NO. 82-147 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1983 

PIONEER CONCRETE & FUEL, INC., 

a corporation, 

Plaintiff and Respondent, 

vs. 

APEX CONSTRUCTION, INC., a 

corporation; and UNITED PACIFIC 

INSURANCE COMPANY, a corporation, 

Defendants, Third-Party Plaintiffs 

and Appellant, 

VS. 

DARRELL BIRDSBILL, d/b/a 

BIRDSBILL CEMENT CONTRACTOR, 

Third-Party Defendant & CrossAppellant. 

Appeal from: District Court of the Second Judicial District, 

In and for the County of Silver Bow 

Honorable Arnold Olsen, Judge presiding. 

Counsel of Record: 

For Defendants, Third-Party Plaintiff and Appellant: 

Gough, Shanahan, Johnson & Waterman, Helena, Montana 

Ronald F. Waterman argued, Helena, Montana 

For Third Party Defendant and Cross-Appellant: 

Joseph C. Engel 111, argued, Butte, Montana 

For Plaintiff and Respondent: 

Corette, Smith, Pohlman & Allen, Butte, Montana 

Kendrick Smith argued, Butte, Montana 

Submitted: April 71 1983 

Decided: June 16, 1983 

~iled: JUN 1 6 1983 

--- - - Clerk 
Mr. Justice Fred J. Weber delivered the Opinion of the Court. 

United Pacific Insurance Company (United) appeals from a 

January 8, 1980, judgment in the District Court of Silver Bow 

County in the amount of $17,532.93 in favor of Pioneer 

Concrete & Fuel, Inc., (Pioneer) against Apex Construction, 

Inc. , (Apex) , a public works subcontractor. In that 

judgment, the Court found that United, the bonding company 

for the subcontractor, was fully obligated for any 

indebtedness of Apex. Darrell Birdsbill, d/b/a Birdsbill 

Cement Contractor (Birdsbill), subcontractor of Apex, appeals 

from a judgment of December 22, 1981 in favor of Apex against 

Birdsbill in the amount of $13,921.04, and in favor of United 

against Birdsbill in the amount of $17,532.92. We affirm the 

judgments of the District Court with the exception that we 

modify the judgment against Apex so that United is held 

jointly liable to Pioneer and modify the judgment against 

Birdsbill so that it grants judgment in the alternative 

against Apex or United in the amount of $13,921.04. 

The issues presented: 

1. Whether United is liable to Pioneer, supplier of 

materials to subcontractor Apex, under subcontract bonds 

issued by United in behalf of Apex under two municipal 

contracts for street and storm sewer improvements in Butte? 

2. In the absence of liability on the part of United 

under the wording of the subcontract bonds issued in behalf 

of Apex as subcontractor, can the judgment of the District 

Court be affirmed on a theory of equitable responsibility of 

United for the Apex obligation? 

3. Is there substantial evidence sufficient to require 

affirmance of the judgment against Birdsbill? 
4. In the event that the judgment against Birdsbill is 

affirmed, should the judgment in behalf of United be reduced 

to the same amount as the judgment in behalf of Apex? 

The facts disclose that Jim Gilman Excavating, Inc. 

(Gilman) entered into two contracts for street and storm 

sewer improvements in the city of Butte with Butte-Silver 

Bow, a municipal corporation. The Bellevue Project was 

contracted in April 1978, and the Farragut Project was 

contracted in August 1978. As general contractor, Gilman 

provided performance bonds which are not at issue in this 

case. 

In May 1978, Gilman hired Apex to perform curb, gutter, 

sidewalk and driveway work on the Bellevue Project and in 

September 1978 again hired Apex to perform similar work on 

the Farragut Project. 

In turn, Apex subcontracted a portion of its work to 

Birdsbill for handfinishing sidewalks, driveway and curbs on 

the Bellevue Project in June 1978 and in October 1978 on the 

Farragut Project. 

