Court Opinion

ID: 6842958
Source: CourtListenerOpinion
Date Created: 2022-07-23 20:23:25.595046+00
Date Added: 2024-06-11T16:04:54.291738
License: Public Domain

WILBUR, Circuit Judge
(dissenting).
As to the claimants other than Dave C. Yegen I adhere to the opinion heretofore rendered herein. 35 F.(2d) 933. I am satisfied that the claimants have had their day in court in the Martin Case and in the Frantz Case. In both these eases the judgment of the trial court was adverse to the rights of the claimants upon the merits. In the Martin Case upon appeal this judgment, on the merits, was affirmed. It is true that the Supreme Court of Montana in affirming the judgment based its conclusion largely upon the proposition that there was no express' promise made on behalf of the claimants on the bond, but judgment being on the merits is conclusive as to any other right the claimants had, and whether right or wrong is binding upon the parties. The decisions of the court upon which the opinion of Judge Dietrich is based are all to the effect that the materialmen and laborers have an action upon the bond. The only cases which I have found in which the suit is brought by a municipal corporation or a publie corporation are two eases in Missouri where the bond expressly provided that the suit could be brought by the public corporation on behalf of the materialmen and laborers. City of St. Louis v. Ton Phul, 133 Mo. 561, 34 S. W. 843, 54 Am. St. Rep. 695; St. Louis Public Schools v. Woods, 77 Mo. 197. In State v. Royal Indemnity Co., 99 W. Va. 277, 128 S. E. 439, 43 A. L. R. 552, it is held that under the West Virginia Code the laborers and materialmen could not sue directly on the bond at law unless the bond was for their sole benefit and that otherwise their remedy upon the bond was in equity. The Supreme Court of Montana in Gary Hay & Grain Co. v. Carlson, 79 Mont. 111, 255 P. 722, 725, in part overruled the decision in the Martin Case. That court there held that the materialmen and laborers had a right of action upon the bond and contract where there was an express agreement in the contract on the part of the contractor to pay laborers and materialmen. So far as it did not overrule the Martin Case it was sustained upon the theory that the laborers and materialmen had a right to recover on the bond only where there was an express promise in the "contract that there was no such express promise in the contract now sued upon in the ease at bar. The court there said:
“3. Again, as in the absence of statutory authority no lien may be filed against public works, the obligee under such a bond cannot be injured by the failure of the contractor to pay for labor and material, and the governmental agency may or may not, at its pleasure, as a part of the contract exact a promise to make such payments (Southwestern *963Portland Cement Co. v. Williams [1926] 32 N. M. 68, 251 P. 380, 49 A. L. R. 525); if none is exacted or contained in the contract, but is incorporated in the bond of which the contract is a part, such condition of the bond is unenforceable by laborers and material-men, as the bond, in this particular, is without consideration (State Board of Agriculture v. Dimick, 46 Colo. 609, 105 P. 1114; Jefferson v. Asch, 53 Minn. 446, 55 N. W. 604, and extensive note in 25 L. R. A. 257, 39 Am. St. Rep. 618; Townsend v. Rackhan, 143 N. Y. 516, 38 N. E. 731; Standard Gas Power Corp. v. England Casualty Co., 90 N. J. Law, 570, 101 A. 281; Evans & Howard Co. v. National Surety Co., above [42 S. D. 109, 173 N. W. 448]).
“Under this rule, the result reached in the Martin Case may be upheld, as the contract there under consideration contained no promise to pay for labor and material as part of the contract.”
The court then proceeded to analyze the cases holding that materialmen and laborers would have a direct action upon the bond, stating:
“It is as though two separate bonds were given.
