Wells-Stewart Const. Co. v. Martin Marietta Corp.

• Decision Date: 20 June 1968
• Docket Number: No. 8594,WELLS-STEWART,8594
• Citation: 442 P.2d 119,103 Ariz. 375
• Parties: CONSTRUCTION CO., Inc., a Nevada corporation; and the Travelers Indemnity Company, a Connecticut corporation, Appellants, v. MARTIN MARIETTA CORPORATION, a Maryland corporation; and the State of Arizona, for the use of Martin Marietta Corporation, Appellees.
• Court: Arizona Supreme Court

Page 119

442 P.2d 119

103 Ariz. 375

WELLS-STEWART CONSTRUCTION CO., Inc., a Nevada corporation; and the Travelers Indemnity Company, a Connecticut corporation, Appellants, v. MARTIN MARIETTA CORPORATION, a Maryland corporation; and the State of Arizona, for the use of Martin Marietta Corporation, Appellees.

No. 8594.

Supreme Court of Arizona, In Division.

June 20, 1968.

Fennemore, Craig, Allen & McClennen, by Calvin H. Udall, Phoenix, for appellants.

Dushoff, Sacks & Corcoran by Seymour Sacks, Phoenix, for appellees.

McFARLAND, Chief Justice:

Defendant-appellant Wells-Stewart Construction Co., Inc., hereinafter referred to as Wells, contracted with the State of Arizona to construct certain federal-aid highway projects near Navajo, Arizona. In order for a bid to be considered it had to be accompanied by a performance bond prepared by the Arizona Highway Commission, hereinafter referred to as the Commission. The projects included the installation of guard-rails on certain curves. That part of the job was subcontracted to Arizona Petroleum and Asphalt Company, hereinafter referred to as Arizona Pete. When the work was completed Wells was paid in full, and it paid Arizona Pete for all labor and material involved in the installation of the guard-rails.

However, Arizona Pete became insolvent before paying plaintiff-appellee Martin Marietta Corporation (hereinafter referred to as Martin) who sold Arizona Pete the guard-rails. Martin brought this action against Wells and against co-defendant-appellant, Travelers Indemnity Company, the surety on Wells' performance bonds. For convenience we shall use the singular 'bond' when referring to the bonds.

Wells filed an answer and counterclaim. The answer denied any legal relationship between Wells and Martin, pleaded both laches and the statute of limitations, and denied that Martin was a creditor covered by the bond. The counterclaim alleged that the conditions in the bond were broader than the pertinent statutes and regulations, and were therefore invalid, and that the enforcement of those provisions deprived Wells of equal protection of the laws, and of its property without due process of law. Martin moved for summary judgment, and this was granted. Judgment was entered against both defendants after a short cause hearing on the reasonable value of the material actually used on the projects, and for attorney's fees. Both defendants appealed.

The material part of the bond reads as follows:

'We, Wells-Stewart Construction Co., Inc., as principal, and the Travelers' Indemnity Company, as surety, are held firmly bound to the State of Arizona in the penal sum of $1,062.297.25. WHEREAS * * * Wells-Stewart Construction Co., Inc., * * * has contracted * * * to construct * * * a certain highway * * *.

'THE CONDITIONS OF THIS BOND ARE SUCH that if the principal herein * * * shall promptly pay all * * * laborers, mechanics, subcontractors and materialmen, and all persons who shall supply such laborers, mechanics or subcontractors with material * * * then this obligation to be void, otherwise to remain in full force and effect.

'We further agree * * * to pay * * * a reasonable attorney's fee * * *.

'All rights and benefits of the above and foregoing bond shall inure to the benefit of any and all creditors of said principal and contractor for any and all claims * * * incurred for * * * materials * * * incurred in the performance of said contract, and such creditors may * * * maintain an action upon said bond in the name of the State of Arizona.'