On each project, Apex furnished to Gilman a Subcontract 

Bond in identical form, which provided that Apex and United 

were bound to Gilman for the amount of the subcontracts, with 

reference to the two contracts between Gilman and 

Butte-Silver Bow. The bonds further provided: 

"NOW, THEREFORE, THE CONDITION OF THIS OBLIGATION 

IS SUCH, That, if the above bounden Principal shall 

faithfully perform the work contracted to be done 

under said Subcontract, and shall idemnify the Said 

Obligee against all loss or damage which obligee 

may sustain by reason of the failure of said 

Principal to pay claims for labor, services or 

materials, furnished and used or consumed directly 

in connection with the performance of such 

Subcontract, then this obligation shall be void; 

otherwise it shall remain in full force and effect. 

PROVIDED, HOWEVER, notwithstanding anything in said 

Subcontract to the contrary, this bond is one of 

idemnity only and does not inure to the benefit of 
or confer any right of action upon any person other 

than the named Obligee." 

The contracts between Apex and Gilman were on a Standard 

Subcontract Agreement form prepared by the Associated General 

Contractors of America. Regarding the payment by Apex for 

materials and labor, both contracts provided: 

"That the Subcontractor shall: 

" (3) Pay for all materials and labor used in or in 

connection with, the performance of this contract, 

through the period covered by previous payments 

received from the Contractor, and furnish 

satisfactory evidence when requested by the 

Contractor, to verify compliance with the above 

requirements." 

Trying the case without a jury, the District Court found 

in its findings of fact that Pioneer had furnished ready mix 

concrete, cement, sand and curing compound to Apex on both 

the Bellevue and Farragut Projects. The Court further found 

that the total of the claims for such materials on the two 

projects was $30,244.84, and that Apex had paid $12,711.91, 

leaving a balance owing from Apex to Pioneer of $17,532.93. 

The District Court further found that United was obligated 

fully under its subcontractor bonds. Judgment was decreed in 

the amount of $17,532.93. 

In the same cause, Apex and United had sued Birdsbill as 

a third party defendant. Initially default judgment was 

entered against Birdsbill. Subsequently the default was set 

aside and the third party portion of the action went to trial 

before the District Court without a jury. The District Court 

found that $3,611.88 was owing by Apex to Birdsbill which was 

to be offset against the debt owing from Birdsbill to Apex in 

the amount of $17,532.92. The District Court therefore 

concluded that the net amount owed by Birdsbill to Apex was 

$13,921.04 and entered judgment accordingly. As to United, 
the District Court concluded that the offset of $3,611.88 was 

not properly to be allowed, and therefore entered judgment in 

the full amount of $17,532.92. 

The first issue is whether United is liable to Pioneer, 

supplier of materials to Apex, a subcontractor, under 

subcontract bonds issued by United in behalf of Apex. This 

issue must be determined by a careful analysis of the wording 

in both subcontract bonds, which are identical in substance. 

Pioneer contends that the interpretation required is 

similar to the bond interpretation made by this Court in Carl 

Weissman & Sons, Inc. v. St. Paul ire & M. Ins. Co. (1968) , 

152 Mont. 291, 448 P.2d 740. In contrast, United contends 

that the bond interpretation must be construed in accordance 

with Treasure State Industries Inc. v. Welch (1977), 173 

Mont. 403, 567 P.2d 947. We find these cases to be 

controlling, and conclude that Treasure State Industries 

requires a conclusion for United. 

A comparison of the bonds and underlying subcontracts in 

Weissman, Treasure State Industries and this case discloses 

significant differences. As pointed out in 

Treasure State Industries, 173 Mont. at 406, 567 P.2d at 949: 

"We feel Weissman can be distinguished on the 

facts. In Weissman the surety bond and the 

contract contained an express provision to pay 

materialmen. The bond in the instant case 

contained no such provision. In Weissman the 

surety bond contained no condition of 

indemnification of the named obligee. The 

subcontract in Weissman did not contain a special 

provision whereby the subcontractor agreed to 

indemnify the contractor." 

The Court in Treasure State Industries then pointed out that 

although the surety bond and the underlying contract must be 

read together, the surety's obligations are not coextensive 
with the obligation of the underlying contract. The Court 

stated at 173 Mont. 407-08, 567 P.2d 949-50: 

"This Court made special note of the fact that, 

unless a promise of the principal is contained in 

the underlying contract was also specifically 

mentioned or made a condition in the surety bond, 

the surety would not have obligations coextensive 

with and measured by the promises of the principal 

in the underlying contract. In the instant case, 

even though there exists a promise on the part of 

Welch in the subcontract to pay all materialmen, 

there was no condition in Aetna's bond which would 

make this obligation on the part of Welch 

coextensive with the obligations of Aetna. 

