No. 12352 INTHE SUPREME COURT OF THE STATE OF MONTANA 1973

C. E. MITCHELL 

### AND SONS, Plaintiff and Respondent,


### -vs

# - DELMAR DAVIS and CITY OF GRFAT FALLS, Defendants and Appellants.
Appeal from: District Court of the Eighth Judicial District, Honorable Paul G. Hatfield, Judge presiding. Counsel of Record: For Appellants : Burton and Coder, Great Falls, Montana. Howard C. Burton argued, Great Falls, Montana. For Respondent : E. F. Gianotti argued, Great Falls, Montana.

Submitted: April 26, 1973 Decided : 

### MAY

## 161973

### Mr. Justice Frank I. Haswell delivered the Opinion of the Court. This appeal isfrom ajudgment of the district 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 go1f course. The City of Great Fa11s appeals from thejudgment. 

### On July 29, 1963, the City of Great Falls entered into a written contractwith Davis for the construction of improvements to the municipal golf course. Rursuant to the provisions of the written contract Davis furnished the City a performance bond. The surety was General Insurance Company of America with Don J. Morrison of Rainbow Electric Company, Great Falls, Montana, as indemnitor. Davis, 

### inthe course of construction, hired Ed Mitchell to supervise thejob and authorized him 

### to secure the necessary equipment and materials. Mitchell hired some equipment from plaintiff C. E. Mitchell & Sons, charged
some materials 

### toplaintiff, and made a $4.00 phone call. When plaintiff was not paid itsent a statement to the City for $771.68, representing the above items plus interest and service charges. Subsequently, Davis did some work for plaintiff reducing the bill. Thereafter plaintiff submitted an adjusted claim to the City for $618.52. Other subcontractors of Davis submitted notice of their claims 

### to the City in accordance with section 6-401 etseq., R.C.M. 1947. After the project was completed the Citymade full payment to Morrison as the indemnitor for Davis. Morrison, in return, made payment to all of the subcontractors submitting their notices of claim with the exception of plaintiff and one other subcontractor. 

### As a result of nonpayment, plaintiff subsequently filed this action against the City and Davis on June 30, 1965. Default was taken against Davis thereafter but the case was not prosecuted tojudgment atthat time. Thereafter Davis was declared a bankrupt and the claims of plaintiff were included inthe bankruptcy. This causefinally came on for trial on May 8, 1972; judgment was awarded to plaintiff against the City for $618.52. The City now appeals. The underlying issue upon this appeal iswhether a materialman or supplier of a contractor who has a publicworks contractwith the City may hold the municipality liablefor materials and supplies not paid for by the contractor butused inthe performance of the contract. The district court held the City liabletothe materialman. We reverse. The City has no direct liabilityto subcontractors, laborers, materialmen and suppliers forwork performed or materials supplied inthe performance of a publicworks contract where a bond has been posted as required by statute. Section 6-401 et seq., R.C.M. 1947. There was no privity between the City and plaintiff to permit recovery against the City. The proper remedy for the plaintiffwas to proceed on the publicworks bond. Prior tothe adoption of section 6-401 etseq., R.C.M. 1947, Montana followed the minorityview which requiredan intent to benefitthe third party beneficiary and a consideration passing from the beneficiary tothe promisee inorder for a third party to sue. Ina 1927 case, Osborne
v. United States, 17 F.2d 246 (9th Cir.), the federal court interpreting Montana's law regarding the rights ofthird party beneficiariesdenied a supplier the righttomaintain an action against the surety. See also Tatem
v. Eglanol Mining Co., 45 Mont. 367, 123 P. 28. The belief then was that a moral not a 1 egal obli gation existed between the subcontractor (supplier) and surety. McDonald v. American Nat. B'k, 25 Mont. 456, 65 P. 896. In1931 section 6-401 etseq., R.C.M. 1947, was enacted requiring the contractor for a municipality tofurnisha performance and payment bond. The purpose ofthe statute isto protect laborers and materialmen who supply contractors working on stateor municipal projects (Bower v. Tebbs, 132 Mont. 146, 314 P.2d 731) by giving them 

### " 

## * * * the same rightunder the provisions

### of such bond as if such work, services,provender, provisions, suppl ies
ormaterial

## ,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 InsuranceCo. of Philadelphia, Pa., 227 F.Supp. 939 

### (1964). As a general rule, a performance bond on a public works contract is for the benefit and protection of the municipality. 63C.J.S. Municipal Corporations, § 

### 1172,p. 859. Themunicipality is not liable to a person who has furnished materials to a contractor for a public works project unless provided by statute. 63C.J.S. Municipal Corporations, § 

### 1215,p. 942. Section 6-401 et seq., R.C.M. 1947 allows amaterialmanwho has supplied a subcontractora 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 InsuranceCo. of Philadelphia,Pa., supra. For these reasons the judgment of the district court is reversed and 

### the case dismissed.

Associate justice

Hon. ~lfrddp. Coate,DistrictJudge, sitting in"p1aceof Mr. Justice John C. Harrison.