Northwestern Bridge & Iron Co. v. Maryland Casualty Co.

The following opinion was filed April 6, 1920: Rosenberry, J. The defendant makes three principal contentions: First, that the plaintiff is an assignee and stands in the shoes of Phillips and has no greater right to recover from the surety on the bond than Phillips, the contractor, would have had. Second, that neither the bond nor contract contains any express agreement that Phillips, the contractor, will pay the claims of laborers, materialmen, or subcontractors. Third, that the plaintiff having brought suit in its own name against the city of Waukesha and Phillips without joining the defendant, and having caused the city of Waukesha in such action to pay the balance of the contract price in full, any rights reserved under the contract between Phillips and the city in favor of, or for the protection of, subcontractors and materialmen are waived and satisfied. It is the contention of the defendant that the plaintiff did [530] not agree to do the work itself, but agreed to furnish the moneys necessary to pay for the labor and material; that it assumed arid agreed to carry out the contract between Phillips and the city; that this agreement in effect placed it in the shoes of Phillips, the contractor, and the plaintiff, therefore, could not be a subcontractor or materialman within the meaning ,of thqse terms as used in the contract between the city and the contractor. It appeared without dispute that the local agent of the defendant attempted to procure the city’s consent to the substitution of the plaintiff for Phillips as principal contractor. The city consistently refused to consent to said substitution, in the absence of which it must be held that Phillips remained liable to the city, and the plaintiff was a subcontractor under Phillips, bound by its contract to furnish the materials and labor which Phillips had agreed to furnish in his contract with the city. Plaintiff’s agreement to complete the contract was nothing more than an agreement to furnish the labor and material still due from the contractor. The second and more serious contention of the appellant is that the bond upon which it was a surety contained no clause by which the surety expressly agreed to pay subcontractors and materialmen. The material part of the bond was as follows: “Now, therefore, the conditions of this obligation are such that if the said C. IT. Phillips shall' faithfully perform the terms of said contract and specifications on- his part to be performed, then this obligation to.be void, otherwise to remain in full force and effect.” ,. , In addition to the language set out in the statement of facts, the specifications also contain the following clause under the heading Estimates: “These estimates will amount to at least seventy-five per cent, of the value -of the completed work, provided that the contractor has paid for his materials and labor performed under the previous payment, and provided that substantial progress is being made on the work.” [531] The trial court found that by reason of these agreements Phillips expressly agreed to pay and settle the claims of all third persons who might furnish material or labor going into the work. The appellant’s contention is that the language used is not sufficient to show a clear intent on the part of the contractor to become liable to third persons, and therefore that the case is ruled by Electric A. Co. v. U. S. F. & G. Co. 110 Wis. 434, 85 N. W. 648, and Yawkey-Crowley L. Co. v. De Longe, 157 Wis. 390, 147 N. W. 334. The language of the contract is that the contractor shall furnish satisfactory evidence “That all claims of all persons . . . have been fully settled.” The language in New York C. J. F. Co. v. Kenosha, 167 Wis. 371, 167 N. W. 451, is that the city shall be satisfied “that all claims and demands against the plaintiff herein by any subcontractor for work performed or material furnished in the erection and construction of said filtration plant were paid.” ' We think this case is ruled by the Kenosha Case. “Fully settled” means paid and discharged. As was said in Builders L. & S. Co. v. Chicago B. & S. Co. 167 Wis. 167, 166 N. W. 320, if these clauses are not inserted for the benefit of laborers and materialmen, why are they inserted at all ? The contractor agrees to furnish and pay for all the labor and material going into the completed structure. He does not carry out his contract until he has done so. The trial court was right in holding that it was the intention of the parties to the contract to protect third parties who might furnish material or labor going into the work, by insuring payment of their claims, and that the defendant, by the language of its undertaking, became liable in the’event of the contractor’s default in that respect. The appellant further contends that the suit brought by the plaintiff against the city and Phillips to determine the amount due, and the subsequent application of the moneys in the hands of the city under the mandate of the judgment, [532] constituted a waiver and satisfaction of all rights under the contract, and that under the rule laid down in Electric A. Co. v. U. S. F. & G. Co. 110 Wis. 434, 85 N. W. 648, the contractor was relieved from further performance under that clause of the contract which required him to furnish satisfactory evidence that all claims had been fully settled. In the Electric A. Co. Case payment by the city was voluntary and in defiance of the expressed terms of the contract, and it is pointed out that there was no express agreement for the benefit of third parties. In this case, on the contrary, the common council adopted a resolution directing that no payments be made until satisfactory evidence should be furnished of the payment of claims for labor and material. In its answer in the suit the city set up its willingness to pay as soon as such evidence was furnished. Under these facts no inference of waiver arises, nor can the action of the city in paying the money in response to the judgment of the court be said to be voluntary. Our conclusions make consideration of other questions raised unnecessary. By the Court. — Judgment affirmed. A motion for a rehearing was denied, with $25 costs, on June 1, 1920.