"This decision further supports the rule that the 

mere fact the underlying subcontract of Welch 

contained a promise to pay all materialmen in no 

way creates an obligation on the part of Aetna, the 

surety, unless the bond itself contains a similar 

promise to pay the materialmen. 'I (emphasis added. ) 

As pointed out in Treasure State Industries, the subcontract 

bond in Weissman obligated the principal to pay the claims of 

all persons furnishing materials and did not have a provision 

indemnifying the principal contractor. In contrast, the 

underlying subcontract in Treasure State Industries required 

payment of materialmen by the subcontractor, but the bond 

itself did not contain a direct promise to pay for any 

materials. Instead, the Treasure State Industries bond 

contained an obligation of Aetna to indemnify the principal 

contractor. As previously quoted, the subcontract bond in 

the present case states, in a manner similar in substance to 

Treasure State Industries, that Apex shall indemnify Gilman 

against all loss which Gilman may sustain by reason of the 

failure of Apex to pay claims for materials furnished. It 

further expressly provides that the bond is one of indemnity 

only and does not inure to the benefit of any person other 

than Gilman. 

Based upon Treasure State Industries, we therefore 

conclude that the provisions in the Apex subcontract bonds 
provide for indemnification of Gilman only and therefore 

evidence an intent to protect Gilman and not Pioneer, the 

materialman. As a result, under the express wording of the 

subcontract bonds, Pioneer has no right of action against 

United on the subcontract bonds, and therefore cannot recover 

as a matter of contract law under the bonds themselves. 

11. 

The second issue is whether, in the absence of liability 

on the part of United under the wording of Apex's subcontract 

bonds, the judgment of the District Court can be affirmed on 

a theory of equitable responsibility of United for the Apex 

obligation. 

Notwithstanding our analysis of the contract language of 

the subcontract bonds, a review of the facts discloses 

equitable considerations which are controlling in a manner 

similar to that in Weissman. 

We therefore set forth a summarized chronology of facts 

to emphasize their significant relationship to one another: 

7/17/78. Apex officers and wives executed a continuing 

Agreement of Indemnity to indemnify United from all loss and 

expense incident to the bonding of Apex Construction, Inc. 

2/5/79. Pioneer, an unpaid materialman, sued Apex and 

United for supplies furnished. Defendants, Apex and United, 

were represented by the same attorneys. 

1/8/80. Judgment for Pioneer against Apex and United in 

the amount of $17,532.93. 

2/7/80. Defendants Apex and United filed notice of 

appeal of the Pioneer judgment. 

2/16/80. Meeting between attorneys for United and Apex 

about Apex's financial problems. Agreement reached that 

United would advance $120,000.00 to pay bonded claims in 

exchange for the Cricks' (officers and stockholders of Apex) 
agreement to assign personal as well as corporate assets to 

United. 

4/18/80. Assignment from Apex to United of five claims 

by Apex amounting to over $28,000.00. On same date, an order 

was entered dismissing Apex with prejudice from the Supreme 

Court appeal, based on Apex's lack of assets. 

11/1/80. Assignment from Apex, the Cricks and their 

wives, agreeing to forward future proceeds received by Apex 

to United, to reimburse United for all disbursements made by 

United on Apex's behalf, setting forth a monthly payment 

schedule by each of three Cricks in a cumulative amount of 

approximately $400.00 per month, and providing that after 

Apex contract claims and litigation are resolved, the three 

Cricks would apportion the final accounting of United debts 

between them in specified percentages. In addition, a 

security interest was granted by Apex to United in the 

promissory note payable by James Crick, Jr. for $30,294.58. 

Mortgages were also given by the Cricks on various real 

properties individually owned by them. 

