School Dist. No. 1, Multnomah County ex rel. Lynch Co. v. A. G. Rushlight & Co.

• Decision Date: 24 October 1962
• Parties: SCHOOL DISTRICT NO. 1, MULTNOMAH COUNTY, Oregon, on the relation of The LYNCH CO., a corporation, Appellant, v. A. G. RUSHLIGHT & CO., an Oregon corporation, Defendant. R. B. Hammond and W. A. Hammond, copartners, doing business under the firm name and style of Ross B. Hammond Co., and General Insurance Company of America, a Washington corporation, Respondents.
• Court: Oregon Supreme Court

Page 411

375 P.2d 411

232 Or. 341

SCHOOL DISTRICT NO. 1, MULTNOMAH COUNTY, Oregon, on the

relation of The LYNCH CO., a corporation, Appellant, v. A. G. RUSHLIGHT & CO., an Oregon corporation, Defendant.

R. B. Hammond and W. A. Hammond, copartners, doing business

under the firm name and style of Ross B. Hammond

Co., and General Insurance Company of

America, a Washington

corporation, Respondents.

Supreme Court of Oregon, Department 2.

Argued and Submitted Sept. 11, 1962.

Decided Oct. 24, 1962.

W. J. Masters, Portland, for appellant. Masters & Masters, Portland, on the brief.

Preston C. Hiefield, Jr., Portland, for respondents. Jones & Brown and Eugene E. Feltz, Portland, on the brief.

Before McALLISTER, C. J., and SLOAN, O'CONNELL, LUSK, and DENECKE, JJ.

DENECKE, Justice (pro tem.).

The Lynch Co., the appellant, brought an action for work performed for a subcontractor on the John Marshall High School, Portland. The litigation was brought in the name of School District No. 1, for whom the school was constructed, on the relation of Lynch Co. The defendants were Ross B. Hammond Co., the general contractor, General Insurance Company of America, their surety, and A. G. Rushlight & Co., the mechanical subcontractor for whom Lynch Co. did the sheet metal work.

The court directed a verdict in favor of Lynch and against Rushlight for the full amount, approximately $29,000. Rushlight did not appeal. The court granted a motion for involuntary nonsuit in favor of Hammond and General Insurance. The motion was granted on the ground that the plaintiff Lynch had failed to prove the giving of sufficient notice of claim as required by statute.

The action against the general contractor and his surety was brought pursuant to ORS 279.536. This statute provides that an unpaid subcontractor has a right of action against a contractor and his surety if the subcontractor has filed a timely and sufficient notice of claim. The right of action is by reason of a bond executed by the general contractor as principal and by the surety. The form of the bond is prescribed by ORS 279.510. Such a bond is sometimes referred to as an Oregon Public Works Bond.

An unpaid laborer, materialman, or subcontractor is granted a right of action under such a bond

'* * * if he * * * has presented and filed a notice of claim, as prescribed in ORS 279.528, prior to the expiration of six months immediately following the acceptance of the work by the affirmative action of the public body which let the contract.' ORS 279.526.

The contents of the notice and the action to be taken thereon are prescribed by ORS 279.528:

'(1) The notice of claim required by ORS 279.526 shall be presented to and filed with the Secretary of State or the clerk or auditor of the public body which let the contract.

'(2) The notice shall be in writing substantially as follows:

'To (here insert the name of the public body):

'Notice hereby is given that the undersigned (here insert the name of the claimant) has a claim for (here insert a brief description of the labor or materials performed or furnished and the person by whom performed or furnished; if the claim is for other than labor or materials, insert a brief description of the claim) in the sum of (here insert the amount) dollars against the bond taken from (here insert the name of the principal and surety or sureties upon the bond) for the work of (here insert a brief description of the work concerning which the bond was taken).

________ (here to be signed)

'(3) The notice shall be signed by the person making the claim or giving the notice.

'(4) The notice, after being presented and filed, shall be a public record open to inspection by any person.'

The notice relied upon was as follows:

'THE LYNCH COMPANY, INC.

Air Conditioning--Steel Fabrication

6000 N. E. Union Avenue

Portland 11, Oregon

February 9, 1961

'Registered.

'Portland Public School District

620 N. E. Halsey Street

Portland 12, Oregon

'Attention: L. J. Baker, Business Manager.

'Dear Sir:

'This letter is to inform you that we 'The Lynch Company, Inc.' of 6000 N. E. Union Avenue, Portland 11, Oregon, have an unpaid amount of $30,187.54 due us for labor and materials furnished to the John Marshall (Southeast) High School located at 3905 S. E. 91st Avenue, Portland, Oregon. This covers the period from October 24, 1958 to and including February 9, 1961.

