MITCHELL v DAVIS GREAT FALLS

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No. 12352 I N THE SUPREME COURT O THE STATE O M N A A F F OTN 1973 C. E. MITCHELL AND SONS, P l a i n t i f f and Respondent, -vs - D L A DAVIS and C I T Y OF GRFAT FALLS, EM R Defendants and A p p e l l a n t s . Appeal from: D i s t r i c t Court o f t h e E i g h t h J u d i c i a l D i s t r i c t , Honorable P a u l G . H a t f i e l d , Judge p r e s i d i n g . Counsel o f Record: For Appellants : Burton and Coder, G r e a t F a l l s , Montana. Howard C . Burton a r g u e d , G r e a t F a l l s , Montana. F o r Respondent : E. F. G i a n o t t i a r g u e d , G r e a t F a l l s , Montana. Submitted: Decided : A p r i l 26, 1973 MAY 1 6 1973 Mr. J u s t i c e Frank I . Haswell delivered the Opinion of t h e Court. This appeal i s from a judgment of t h e d i s t r i c t court of Cascade County, s i t t i n g without a jury, finding an indebtedness owed t o p l a i n t i f f by defendant City of Great Falls in the amount of $618.52 with i n t e r e s t and c o s t s . The case involves payments due f o r various materials, labor and equipment furnished by p l a i n t i f f t o Delmar Davis, a contractor, engaged by the City of Great Falls t o enlarge and make improvements on the municipal go1 f course. The City of Great Fa1 1s appeals from the judgment. On July 29, 1963, t h e City of Great F a l l s entered i n t o a written contract w i t h Davis f o r the construction of improvements t o the municipal golf course. Rursuant t o the provisions of the written contract Davis f u r nished the City a performance bond. The surety was General Insurance Com- pany of America with Don J . Morrison of Rainbow E l e c t r i c Company, Great F a l l s , Montana, as indemnitor. Davis, i n t h e course of construction, hired E Mitchell t o supervise d the job and authorized h i m t o secure the necessary equipment and materials. Mitchell hired some equipment from p l a i n t i f f C. E. Mitchell & Sons, charged some materials t o p l a i n t i f f , and made a $4.00 phone c a l l . When p l a i n t i f f was not paid i t s e n t a statement t o t h e City f o r $771.68, representing the above i tems plus i n t e r e s t and service charges. Subsequently, Davis did some work f o r p l a i n t i f f reducing the b i l l . Thereafter p l a i n t i f f submitted an adjusted claim t o the City f o r $618.52. Other subcontractors of Davis submitted notice of t h e i r claims t o the City in accordance with section 6-401 e t seq., R.C.M. 1947. After the project was completed the City made f u l l payment t o Morrison as the indemnitor f o r Davis. Morrison, in return, made payment t o a l l of the subcontractors submitting t h e i r notices of claim w i t h t h e exception of p l a i n t i f f and one other subcontractor. A a r e s u l t of nonpayment, plains t i f f subsequently f i l e d t h i s action against the City and Davis on June 30, 1965. Default was taken against Davis t h e r e a f t e r b u t the case was not ecuted t o judgment a t t h a t time. pros- Thereafter Davis was declared a bankrupt and the claims of p l a i n t i f f were included i n the bankruptcy. This cause f i n a l l y came on f o r t r i a l on May 8, 1972; judgment was awarded t o p l a i n t i f f a g a i n s t t h e City f o r $618.52. The City now appeals. The u n d e r l y i n g i s s u e upon t h i s appeal i s whether a materialman o r s u p p l i e r o f a c o n t r a c t o r who has a p u b l i c works c o n t r a c t w i t h t h e City may h o l d t h e m u n i c i p a l i t y l i a b l e f o r m a t e r i a l s and s u p p l i e s n o t p a i d f o r by t h e c o n t r a c t o r b u t used i n t h e performance o f t h e c o n t r a c t . h e l d t h e City l i a b l e t o t h e materialman. The d i s t r i c t c o u r t W reverse. e The City has no d i r e c t l i a b i l i t y t o s u b c o n t r a c t o r s , l a b o r e r s , materialmen and s u p p l i e r s f o r work performed o r m a t e r i a l s s u p p l i e d i n t h e performance o f a p u b l i c works c o n t r a c t where a bond has been posted as r e q u i r e d by s t a t u t e . S e c t i o n 6-401 e t seq., 1947. R.C.M. There was no p r i v i t y between t h e City and p l a i n t i f f t o p e r m i t r e c o v e r y a g a i n s t t h e City. The p r o p e r remedy f o r t h e p l a i n t i f f was t o proceed on t h e p u b l i c works bond. P r i o r t o t h e a d o p t i o n o f s e c t i o n 6-401 e t seq., R.C.M. 1947, Montana f o l l o w e d t h e m i n o r i t y view which r e q u i r e d an i n t e n t t o b e n e f i t t h e t h i r d p a r t y b e n e f i c i a r y and a c o n s i d e r a t i o n passing f r o m t h e b e n e f i c i a r y t o t h e promisee i n o r d e r f o r a t h i r d p a r t y t o sue. v. U n i t e d S t a t e s , 17 F.2d 246 ( 9 t h C i r . ) , I n a 1927 case, Osborne the federal court interpreting Montana's l a w r e g a r d i n g t h e r i g h t s o f t h i r d p a r t y b e n e f i c i a r i e s denied a s u p p l i e r t h e r i g h t t o m a i n t a i n an a c t i o n a g a i n s t t h e s u r e t y . v. Eglanol M i n i n g Co., 45 Mont. 367, 123 P. 28. See a l s o Tatem The b e l i e f t h e n was t h a t a moral n o t a 1egal o b l ig a t i o n e x i s t e d between t h e s u b c o n t r a c t o r (suppl i e r ) and s u r e t y . McDonald v . American Nat. B'k, 25 Mont. 456, 65 P. 896. I n 1931 s e c t i o n 6-401 e t seq., R.C.M. 1947, was enacted r e q u i r i n g t h e c o n t r a c t o r f o r a m u n i c i p a l i t y t o f u r n i s h a performance and payment bond. The purpose o f t h e s t a t u t e i s t o p r o t e c t l a b o r e r s and materialmen who s u p p l y c o n t r a c t o r s working on s t a t e o r m u n i c i p a l p r o j e c t s (Bower v . Tebbs, 132 Mont. 146, 314 P.2d 731) by g i v i n g them " * * * t h e same r i g h t under t h e p r o v i s i o n s of such bond as if such work, services, provender, provisions, suppl ies or material , 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 Insurance Co. of Philadelphia, Pa., 227 F.Supp. 939 (1 964). As a general rule, a performance bond on a public works contract is for the benefit and protection of the municipality. 63 C.J.S. Municipal Corporations, § 1172, p. 859. The municipality is not liable to a person who has furnished materials to a contractor for a public works project unless provided by statute. 63 C.J.S. Municipal Corporations, § 1215, p. 942. Section 6-401 et seq., R.C.M. 1947 allows a materialman who has supplied a subcontractor a 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 Insurance Co. of Philadelphia, Pa., supra. For these reasons the judgment of the district court is reversed and the case dismissed. Associate justice Hon. ~ l f r d d p .Coate, District Judge, sitting in"p1ace of Mr. Justice John C. Harrison.

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