Levy v. Glens Falls Indemnity Co.

Delaplaine, J., delivered the opinion of the Court. On January 17, 1952, John N. Prevosto, a building contractor, entered into a written contract with Robert D. Levy and Louise Levy, his wife, to build a one-story dwelling on their lot at 3102 Strathmore Avenue in Baltimore. He agreed to give a bond to assure faithful performance of the contract and payment to all persons who furnish labor and material in the prosecution of the work. The bond was executed by Prevosto, as principal, and ²⁶⁹ Glens Falls Indemnity Company, as surety, on July 17, 1952.

It was conditioned as follows: “Now, therefore, the condition of this obligation is such that if Principal shall well and truly perform the contract and make payment to all persons who have furnished Principal labor or material in the prosecution of the work provided for in the contract, then this obligation to be void, otherwise to remain in full force and effect; provided, however, this bond is executed by the Surety, upon the following express conditions, which shall be precedent to the right of recovery hereunder. “1. Any person who has furnished Principal labor or material in the prosecution of the work provided for in the contract shall have a direct right of action under this bond, subject to Obligee’s priority, provided such person shall notify Obligee in writing, giving the details of the indebtedness, within the time required for filing statutory notice under the Mechanic’s Lien Law. * * *” The Maryland Mechanic’s lien Law, Code 1951, art. 63, sec. 11, provides as follows: “If the contract for furnishing such work or ma-. terials, or both, shall have been made with any architect or builder or any other person except the owner of the lot on which the building may be erected, or his agent, the person so doing work or furnishing materials, or both, shall not be entitled to a lien unless, within sixty days after furnishing the same, he or his agent shall give notice in writing to such owner or agent, if resident within the city or county, of his intention to claim such lien.” On December 19, 1952, this suit was entered in the Superior Court of Baltimore City by Robert D. Levy and Louise Levy, his wife, to the use of Walbrook Mill and Lumber Company, and by Walbrook Mill and Lumber Company, a ²⁷⁰ body corporate, against Prevosto and Glens Falls Indemnity Company. The declaration contained three separate claims. The first claim was brought by Levy and his wife to the use of the lumber company against both defendants.

It alleged that Prevosto, while building the house, ordered lumber to be delivered to the premises; that the lumber was delivered and became a part of the house; that the amount due therefor was $1,313.52; and that Prevosto and the surety had failed and refused to pay for the same. The second claim was the same as the first, except that it was brought by the lumber company, instead of by the Levys to the use of the company. The third claim was brought by the lumber company against Prevosto alone on his promissory note, dated June 10, 1952, payable to the order of that company. It was claimed that the balance due on the note was $2,525.59.

The lumber company obtained judgment against Prevosto by default, and the Court subsequently entered judgment on inquisition against him for $3,839. The case against the surety was tried before the Court sitting without a jury. The lumber company produced an itemized unpaid bill for $1,313.52 for lumber which had been ordered by Prevosto. The bill showed that the lumber had been delivered between September 15 and October 4, 1952.

The surety moved for a directed verdict on the grounds (1) that there was no privity of contract between the lumber company and the surety, and (2) that the lumber company did not give the Levys a written notice of the indebtedness within the time required by the bond. The Court, finding that the lumber company had not given the Levys a notice as required by the bond, rendered a verdict in favor of the surety. Judgment was entered on the verdict, and the lumber company appealed here from the judgment. It is an ancient rule of the common law that a person who did not enter into a contract, or succeed to the interest of those who did, has no right of action for its breach, although he sustained damage thereby.

The modern decisions recognize an exception to this rule in holding that laborers and ²⁷¹ materialmen may recover on a contractor’s bond, since it is executed expressly for their benefit. Knight & Jillson Co. v. Castle, 172 Ind. 97 , 87 N. E. 976 , 27 L. R. A., N. S., 573. In Hartford Accident & Indemnity Co. v. W. & J. Knox Net & Twine Co., 1926, 150 Md. 40 , 132 A. 261 , this Court held that where a contractor’s bond is drawn to cover the claims of those furnishing labor and material, suit on the bond can be maintained by the obligee for the use of those having such claims. Moreover, in Mackubin v. Curtiss-Wright Corporation, 1948, 190 Md. 52 , 57 A. 2d 318 , we held that a direct right of action, either at law or in equity, arises from a contract promising performance for the benefit of either a donee beneficiary or a creditor beneficiary.

In the present case Levy and his wife testified that they never authorized the institution of this suit for the use of Walbrook Mill and Lumber Company. However, the bond expressly provides that a laborer or materialman shall have a direct right of action against the surety, subject to the Levys’ priority, provided that the laborer or materialman shall notify the Levys in writing within the time