Opinion
32903.
DECIDED MAY 5, 1950. REHEARING DENIED JUNE 14, 1950.
Complaint on bond; from Fulton Superior Court — Judge Pharr. November 23, 1949. (Application to Supreme Court for certiorari.)
MacDougald, Troutman, Sams Schroder, Gilmer A. MacDougald, for plaintiff.
Powell, Goldstein, Frazer Murphy, for defendant.
The bond sued on given by a subcontractor to the principal contractor construed together with the contract between the principal contractor and the subcontractor and the contract between the owner and the principal contractor, is construed to indemnify laborers and materialmen furnishing labor and material for the work to the subcontractor, as well as to indemnify the named obligee. A performance bond covers the undertakings of the parties to the contract not specifically excepted.
DECIDED MAY 5, 1950. REHEARING DENIED JUNE 14, 1950.
The Southeastern Construction Company, for the use of Gill Equipment Company, sued J. L. Smith, principal and Glens Falls Indemnity Company, surety. The petition alleges, among other things, the following: "4. On October 29, 1947, Lindmont Apartments Inc., a corporation, entered into an agreement with Southeastern Construction Company, a corporation, the contractor, whereby said Southeastern Construction Company was obligated to furnish labor and materials to do certain work to said Lindmont Apartments Inc., in the construction of a number of apartment buildings. The agreement between said Lindmont Apartments Inc. and Southeastern Construction Company is not in the possession of Gill Equipment Company. However, each of said contracting parties has an executed copy of same. 5. Among the terms and conditions of said agreement between Lindmont Apartments Inc. and Southeastern Construction Company were the following: `Article 9. Unless otherwise stipulated, the contractor shall provide and pay for all materials, labor, water, tools, equipment, light, power, transportation, and other facilities necessary for the completion of the work. Article 30. Guaranty Bonds. The owner shall have the right, prior to the signing of the contract, to require the contractor to furnish bond covering the faithful performance of the contract and the payment of all obligations arising thereunder, in such form as the owner may prescribe and with such sureties as he may approve. If such bond is required by instructions given previous to the submission of bids, the premium shall be paid by the contractor; if subsequent thereto, it shall be paid by the owner.' 6. Pursuant to said agreement between Lindmont Apartments Inc. and Southeastern Construction Company, the Southeastern Construction Company did sublet a subcontract for a portion of the work which it undertook, to defendant, J. L. Smith. A copy of said subcontract between Southeastern Construction Company and J. L. Smith is hereto attached, marked Exhibit `A', and made a part of this petition and paragraph by reference. 7. Among the conditions of the said subcontract was the following: `The subcontractor shall furnish the contractor with a payment and a completion bond written by a company acceptable to the contractor. This bond shall be in the full amount of the subcontractor.' 8. Pursuant to the provision of the subcontract set out in paragraph 7 above, the defendants did, on October 30, 1947, execute their bond running to, and in favor of, Southeastern Construction Company, guaranteeing performance by said J. L. Smith of his agreement with the said Southeastern Construction Company. A copy of said bond is hereto attached, marked Exhibit `B', and made a part of this petition and paragraph by reference. 9. According to the terms of the subcontract, defendant J. L. Smith was obligated to pay for certain items of equipment and material used in the work which he obligated himself to perform. 10. At the special instance and request of defendant J. L. Smith, Gill Equipment Company did furnish certain materials and parts which enabled the said J. L. Smith to perform the work in compliance with his subcontract. Gill Equipment Company sold the said J. L. Smith certain parts priced at $2,396.63, and rented the said Smith certain equipment. The rental price therefor was in the amount of $5,915. In addition, the said Smith is indebted to the Gill Equipment Company in the sum of $583, pursuant to a note executed by the said Smith in favor of Gill Equipment Company dated October 30, 1947, in payment of the rental of certain equipment utilized in the work embraced by the said Smith's subcontract with the Southeastern Construction Company. . . 11. All of said items were furnished the said Smith, and used by him in performing work pursuant to his subcontract with the Southeastern Construction Company. 