Utah State Bldg. Bd. v. Walsh Plumbing Co.
| Decision Date | 19 February 1965 |
| Docket Number | No. 10143,10143 |
| Citation | 399 P.2d 141,16 Utah 2d 249 |
| Parties | d 249 UTAH STATE BUILDING BOARD et al., Plaintiffs, v. WALSH PLUMBING COMPANY et al., Defendants. George R. ROMNEY et al., Defendants and Appellants, v. INDUSTRIAL INDEMNITY COMPANY, a corporation, Third-Party Defendants and Respondents. |
| Court | Utah Supreme Court |
Clyde, Mecham & Pratt, Salt Lake City, for appellants.
Shirley P. Jones, Jr., Salt Lake City, for respondents.
Utah State Building Board commenced an action on November 2, 1962, on behalf of laborers and materialmen against Romney Company, alleging nonpayment for work and material supplied for the construction of a Rehabilitation Center at the University of Utah. Defendant Romney filed a third-party complaint against Industrial Indemnity Company for the payment of the claims of the laborers and materialmen under the terms of an indemnity bond.
A pretrial conference was held February 24, 1964, following which an order was entered against Romney dismissing its claim against Industrial Indemnity with prejudice. On April 2, 1964, a judgment was entered against Romney incorporating the pretrial order of February 24, 1964, and entering the judgment nunc pro tunc as of February 24, 1964. Romney appeals.
In July, 1959, Romney Company, general contractor, entered into a contract with the Utah State Building Board to construct the Rehabilitation Center at the University of Utah. Romney subcontracted the plumbing work to Walsh Plumbing Company for $120,526 and required Walsh to obtain a bond in this amount guaranteeing that the latter would pay for the labor and materials going into the job. A bond for that purpose was furnished by Industrial Indemnity as surety, running to Walsh, named as principal, and to Romney, named as owner therein.
Romney paid Walsh Plumbing Company for this subcontract work in reliance on lien waivers which Walsh had wrongfully obtained from the laborers and materialmen by giving checks which were dishonored. Walsh defaulted and was unable to pay. The Utah State building Board brought this action on behalf of laborers and materialmen to collect their money. Romney answered, has now paid the claims, and by its third-party complaint, seeks reimbursement from Industrial Indemnity on its surety bond.
Industrial Indemnity contends that Romney cannot maintain the action against it because it was not given notice of Walsh's default to which the terms of the bond entitle it. The pertinent provision states:
3. No suit or action shall be commenced hereunder by any claimant.
(a) Unless claimant shall have given written notice to any two of the following: The Principal, the Owner, or the Surety above named, within ninety (90) days after such claimant did or performed the last of the work or labor, or furnished the last of the materials for which said claim is made, stating with substantial accuracy the amount claimed and the name of the party to whom the materials were furnished, or for whom the work or labor was done or performed.
In support of its position with respect to notice, Industrial Indemnity contends that the bond was given only for the benefit of laborers and materialmen; that Romney having paid those claims now sues on their behalf and stands in their shoes; and that the paragraph just quoted above requires that before the action is maintainable, they must have given the required notice of the default of Walsh. It is conceded that none of the laborers or materialmen gave such a notice. The critical question here is whether this failure precludes Romney from maintaining his action against Industrial Indemnity. In addressing this question these principles should be kept in mind: The terms of the bond should be construed strictly against Industrial Indemnity, as the paid surety who furnished it; 1 and it is not entitled to notice unless the bond expressly so provides. 2
Industrial Indemnity's contention that the bond was given only to protect the laborers and materialmen is fallacious. It does not take into account the full nature and purpose of the bond. Conceded, that is one of its purposes. But looking at this transaction in full and proper perspective, as it should be, 3 will reveal clearly that it also had other purposes. The fundamental one who to carry out the overall objective of constructing and delivering a debt-free building. It was to accomplish this that Romney required Walsh to obtain the bond. The bond refers to the building contract between Walsh and Romney and states that it is 'by reference made a part thereof.' The contract provides 'that the subcontractor (Walsh) shall submit to the contractor (Romney) a performance bond * * * [covering the entire contract price] * * * for the faithful performance of this agreement.' In accordance with the contract, Romney paid the premium on the bond, which named Walsh as principal and Romney as owner therein.
Looking directly to the latter's rights in the matter, it is evident that in addition to protecting the laborers and materialmen, the bond had the separate and important function of assuring the owner Romney that Walsh would fulfill its obligation to Romney by paying for the labor and materials which went into the job. 4 Walsh having defaulted in this obligation to Romney, the latter could bring suit in its own right against Walsh, or its surety, Industrial Indemnity, who accepted the premium and issued its bond to insure against the very condition that has come about: that Walsh may not pay the laborers and materialmen, and that Romney may have to do so. 5 The fact that Romney has paid the claimants and could be subrogated to their rights, does not necessarily mean that it must be considered as standing in their shoes, suing as a 'claimant,' and thus lose its right to sue in its own behalf. 5
Reverting to paragraph 3(a) of the bond quoted above, it will be noted that it requires only that the notice be given by a 'claimant.' Claimant is defined in the bond as 'one having a direct contract with the principal (Walsh) or with a subcontractor of the principal for labor, material, or both * * *.' It is thus obvious that 'claimant' refers only to a laborer or materialman, and it is equally clear that it does not refer to the 'owner' (Romney). In fact the owner is one of the parties to whom the claimant must give notice before bringing the action. Due to the fact that Romney sues in its own right and not as a 'claimant,' there is no requirement that it give the notice insisted upon by Industrial Indemnity.
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