Poorvu Const. Co. v. Nelson Elec. Co.

• Decision Date: 11 March 1957
• Citation: 335 Mass. 545,140 N.E.2d 891
• Parties: POORVU CONSTRUCTION CO., Inc. v. NELSON ELECTRICAL COMPANY, Incorporated, et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 891

140 N.E.2d 891

335 Mass. 545

POORVU CONSTRUCTION CO., Inc. v. NELSON ELECTRICAL COMPANY, Incorporated, et al.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued Jan. 9, 1957.

Decided March 11, 1957.

Joseph B. Abrams, Robert T. Abrams, Boston, with him (Jarvis Hunt, N. Attleboro, amicus curiae, with him), for plaintiff.

Patrick F. Shanahan, Lynn (Joseph M. Corwin, Boston, with him), for defendants.

Before WILKINS, C. J., and SPALDING, WILLIAMS, WHITTEMORE and CUTTER, JJ.

CUTTER, Justice.

The plaintiff is a contractor who was awarded the general contract for the construction of a school building in the town of Lynnfield. Each of the defendants was named in the plaintiff's bid, under item 2 of the bid, as a subcontractor, each for a specified part of the work, and was approved as a subcontractor by the town. The bids were submitted to the town in accordance with G.L. (Ter.Ed.) c. 149, §§ 44A-44C, inclusive, as appearing in St.1954, c. 645, §§ 1-3; § 44D, inserted by St.1939, c. 480; and § 44E, inserted by St.1954, c. 645 § 4. ¹

After the award of the general contract to the plaintiff and prior to the execution of the subcontracts with the defendants, respectively, the plaintiff demanded from each of the defendants a performance bond and a payment bond covering work under its subcontract. It was contended by the defendants that, under the 1954 amendments of §§ 44A-44C, inclusive, an approved subcontractor could not be required to furnish a performance bond and a payment bond to the plaintiff, even if the plaintiff paid the bond premiums. The dispute was settled, apparently so that the work would not be delayed, by the execution of a subcontract by each defendant from which had been struck out printed provisions whereby 'each of the defendants [was required] at its own expense to furnish to the plaintiff a performance and payment bond * * * equal to 100% of the subcontract price'; 'in place of' such provisions each defendant stipulated with the plaintiff that a performance bond would be furnished by the subcontractor 'and in the event that the court determines that the cost of said * * * bond must be borne by the general contractor that the general contractor will reimburse the subcontractor for the cost.' Apparently, despite their stipulation, for reasons not apparent on this record, only one of the defendants actually furnished a performance bond on these terms.

The plaintiff brought this bill for declaratory relief as to its rights. The trial judge found the facts substantially as summarized above and entered a final decree outlining the situation and dismissing the bill and determining (a) that §§ 44A-44E (as amended by the 1954 legislation) bar the plaintiff from requiring the bonds here in issue and the insertion in the bid and subcontract documents of any requirement for such bonds, and (b) that the bond in fact given by one of the defendants should be cancelled and that this defendant should be reimbursed for the premium. The parties, in lieu of including certain testimony in the record, entered into a stipulation entitled 'Agreed Statement of Facts on Appeal.' This was done with the approval of the trial judge. Apart from the facts summarized in the 'Agreed Statement,' the trial judge also found in substance that there was no evidence of any practice or custom or usage with respect to the requiring by general contractors of performance bonds from subcontractors under the 1954 legislation, inasmuch as no practice could have developed in the brief interval between the effective date of the 1954 amendments and the signing of the contracts here in issue.

The provisions of the General Laws governing bidding on public works of the type and value here involved were inserted by St.1939, c. 480, and were comprehensively revised by St.1941, c. 699, and St.1954, c. 645. This court has had occasion to consider the earlier or the 1954 forms of the provisions principally ² in three cases, Gifford v. Commissioner of Public Health, 328 Mass. 608, 105 N.E.2d 476; East Side Construction Co., Inc., v. Town of Adams, 329 Mass. 347, 108 N.E.2d 659; Grande & Son, Inc., v. School Housing Committee of North Reading, 334 Mass. ----, 135 N.E.2d 6, in which various aspects of the general structure of the statute have been considered.

