Weyerhaeuser Co. v. Twin City Millwork Co., 42671

• Decision Date: 15 October 1971
• Docket Number: No. 42671,42671
• Citation: 191 N.W.2d 401,291 Minn. 293
• Parties: WEYERHAEUSER COMPANY, Respondent, v. TWIN CITY MILLWORK CO., et al., Defendants. WATSON CONSTRUCTION COMPANY and Planet Insurance Company, defendants and third-party plaintiffs, Appellants, v. FIRST NATIONAL BANK OF MINNEAPOLIS and Fidelity Bank and Trust Company, third-party defendants.
• Court: Minnesota Supreme Court

Page 401

191 N.W.2d 401

291 Minn. 293

WEYERHAEUSER COMPANY, Respondent, v. TWIN CITY MILLWORK CO., et al., Defendants.

WATSON CONSTRUCTION COMPANY and Planet Insurance Company, defendants and third-party plaintiffs, Appellants, v. FIRST NATIONAL BANK OF MINNEAPOLIS and Fidelity Bank and Trust Company, third-party defendants.

No. 42671.

Supreme Court of Minnesota.

Oct. 15, 1971.

Rehearing Denied Nov. 12, 1971.

Syllabus by the Court

1. A business concern which agreed to furnish a prime contractor 1,107 doors for use in construction of a public building Held to be a subcontractor, and its supplier who actually fabricated the material was therefore entitled to recover on the prime contractor's bond when the subcontractor became bankrupt.

2. A prime contractor and its surety may not for the first time on appeal raise the question of whether a bond is executed pursuant to Minn.St. 574.26, which allows attorneys' fees as part of claimant's recovery.

Faegre & Benson and Gordon Busdicker and Arthur L. Doten, Minneapolis, for appellants.

Carlsen, Greiner & Law, and Timothy O'Brien, Minneapolis (for Associated General Contractors of Minnesota), amicus curiae.

Briggs & Morgan and Philip L. Bruner, St. Paul, for respondent.

Heard before KNUTSON, C.J., and NELSON, MURPHY, OTIS, and ROGOSHESKE, JJ.

OPINION

OTIS, Justice.

Plaintiff, Weyerhaeuser Company, has sued and recovered against the prime contractor and its surety on a contractor's bond for millwork which it furnished in the construction of an addition to a building on the University of Minnesota campus. The principal issue is whether the record permits a finding that Twin City Milwork Company, with whom plaintiff contracted, was a subcontractor under the prime contractor, Watson Construction Company, or was simply a materialman. We have concluded that the trial court was justified in finding that Twin City Millwork Company was a subcontractor, and affirm.

At the outset we note that the issue presented is close and difficult. A brief on behalf of appellants has been filed by Associated General Contractors of Minnesota as amicus curiae. They seek a narrow construction of the applicable statutes which we are not prepared to furnish. We are satisfied from an examination of the authorities that each case must hinge on the totality of the surrounding circumstances and none lends itself to hard-and-fast rules which may be inflexibly applied. With this principle in mind, we would have been better satisfied had the matter been thoroughly litigated rather than disposed of by summary judgment. The parties, however, did not press the lower court for a trial on the merits but seemed content to submit the matter on affidavits and documentary evidence.

On May 20, 1965, Watson entered a prime contract with the Regents of the University of Minnesota to build an addition to Sanford Hall. With Planet Insurance Company as surety, it furnished the university a contractor's bond in the sum of $765,300 similar in language to that prescribed by Minn.St. 574.26. In the process of construction, Watson entered contracts with 34 subcontractors and materialmen, including Twin City Millwork Company (TCM). Almost half of the work undertaken by this contract was the furnishing of 1,077 wooden doors of various sizes, finishes, and cores. TCM prepared and submitted to the university's architects shop drawings detailing the requirements contemplated by the prime contractor.

Because it did not itself manufacture doors, TCM solicited bids from Weyerhaeuser Company, U.S. Plywood Company, and Hardwood Products. Ultimately, it awarded the contract to Weyerhaeuser. The contract was subsequently amended to call for 1,107 doors for which TCM agreed to pay a total price of $23,611.74. All of the doors were individually made by Weyerhaeuser and delivered to TCM, who took them to the job site for installation by Watson. TCM became bankrupt and Weyerhaeuser has not been paid. It brought this action against Watson and Planet on the contractor's bond. The trial court awarded Weyerhaeuser $23,311.74 on principal and $4,500 attorneys' fees.

