SIMS'CRANE SERV., INC. v. Reliance Ins. Co.

• Decision Date: 15 May 1981
• Docket Number: Civ. A. No. CV180-40.
• Citation: 514 F. Supp. 1033
• Parties: SIMS' CRANE SERVICE, INC., Plaintiff, v. RELIANCE INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Southern District of Georgia

514 F. Supp. 1033

SIMS' CRANE SERVICE, INC., Plaintiff, v. RELIANCE INSURANCE COMPANY, Defendant.

Civ. A. No. CV180-40.

United States District Court, S. D. Georgia, Augusta Division.

May 15, 1981.

COPYRIGHT MATERIAL OMITTED

William A. Trotter, III and Patricia Warren, Wilson & Trotter, Augusta, Ga., for plaintiff.

John M. Tatum, Savannah, Ga., for defendant.

ORDER

BOWEN, District Judge.

The above-captioned case is presently before the Court on the parties' cross motions for summary judgment, or, in the alternative, for partial summary judgment. On review of the pleadings, affidavits and discovery on file, the following facts emerge as uncontested:

Whalley Construction Company, Inc. Whalley entered into a general contract with Georgia Infirmary Non-Profit Housing Corporation Georgia Infirmary for the construction of an apartment complex in Savannah, Georgia. Financing for the project was provided by the Department of Housing and Urban Development HUD. Pursuant to the requirements of the general contract, Whalley, as principal, and defendant Reliance Insurance Company Reliance, as surety, executed and delivered a performance and payment bond on a printed HUD form, in favor of Georgia Infirmary and the Secretary of HUD, in the amount of $3,659,800.00. The bond is conditioned upon Whalley performing all undertakings of the general contract and satisfaction of all claims and demands incurred under such contract, including "all amounts due for materials, lubricants, oil, gasoline, coal and coke, repairs on machinery, equipment and tools, consumed or used in connection with the construction of such work, and all insurance premiums on said work, and for all labor, performed in such work whether by subcontractor or otherwise."

Whalley subcontracted a portion of the work required by the general contract to H. S. Horn Construction Company, Inc. Horn on a cost plus a fee basis subject to an agreed maximum, after all change orders, of $438,308.43. In the performance of its subcontract, Horn leased cranes from plaintiff Sims' Crane Service, Inc. Sims' on terms of an oral contract agreed to by Horn and Sims' in accordance with the prior dealings between the parties and the custom and usage of the trade. Pursuant to this agreement, Sims' furnished a crane, serial number 35228, without a crane operator, to Horn on or about March 8, 1979. At the time of delivery, a delivery receipt, No. 0357, recording the condition of the crane was signed by agents of Sims' and Horn. On March 30, 1979, the crane was damaged at the job site while being operated by an employee of Horn, and subsequently was repaired by Sims'.

Shortly thereafter, another crane, serial number 35109, was leased by Horn. The lease began on March 31, 1979 and the crane remained at the job site until approximately June 22, 1979. Sims' claims that rental charges for cranes supplied by Sims' remain due and owing by Horn.

Sims' brought this action on the payment bond, seeking to impose liability on the surety for the unpaid rent and repair costs on its cranes, and attorney's fees for the cost of collection. In its motion for summary judgment, plaintiff contends that there is no genuine issue of material fact as to the validity of its claim under the terms and conditions of the bond and the concomitant liability of the surety. By cross motion, Reliance asserts that the terms of the bond, when construed in accordance with the Georgia law, do not permit recovery of any of the items sought by plaintiff. The issue presented is whether plaintiff, as a materialman in the status of lessor of machinery to a subcontractor of the prime, is, as a matter of law, an intended beneficiary under the general contractor's surety bond entitled to recovery on the bond for the default of the subcontractor.