Appellants argue that Martin is a 'materialman of a materialman,' and not a materialman of a subcontractor, and therefore not covered by the bond. Appellants base this position on the fact that Wells ordered the guard-rail from Arizona Pete by a 'purchase order' which is a document ordinarily used to buy material rather than to contract for work. However, it is admitted that the purchase order was 'for the furnishing and installation of 'Road Guard' (guard-rail) and guide posts C.I.P. (Complete In Place.)' Labelling a contract 'Purchase Order' does not make it any the less a contract. A document is what its contents make it, not what it is labelled. Kintner v. Wolfe, 102 Ariz. 164, 426 P.2d 798. A subcontractor is one who contracts for the performance of an act, with a person who has already contracted for its performance. Staley v. New, 56 N.M. 756, 250 P.2d 893. If Wells had contracted with Arizona Pete only for the furnishing of guard-rail which Wells intended to install itself, and if Arizona Pete had merely bought the guard-rail from Martin in order to resell to Wells, that would be a case of a 'materialman of a materialman,' and recovery would have to be denied. But the situation in the instant case is clearly one where Arizona Pete was a subcontractor, and Martin 'supplied such subcontractor with material' so that Martin is covered by that provision of the bond.

Appellants contend that their liability, if any, is created by statute, and not by the performance bond which they signed. From this they deduce (a) that where the bond is broader than the statute authorizing it, liability is only as broad as the statute, and (b) that the one-year statute of limitations applicable to statute-created liability applies, instead of the six-year statute relating to liability under written instruments such as performance bonds.

The statute involved here is A.R.S. § 18--113, which provides that:

'* * * Should a bid satisfactory to the commission be received, it shall authorize the state engineer to let a contract to the lowest responsible bidder, upon the contractor giving such bond or bonds as are deemed necessary.'

The argument that the liability in the instant case comes from the statute, rather than from the bond, is the result of the fallacious line of reasoning that if there had been no statute, appellants would not have signed any bond--that their signing of the bond therefore was involuntary and under duress. But they were not compelled to enter into the highway contract. They undertook it voluntarily.

We have examined appellants' authorities and find them inapplicable to the facts of the instant case.

While A.R.S. § 18--113 clearly authorizes--and even directs--the Commission to require a bond, it spells out no details of the bond's contents, and it would be a strain on the English language to hold that the act creates the liability. If it does, how can one determine its extent? We therefore hold that the liability in the instant case was created by the bond and not by the statute. It follows that the applicable statute of limitations is six years.

The terms of the regulations adopted by the Highway Commission in its 'Administrative Procedure Act,' Title 22, Art. III, Div. 1, Art. C, page 6, provide:

'Said bond shall be conditioned upon the faithful performance of the Contract and the payment of all labor, materials, and supplies Furnished therefor. * * * The form of bond will be provided by the commission.' (Italics ours.)

Appellants contend that Wells 'paid for all labor materials, and supplies which It furnished the state in connection with its 'faithful performance. " (Italics ours.) We do not consider this description of what Wells paid for, to be the same as the above-quoted regulation.

Appellants also argue that if the liability were not created by statute, then the Commission had no authority to determine the form of the bond, because the legislature cannot delegate its law-making powers to an administrative agency. As a general principle this is a correct rule. The applicability of the rule to the instant case does not appear. Two cases are cited by appellants. In Crane v. Frohmiller, 45 Ariz. 490, 45 P.2d 955, this Court merely held that the legislature could not make an open-end appropriation allowing an administrative body to draw on the state's general fund, and could not delegate its lawmaking power to any other body. In State v. Marana Plantations, 75 Ariz. 111, 252 P.2d 87, we upheld a trial court's striking down of a statute vesting the Board of Health with sweeping powers to promote the public health. We said that 'The line of demarcation between what is a legitimate granting of power for administrative regulation and an illegitimate delegation of legislative power is often quite dim.' At the same time we recognized that 'the legislature sometimes cannot practically nor feasibly prescribe all administrative details, and such duties within limits may be left to the board.' We hold that the detailed provisions of the bond required by bidders on highway construction are properly left to the Highway Commission which has the technical knowledge amid changing conditions to know what ought to be included in the bonds.

Wells had various alternatives to signing the bond. It could have...