12. Demand for payment has been refused, said refusal constituting a breach of the subcontract. 13. By virtue of the facts hereinabove alleged, the defendant, J. L. Smith, has failed to well and truly perform all the undertakings, covenants, terms, conditions and agreements of said subcontract. 14. Demand for payment has been made on the defendant, Glens Falls Indemnity Company, and said defendant has refused to recognize its obligation to plaintiff's usee, Gill Equipment Company." The subcontract provided: (a) That the prime contract, and particularly the provisions above mentioned, article 9 and article 30, were a part of the subcontract; (b) that the subcontractor was to furnish all labor, materials, tools and equipment to complete all the work specified under the heading "Clearing, Grubbing, Demolition, and General Grading"; (c) that the subcontractor should furnish the contractor with a payment and a completion bond in the full amount of the subcontract ($38,000); (d) that the subcontractor would be bound to the contractor by the terms of the agreement and general conditions, drawings and specifications of the prime contract, and would assume toward him all the obligations and responsibilities that he, by those documents, assumed toward the owner. The subcontract, section 2, provides: "The subcontractor and the contractor agree that the materials to be furnished and work to be done by the subcontractor are: furnish all labor, materials, tools and equipment required to complete all work specified under the heading `Clearing, Grubbing, Demolition and General Grading' and applicable addenda 1 through 53. Alternate 1 has been accepted by the Owners." The surety filed general demurrers to the petition which were sustained, and plaintiff excepted.
1. The bond sued on is dated October 30, 1947. It guarantees the performance of a subcontract dated October 29, 1947, whereas the subcontract alleged to have been guaranteed by the bond was dated October 10, 1947, and refers to the prime contract dated October 29, 1947 and makes the prime contract a part of the subcontract. The allegations of the petition are accepted as true on demurrer. Under the allegations of the petition the inference is demanded that the bond sued on was given to guarantee the performance of the subcontract dated October 10, 1947, whether there was a mistake in dating or whether it antedated the prime contract of October 29, 1947. Whether the bond actually covered the subcontract dated October 10, 1947 is a matter of evidence showing the intention of the parties. As against a general demurrer the allegations are sufficient to allege that the bond covered the subcontract dated October 10, 1947. See Great American Indemnity Co. of N. Y. v. Horkan, 206 Ga. 451 ( 57 S.E.2d 487).
2. The principal question involved is whether the obligation in the bond sued on runs not only to the sole express obligee, to wit, Southeastern Construction Company, but also to materialmen and laborers furnishing material or labor for the completion of the subcontract. The obligation of the bond is that the principal shall well and truly perform and fulfill all the undertakings, covenants, terms, conditions and agreements of said contract, meaning the subcontract, which is made a part of the bond. The bond, the contract attached thereto, and the parts of the contract between the owner and the principal contractor to which the contract attached to the bond referred, must be construed together. McArthor v. McGilvray, 1 Ga. App. 643 ( 57 S.E. 1058); Pittsburgh Plate Glass Company v. American Surety Co. of N. Y., 66 Ga. App. 805 ( 19 S.E.2d 357). The subcontractor agreed to furnish the contractor with a "payment and completion bond" in the full amount of the contract. It seems to us that the provisions in the subcontract to the effect that the prime contract should become a part of the subcontract and that the subcontractor agreed to assume toward the contractor all the obligations and responsibilities that the contractor, by those documents, assumed toward the owner have the effect of making articles 9 and 30 of the prime contract a part of the subcontract and a part of the bond to the extent of the subcontractor's obligations. The bond guarantees that the contract will be performed, so the obligations of the contract determine the meaning of the bond. Construed together the prime contract and the subcontract obligate the subcontractor to furnish and pay for the labor and materials necessary to complete the subcontract. There is a conflict of authority on the question whether the mere agreement to furnish labor and materials would give materialmen or laborers a right to sue on a bond not specifically indemnifying them, but the weight of authority