Pacific States Electric Co. v. United States Fidelity & Guaranty Co.

MR. JUSTICE THOMPSON (R. L.) Delivered the Opinion of the Court.

This is an appeal from a judgment rendered against each of the plaintiffs in the foregoing cases which were consolidated for trial. Each of the actions was based upon the claims of materialmen against a surety bond which was given to pledge the faithful performance of a subcontractor for the construction of specific parts of a building. The court held that the bond was not liable for the labor performed or the materials furnished. The judgment depends upon a construction of the bond.

The Breakers Hotel Company, a corporation, awarded a contract to construct a hotel of the same name at Long Beach to William G. Reed at a cost of about $850,000. The court found that Reed agreed

to

furnish

and

pay for all necessary labor and materials to complete the building according to the contract. Mr. Reed, as principal, and the Metropolitan Casualty Insurance Company, as surety, executed and delivered to the hotel company a bond pursuant to section 1183 of the Code of Civil Procedure for the faithful performance of the contract. This bond was duly recorded. It guaranteed “the payment in full of the claims of all persons performing labor upon or furnishing materials

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to be used in the work” of constructing the hotel building. By the terms of this bond its provisions were to “inure to the benefit of any and all persons who should perform labor upon or furnish materials for the work” performed under the contract.

William G. Reed, the general contractor, made a subcontract with Jensen Electrical Company for the furnishing of materials and the performance of certain portions of the structure. Each plaintiff in this group of consolidated cases furnished the subcontractor, Jensen Electrical Company, with materials of substantial value which were used in the construction of the building. For the faithful performance of this subcontract an independent common-law bond was executed and delivered to Reed, the general contractor, with Jensen Electrical Company as principal and United States Fidelity and Guaranty Company as surety. This was the only bond executed by the last-mentioned surety on account of the structure. It provides in part: “Whereby the said party of the second part (the subcontractor) undertakes to furnish all necessary labor and material and to perform and complete for the said party of the first part . . . (the work contracted for) we, Jensen Electrical Co., as Principals, and the United States Fidelity and Guaranty Company, ... as Surety, are held and firmly bound unto said William G. Reed. . . . The condition of this obligation is such that if said contract is made, and if the said contractor shall well and faithfully keep and perform all of the covenants and agreements of said contract, by them to be kept and performed, and shall turn over and deliver to said General Contractor, said improvement according to said contract, and shall save and hold harmless the said general contractor from any and all loss or damage arising out of the failure of said contractor to fulfill said contract, then the above obligation to be void; otherwise to remain in full force and effect.”