Ordinarily, as a matter of construction, "the liability of a surety on a bond which is plain and unambiguous is governed, like any other contract, by the intention of the parties as expressed in the instrument." American Casualty Co. v. Irvin, 426 F.2d 647, 650 (5th Cir. 1970); see Barge & Co., Inc. v. Oakwood, 128 Ga.App. 597, 598, 197 S.E.2d 405 (1973) (materialman's right to sue on a private, voluntary bond must be determined from the intent of the parties); 17 Am.Jur.2d Contractors' Bonds § 17 (1964). Such construction and interpretation of a written contract is matter of law for the court, see King v. Gilbert, 445 F.Supp. 479, 483 (N.D.Ga.1977), aff'd, 5 Cir., 569 F.2d 398 (1978), and, therefore, is properly subject to disposition by summary judgment. See R. C. Craig Limited v. Ships of Sea, Inc., 345 F.Supp. 1066, 1069 (S.D.Ga. 1972). If, however, an ambiguity remains after application of all applicable rules of construction, then a jury question is presented. See National Car Rental System, Inc. v. Council Wholesale Distributors, Inc., 393 F.Supp. 1128, 1132 (M.D.Ga.1974). It should be noted that "a contract is not ambiguous, even though difficult to construe, unless and until an application of the pertinent rules of interpretation leaves it uncertain as to which of two or more permissible meanings represents the true intention of the parties." Runyan v. Economics Laboratory, Inc., 147 Ga.App. 53, 55, 248 S.E.2d 44 (1978). Thus, in deciding the propriety of summary disposition on one or more of plaintiff's claims, the task before the Court is to analyze the language of the bond, in light of the pertinent rules of construction, and determine whether: (1) it is a certainty, as a matter of law, that the intention of the parties to the payment bond, as reflected in the terms and conditions of the bond and gleaned therefrom, is to include Sims' as a beneficiary of the bond, or, conversely, (2) it is a certainty, as a matter of law, the plaintiff is not such an intended beneficiary.

Turning, then, to the material language of the bond, it provides that:

the Principal shall ... satisfy all claims and demands incurred under the general contract, and shall promptly make payment to all persons, firms, subcontractors, and corporations furnishing materials for or performing labor in the prosecution of the work provided for in the general contract ..., including all amounts due for materials, ... repairs on machinery, equipment and tools, consumed or used in connection with the construction of such work, ..., and for all labor, performed in such work whether by subcontractor or otherwise ....

The operative phrase "furnishing materials for ... the prosecution of the work provided for in the general contract" clearly denotes an intent by the parties to endow materialmen, not just subcontractors, with a beneficial interest in the bond. Whether this beneficial interest is intended to extend only to materialmen in privity or having a direct relationship with the general contractor is not express by the terms of the bond. Yet, the language "all persons, firms, subcontractors, and corporations furnishing materials ... consumed or used in connection with the ... work", and the concluding phrase of the above-quoted excerpt, "performed in such work whether by subcontractor or otherwise," is evincive of an intent to include other materialmen as beneficiaries, not simply those furnishing materials directly to the prime contractor. The bond does not expressly define persons furnishing materials as including or excluding any type of materialman, much less a lessor of machinery to a subcontractor, and consequently resort must be had to the applicable rules of contract construction and Georgia case law to resolve whether such a delineative intent may be affixed as a matter of law.

Under Georgia law since 1949, "the beneficiary of a contract made between other parties for his benefit may maintain an action against the promisor on said contract." Ga.Code Ann. § 3-108 (1975). Accordingly, materialmen having a beneficial interest in a contractor's bond may bring an action on the bond in their own name rather than in the name of the nominal obligee. See Climatrol Industries, Inc. v. Home Indemnity Co., 316 F.Supp. 314, 318 (N.D.Ga. 1970). Recognizing that a materialman, as a third-party beneficiary, may have a statutory capacity to sue on a bond, Georgia courts necessarily have grappled with various bond terminology in deciding whether the bond actually inures to the benefit of a particular plaintiff-materialmen. See Climatrol Industries Inc. v. Home Indemnity Co., 316 F.Supp. 314 (N.D.Ga.1970) (plaintiff-materialman seeking payment for materials furnished to subcontractor of prime may sue surety on payment bond between subcontractor and prime, as real obligee in interest, when subcontractor bond is conditioned to pay all persons who have contracts with the principal subcontractor for labor and materials); Travelers Indemnity Co. v. Cleveland Electric Co., 147 Ga.App. 653, 249 S.E.2d 624 (1978) (supplier to wholesaler from whom general contractor ordered materials, held entitled to sue on general contractor's payment bond for wholesaler's nonpayment when claimants under bond were defined as one having a direct contract with a subcontractor for labor, material or both, used or reasonably required for use in the performance of contract); Sentry Indemnity Co. v. Central Electric Co., Inc., 136 Ga.App. 557, 222 S.E.2d 40 (1975) (express provision in bond stating that no right of action shall accrue on the bond to or for the use or benefit of any person or corporation other than the named owner and lender, held to preclude action on bond by materialman); Robinson Explosives, Inc. v. Dalon Contracting Co., Inc., 132 Ga.App. 849, 209 S.E.2d 264 (1974) (materialman furnishing materials and services to subcontractor allowed to maintain action against surety on general contractor's payment bond for subcontractor's nonpayment when claimants under bond were defined to include "one having a direct contract with a subcontractor of the principal for labor, material, or both used or reasonably required for use in...