seems to be that where the contract provides that the labor and material are to be furnished and paid for by the contractor, and the bond is a performance bond, laborers and materialmen may maintain an action on the bond. In the case of Fidelity Deposit Co. of Maryland v. Pittman, 52 Ga. App. 399 ( 183 S.E. 572), this court held the bond to run to laborers and materialmen. The bond was a performance and indemnifying bond but contained a further provision that the contractor "shall pay all persons who have contracts directly with the principal (the subcontractor) for labor or materials." Union Indemnity Co. v. Riley, 169 Ga. 229 ( 150 S.E. 216) is to the same effect. It seems to us that these cases control this case in principle. A performance bond guaranteeing performance of a contract agreeing to furnish and pay for labor and materials as effectively runs to laborers and materialmen as does a bond indemnifying a named obligee against loss and also guaranteeing that the contractor would pay laborers and materialmen, especially if it is a bond complying with a contract to furnish a payment bond, which could have but one purpose and that is to guarantee the payment of laborers and materialmen. We can see no distinction between an agreement to furnish and pay for labor and materials and one agreeing to pay laborers and materialmen for the labor and material they furnish. Payment could only be made to the ones who furnished the labor and materials. We have not been cited nor have we found a Georgia case directly in point. The following cases from other jurisdictions are substantially in accord with the foregoing reasoning, though there may be others to the contrary: Orinoco Bldg. Supply Co. v. Shaw Bros. Lumber Co., 160 N.C. 428 ( 76 S.E. 273, 42 L.R.A. (N.S.) 707); Greenfield Lumber Ice Co. v. Parker, 159 Ind. 571 ( 66 N.E. 747); Knight Jillson Co. v. Castle, 172 Ind. 97 ( 87 N.E. 976); Pennsylvania Supply Co. v. National Casualty Co., 152 Pa. Super. 217 ( 31 A.2d, 453); Pacific States Electric Co. v. U.S. F. G., 109 Cal. 691 ( 293 P. 812); Bristol Steel Iron Wks. v. Plank, 163 Va. 819 ( 178 S.E. 58); 77 A.L.R. 21; 118 A.L.R. 57.
To come to this conclusion is not to give a liberal construction to the suretyship contract. We arrive at the construction by a common sense and logical consideration of the plain meaning and terms of the bond and contracts which form a part of it. The bond and contracts in this case mean the same thing as those in the two Georgia cases first cited on this question, the Pittman and Riley cases. Defendant in error insists that the following Georgia cases are controlling: American Surety Co. v. Small Quarries, 157 Ga. 33 ( 120 S.E. 617), American Surety Co. v. Bibb County, 162 Ga. 388 ( 134 S.E. 100), AEtna Casualty Ins. Co. v. Leathers, 33 Ga. App. 444 ( 126 S.E. 881), United States Supply Co. v. U.S. F. G. Co., 32 Ga. App. 472 ( 123 S.E. 907), Mass. Bonding Co. v. Hoffman, 34 Ga. App. 565 ( 130 S.E. 375), and Durden v. American Surety Co., 40 Ga. App. 705 ( 151 S.E. 408). The answer to this contention is that the court in American Surety Co. v. Bibb County, supra, construed the bond in that case as one indemnifying the named obligee from certain losses, and one of those losses was "for the payment, as they become due, of all just claims for . . materials furnished by persons under and for the purpose of said contract." The court held that such an obligation ran to the obligee alone. There was no obligation in that case either in the contract or bond obligating the contractor to furnish and pay for labor and materials so as to make the bond cover a breach of such an obligation, as in the instant case. To state the matter another way, in the Bibb County case the court treated the provision relative to payments for labor and material as an integral part of the agreement to indemnify the obligee against loss and did not treat such provision as a separate undertaking of the surety. This covers all the cases relied on by the defendant in error except that of Durden v. American Surety Co., supra, which is contrary to Union Indemnity Co. v. Riley, supra. The bond in the instant case undertakes to guarantee performance of the contracts referred to therein, which includes the obligation to pay laborers and materialmen, and runs to them as well as to the named obligee. If such was not the intention of the surety it would be very easy to so provide in the bond as was done in Mass. Bonding Co. v. Hoffman, 34 Ga. App. 565 (supra), and Hannah v. Lovelace-Young Lumber Co., 159 Ga. 856 ( 127 S.E. 225).
The court erred in sustaining the general demurrer to the petition.
Judgment reversed. Sutton, C.J., MacIntyre, P.J., and Gardner, Townsend, and Worrill, JJ., concur.