Royal Indem. Co. v. Special Service Supply Co.

• Decision Date: 19 April 1966
• Docket Number: No. 4982,4982
• Parties: ROYAL INDEMNITY COMPANY, Inc., a New York corporation, Appellant, v. SPECIAL SERVICE SUPPLY CO., Inc., a corporation, Respondent.
• Court: Nevada Supreme Court

Page 500

413 P.2d 500

82 Nev. 148

ROYAL INDEMNITY COMPANY, Inc., a New York corporation, Appellant, v. SPECIAL SERVICE SUPPLY CO., Inc., a corporation, Respondent.

No. 4982.

Supreme Court of Nevada.

April 19, 1966.

Rehearing Denied May 16, 1966.

Singleton, DeLanoy & Jemison, Las Vegas, for appellant.

Deaner, Butler & Adamson, Las Vegas, for respondent.

ZENOFF, District Judge.

We are called upon to construe a bonding agreement between a professional surety and a contractor to determine whether a materialman, due and owed monies from the contractor, may recover against the bond.

The surety, Royal Indemnity Company, Inc., contracted a $3,000 bond with Darby Air Conditioning which provided:

'NOW, THEREFORE, if the Principal herein (Darby) shall for the period beginning with the date hereof and ending with the expiration of One Year from said date, faithfully comply with all of the provisions of Chapter 624 of the Revised Statutes of Nevada, as amended, then this obligation shall be null and void, otherwise to remain in full force and effect.

'THE LIABILITY OF THE SURETY herein shall be confined to unlawful acts, omissions, or defaults of the Principal occurring subsequent to the date hereof, and prior to the expiration of One Year from said date; provided, however, that the Surety shall in no event be liable for labor and material bills incurred by the principal prior to the date hereof.'

Appellant Royal Indemnity argues this agreement was not a 'materialmen's bond' but only ran to the statutory requirements of NRS 624.270 which, appellant insists, do not extend to simple breaches of contract to materialmen. ¹

The lower court allowed recovery in a summary judgment. We affirm.

1. It is unnecessary to decide the exact limitations of NRS 624.270. Even if, as appellant claims, the statute does not extend to materialmen's contracts, a bond may be conditioned more broadly than the statute requires and 'is good at common law, if it is entered into voluntarily by competent parties for a valid consideration, and is not repugnant to the letter or policy of the law * * *.' Clatsop County v. Feldschau, 101 Or. 369, 199 P. 953 (1921) and authorities cited therein; 18 A.L.R. 1227; 9 C.J. 29. Thus we look exclusively to the particular bonding contract here in issue.

2. We first resort to general rules of contractual construction. Every word must be given effect if at all possible. As was noted in Reno Club v. Young Investment Co., 64 Nev. 312, 324, 182 P.2d 1011, 1017, 173 A.L.R. 1145 (1947), '(t)he court is not at liberty, either to disregard words used by the parties, descriptive of the subject matter or of any material incident, or to insert words which the parties have not made use of. It cannot reject what the parties inserted, unless it is repugnant to some other part of the instrument.' Also, Hoaglund v. City of Los Angeles, 103 Cal.App.2d 499, 229 P.2d 823 (1951); Johnston v. Miller, 326 Mich. 682, 40 N.W.2d 770 (1950); Musto v. Grosjean, 208 Cal. 453, 281 P. 1022 (1929).

3. For purposes of this dispute, the instant contract has three crucial provisions: (1) that full compliance with Ch. 624 by Darby shall make the surety, Royal Indemnity's, obligation 'null and void'; (2) that Royal's liability shall be 'confined to unlawful acts, omissions, or defaults' of Darby; and (3) that Royal 'shall in no event be liable for labor and material bills incurred by (Darby) prior to the date' of the bonding agreement. The problem is to give full effect to each of these provisions. If we accept appellant's argument that materialmen's defaulted bills were not included in the bond, there appears no purpose for Royal expressly denying liability for prior materials, thus, by implication accepting liability for materials procured after the date of the bonding agreement.

4. Royal argues that the provision for materials was surplusage; 'the extraneous insertions of over-cautious attorneys.' We cannot so discard plain words in a valid contract.

Royal next argues that the provision for materials must be read in context with Ch. 624, which does not expressly provide for guarantying the payment of materialmen's bills, and Royal was freed of all obligations if Darby 'faithfully compl(ied) with all of the provisions of Chapter 624.' We must attempt to reconcile 'faithful compl(iance) with * * * Chapter 624' with the later clause whereby Royal Indemnity impliedly agreed to incur liability for materials obtained during the term of the bonding contract, though Ch. 624, standing alone, might not require such a bonding.

5. 'If clauses in a contract appear to be repugnant to each other, they must be given such an interpretation and construction as will reconcile them if possible.' Quinerly v. Dundee Corp., 159 Fla. 219, 31 So.2d 533, 534 (1947); see Hull v. Burr, 58 Fla. 432, 50 So. 754, 765 (1909). It is only where clauses are totally irreconcilable that a choice may be made between them. Morgan v. Firestone Tire & Rubber Co., 68 Idaho 506, 201 P.2d 976 (1948). In the instant contract, compliance with Ch. 624 can be harmonized with payments for materials in either of two ways: (1) the contract only encompassed payments for 'unlawful' materials--i.e., those obtained incident to a violation of Ch. 624; or (2) the bonding contract assumed that failure to pay a due and owing bill to a materialman was not 'faithful compl(iance) with all of the provisions of Chapter 624'--regardless of whether Ch. 624 required a bonding of such payments.

We cannot accept the interpretation as to 'unlawful' materials. Parties to a bonding agreement seem unlikely to have singled out for protection materialmen supplying only wrongful contractors. Certainly Ch. 624 does not so require. 'If one interpretation would lead to an absurd conclusion, then such interpretation should be abandoned and the one adopted which would be in accord with reason and probability.'...