United States ex rel. Vermont Marble Co. v. Burgdorf

Mr. Justice Shepard delivered the opinion of the Court: Whether founded in a superior natural equity or not, the claims of those who furnish labor and materials in the construction of buildings for private owners have for very many years been regarded with special favor by legislatures. The evils resulting from the failures, and sometimes frauds, of contractors and owners were considered so serious and wide-reaching as to require remedy upon considerations of sound public policy; and statutes conferring special rights of lien upon the improved property were generally enacted by the States of the Union, and have been continued in force, with a tendency rather towards the extension of — 519 — their scope. Congress, long since, adopted the same general policy in its legislation for the District of Columbia. This idea of public policy, however, was not stretched to the extent of giving such liens upon public buildings; other important considerations stood in the way. The evils, therefore, that were in part remedied through legislation in respect of private building contracts, remained and increased in proportion with the enormous public works in which the United States are constantly engaged, until the statute hereinabove recited was enacted with the intent to meet and mitigate- them. The obligation of this statute falls directly upon the person to whom a contract shall have been awarded, as a condition precedent to his entry upon its performance. It commands him to execute a bond with, sufficient sureties, conditioned, in addition to the faithful performance of his contract, that he shall promptly make payments to all persons supplying him labor and material in the prosecution of the work provided for therein. The practical effect of the statute is to confer a special lien in favor of such persons and to substitute this bond, in the place of the public building, as the thing upon which that lien is charged. The bond is not, therefore, to be considered as if a special private offer of guaranty by the sureties to particular persons from whom their principal may solicit credit in the procurement of labor and materials, but as the performance of a precedent statutory condition of his contract, intended fdr the benefit of all persons whomsoever, that, relying upon the provisions of the statute, shall have supplied hirfi labor and material in its performance. The bond sued on follows the general terms of the statute and is the execution of its purpose. The sureties are as much bound by its true intent and meaning as the principal who executed it with them, and their liability is to be determined by the same, general rule — 520 — of construction. Fulton v. Fletcher, 12 App. D. C. 1, 17 ; United States v. Maloney, 4 App. D. C. 505, 511. We see no reason why the liability of the sureties in this case should not be governed by the same rule of construction that applies in the assertion of similar liens against the private owners of buildings under the ordinary lien laws, rather than by that which applies in the case of special private bonds, or letters of credit and of commercial guaranty, wherein, especially by the older authorities, sureties have been regarded with especial favor by .the courts, and, in consequence, have had the obligations of such contracts interpreted with the greatest strictness. Nor is there any just reason why greater consideration should be given to the sureties in such bonds than to the private owners of property, who are in no better condition to protect themselves against the defaults of contractors. As a general rule, statutes providing for liens in favor of those furnishing labor and materials used in the construction of buildings have been liberally construed in aid of the suppression of the mischief and the advancement of the remedy. Mining Co. v. Cullins, 104 U. S. 176, 177. It is a reasonable rule of construction of such statutes, creating liabilities that did not before exist, that they are limited to such persons and purposes as come directly, or by necessary implication, within their granting words. And it is in accordance therewith that we have held that the mechanic’s lien law of this District does not extend to the subcontractors of a subcontractor. Leitch v. Hospital 6 App. D. C. 247, 257; Herrell v. Donovan, 7 App. D. C. 322. ’ Applying the same rule to the statute under consideration, it is conceded that the remedy on the bond must be confined to those who supply the labor and materials to the contractor; those supplying his subcontractors are not within its contemplation. Founded on that conclusion, the contention of the ap — 521 — pellees in support of the judgment is, that the condition of the bond can not be extended to contracts for labor and materials other than those made with the principal contractor alone. Their argument is, that the sureties in the bond guaranteed the- performance of Winfree’s contracts only, and that they have the right to stand on the very letter of their guaranty; their liability can not be enlarged by construction; to hold them liable upon the contract of Winfree & Esher would be holding them as guarantors of a contract which the language of the bond does not cover; that the objection goes to the identity of the contract; that the contract between the plaintiff and Winfree & Esher is several as well as joint does