William S. PORTER and Standard Accident Insurance Company, Inc., a corporation, Appellants,
V. S. EYER and Alice Eyer, husband and wife, d/b/a Coolidge Sand and Rock Company, Appellees.
Rehearing Denied March 20, 1956.
[80 Ariz. 170] Eugene K. Mangum, Casa Grande, for appellants.
Chas. W. Stokes, Coolidge, for appellees.
The question is here presented whether a suit may be maintained by one who furnishes materials to a sub-contractor, against the prime contractor and his surety where there was no direct contractual relationship between said parties and neither the original contract with the owner nor the performance bond itself expressly provide for the maintenance of such a suit.
The undisputed facts are these: on January 27, 1953, defendant-appellant William S. Porter, a licensed contractor, agreed in writing with O. S. Stapley Company, a corporation, for a consideration of $39,100, to build a shop and display building in Coolidge, Arizona. The contract provided that Porter, the prime contractor, would '* * * furnish all labor, materials * * * for the satisfactory completion * * *', etc., and that he 'agrees to execute a performance bond in the amount of $39,100.' The next day a bond in this latter amount was furnished with the O. S. Stapley Company named as obligee, signed by Porter as principal and Standard Accident Insurance Company, a corporation (defendant-appellant), as surety. This bond incorporates the contract by reference and contains the usual provision guaranteeing full performance of the contract and [80 Ariz. 171] that there will be no failure or default on the part of the principal. Apparently defendant Porter thereafter subcontracted with the Riggs Construction Company to furnish certain materials for said building. The letter company in turn made arrangements with the plaintiffs-appellees, V. S. Eyer, et ux, d.b.a. Coolidge Sand and Rock Company, to supply them with mixed concrete, sand and gravel for this Stapley job. The total amount of Eyer's invoices was $4,827.63. Riggs, before becoming insolvent and taking bankruptcy, made a payment thereon of $2,500, leaving a balance due of $2,327.63. It is not contended that any of such materials were not used in the construction of the Stapley building or that plaintiffs have been fully paid therefor.
Plaintiffs filed no materialman's lien but on October 29, 1953 elected to sue both defendants on said completion bond for the balance claimed due them for materials supplied for said building. Admittedly this bond was given pursuant to the provisions of Chapter 43, S.L. of 1952, adding Section 67-2318a, A.C.A.1939, 1952 Cumulative Supplement. Defendants jointly filed a motion to dismiss on the ground that the complaint failed to state a claim upon which relief could be granted. This motion was denied and thereafter a joint answer was filed, denying any indebtedness to plaintiffs and affirmatively asserting that there was no contractual relationship between plaintiffs and defendants, and that the bond sued upon 'does not run to or for the benefit of plaintiffs'. The case was tried to the court sitting without a jury, whereupon judgment was entered for plaintiffs as prayed for, with interest and costs. Motion for new trial was made and later denied by operation of law. This appeal followed.
A point most strenuously urged for reversal-and the only affirmative defense raised by their answer-is that there is no privity of contract between plaintiffs and defendant Porter. Furthermore, as to the defendant surety, they contend the rule of strictissimi juris applies. The following proposition of law is advanced:
'A bond furnished by one party to a second party cannot be made to run to the benefit of a third party, where such third party is in no wise mentioned or provided for in the said bond.'
Were we limited in our consideration to the contract and bond sued upon this would perhaps be true, because nowhere therein is it spelled out that materialmen are covered by the bond. Generally speaking, in order that a suit be maintainable on a contractor's bond by or for the use of a materialman the bond must be construed so as to include the materialman within its coverage, i. e., to give him some beneficial interest therein. Hence in the instant case if the judgment entered is to be sustained it must be because the following statute, which was
then in force and effect, brought plaintiff within the coverage of the bond. The pertinent part thereof reads as follows:
'67-2318a. Completion bond.-A contractor licensed under the provisions[80 Ariz. 172] of this article shall, on every contract undertaken by him pursuant to the authority of his license and prior to the commencement of work thereon, furnish to the owner or other contracting party:
'1. A surety bond in the amount of the contract, conditioned upon completion of the contract according to its terms and payment of all subcontract labor, and material supplier charges.' Ch. 43, 1952 Session Laws, Arizona, supra. (Emphasis supplied.)
The law is well settled that if a surety makes a contract with the law before him the law enters into and becomes a part of the agreement.
'(Sec. 40(e).) Law as Part of Bond. The law at the time of the execution of a statutory bond is a part of it; if it gives to the bond a certain legal effect, it is as much a part of the bond as if in terms incorporated therein. Where a bond is given under the authority of a statute in force when it is executed, in the absence of anything appearing to show a different intention it will be presumed that the intention of the parties was to execute such a bond as the law required, and such statute constitutes a part of the bond as if incorporated in it, and the bond must be construed in connection with the statute and the construction given to the statute by the courts. Such a bond must be given the effect which in reason must have been intended by the statute. Whatever is included in the bond, and is not required by the law, must be read out of it, and whatever is not expressed, and ought to have been incorporated, must be read as if inserted into it * * *.' 11 C.J.S., Bonds, p. 420.
Southern Surety Co. v. County of Cochise,
27 Ariz. 473, 476, 233 P. 897. See also cases cited in: Annotation-Contractor's Bond-Laborers or Materialmen, 77 A.L.R. 21, particularly Sub. III(d) thereof; supplemented in 118 A.L.R. 57. Cf. Ward v. Johnson,72 Ariz. 213, 232 P.2d 960; American Federation of Labor v. American Sash & Door Co.,67 Ariz. 20, ...