Fidelity & Deposit Co. v. Mattingly Lumber Co.

²¹⁹ Johnson, J., delivered the opinion of the Court. The judgment from which the present appeal is taken was entered upon an inquisition following a judgment by default (Code, art. 75, sec. 94) against appellant (defendant below) for failure to plead over after the trial court had sustained a demurrer to its general issue pleas as amplified by bill of particulars. Primarily, the problem presented relates to the construction of three bonds executed to the Mayor and City Council of Baltimore by The P. C. Streett Engineering Company, as principal, and Fidelity and Deposit Company of Maryland, as surety, in connection with the awarding to the principal by the City of three separate contracts, one for the construction of a tuberculosis building at Baltimore City Hospitals, another for erecting an addition to Ward A of the same hospitals, while the third provided for building an addition to School No. 56 of Baltimore City. The suit was instituted against the surety on the bonds.

The declaration contains three counts, in each of which it is alleged that The P. C. Streett Engineering Company and the Mayor and City Council of Baltimore entered into one of the three contracts, and the Engineering Company covenanted for the furnishing to the City of all materials and doing all work for the completion of the construction applicable to the particular contract upon certain terms and conditions therein set forth, and the Engineering Company, as principal, and Fidelity and Deposit Company of Maryland, as surety, executed and delivered to the City a bond for the completion of the project referred to in the contract; that, at the request of the Engineering Company, the plaintiff furnished certain materials that were “installed, erected and incorporated in said structure or work” for which the Engineering Company was liable, but the plaintiff had not been paid therefor, and although all things had been done which were necessary to entitle the plaintiff to the performance by the defendant of the conditions of said bond to pay for such materials, the defendant had not been ²²⁰ paid the same and had not complied with said conditions in any respect. In each count plaintiff declared upon one of the bonds and included a list of materials furnished by it to the Engineering Company under one of the contracts and the prices at which the same were sold. With exception of contract dates, the character of the work contracted for, and differences in penalties, the bonds are similar. The surety bound itself to indemnify the obligee against costs, expenses, damages or losses to which it might be subjected by reason of the wrongful misconduct, negligence, or default upon the part of the Engineering Company in and about the performance of the contract and further agreed to “* * * promptly settle, pay and satisfy all claims, demands and suits made or instituted against the said The P. C. Streett Engineering Company by any and all persons, firms and/or corporations for the non-payment of labor performed in and about the erection of the structure or the work to be done under the contract for which the said The P. C. Streett Engineering Company is liable, including any and all extra work that may become a part of the contract, and for all material furnished, installed, erected and incorporated in said structure or work for which The P. C. Streett Engineering Company is liable * * etc. ■ Appellant’s demurrer to this declaration was overruled, but since the correctness of that ruling was not raised in its brief nor in argument, any objection thereto may, under Rule 89, sec. 4, of this court, be treated as abandoned.

However, as to the correctness of the ruling, see Owings v. Owings, 1 H. & G. 484, 489 ; Small v. Schaefer, 24 Md. 143 ; Seigman, use of Shaffer, v. Hoffacker, 57 Md. 321 ; Northern Central Ry. Co. v. United Rys. Co., 105 Md. 345 , 66 A. 444 ; Mackenzie v. Schorr, 151 Md. 1 , 133 A. 821 ; Code, art. 75, sec. 15; Sterling v. Cushwa & Sons, 170 Md. 226 , 183 A. 593 ; Williston on Contracts (Rev. Ed.), sec. 372. After the demurrer to the declaration had been overruled, the defendant filed general issue pleas, and, in compliance with plaintiff’s demand for the particulars there ²²¹ of, replied that the materials furnished by plaintiff, the price for which was sought to be recovered, were purchased for and became part of the plant and equipment of the Engineering Company and were used “either for forms for concrete or for scaffolding” and none of them were incorporated in the buildings referred to so as to become a permanent part of the same; that after being used for the purposes mentioned they were removed from the premises on which the buildings were located and sold under an execution issued upon a judgment obtained by another creditor of the Engineering Company; further, that such materials were not within the coverage of the bonds, and there was no liability on the part of the defendant therefor.

Plaintiff demurred to the general issue pleas as thus amplified, and the demurrer was sustained. To determine the correctness of that ruling it becomes necessary to construe the pertinent provisions of the bonds sued upon. Appellee contends that, by a fair construction of the bond provisions, the materials which it furnished are within the coverage, but further submits that even if this contention be not adopted, it is entitled to recover in this action under the doctrine of constructive annexation, upon the theory that such materials were constructively annexed to the buildings. Appellant asserts, first, that under the conditions of the bond, it is not liable for the materials in question, and that such materials are to be regarded as a part of the plant and equipment of the Engineering Company; secondly, that even if it is to be held liable for the materials, the measure of damages is not their full value, but this sum must be credited with the salvage value of such materials after their use upon the structures erected.

