Opinion ID: 1510643
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Heading: Questions Presented by Appeal of Contractor and its Surety.

Text: The principal question presented by the appeal of the contractor and its surety is the question as to their liability for materials and supplies furnished the subcontractor. As the subcontractor is insolvent and his bond is liable only for the penalty of $25,000 and interest, the question involves a balance on the claims amounting to approximately $30,000. We think that the learned judge below was correct in holding both the contractor and its surety liable for these claims. Each of the bonds, signed by the contractor as well as the surety, guaranteed that the contractor would pay when and as due all lawful claims for labor performed or materials and supplies furnished for use in and about the construction of said highway or highway structures; and we do not see how the letting of a part of the work to a subcontractor could be held to absolve the contractor or the surety from the obligation so undertaken. The public authorities were interested in providing that those who furnished labor or materials for the construction of the highways should be paid for them; the bonds were taken for the purpose of guaranteeing that this would be done; the contractor could not have obtained the contracts without giving such bonds; and we do not think that, after they have been given and the contracts thereby obtained, laborers and materialmen, for whose protection they were required, should go unpaid because the work has been let to a subcontractor, who has given an inadequate bond and who proves to be insolvent. This has been expressly decided by the Supreme Court of the United States in suits instituted under the Hurd Act (40 USCA § 270). United States for Use of Hill v. American Surety Co., 200 U. S. 197, 26 S. Ct. 168, 50 L. Ed. 437; Mankin v. U. S. to Use of Ludowici-Celadon Co., 215 U. S. 533, 30 S. Ct. 174, 54 L. Ed. 315. And the same rule is supported by the over-whelming weight of authority in other jurisdictions. See exhaustive note in 70 A. L. R. 308 and cases there cited. It is said, however, that the contractor and surety are relieved of this liability by reason of a section of the specifications which provides: 8. 1. Subletting or assigning of contract. The work awarded shall be performed by the contractor to whom the award is made, with the assistance of workmen under his immediate superintendence; and the contract shall not be sublet, assigned or otherwise disposed of, either in whole or in part, except with the written consent of the Richland County Supervisor. Before any such consent is requested, the contractor shall submit evidence that the party to whom it is proposed to make assignment is competent and responsible together with a statement from the surety company concerned showing that the contract bond is authorized to cover all operations and obligations of the proposed assignee. Any subcontractor, regardless of whether he has been approved by the Board of County Commissioners, will be considered an agent of the principal contractor, provided that this shall not serve to make the principal contractor liable for purchase made by the subcontractor from third parties without the specific approval of the principal contractor. It is true, of course, that the contract and bond are to be construed together. Maryland Casualty Co. v. Fowler (C. C. A. 4th) 31 F.(2d) 881, 63 A. L. R. 1375; Standard Oil Co. v. Powell Paving & Contracting Co., 139 S. C. 411, 138 S. E. 184. But we do not think that this provision of the contract relieves either the contractor or the surety of their undertaking that labor and materials furnished for the work shall be paid for. Its manifest purpose was to prevent subletting without the approval of the public authorities, and to hold the contractor for the acts of any subcontractor by making the latter his agent. The purpose of the proviso in the last sentence was merely to limit this agency, not to absolve the contractor or his surety from liability for labor and materials that should be used in performing the contract. The fact that the contractor was not to be liable as principal for purchases made by the subcontractor, could not have been intended to affect the liability under the bond, and should not be given an interpretation at variance with the other provisions of the instruments and the manifest purpose for which the bond was required. The point is raised by the contractor and his surety that attorneys' fees should not have been allowed against them in favor of the attorneys of claimants. We agree with the court below, however, that such allowance was proper. The bonds contain a provision relating thereto as follows: And should the said principal default in carrying out said contract, the cost to the Board of Commissioners of Richland County of determining the amount of the losses caused the said Board of Commissioners of Richland County by reason of said default, as well as all cost incident to securing settlement from the surety, including reasonable attorney's fees, shall be payable and collectible from the surety, as a part of the penalty of the bond. This provision clearly contemplates that those entitled under the bond shall not be put to expense in enforcing its provisions. If suit had been brought by the obligee named to enforce the bond for the benefit of laborers and materialmen, there could be no question as to the liability for the fees of counsel in the proceeding; and we cannot see how the fact that it was brought by the materialmen themselves, instead of by the obligee named, makes any difference as to this liability. It is well settled that laborers and materialmen protected by a bond such as this may institute proceedings for the enforcement of their rights. Maryland Casualty Co. v. Fowler, supra; Standard Oil Co. v. Powell Paving & Contracting Co., supra. And, where they do institute the proceeding and thereby incur expense, there is no reason to deny them the benefit of this provision. It is argued that under the ejusdem generis rule the right to recover the cost incident to securing settlement, including attorneys' fees, is limited to the named obligee, because only the named obligee can recover the cost of determining the losses caused to it by reason of the default of the contractor in carrying out the contract. But only the named obligee would be put to cost in determining the loss in that event, whereas laborers and materialmen as well as the named obligee might incur cost in securing settlement from the surety, and there is thus no basis for applying the ejusdem generis rule, which rests upon the presumed intention to restrict general expressions following an enumeration of particulars to things of the general class of those enumerated where no contrary intention appears. 6 R. C. L. 843. If it had been intended that only the named obligee should recover such cost, the intention should have been expressed plainly instead of by the general provision that same should be collectible as a part of the penalty of the bond. As has been frequently said, these bonds are like policies of insurance, and where doubt exists as to their meaning, their language is to be liberally construed in favor of the parties whom they are designed to protect. Maryland Casualty Co. v. Fowler, supra; Maryland Casualty Co. v. Ohio River Gravel Co. (C. C. A. 4th) 20 F.(2d) 514; Pickens County v. Nat. Surety Co. (C. C. A. 4th) 13 F.(2d) 758; Atlantic Trust & Deposit Co. v. Town of Laurinburg (C. C. A. 4th) 163 F. 690. It follows that on the appeal of the Standard, the decree of the court below will be reversed. On the appeal of the Consolidated and the contractor, it will be affirmed. On both appeals the cause will be remanded for further proceedings not inconsistent with this opinion, and with power in the court below to reconsider allowances, [1] retax costs, and make further orders as to distribution of funds in its hands. No. 3396 reversed and remanded. No. 3397 affirmed and remanded.