them on the project is stipulated. The project was completed June 27, 1957, and the action was commenced by plaintiff March 10, 1958, more than six months after completion of the project, which forms the basic issue of this appeal. The more than five years delay before trial after commencement of the action is not an issue. Plaintiff pleads waiver and estoppel of the defendant to plead the six (6) months provision of § 2, above, retailing the representations and acts of the defendant which lulled plaintiff into not filing its action within the six month period because of its reliance thereon.

The issues were joined by defendant's unverified Answer to plaintiff's Petition and verified account, and plaintiff's reply to defendant's answer.

The case was submitted to the trial court without a jury, and judgment was entered for defendant. Attached to the Journal Entry of Judgment was a Memorandum which contained specific findings by the trial court. Plaintiff has appealed.

Plaintiff has presented four propositions of error upon which it seeks reversal. We consider one of them decisive of this appeal. It focuses on the question of defendant's estoppel to rely upon the limitation provision of 61 O.S.Supp.1955, § 2.

Defendant contends that the limitation provision,

'* * * that no action shall be brought on said bond after six (6) months from the completion of said improvements or public buildings.',

is not subject to plaintiff's plea of waiver or estoppel. Defendant further contends that if the limitation provision is subject to the pleas of waiver and estoppel, the evidence is insufficient to establish either.

The gist of defendant's position which would deny to plaintiff its plea of estoppel as against the limitation provision of the statute, is that a provision limiting commencement of an action which is contained in a statute which itself creates a new liability and a remedy for its enforcement, is not an ordinary limitation, but is an extinguishment of the remedy. We have recognized the existence of such a distinction in limitation provisions, and have held that when the provision is contained in a statute or statutes which create a new liability and provide for a new remedy for enforcement of that new liability the provision of limitation is not subject to estoppel. Hiskett v. Wells, Okl., 351 P.2d 300. See also Saak v. Nicks, Okl., 321 P.2d 425.

The first question to be decided, then, is whether 61 O.S.1961, §§ 1 and 2 create a new liability or a new right and provide for a new remedy, neither of which would exist independent of these sections.

Defendant cites one case, Metropolitan Casualty Ins. Co. of N.Y. v. Dolese Bros. Co., 163 Okl. 36, 20 P.2d 569, interpreting the sections herein involved which is authority for its position. The pertinent portion of the Court's opinion in that case follows:

'The section provides a remedy in derogation of the common law, and provides for the maintenance of an action against a surety on the bond, which, in the absence of the statute could not be maintained. The action authorized by the statute can be maintained only when it is commenced within six months from the date the public improvement is completed. The burden was upon the plaintiff to show that the action was commenced within the authorized time. See Glazier v. Heneybuss et al., 19 Okl. 316, 91 P. 872; Chouteau v. Hoss et al., 118 Okl. 76, 246 P. 844; Zahn v. Obert et al., 60 Okl. 118, 159 P. 298; Chicago Bridge & Iron Works v. Walker et al., 120 Okl. 244, 251 P. 478; and Taylor Bros. v. Gill et al., 126 Okl. 293, 269 P. 236, 54 A.L.R. 979.'

Of the cases cited with approval in the above quotation, only Chicago Bridge & Iron Works v. Walker, supra, deals with the statutes here under consideration. The others deal with statutes clearly of the creative variety.

In Chicago Bridge & Iron Works, supra, the surety defendant pleaded the six month provision, which the Court called a 'statute of limitation', and, although applying the provision as a bar to that action, held,

'The parties might have done everything prior to the passage of the statutes (§§ 7486 and 7487, C.O.S.1921, and now 61 O.S.1961 §§ 1 and 2) that was enumerated and required in section 7486 in relation to the builders bond.',

and

'The right of action in favor of builders and materialmen on the bond will be barred, unless the action be commenced within six months from the date of the completion of the public inprovements or public building, Unless the acts or conduct of the surety against whom the judgment is sought operates to estop such surety from pleading the limitation.,' (Emphasis supplied.)

and in its discussion of the six month provision, the Court said:

'The limitation is disassociated from the requirement to make the bond; it runs against the contract which might have been made before the enactment of section 7486, supra, now required to be made by the section.'

A reading of the statutes reveals that they create no surety liability; that only require that such liability be created by the bond. A recognition of the legality and enforceability of thrid-party beneficiary and enforceability of third-party beneficiary substance of the surety bond, without regard to the statutes here involved, clearly establishes that the language of 61 O.S.1961, § 2, '* * * any person * * * may bring an action on said bond * * *,' is only the preamble to the special limitation for bringing an action upon the bond and neither creates a new liability or right nor provides a new remedy for enforcement of the liability created by a bond executed in conformity with the provisions of the sections.

Kansas and Missouri have treated the identical six month provision of the Kansas statutes (from which our statutes were adopted in 1893) as an ordinary statute of limitation which must be pleaded to be relied upon and which is not co-extensive with the liability created by the contract and bond when sued upon in a foreign jurisdiction. Mitchell v. Ripley, 5 Kan.App. 818, 49 P. 153; Weber Implement and Auto Co. v....