United States Fidelity & Guaranty Co. v. Housing Authority Ex Rel. Monumental Brick & Supply Co.

Henderson,, J., delivered the opinion of the Court. This appeal is from three summary judgments entered in the Superior Court of Baltimore City in favor of three corporations supplying building materials to‘the firm of C. & C. Construction Company, which company had entered into a contract with Construction Company of Maryland, Inc., the general contractor for the construction of dwelling units for the Housing Authority of Baltimore City. In connection with the general contract, a payment bond was executed on which the United States Fidelity & Guaranty Company was surety. The question presented is whether the general contractor, and the surety upon the bond of the general contractor, are liable to pay for materials furnished to a sub-contractor.

This, of course, involves a construction of the bond. On its face, the language of the bond would appear to be broad enough to establish liability. The undertaking was to “make payment to all persons supplying labor and materials in the prosecution of the work provided for in said contract.” Cf. Women’s Hospital v. U. S. F. & G. Co., 177 Md. 615 ; Board of Education v. Lange, 182 Md. 132 ; and Lange v. Board of Education, 183 Md. 255 .

See also the cases collected in notes 77 A. L. R. 21 and 118 A. L. R. 57. It may be noted that the bond was drawn on a standard form intended for use in connection with government work under the Miller Act, 40 U. S. C. §270a. Of course, the bond in the in ³⁸² stant case is not a statutory bond, but the fact that it was labeled as a Miller Act bond is not without significance in seeking the intention of the parties as to the meaning of the language used. Hartford Accident & Ind.

Co. v. Net & Twine Co., 150 Md. 40, 46 . The cases under the Miller Act, supra, and its predecessor, the Heard Act., 40 U. S. C. §270 , construing the language “for the protection of all persons supplying labor and material in the prosecution of the work provided for in said contract”, have uniformly held that the coverage extends to suppliers of material to sub-contractors. United States, Use of Hill v. American Surety Co., 200 U. S. 197, 203 , cited in Trimount Dredging Co. v. U. S. F. & G. Co., 166 Md. 556 ; Mankin v. U. S., 215 U. S. 533 ; U. S. v. James Baird Co., 73 F. 2d 652 ; MacEvoy v. U. S., 322 U. S. 102 ; U. S. v. Munsey Trust Co., 332 U. S. 234 . The appellants contend, however, that the bond, the contract and the specifications must all be read together, citing Lange v. Board of Education, supra, 183 Md. 255, 261 .

When so read, they contend that their liability is limited. The appellees contend that the case is inapplicable because the court was there dealing with a performance bond and there was an express incorporation by reference. Assuming, without deciding, that a clear limitation contained in the contract and specifications might narrow the scope of the coverage implicit in the language of the bond, we find no such limitation in the instant case. At the outset, it appears that the exact form of bond was specified in the contract, and the condition stated was that “the principal shall promptly make payment to all persons supplying labor and material in the prosecution of the work provided for in said contract.” This form of bond was prescribed in Part I, Division IX, of the specifications.

The invitation for bids, part I, Division I, required the successful bidder to furnish a “satisfactory” payment bond. It seems clear that no other form of bond would have been acceptable. Moreover, ³⁸³ in Part I, Division XI, under Section 47, Warranty of Title, after stating that the Contractor agrees that neither he nor any person, firm or corporation furnishing any material or labor shall have a lien, provides: “Nothing contained in this paragraph, howevfer, shall defeat or impair the right of such persons furnishing materials or labor under any bond given by the Contractor for their protection * * *. The provisions of this paragraph shall be inserted in all subcontracts and material contracts and notice of its provisions shall be given to all persons furnishing materials for the work * * The appellants strongly rely upon language contained in Part I, Division II, Instructions to Bidders, Section 17, that the successful bidder shall furnish a payment bond “for the payment of all persons, firms, or corporations to whom the Contractor may become legally indebted for labor, materials, tools, equipment, or services, of any nature, employed or used by him in performing the work.

Such bonds shall be in the forms included in the Specifications * * *.” They argue that this language limits the coverage to those persons whom the general contractor contracts to pay. But there are several answers to this argument. In the first place, we think the instructions to