'We are subcontractors to A. G. Rushlight & Co. of 3900 N. W. St. Helens Road, Portland, Oregon; who in turn are subcontracting from Ross B. Hammond Co. of P. O. Box 2111, Portland 4, Oregon.

'We furnished and installed the sheet metal work covering the Heating and Ventilation systems.

'This letter is in no way either a reflection or complaint on the above contractors but is sent to you to protect our interests in this matter. This is an undisputed account.

'Very truly yours,

THE LYNCH COMPANY, INC.

s/ J. R. LYNCH

J. R. LYNCH, PRESIDENT.

'jrl:ajb.

CC to R. B. Hammond Co.'

This letter was received within six months after acceptance of the work. The question is whether the notice is substantially in the form required by statute.

The respondents contend that the letter was insufficient as statutory notice in the following particulars: (1) it was not presented and filed with the clerk of the public body; (2) it does not name the principal or surety on the bond; (3) it does not make a claim on the bond.

The Oregon notice of claim statute probably was patterned after the Washington statute. ¹ It was adopted in Oregon in 1917. The form of notice required is almost identical. The only other state in the West having such a similar notice provision is Montana, and its law was definitely taken from Washington. Kirkpatrick et al. v. Douglas et al., 104 Mont. 212, 65 P.2d 1169 (1937).

The interpretation placed upon the Washington law by the Washington court prior to Oregon's adoption of the law either governs the construction to be placed on it in Oregon or is highly persuasive. Elliott v. Clement, 175 Or. 44, 50, 149 P.2d 985, 151 P.2d 739 (1944); National Surety Corp. v. Smith, 168 Or. 265, 324, 114 P.2d 118, 123 P.2d 203 (1942). However, the Washington court, both before and after 1917, has varied in the degree of compliance with the statutory notice provision which it required.

The lenient construction is illustrated by Cascade Lumber Co. v. Aetna Indemnity Co., 56 Wash. 503, 106 P. 158 (1910). The notice in that appeal stated that the claimant had an unpaid bill and he would like to have it straightened out so he would not have to take legal action. The court held that even though the notice did not state that a claim was made against the bond, that certainly was the plain inference and therefore the notice was sufficient.

However, the latest Washington decision noted the past variations and went on to require almost literal compliance with the notice statute. Fidelity & Deposit Co. v. Conway, 14 Wash.2d 551, 128 P.2d 764 (1942). The claimant in the Conway case first sent the architect a copy of his final invoice to the general contractor and said that he understood that the general contractor's retainage was being held to pay outstanding bills. A copy of this letter was sent to the school superintendent. Later, the claimant wrote the architect asking the name of the surety so that the claimant could file a claim. The architect gave this information. The claimant wrote the surety and said he had a claim of $1,281 against the contractor and asked the surety what it was going to do about it. The surety wrote that in due course the matter of paying bills would receive attention. The claimant wrote asking the surety to let the claimant know if any legal procedure must be followed to protect his claim; a copy went to the school district secretary. The surety replied, follow statutory procedure.

The Washington court held that the notice was insufficient; the letters were not 'actually filed with the district;' the letter did not say that the claimant was asserting a present claim against the bond. The trial court in this case dissected the Washington decision and 'measuring it [Lynch's letter] by the Washington decisions' concluded Lynch's notice was insufficient.

The Washington decisions, as stated, are not completely consistent and the Conway case, discussed immediately above, was decided 25 years after the Oregon statute was adopted. We believe the Washington decisions should be given weighty consideration, but should not be considered binding.

Decisions of the Michigan court have been cited to us as adopting a more lenient view than the Conway case. In People, for use of Chasteen, v. Michigan Surety Co., 360 Mich. 546, 104 N.W.2d 213 (1960), the applicable Michigan statute required notice of claim to the public body which in turn was required to give notice to the surety. The court held that direct notice to the surety without notice to the public body was sufficient. Chief Justice Dethmers, speaking for the court, stated:

'* * * Under such circumstances [direct notice to the surety] the old rule of Traves should apply, that lack of strict compliance with the statutory requirement to serve notice on the administrative board stands as no defense to defendant, a paid surety, unless it shows resultant injury.' 360 Mich. at 549, 104 N.W.2d at 214.

The Oregon statute only requires notice 'substantially' as set out in the statute. Whether or not the appellant has substantially complied with the statute should be determined largely by deciding whether or not the notice given performed the function intended.

Public works bonds were required as substitutes for the security offered by mechanics' liens on land and improvements. No lien mechanic's or otherwise, is enforceable against public property. ORS 23.160 (7); Portland Lumbering etc. Co. v. School Dist. No. 1, 13 Or. 283, 10 P. 350 (1886). In order to provide laborers, suppliers, and subcontractors on public works with security comparable to that afforded on...