Sections 44A-44C contemplate that requests for bids will designate certain work on each project to be done by subcontractors. General contractors are required to file their bids on a form set out in § 44C(G) in two parts, 'Item 1, covering all the work of the general contractor' and 'Item 2, covering the work and the bid prices therefor of the subcontractors.' By § 44C(B) all principal and designated minor subcontractors are required to 'deliver or mail to the awarding authority record copies of all bids sent by them to the general contractor' on the bid form set forth in § 44C(H).

Section 44C(B) also directs, by a provision which was new in 1954, that 'Bids which are incomplete, conditional or obscure, or which contain additions not called for, shall be rejected' (emphasis supplied). By § 44C(C) only those subbidders who have filed their bids in this manner may be used by the general contractor in his bid. The statute and the statutory bid forms contain various provisions, not here relevant in detail, for the substitution of subbidders by subsequent arrangement (in precise conformity with the statutory procedure) between a successful general bidder and the awarding authority, but from all of these provisions it appears that the general contractor is not to be required to employ for work any subcontractor (at least if not included in his own bid for that work) against whose standing and ability the general contractor makes objection.

The bid form for general contractors found in § 44C(G) as amended in 1954 provides that he 'within five days * * * after presentation thereof by the awarding authority, [will] execute the contract and furnish a performance bond and also a labor and materials or payment bond * * * each in the sum of at least fifty per cent of the contract price, the premiums for which are to be paid by the general contractor and are included in the contract price.'

The provisions of § 44C(E) and the related bid form have gone through various changes in 1941 and 1954 since their original enactment in 1939, which, in major degree, give rise to the present controversy. The changes in § 44C(E) are best shown by the following excerpt from the section as amended by St.1941, c. 699, § 4. The words in italics were added in 1941. The other words were in the original form of the section as enacted in 1939. '(E) If a sub-contractor who has been selected and included in the general contract fails to sign the subcontract within ten days after notice of selection, or fails to furnish a performance bond to the general contractor within ten days after notice of selection if required so to do by the general contractor or the awarding authority, by an instrument in writing mailed or delivered to such sub-contractor with, or within five days after, such notice of selection, the awarding authority, architect and engineer, or any one or more of them, and the general contractor shall select, from the subbidders who have conformed to the bidding procedure, the next lowest bidder at the amount named in such sub-bid, and the total contract price shall be revised in accordance with the change in figures as submitted.'

By St.1954, c. 645, § 3, § 44C(E) was restored to its 1939 form in all substantial respects here pertinent. ³ All references (inserted in 1941) to bonds are omitted from the 1954 version.

The changes in the relevant provisions of the subbidder's proposal form are shown in the form as amended by St.1941, c. 699, § 7: 'The undersigned further agrees to be bound to the general contractor by the terms of the general conditions, drawings and specifications, and to assume toward him all the obligations and responsibilities that he, by those documents, assumes toward the owner, and, if so required by the general contractor or the awarding authority, by an instrument in writing delivered or mailed by such contractor or authority to the undersigned, to furnish a performance bond with a surety company, authorized to transact business in the commonwealth, as surety, in the sum of twenty-five per cent of the contract sum, the premium for which bond is to be paid by the undersigned.' The words in italics were added in 1941. The remaining language appeared in the 1939 version. By St.1954, c. 645, § 3, the italicized words were omitted from this proposal form, which by the 1954 act ⁴ was placed in § 44C(H). ⁵

There is no basis in the record for any conclusion that, under the 1939 form of the statute, there was any custom by which general contractors required the subcontractors to furnish performance and payment bonds.

The plaintiff contends that the obligation of the subcontractor to furnish a performance bond and a payment and materials bond is found in the language of the bid form, subsection (d), by which the subcontractor agrees 'to be bound to the general contractor by the terms of the general conditions, drawings and specifications, and to assume toward him all the obligations and responsibilities that he, by those documents, assumes toward the owner.' The plaintiff argues that, as the general contractor must give such bonds, each in the amount of at least fifty per cent of the total contract price, so also the subcontractor must give such bonds to the general contractor in at least the same percentage of the subcontract price. The defendants point to the legislative history of changes, already set out above at length, as indicating that the Legislature intended by the 1954 amendments to prohibit general contractors from requiring such bonds from subcontractors, and to force general contractors to use only subcontractors of such reliability as would afford the...