Title: Layrite Conc. Pr. of Kennewick, Inc. v. Halvorson, Inc.
Citation: 411 P.2d 405, 68 Wash. 2d 70
Docket Number: 37852
State: Washington
Issuer: Washington Supreme Court
Date: February 24, 1966

68 Wn.2d 70 (1966) 411 P.2d 405 LAYRITE CONCRETE PRODUCTS OF KENNEWICK, INC., Appellant, v. H. HALVORSON, INC., Respondent.[*] No. 37852. The Supreme Court of Washington, Department One. February 24, 1966. Horton &amp; Wilkins, by Hugh B. Horton, for appellant. Palmer, Willis &amp; McArdle, for respondent. COCHRAN, J.[] Appellant (plaintiff) seeks to recover from the respondent (defendant) as a third party beneficiary of a bond furnished by respondent as part of his subcontract in the construction of the Hanford Atomic Project. *71 The facts on which this claim is based are briefly as follows: May 13, 1959, the United States, through the Atomic Energy Commission, contracted with Kaiser Engineers Division of Henry J. Kaiser Company for Kaiser Engineers to construct a nuclear production reactor at Hanford, Washington. Kaiser Engineers was given the right to subcontract with others for the accomplishment of much of the construction. Kaiser did not give a bond to the United States in connection with this contract. On January 27, 1961, Kaiser Engineers entered into a contract with respondent H. Halvorson, Inc., for construction of a portion of the work. Respondent gave a performance bond and a payment bond in connection with its contract with both Kaiser Engineers and the United States as joint obligees. Respondent also had the right to subcontract and, on March 1, 1961, did so with one H.H. Van de Ven, doing business as Keystone Masonry Company, for certain masonry work. This was only one of several subcontracts entered into by respondent. May 16, 1961, Van de Ven contracted with appellant, Layrite Concrete Products of Kennewick, Inc., for the supplying of materials, the value of which is not disputed and which were not paid for by Van de Ven, although respondent had paid Van de Ven in full. The latter's obligation to appellant was later discharged in bankruptcy. The hold harmless clause of the Kaiser-Halvorson subcontract is as follows: The condition of the payment bond, in its entirety, is as follows: [1] It is the position of the appellant that these obligations are for the benefit of the public, and an unequivocal obligation to pay all persons who supply materials. This court, however, over a period of many years, has held to the contrary. This type of obligation looks up, not down. It is for the sole benefit of the joint obligees, the United States and Kaiser Engineers. [A third party may enforce a contract to which he is not in privity only if it is made to appear that the contracting parties intended to "secure to him personally the benefits of the provisions of the contract."] Pacific Mercantile Agency v. First Nat'l Bank of Ferndale, 187 Wash. 149, 60 P.2d 6 (1936); Spokane Merchants Ass'n v. Pacific Sur. Co., 86 Wash. 489, 150 Pac. 1054 (1915). See, also, 12 Am. Jur. Contracts § 280. Appellant was not known to or contemplated by respondent at the time it gave Kaiser Engineers and the United States a payment bond. The clear intent of the hold harmless clause and the payment bond was to protect Kaiser Engineers, the prime contractor, and the United States, not the creditors of respondent Halvorson or the latter's subcontractors or suppliers. An early case of this kind was that of Spokane Merchants Ass'n v. Pacific Sur. Co., supra, which involved a contract *73 entered into by Ilse and Elliott for the construction by them of a road for the state of Washington. They executed a bond to the state, conditioned that they "shall pay all laborers, mechanics, sub-contractors, and material men and all persons who shall supply such laborers, mechanics or subcontractors with materials, supplies or provisions for carrying on such work, and all just debts, dues and demands incurred in the performance of such work." One Nick Mandic entered into a subcontract with Ilse and Elliott, the prime contractor. Mandic executed a bond with respondent as surety to Ilse and Elliott, conditioned in part substantially the same as the bond given to the state by Ilse and Elliott. Mandic became indebted for supplies furnished him by appellant's assignors. The court held there was no privity of contract between respondent and the persons who furnished Mandic with supplies for the prosecution of his subcontract, citing Sears v. Williams, 9 Wash. 428, 37 Pac. 665, 38 Pac. 135, 39 Pac. 280, and Armour &amp; Co. v. Western Constr. Co., 36 Wash. 529, 78 Pac. 1106. The court said, at 491: "It seems quite plain to us that the bond here sued upon was given only for the benefit of Ilse &amp; Elliott." In Pacific Mercantile Agency v. First Nat'l Bank of Ferndale, supra, the court said, at 151: The most recent pronouncement by our court on this subject is that of Brower Co. v. Noise Control of Seattle, Inc., 66 Wn.2d 204, 401 P.2d 860, decided May 6, 1965. This case had a fact situation very similar to the case at bar with a performance and payment bond of the same type. The court said, at 197: [Citing cases.] Judgment affirmed. ROSELLINI, C.J., OTT, HUNTER, and HALE, JJ., concur. April 19, 1966. Petition for rehearing denied. [*] Reported in 411 P.2d 405. [] Judge Cochran is serving as a judge pro tempore of the Supreme Court pursuant to Art. 4, § 2(a) (amendment 38), state constitution.