“(5) Following this line of reasoning, the great weight of authority and, to our minds, the better reasoned cases, at least under such circumstances as are considered in the last paragraph hold that, even though the dominant purpose of the bond is the indemnity of the obligee (the state), when the contract contains a promise on the part of the contractor to pay for labor and material and the bond contains a condition based on such promise, the intention of the parties and the duty toward such claimants resting upon the surety, either legal or equitable, will be drawn from the insertion of those promises in the instruments, privity of contract established between the surety and the class of persons mentioned in the instruments, and those falling within that class may sue directly in their own names and recover from the surety. French v. Farmer, 178 Cal. 218, 172 P. 1102; Southwestern Portland Cement Co. v. Williams, above; Connor v. Aetna Indemnity Co., 136 Wis. 13, 115 N. W. 811; Jordan v. Kavanaugh, 63 Iowa, 152, 18 N. W. 851; Evans & Howard Co. v. National Surety Co., above; Baum v. Whatcom County, 19 Wash. 626, 54 P. 29; National Surety Co. v. Foster Lumber Co., 42 Ind. App. 671, 85 N. E. 489; Devers v. Howard, 144 Mo. 671, 46 S. W. 625; Lyman v. City of Lincoln, 38 Neb. 800, 57 N. W. 531; Buffalo Cement Co. v. McNaughton, 156 N. Y. 702, 51 N. E. 1089; Montgomery v. Rief, 15 Utah, 495, 50 P. 623; Parker v. Jeffery, 26 Or. 186, 37 P. 712.
“This is the rule adopted in this state in Lanstrum v. Zumwalt [73 Mont. 502, 237 P. 205], except that the question of.suing directly was not there involved, and we believe it is the only rule which may, under the circumstances of this case, in justice and good conscience be applied.
“The contract and bond before us are identical with those considered in the Lanstrum Case, with the omission -of the term ‘equipment/ and we therefore hold that the complaint herein states a cause of action against the surety on such claims included therein as come within the meaning of the phrase ‘labor and material’ furnished under the contract; anything to the contrary appearing in Martin v. American Surety Co., above, is hereby expressly overruled.”
It is clear from the consideration of this later opinion of the Supreme Court of Montana (Gary Hay & Grain Co. v. Carlson, supra) that if the court were of the opinion that the claims of the materialmen and laborers were covered by the contract and bond in question, it would have held in, the Martin Case, as they did subsequently hold in the Gary Hay & Grain Company Case, that such materialmen and laborers could recover in an aetion brought by them upon the bond. I cannot see that there is anything in the distinction between sections 7472 and 9067 of the Revised Code of Montana which justifies the conclusion that the action brought by “a person with whom or in whose name a contract is made for the benefit of another” must proseeute the aetion on behalf of the beneficiaries of the “express trust.” We are not without authority on this point. The Code of Montana is adopted from the Code of California. The provisions of section 9067 of the Revised Code of Montana are found in sections 367 and 369 of the Code of Civil Procedure of California, which read as follows:
“367. Aetion to be in name of party in-interest. Every aetion must be prosecuted in the name of the real party in interest, except as provided in section three hundred and sixty-nine of this code.”
“369. Executor, trustee, etc., may sue without joining the persons beneficially interested. An executor or administrator, or trustee of an express trust, or a person ex*964pressly authorized by statute, may sue without joining with him the persons for whose benefit the action is prosecuted. A person with whom, or in whose name, a contract is made for the benefit of another, is a trustee of an express trust, within the meaning of this section.”
It was held by the Supreme Court of California that section 369 was merely permissive and that the action might be brought in the name of either the beneficiary or the trustee in Anglo-Califomian Bank v. Cerf, 147 Cal. 384, 81 P. 1077, 1079. That action is brought by the beneficiary of the express trust. It was contended that the action should have been brought by the trustee, Steinhart, who was the grantee in the deed which was intended as a. mortgage. The court there said:
“It is unnecessary to determine here whether Steinhart, as the trustee of an express trust within the meaning of section 369, Code Civ. Proe. could have maintained an action to foreclose these mortgages. That section is permissive only, and did not exclude an action in the name of the real party in interest. As already stated, Steinhart was made a party defendant, and the record shows that he consented that judgment be entered in favor of plaintiff as prayed for in its complaint.”
See, also, to the same effect, Horseshoe Pier Amusement Co. v. Sibley, 157 Cal. 442, 108 P. 308; Allen v. Chatfield, 34 Cal. App. 785, 787, 168 P. 1149; Ellis v. Harrison, 104 Mo. 270, 16 S. W. 198.
If this rule is applied to the ease at bar,' it- would follow that under section 9067 of the Revised Code of Montana the action upon the bond in question could be brought either by the plaintiff herein or by the materialmen and laborers as beneficiaries under the promise contained in the contract and bond. It should be observed also that section 7472 of the Revised Code of Montana, which is identical with section 1559 of the Civil Code of California, is merely a codification of the common law. In 6 Cal. Jur. it is said:
“§ 278. As a general rule contracts are enforeible only by the parties thereto, strangers cannot sue upon them even on behalf of the real parties. Such,suits are permitted only in a limited class of eases. One of these is declared by § 1559 of the Civil Code by force of which a third party is allowed to bring suit upon a contract made expressly for his benefit.