not alter the situation, because it is not Winfree’s sole contract; that the sureties were willing to guarantee any contract made by Winfree alone, does not warrant an inference that they were willing to and did guarantee contracts made by him and another; that they might be willing to trust the judgment and capacity of Winfree alone, but not having said that they were willing to trust those of any other person, the court ought not, by inference or construction, to enlarge their undertaking. This contention, we think, is sufficiently answered by what has been said hereinabove in respect of the right rule of construction to be applied in determining the scope of the obligation and liability of the sureties. In consideration of the argument in support of the contention, it may be added, that the question, under the statute, is not one of the guaranty of the performance of any and all subcontracts that the contractor might make concerning labor and materials. The statute does not require any such condition; the condition is, simply, that the contractor “ shall promptly make payments to all persons supplying him labor and materials in the prosecution of the work provided for in such contract ”—that is, his own contract with the United States. The question is: Does the evidence show that the appel — 522 — lant supplied labor and materials to Winfree in the prosecution of his contract, within the true intent and meaning of the statute? It is contended that the appellant is without the protection of the statute, because, by the introduction of Esher, as indicated by the' contract of appellant with Winfree-and Esher, a third party has been interposed between the appellant on one hand, and the original contractor, Winfree, on the other. In other words, Winfree and Esher, as associated in the contract with the appellant, are to be regarded as subcontractors of Winfree in his individual capacity as the principal contractor. To maintain this view of the effect- of the evidence requires, again, too strict and narrow a construction of the statute. It does not appear that Winfree and Esher entered into a regular partnership, but had they done so the partnership could not have taken an assignment of the contract; that was forbidden by lawT. R. S., Sec. 3737. Nor does it appear even that Winfree associated Esher with him in the performance under some agreement for sharing the proceeds, or profits of the contract. This he might have done, as well as let the performance of parts to subcontractors. Hobbs v. McLean, 117 U. S. 567, 576; Manning v. Ellicott, 9 App. D. C. 71, 80. As the case will be remanded for a new trial, and therein additional evidence may be offered, it is proper to say that, whether Winfree and Esher became actual partners, or whatever their relations were, as to each other, in respect of the work and profits of the contract,'is immaterial, in our view of the operation of the statute, upon the facts showing the actual supply of the materials and labor and their entry into the building. Winfree alone was recognized as the contractor, and he was actually, personally engaged in the performance of the contract. Whilst he was so engaged .the labor and mate — 523 — rials were supplied and went into the building in the manner required by the terms of the contract, and as such were received by the United States, and paid for to Winfree. The contract for the supply of the labor and materials was not with the partnership of Winfree and Esher, if any such in fact existed. It was the contract of W. W. Winfree and George 0. Esher by which they became severally as well as jointly bound to the Marble Company. As long then as Winfree remained in the personal performance of this contract, the labor and materials were supplied him upon his individual contract or order, or upon a contract with him and Esher jointly—he remaining severally liable therefor—his independent relations with Esher ought not to affect the rights of those who supplied the labor and materials. Under a fair and liberal construction of the statute they are to be regarded as supplied, nevertheless, to the contractor. As regards the relations thus created between appellant and Winfree, Esher, in respect of appellant’s right under the statute, may be considered in the light of a surety for Winfree and nothing more. So far as we have been able to ascertain, the reports disclose no case where the statute under consideration has received judicial interpretation; and there are but few decided cases that furnish any analogy. These, we think support the conclusion at which we have arrived, and we will discuss them as briefly as possible. The first of these is relied on also by the appellees. Wells v. Mehl, 25 Kansas, 205: The contractor for the construction of a railroad gave a bond required by law as a substitute for a lien upon the road in favor of persons furnishing labor, materials and provisions. The contractor let certain work of construction to a subcontractor. Plaintiff furnished provisions to the subcontractor for the use of his laborers, which remained unpaid for. He sued upon the bond to recover the amount of the debt. The court, in interpreting the statute under — 524 — which the bond had been entered into, said that it contained two purposes: The first to make the sureties liable'for labor and materials of every kind that entered into the road, and second, for provisions that