Stewart Carpet Service, Inc. v. Contractors Bonding and Ins. Co.

• Decision Date: 06 March 1986
• Docket Number: No. 51883-1,51883-1
• Court: Washington Supreme Court
• Parties: STEWART CARPET SERVICE, INC., Petitioner, v. CONTRACTORS BONDING AND INSURANCE COMPANY, Respondent. F/M SALES COMPANY, INC., Respondent, v. ICOM PLUMBING & HEATING, INC., a Washington corporation, Defendant, Contractors Bonding and Insurance Company, Respondent. CREE CONSTRUCTION COMPANY, INC., a Washington corporation, Petitioner, v. ICOM PLUMBING & HEATING, INC., a Washington corporation, Defendant, Contractors Bonding and Insurance Company, Respondent. The WING COMPANY, a DIVISION OF WING INDUSTRIES, INC., a corporation, Respondent, v. ICOM PLUMBING & HEATING, INC., a Washington corporation, Defendant, Contractors Bonding and Insurance Company, Respondent. En Banc

Page 353

105 Wn.2d 353

715 P.2d 115

STEWART CARPET SERVICE, INC., Petitioner, v. CONTRACTORS BONDING AND INSURANCE COMPANY, Respondent.

F/M SALES COMPANY, INC., Respondent, v. ICOM PLUMBING & HEATING, INC., a Washington corporation, Defendant, Contractors Bonding and Insurance Company, Respondent.

CREE CONSTRUCTION COMPANY, INC., a Washington corporation, Petitioner, v. ICOM PLUMBING & HEATING, INC., a Washington corporation, Defendant, Contractors Bonding and Insurance Company, Respondent.

The WING COMPANY, a DIVISION OF WING INDUSTRIES, INC., a corporation, Respondent, v. ICOM PLUMBING & HEATING, INC., a Washington corporation, Defendant, Contractors Bonding and Insurance Company, Respondent.

No. 51883-1.

Supreme Court of Washington,

En Banc.

March 6, 1986.

Rigby, Jones & Zuanich, James Rigby, Ulin, Dann, Elston & Lambe, Garth A. Schlemlein, Seattle, for petitioner Stewart Carpet Service.

Bobette S. Jones, Seattle, for respondent.

PEARSON, Justice.

These cases were consolidated for appeal by the Court of Appeals. The issue in both cases is whether, upon default by a lower-tier subcontractor, an upper-tier general contractor may recover against a contractor's bond posted by the lower-tier contractor pursuant to the registration of contractors act, RCW 18.27.010, et seq. ¹ We affirm the decision of the Court of Appeals, 41 Wash.App. 46, 701 P.2d 546, holding that an upper-tier contractor cannot reach the proceeds of a contractor's registration bond posted by a lower-tier contractor pursuant to RCW 18.27.040.

The facts in both of these cases were cogently distilled by the Court of Appeals, and are as follows:

Stewart Carpet

Stewart Carpet Service, Inc. (Stewart) sought to recover against a statutory contractor's bond posted by Steven Glines, d/b/a Fuzzy Side Up. Stewart, the upper-tier general contractor, had subcontracted a floor covering job for a consumer to Fuzzy Side Up, the lower-tier subcontractor, which it negligently performed, forcing Stewart to subcontract the job to another contractor. Fuzzy Side Up then filed a petition in bankruptcy.

Stewart subsequently filed suit against the statutory surety bond which Fuzzy Side Up had posted pursuant to the registration of contractors act. The trial court granted summary judgment in favor of the bond surety, Contractors Bonding and Insurance Company (Bonding Company), holding Stewart was not entitled to recover from the bond proceeds. Stewart appealed to the Court of Appeals, which affirmed the trial court.

Cree Construction

Cree Construction Company, Inc. (Cree), the upper-tier general contractor, sought to recover against the statutory contractor's bond posted by ICOM Plumbing and Heating, Inc. (ICOM), the lower-tier subcontractor, which had breached its contract with Cree to perform work on a Bellevue public works project Cree was building. ICOM also had not paid its materials suppliers, F/M Sales Company, Inc., and the Wing Company (Materials Suppliers).

The Bonding Company tendered the proceeds of ICOM's bond into the registry of the court. The Materials Suppliers intervened in the suit between Cree and ICOM, and the trial court gave Cree priority to the proceeds ahead of the Materials Suppliers. The Materials Suppliers appealed to the Court of Appeals, which reversed the trial court.