In summary, the facts show that United initially joined 

with Apex in the trial of the principal case and paid the 

expenses and attorney fees. Both United and Apex then joined 

as cross-plaintiffs in suing Birdsbill. United also joined 

Apex in the appeal. Next United's attorneys secured 

dismissal with prejudice of the Apex appeal, resulting in an 

outstanding judgment of the District Court against Apex in 

the amount of $17,532.92. That judgment was rendered 

ineffective by a transfer of all assets from Apex. The 

original transfer of assets from Apex to United was later 

enhanced by the personal promises of the three Cricks to 

reimburse United on a monthly payment schedule for all the 

liabilities of Apex ultimately paid by United. 
The effect of the actions of the Cricks, as officers and 

stockholders of Apex, clearly indicates their desire to see 

that the obligations of Apex were to be paid by United and 

that United be reimbursed. While we are not suggesting that 

the transfers were made for the purpose of defrauding 

creditors, it is apparent that the effect of all of the steps 

taken eliminated the capacity of Apex to pay the outstanding 

judgment against it, thereby rendering valueless the judgment 

by Pioneer against Apex. In addition to the Apex transfer of 

assets, the individual Cricks agreed to reimburse United for 

amounts paid in Apex's behalf. We therefore conclude, under 

basic equitable principles, that United is responsible for 

the Apex judgment. 

The third issue is whether there is substantial evidence 

sufficient to require an affirmance of the judgment against 

Birdsbill. The basic question raised by Birdsbill is whether 

or not there are sufficient facts to affirm the judgment of 

the District Court against Birdsbill. In reviewing the 

evidence, this Court has set forth the following sta.ndard in 

Walsh v. Ellingson Agency (1980), Mont. , 613 P.2d 

1381, 1384, 37 St.Rep. 1269, 1273: 

"With regard to the standard of review, this Court 

has repeatedly stated it will not overturn findings 

of fact and conclusions of law if supported by 

substantial evidence and by the law. ~vidence will 

be viewed in the light most favorable to the 

prevailing party. Rule 52, M.R.Civ.P.; 

Luppold v. Lewis (1977), 172 Mont. 280, 563 P.2d 

538; Morgen & Oswood Construction Co. v. Big Sky 

- of Montana, Inc. (1976), 171 Mont. 268, 557 P.2d 

1017. The judgment of the District Court is 

presumed to be correct and will be upheld unless 

clearly shown to be erroneous; the burden of such 

showing is upon the appellant. Kamp v. ~irst 

National Bank and Trust Co. (1973), 161 Mont. 

103, 504 P.2d 987 

We have reivewed the contentions on the part of Birdsbill and 

the record. Essentially the facts in the record are 
undisputed and clearly constitute substantial evidence 

sufficient to support the findings of fact and conclusions of 

law. Nothing has been shown to be clearly erroneous. We 

therefore affirm the judgment against Birdsbill. 

IV. 

The fourth issue is, in the event that issue three is 

resolved in an affirmance of the judgment, should the 

judgment in behalf of United be reduced to the same amount as 

the judgment in behalf of Apex. In view of our determination 

that United is responsible for the debt of Apex to Pioneer 

and in view of the transfer of all assets to United, we also 

conclude that it is appropriate that Birdsbill be allowed the 

same offset against United as the District Court granted 

against Apex. As we review the wording of the judgment 

against Birdsbill, it appears that Birdsbill could. be 

considered to be responsible for the payment of $13,921.04 to 

Apex and also $17,532.92 to United Pacific. 

We therefore direct the District Court to modify the 

judgment against Birdsbill to provide that Apex and United 

are entitled to recover the sum of $13,921.04 from Birdsbill. 

We also note that the District Court found, in the 

findings of fact of the judgment against Apex, that Apex was 

indebted to Pioneer and that United was fully obligated for 

any indebtedness of Apex. However, no further mention is 

made of United in either the conclusions of law or the order. 

United raises the technical objection that this judgment is, 

therefore, against Apex only. 

In light of the obvious intent of the District Court's 

findings of fact and our conclusions regarding United's 

equitable responsibility for the Apex obligation, we direct 

the District Court to modify the judgment against Apex to 
provide that both Apex and United are liable to Pioneer in 

the sum of $17,532.92. 

We affirm the judgments of the District Court with the 

above-noted exceptions and remand for modification of the 

judgments consistent with th is opi 

We concur: 

n.