“§ 279: Long recognized and clearly established is the principle that where one person, for a valuable consideration, 'engages with another to do some act for the benefit of the third, the latter who would enjoy the benefit of the act,'may maintain an action for the breach of such engagement. Section 1559 of the Civil Code is but an expression of this rule. The terms of this section are:
“ ‘A contract made expressly for the benefit of a third person may be enforced by him at any time before the parties thereto rescind it.’ * * *
“§ 280: The rule of the decisions is clear to the point that in order to sustain an action for the enforcement of a contract made for the benefit of a third person, there must have been an intent cleaily manifested on the part of the contracting parties to make the obligation inure to the benefit of the third party. * * * It has been expressly stated that section 1559 of the Civil Code is not intended to apply to instances where a third person is or may be merely incidentally or remotely benefited. As the code declares the contract must be one ‘made expressly for the benefit of a third person. * * ”
If the materialmen and laborers as beneficiaries under the bond could litigate their rights either by an action brought in their own name as plaintiffs or in an action brought by the Cove irrigation district as trustee for them, the judgment in either case would be conclusive upon their rights. If there was no “intent clearly manifested” to pay these third persons, they could not recover upon the bond regardless of whether the action was brought by them or on their behalf. 6 Cal. Jur. 280, supra. As I understand it, what the Supreme Court of Montana determined in the Martin Case was that there was no right of recovery upon the bond because there was nothing in the contract or bond “to indicate that it was intended expressly, or otherwise, for the protection of third parties.” Martin v. American Surety Co., 74 Mont. 43, 238 P. 877, 878. That court subsequently overruled the Martin Case so far as its interpretation of j;he bond was concerned, but it still required such a promise in the contract as a consideration for the otherwise sufficient promise in the bond. Gary Hay & Grain Co. v. Carlson, supra. It follows that under the law of Montana, the place of contract, as stated by its courts, there can be no- recovery by the claimant upon the bond in question either directly or through the intervention of the Cove irrigation district as “trustee of an express trust”
*965With reference to the claim of Dave C. Yegen, the Circuit Court of Appeals in the Eighth Circuit, in Federal Surety Co. v. Minneapolis Steel & Mach. Co., 17 F.(2d) 242; Id., 34 F.(2d) 270, had under consideration the rights of materialmen and laborers against a surety upon a bond in the exact form of bond involved in the ease at bar. It is held in these decisions that the material-men had no right of action upon the bond under the law of Montana for the reason that the contract contained no direct promise on the part of the contractor! to pay the persons furnishing the labor and material for the work. In so far as this determination is based on the statutory law of Montana, the decisions of the Supreme Court of that state are binding upon the federal courts. It is held by the Circuit Court of Appeals of the Eighth Circuit in the first appeal [17 F.(2d) 242] and in the second appeal [34 F.(2d) 270] that the materialmen and laborers could not recover on the bond for the reason that under the law of Montana, as established by the decisions of the Supreme Court of that state construing its legislation, the promise in the bond was without consideration because there is no direct promise in the contract. That court cited the decision of this court in McNaught v. Hoffman, 274 F. 918, 920, holding that the decisions of the Montana Supreme Court as to the proper construction of section 7472, Rev. Codes, was binding on this court. It was said by this court in McNaught v. Hoffman, supra, that: “It may be conceded that the rule so established in Montana as to the rights of third persons for whose benefit contracts have been made is opposed to the weight of modern authority. 6 R. C. L. 884; 13 C. J. 705. But it rests upon the construction of a state statute, and it is binding upon this court.”
It follows from these decisions that the materialmen and laborers cannot sue upon a contract in question because there was no direct promise made therein for their benefit, and they cannot sue upon the promise in the bond for the reason that such bond is without consideration. It has thus been determined by the Supreme Court of the State of Montana that the promise in the bond in the case at bar so far as it is a direct promise to pay the laborers and materialmen on the job is without consideration for the reason that in the contract there is no direct promise made by the contractor to the Cove irrigation district to pay for such labor, and material.