1. The relevant portion of the bond furnished by Watson reads thus:

'This obligation is made for the use of the Obligee and of all persons doing work or furnishing skill, tools, machinery or materials, or insurance premiums, or equipment, or supplies for any camp maintained for the feeding or keeping of men or animals, or any combination thereof, engaged under or for the purpose of the execution of said Contract and may be sued on thereby.' ¹

Watson and Planet argue that the reference in the bond to those engaged under 'said Contract' refers only to the contract between Watson and the regents. They take the position that TCM was merely a materialman and Weyerhaeuser its supplier. Appellants stress the fact that TCM was to perform no labor on the job site; that a subcontractor is defined in the prime contract as a person supplying labor and material at the site of the project; and that the doors here in question were standard items routinely manufactured rather than custom-built.

Appellants assert that Watson's contract with TCM refers to 'materials only' and designates TCM merely as a 'vendor.' It is further argued that the affidavit of Watson's president compels a finding that persons in TCM's position are universally considered in the industry as materialmen rather than subcontractors. Finally, both appellants and amicus contend that whatever may have been TCM's status, Watson had no notice of TCM's contract with Weyerhaeuser, and therefore Weyerhaeuser was in a better position than Watson to protect itself from the possibility of TCM's insolvency. Although there is merit to these arguments, we are persuaded that the weight of authority, and particularly the long-established policy of this state, require an affirmance.

As we have suggested, a basic question is whether the prime contractor can be expected to have notice of plaintiff's participation in the project. There is always a question of whether one who furnishes labor or material is so remote the prime contractor cannot reasonably protect his interest. It is for this reason that some courts have insisted on labor and material being furnished at the job site where the contractor can observe what is being done. The point at which the cutoff is appropriate must necessarily be somewhat arbitrary. Suffice it to say that the almost universal rule permits protection to materialmen who sell to subcontractors but does not allow recovery by those who sell standard products to materialmen.

In Clifford F. MacEvoy Co. v. United States, 322 U.S. 102, 108, 64 S.Ct. 890, 894, 88 L.Ed. 1163, 1168 (1944), a leading case which deals with the payment bond required from contractors by §§ 1 and 2 of the Miller Act, 49 Stat. 793, 794, as amended 40 U.S.C.A., §§ 270a and 270b, ² the United States Supreme Court summarized the problem thus:

'The Miller Act itself makes no attempt to define the word 'subcontractor.' We are thus forced to utilize ordinary judicial tools of definition. Whether the word includes laborers and materialmen is not subject to easy solution, for the word has no single, exact meaning. In a broad, generic sense a subcontractor includes anyone who has a contract to furnish labor or material to the prime contractor. In that sense Miller was a subcontractor. But under the more technical meaning, as established by usage in the building trades, a subcontractor is one who performs for and takes from the prime contractor a specific part of the labor or material requirements of the original contract, thus excluding ordinary laborers and materialmen. * * *

'Practical considerations underlying the Act likewise support this conclusion. Congress cannot be presumed, in the absence of express statutory language, to have intended to impose liability on the payment bond in situations where it is difficult or impossible for the prime contractor to protect himself. The relatively few subcontractors who perform part of the original contract represent in a sense the prime contractor and are well known to him. It is easy for the prime contractor to secure himself against loss by requiring the subcontractors to give security by bond, or otherwise, for the payment of those who contract directly with the subcontractors. United States, for Use of Hill v. American Surety Co. (200 U.S. 197, 26 S.Ct. 168, 50 L.Ed. 437); Mankin v. United States for Use of Ludowici-Celarion Co. (215 U.S. 533, 30 S.Ct. 174, 54 L.Ed. 315). But this method of protection is generally inadequate to cope with remote and undeterminable liabilities incurred by an ordinary materialman, who may be a manufacturer, a wholesaler or a retailer. Many such materialmen are usually involved in large projects; they deal in turn with innumerable sub-materialmen and laborers. To impose unlimited liability under the payment bond to those sub-materialmen and laborers is to create a precarious and perilous risk on the prime contractor and his surety. To sanction such a risk requires clear language in the statute and in the bond so as to leave no alternative. Here...