I

The Washington registration of contractors act, RCW 18.27, requires a construction contractor to file a surety bond with the Department of Labor and Industries as a condition precedent to obtaining registration for the conduct of construction activities in Washington. RCW 18.27.040. If a contractor engages in construction activity without posting the appropriate bond, the Department of Labor and Industries may impose civil and criminal penalties, RCW 18.27.240, and the contractor may be barred from commencing suit in the state court to recover on a contract claim. RCW 18.27.080. In 1981, RCW 18.27.040 required a "general contractor" to file a bond of $4,000, and required a "specialty contractor" to file a bond of $2,000. ² The bond filed by Fuzzy Side Up was a general contractor's bond of $4,000. The bond filed by ICOM was a specialty contractor's bond of $2,000. ³

RCW 18.27.040 identifies the persons who may make claims against these bonds, specifies the procedures for making the claims, and sets forth an order of priority by which claims are to be paid. RCW 18.27.040 provides, in relevant part:

Each applicant shall ... file ... a surety bond ... conditioned that the applicant will pay all persons performing labor, including employee benefits, for the contractor, will pay all taxes and contributions due to the state of Washington, and will pay all persons furnishing labor or material or renting or supplying equipment to the contractor and will pay all amounts that may be adjudged against the contractor by reason of negligent or improper work or breach of contract in the conduct of the contracting business....

* * *

Any person ... having a claim against the contractor for any of the items referred to in this section may bring suit upon such bond ...

... [When multiple claims against the bond exceed the amount of the bond] claims shall be satisfied from the bond in the following order:

(a) Labor, including employee benefits;

(b) Claims for breach of contract by a party to the construction contract;

(c) Material and equipment;

(d) Taxes and contributions due the state of Washington;

(e) Any court costs, interest, and attorney's fees plaintiff may be entitled to recover.

The parties to this appeal request this court to determine whether the intended beneficiaries of the statutory contractor's bond include upper-tier contractors. Stewart and Cree argue that the bond protects all contractors vis-a-vis each other, entitling them to recover against the bonds posted by Fuzzy Side Up and ICOM, respectively. The Bonding Company and the Materials Suppliers argue that the bond only protects consumers, materials suppliers and lower-tier contractors from upper-tier contractors, and not upper-tier contractors from lower-tier contractors.

II

The function of the court in statutory interpretation is to discover the intent of the Legislature and give effect to that intent. Wilson v. Lund, 74 Wash.2d 945, 947-48, 447 P.2d 718 (1968). If a statute is unambiguous, the meaning of the statute must be derived from the actual language of the statute. In re Lehman, 93 Wash.2d 25, 604 P.2d 948 (1980). If a statute is amenable to more than one interpretation, the court should adopt the interpretation most consistent with the Legislature's intent. Human Rights Comm'n v. Cheney Sch. Dist. 30, 97 Wash.2d 118, 121, 641 P.2d 163 (1982). The intent of the Legislature must be derived from the language of the act as a whole, Human Rights, at 121, together with the constructions placed on the statute by this court. State v. Regan, 97 Wash.2d 47, 51-52, 640 P.2d 725 (1982).

Cree argues that it is entitled to recover against the statutory bond by virtue of the language in RCW 18.27.040, which permits recovery for "breach of contract in the conduct of the contracting business." According to Cree, it is a beneficiary of the bond because ICOM breached its construction contract with Cree. Stewart argues that it is entitled to recover against the statutory bond for the same reason, but asserts additionally that it is a beneficiary of the bond under the language of RCW 18.27.040 because it performed labor for the contractor, Fuzzy Side Up.

The question, therefore, is what the Legislature meant by "all persons performing labor ... for the contractor" or by "breach of contract by a party to the construction contract". RCW 18.27.040. The ordinary and obvious meaning of this language, and of the section as a whole, is that the Legislature is focusing on wages and benefits contractors owe to individual laborers, and on the contract between the consumer and the upper-tier contractor.

The only provision in the priority section for labor claims includes "employee benefits", a clear indication that the Legislature is focusing on laborers. The only provision in the priority section which would apply to a consumer's claim specifies claims for "breach of contract by a party to the construction contract", which must mean the contract between the consumer and a contractor, since the consumer is not a party to any other construction contract. If the contractor does not perform pursuant to the terms of "the contract", clearly the consumer has a right of action against the bond.

Cree and Stewart assert, however, that "the construction contract" also refers to a construction contract between an upper-tier contractor and its subcontractor. Stewart argues that "labor for the contractor" also means labor Stewart had another contractor perform for Stewart so that Stewart could meet its obligation to provide such labor for the consumer. The express legislative intent and developed judicial history of the act preclude these awkward interpretations. Language enacted to protect laborers and consumers from contractors cannot also be construed to protect upper-tier contractors from lower-tier contractors. ⁴

In 1973 the Legislature amended chapter 18.27 to add RCW 18.27.140, which provided: "It is the purpose of this chapter to afford protection to the public from unreliable, fraudulent, financially irresponsible, or incompetent contractors." (Italics ours.) The Bonding Company and the Materials Suppliers argue that RCW 18.27.140 is a legislative directive that the act be interpreted to accomplish its public protection purpose. According to them, "the public" entitled to protection from contractors does not include upper-tier contractors, and therefore upper-tier contractors should not recover against a bond posted for the benefit of "the public" contemplated by the Legislature.

Stewart and Cree, on the other hand, argue that RCW 18.27.140 merely adopted the doctrine of "substantial compliance" under...