Case Title: MITCHELL v DAVIS GREAT FALLS

Citation: 

Docket Number: 

State: montana

Court: Montana Supreme Court

Date: 1973-05-16T00:00:00Z

Document:
No. 12352 I N T H E SUPREME C O U R T O F THE STATE O F M O N T A N A 1973 C. E. MITCHELL AND SONS, P l a i n t i f f and Respondent, -vs - D E L M A R DAVIS and CITY OF GRFAT FALLS, Defendants and Appellants. Appeal from: D i s t r i c t Court of t h e Eighth J u d i c i a l D i s t r i c t , Honorable Paul G. Hatfield, Judge presiding. Counsel of Record: For Appellants : Burton and Coder, Great F a l l s , Montana. Howard C. Burton argued, Great F a l l s , Montana. For Respondent : E. F. G i a n o t t i argued, Great F a l l s , Montana. Submitted: April 26, 1973 Decided : MAY 1 6 1973 M r . Justice Frank I . Haswell delivered the Opinion of the Court. This appeal i s from a judgment of the d i s t r i c t court of Cascade County, sitting without a jury, finding an indebtedness owed to plaintiff by defendant City of Great Falls in the amount of $618.52 with interest and costs. The case involves payments due for various materials, labor and equipment furnished by plaintiff to Delmar Davis, a contractor, engaged by the City of Great Falls to enlarge and make improvements on the municipal go1 f course. The City of Great Fa1 1s appeals from the judgment. On July 29, 1963, the City of Great Falls entered into a written contract w i t h Davis for the construction of improvements to the municipal golf course. Rursuant t o the provisions of the written contract Davis fur- nished the City a performance bond. The surety was General Insurance Com- pany of America with D o n J . Morrison of Rainbow Electric Company, Great Falls, Montana, as indemnitor. Davis, i n the course of construction, hired E d Mitchell t o supervise the job and authorized him t o secure the necessary equipment and materials. Mitchell hired some equipment from plaintiff C. E. Mitchell & Sons, charged some materials t o plaintiff, and made a $4.00 phone c a l l . W h e n plaintiff was not paid i t sent a statement t o the City for $771.68, representing the above i tems plus interest and service charges. Subsequently, Davis did some work for plaintiff reducing the b i l l . Thereafter plaintiff submitted an adjusted claim to the City for $618.52. Other subcontractors of Davis submitted notice of their claims t o the City in accordance with section 6-401 e t seq., R.C.M. 1947. After the project was completed the City made full payment t o Morrison as the indemnitor for Davis. Morrison, in return, made payment t o a l l of the subcontractors submitting their notices of claim w i t h the exception of plaintiff and one other subcontractor. A s a result of nonpayment, plain- t i f f subsequently filed this action against the City and Davis on June 30, 1965. Default was taken against Davis thereafter b u t the case was not pros- ecuted to judgment a t that time. Thereafter Davis was declared a bankrupt and the claims of plaintiff were included i n the bankruptcy. This cause f i n a l l y came on f o r t r i a l on May 8, 1972; judgment was awarded t o p l a i n t i f f against the City f o r $618.52. The City now appeals. The underlying issue upon t h i s appeal i s whether a materialman o r supplier o f a contractor who has a p u b l i c works c o n t r a c t w i t h the City may hold the m u n i c i p a l i t y l i a b l e f o r materials and supplies not paid f o r by t h e contractor b u t used i n the performance o f the contract. The d i s t r i c t c o u r t held the City l i a b l e t o the materialman. W e reverse. The City has no d i r e c t l i a b i l i t y t o subcontractors, laborers, materialmen and suppliers f o r work performed o r materials supplied i n the performance o f a p u b l i c works contract where a bond has been posted as r e - quired by statute. Section 6-401 e t seq., R.C.M. 1947. There was no p r i v i t y between the City and p l a i n t i f f t o permit recovery against the City. The proper remedy f o r the p l a i n t i f f was t o proceed on the p u b l i c works bond. P r i o r t o the adoption o f section 6-401 e t seq., R.C.M. 1947, Montana followed the m i n o r i t y view which required an i n t e n t t o b e n e f i t t h e t h i r d p a r t y beneficiary and a consideration passing from the beneficiary t o the promisee i n order f o r a t h i r d p a r t y t o sue. I n a 1927 case, Osborne v. United States, 17 F.2d 246 ( 9 t h Cir.), the federal court i n t e r p r e t i n g Montana's law regarding the r i g h t s o f t h i r d p a r t y b e n e f i c i a r i e s denied a supplier the r i g h t t o maintain an action against the surety. See a l s o Tatem v. Eglanol Mining Co., 45 Mont. 367, 123 P. 28. The b e l i e f then was t h a t a moral n o t a 1 egal obl i gation existed between the subcontractor (suppl i e r ) and surety. McDonald v. American Nat. B'k, 25 Mont. 456, 65 P. 896. I n 1931 section 6-401 e t seq., R.C.M. 1947, was enacted r e q u i r i n g the contractor f o r a m u n i c i p a l i t y t o f u r n i s h a performance and payment bond. The purpose o f the s t a t u t e i s t o p r o t e c t laborers and materialmen who supply contractors working on s t a t e o r municipal projects (Bower v. Tebbs, 132 Mont. 146, 314 P.2d 731) by g i v i n g them " * * * the same r i g h t under the provisions of such bond as if such work, services, provender, provisions, suppl ies or material , was furnished to the original contractor * * *. " (Section 6-401, R.C.M. 1947, supra), thus insuring a third party's right of action against the surety. United States v, Reliance Insurance Co. of Philadelphia, Pa., 227 F.Supp. 939 (1 964). As a general rule, a performance bond on a public works contract is for the benefit and protection of the municipality. 63 C.J.S. Municipal Corporations, § 1172, p. 859. The municipality is not liable to a person who has furnished materials to a contractor for a public works project un- less provided by statute. 63 C.J.S. Municipal Corporations, § 1215, p. 942. Section 6-401 et seq., R.C.M. 1947 allows a materialman who has supplied a subcontractor a direct action against the original or general contractor and surety; but it does not establish a claim or right of action against the City. Treasure State Industries v, Leigland, 151 Mont. 288, 443 P.2d 22; United States v. Reliance Insurance Co. of Philadelphia, Pa., supra. For these reasons the judgment of the district court is reversed and the case dismissed. Associate justice Hon. ~lfrddp. Coate, District Judge, sitting in"p1ace of Mr. Justice John C. Harrison.