In over-ruling the demurrer to appellant’s pleas as thus amplified, the trial court rejected the first of these contentions, and at the inquisition taken by the trial court that contention was renewed in appellant’s offer to prove by a witness that none of the lumber sued for was incorporated permanently in the buildings. ²²² . Generally speaking, the construction of a bond is, like other contracts, governed by the intention of the parties at the time of its execution, and the intention is to be ascertained from a consideration of the bond provisions. Strawbridge v. Balto. & O. R. R. Co., 14 Md. 360 ; German Lutheran Evangelical St. Matthews Congregation v. Heise, 44 Md. 453 ; 11 C. J. S., Bonds, sec. 40, page 419; Head & Amory v. Providence Ins. Co., 2 Cranch (U. S.) 127, 2 L. Ed. 229 .

Thus in Aetna Indemnity Co. v. Waters, 110 Md. 673 , 73 A. 712, 722 , it is said: “In dealing with the construction of the bond in this case, and of the contract, the faithful performance of which it was intended to secure, we have kept in view the attitude assumed by us in several recent cases of a similar character, especially the case of State, use of Smith, v. Turner, 101 Md. 584 , 61 A. 334 , where we said: ‘While the liability of the surety is not to be enlarged by mere implication, yet in the effort to ascertain what these duties are, a reasonable construction is to be given to the language of the statutes dealing with these duties, and the construction is not to be strained in order to effect a release of a surety, whose obligation is deliberately entered into, as a commercial transaction, and with the exclusive view to the pecuniary profit resulting from it’.” Later, in State v. National Surety Co., 126 Md. 290 , 94 A. 916 , it was held that the rule that a surety is a favorite of the law and a claim against him is strictissimi juris did not apply to a commercial surety whose undertaking' was essentially that of an insurer. And in 8 Am. Jur., 723, appears this statement: “With respect to the construction of fidelity bonds, it has been repeatedly held that where the instrument is reasonably susceptible of two constructions, one favorable to the insured, and one favorable to the insurer, that construction will be adopted which favors the liability of the insurer for the act or default in question.” See also Champion Ice Mfg. Co. v. American Bonding & Trust Co., 115 Ky. 683 , 75 S. W. 197 ; Farmers & Merchants State Bank v. U. S. Fid. & Guar.

Co., 28 S. D. 315, 133 N. W. 247 . ²²³ A survey of cases, construing the meaning of the expression “materials furnished,” discloses a wide diversity of judicial opinion, and for the most part the courts in those cases were considering the subject under mechanics’ lien statutes (Code, art. 63, sec. 1 et seq.). Thus in Philadelphia v. Perna Engineering & Contracting Co., 94 Pa. Super. 579 , it was held that lumber used for forms, sheathing, and shoring, in connection with the construction of a sewer, none of which lumber remained in the completed structure, but was used up and destroyed in the prosecution and performance of the work, did not constitute “material furnished.” See also Oppenheimer v. Morrell, 118 Pa. 189 , 12 A. 307 , where a mechanic’s lien was denied for lumber used in erecting scaffolding for laying brick. The theory of this line of cases is stated in Gary Hay & Grain Co. v. Fidelity & Deposit Co., 79 Mont. 111 , 255 P. 722 , to the effect that when the bond mentions only material, the surety is liable for payment for that which has gone into and become a part of completed work, and not all supplies furnished, since “supplies” is broader than “material,” and means that which is and can be supplied sufficient for use or need, a quantity of something supplied or on hand, whereas “material” means substance matter of which a thing is made.

Opposed to those views are such cases as Stewart-Chute Lumber Co. v. Missouri Pacific Ry. Co., 28 Neb. 39 , 44 N. W. 47 , holding that lumber, posts, etc., used in erecting temporary shanties for boarding houses used by workmen constructing a railway, were lienable items. In the case of Church E. Gates & Co. v. Jno. F. Stevens Construction Co., 169 App. Div. 221 , 154 N. Y. Supp. 605, 611 , a middle ground was taken, for while the court held that supplies used in constructing temporary buildings and for repairs to plant and steam drills were not lien-able, it did hold that lumber used for temporary trestles, fences, bracing, etc., was “material furnished” within the mechanics’ lien statute.

It was said that “material” meant matter intended to be used in the creation of a mechanical structure or the substance matter of which ²²⁴ anything was made. After reviewing many decisions,, the court there said: “The burden of the appellant’s argument here is that no material is the subject of a lien which does not become a component part of the completed structure, although used in and about the work. It must physically enter into the work, or be actually consumed, destroyed, or annihilated in or about its physical connection with the work, to come under the statute. It is true that there are words in both the dynamite case [Schaghticoke Powder Co. v. G. & J. Ry.

Co., 183 N. Y. 306 , 76 N. E. 153 ] and the shovel case [Troy Public Works Co. v. City of Yonkers, 207 N. Y. 81 , 100 N. E. 700 ], which, torn, from their context, would appear to give support to this argument; but I think the broad principle to be gathered from the three cases referred to is, generally speaking, that although plant, tools, and their adjuncts, which are but instruments for accomplishing the work, surviving its