might be furnished to the contractor. Consequently, it was said, that the liability on the bond extended to all persons furnishing such labor and material, no matter how far removed from the original contractor; but for provisions furnished the liability ended with those supplied to the contractor in person, and not to a subcontractor. It was said that the bond had been substituted for the road as the subject-matter for the enforcement of the lien, and that “when it is sought to extend the bond beyond that which enters into and forms a part of the road, there must be, outside and independent of the bond, a personal liability of the contractor.” There is nothing in the reasoning or conclusion in the above case to warrant an inference that recovery would also have been denied the plaintiff had it appeared that instead of expressly subletting the particular work, the contractor had merely associated the party with himself for the purpose by giving him some character of interest. The applied test of the liability of the sureties was the existence of a personal liability on the part of the original contractor for the provisions furnished. The conditions of that test plainly exist in this case; the original contractor is personally and severally liable for the labor and materials supplied, “ outside and independent of the bond.” It was by reason of the existence of a personal liability on the part of the principal contractor, entered into for the purpose .of enabling his subcontractor to obtain materials for the performance of his subcontract, that this court held, in a recent case, that the party who furnished those materials, for the price of which both the party who received them and the contractor who.gave the order upon which they were delivered, were severally liable, was entitled to the enforcement of a lien. Somerville v. Williams, 12 App. D. C. — 525 — 520, 526. By virtue of that personal liability of the contractor, the case was distinguished from those wherein it had been held that the mechanics’ lien law of the District did not extend its benefits to the subcontractor of a'subcontractor. Another case, arising under a mechanics’ lien law, is that of Van Horne v. Van Dyke, 96 Wis. 30, 32. As appears from the opinion in that case, Edmunds & Dietrich had been partners as contractors, but dissolved their partnership September 22, 1894. Prior to that time they had submitted a proposition to Van Dyke for the construction of a house contemplated bj7 him, which had not been accepted. Subsequently to the dissolution of the partnership aforesaid, he entered into a contract with Dietrich individually. Five days thereafter Dietrich and Edmunds re-entered into partnership; but Van Dyke, though requested thereto, expressly refused to modify the contract and. admit Edmunds or the new partnership therein. The partnership, however, prosecuted the work, and in the course of the same Van Horne and others furnished labor and materials upon contracts made with said partnership. The trial court denied the enforcement of the lien. The decree was reversed. Cassidy, 0. J., speaking for the court, said : “ The radical error of the trial court, as it appears to us, consists in holding, in effect, that the firm of Edmunds & Dietrich were not the principal contractors, but subcontractors under Dietrich individually, as the sole and only principal contractor, and hence, that the several appellants were subcontractors of subcontractors. . . . • Within the purview of the statute, we must hold that the firm ofEdmunds & Dietrich were, in equity, and essentially, the principal contractors, notwithstanding the written contract was in the name of only one of the principals of the firm individually.” The last case to which we shall call attention arose on a — 526 — statutory bond given for a different purpose, but its decision turned upon practically the same question to be decided in this case. Kuhn v. Abat, 14 Martin (N. S. 2) 168. Dutillet was a licensed auctioneer, and, as such was required to give bond for the payment of sums received'by him from auction sales. He entered into partnership with one Sagory, and carried on business as Dutillet & Sagory. Plaintiff consigned goods to them for sale, and this suit was brought upon the bond of Dutillet to recover the proceeds. Their defense was the same made here, that they were not liable because their bond was required and entered into as security for the defaults of Dutillet, and not of any partnership of which he might become a member. The defense was overruled. The court said: “It is clear that the goods were placed in the hands of-Dutillet & Sagory to be sold at auction, and that they were thus disposed of. None but persons licensed for that purpose can lawfully sell at auction; therefore if they were properly sold, it must be considered as the act of Dutillet, who alone had authority to make the sale; and the obligation which his sureties contracted in consequence of the privilege granted to him by the Government ought not to be impaired by the circumstance of his having conducted the affairs of his office with the aid of. a partner in the profits, any more than they would be if he had acted by the assistance of a hired clerk.” For the reasons given the judgment will be reversed, with costs to the appellant, and the cause remanded, with directions to set aside the verdict and grant a new trial. Reversed.