Opinion
No. 38765.
June 5, 1944.
1. CONTRACTS: Principal and Surety: Share of Profits for Past Services: Not Included in Labor Bond. Plaintiff's contract with the construction company which did certain public construction work provided for a salary as a supervisor and also 10% of the profits. The construction company gave a labor bond to secure payment for all labor and services under the construction contract. Plaintiff was paid his salary, and the share of the profits provided in plaintiff's contract were in consideration for past services and were not covered by the labor bond.
2. CONTRACTS: Evidence: Parol Evidence Inadmissible. The testimony of the attorney who drew the contract was properly rejected, as the contract was unambiguous and its terms could not be varied by parol evidence.
3. APPEAL AND ERROR: Erroneous Judgment Against Another Defendant Immaterial. Plaintiff cannot complain because the court erroneously awarded him a judgment against another defendant which did not appeal.
Appeal from Circuit Court of City of St. Louis. — Hon. Robert J. Kirkwood, Judge.
AFFIRMED.
Taylor, Mayer, Shifrin Willer for appellant; Charles P. Williams of counsel.
(1) It is perfectly well settled, by the overwhelming weight of authority, that Mechanics' Lien Statutes are to be liberally construed. Fuhler v. Gohman Levine Constr. Co., 346 Mo. 588, 142 S.W.2d 482. (2) By analogy, and for the same reasons, a liberal construction is given, in favor of persons doing work, to bonds provided for public works. Standard Accident Ins. Co. v. United States for use of Powell, 302 U.S. 442. (3) The great weight of decision in this country is to the effect, that services rendered in superintending construction are within, and protected by, Mechanics' Lien Statutes. Breeding v. Melson, 143 A. 23; 60 A.L.R., p. 1252; Massachusetts Bonding Ins. Co. v. Steele, 293 S.W. 647. (4) Such is the law of Missouri. Fagan v. Brock Motor Car Co., 282 S.W. 135; Carroll Constr. Co. v. Newsome, 201 Mo. App. 117, 210 S.W. 114; Leach v. Bopp, 223 Mo. App. 254, 12 S.W.2d 512; Fuhler v. Gohman Levine Constr. Co., 346 Mo. 588, 142 S.W.2d 482. (5) In another connection, supervision of improvements has been held by this court to be "labor." Wandling v. Broaddus, 10 S.W.2d 651. (6) That same construction is given by the federal courts to the Heard (now Miller) Act (40 U.S.C. § 270a). American Surety Co. v. United States, 76 F.2d 67; United States v. Shea-Adamson Co., 21 F. Supp. 831. (7) It is quite apparent that the requirement of two bonds, the forms of which are set out in the specifications (which were submitted to and approved by the Federal Public Works Administration) cannot be dismissed as meaningless. Both such bonds are required by the (Heard) Miller Act (40 U.S.C. § 270a). One of these bonds — the Performance Bond — contains quite literally the requirements of R.S. 1939, Section 3277 (which was in effect at the date of the specifications). The other bond appears to follow the provisions of the Heard (Miller) Act. If the decision be rested solely upon the provisions of R.S. 1939, Section 3277, it must be observed that that statute contains the significant words "among other things," relating to the content and conditions of the bond required. Those words cannot possibly be rejected as meaningless, without doing violence to the most elementary canons of statutory construction. Those words plainly empower the parties, in the framing of the bond, to go beyond the conditions specified and imperatively required. Audrain County v. Walker, 155 S.W.2d 251; Hilton v. Universal Constr. Co., 202 Mo. App. 672, 216 S.W. 1034; Honey Creek Drain. Dist. v. Sampson, 5 S.W.2d 119. (8) If the work of appellant Alport falls within the coverage of the bond in suit, it makes no difference that his compensation, as an employee of the Construction Company, was based upon a percentage. Id certum, quod certum reddi potest. Many lien cases may be found, where percentage compensation was involved. Fagan v. Brock Motor Car Co., 282 S.W. 135; Wetzel T. Ry. Co. v. Tennis Bros. Co., 145 F. 458; Tual v. Martin, 228 Mo. App. 30, 66 S.W.2d 969. (9) The surety company is bound by the contract between appellant Alport and the construction company. The price fixed by that contract, in the absence of fraud, is binding. State v. Southern Surety Co., 221 Mo. App. 67, 294 S.W. 123; Royal Indemnity Co. v. Woodbury Granite Co., 101 F.2d 689; St. Louis v. Southern Surety Co., 333 Mo. 180, 62 S.W.2d 432; Cabool School District v. United States F. G. Co., 9 S.W.2d 103; Mitchell Planing Mill Co. v. Allison, 138 Mo. 50, 40 S.W. 118; Hilliker v. Francis Co., 65 Mo. 598. (10) The rule that a surety is a favorite of the law has no application to corporations organized to execute bonds as a business, and bonds executed by such a corporation are to be construed most strictly in favor of the obligee. Lackland v. Renshoiw, 256 Mo. 133, 165 S.W. 314; Noonan v. Independence Indemnity Co., 328 Mo. 706, 41 S.W.2d 162; Fidelity Deposit Co. v. John Gill Sons, 270 S.W. 700; Dorr v. Bankers Surety Co., 218 S.W. 398. (11) Appellant Alport's contract with the construction company was drawn up by the attorney for the construction company. It is, therefore, in case of doubt or ambiguity, to be construed most strongly against the construction company. John Deere Plow Co. v. Cooper, 230 Mo. App. 167, 91 S.W.2d 145; Wells v. Thomas W. Garland, Inc., 39 S.W.2d 409; Sternberg v. Drainage District No. 17, 44 F.2d 560; Busch v. Midland Finance Co., 64 F.2d 859; Southern Ry. Co. v. Berthold Jennings Lbr. Co., 247 S.W. 219; Buhler Mill Elevator Co. v. Jolly, 217 Mo. App. 240, 261 S.W. 353; Sanders v. Sheets, 287 S.W. 1069. (12) The appellant's contract looks toward future services. The reference to past work in estimating the costs for the purpose of bidding, was not, and could not have been, intended to reverse the arrangement of the parties, which had remained unchanged. The construction contended for by the surety company is narrow, and unnecessary. (13) The court should have permitted the lawyer for the construction company, who drew the appellant's contract, to testify as to his reason for inserting the "and for and in consideration of" clause in paragraph 6 of the contract. The offer of proof was to show by that witness that he put this clause in to preclude plaintiff from asserting a claim for work done prior to the contract, and did not refer to the expressed considerations for the work to be done under the contract. Actual consideration may always be shown by parol evidence. 1 Williston on Contracts (Rev. Ed.), sec. 115B.
Igoe, Carroll, Keefe Coburn and Roberts P. Elam for respondent.
(1) If, as plaintiff asserts, the labor bond upon which plaintiff seeks recovery in this suit is a bond required by the Miller Act, the judgment in favor of respondent surety company in this suit must be affirmed because state courts, under the specific provisions of that act, are without jurisdiction over actions to recover upon such bonds. 40 U.S.C.A., secs. 270a to 270d, inclusive. (2) The surety company cannot be held beyond its contract as defined in the conditions of the labor bond upon which this suit is brought. State ex rel. Southern Surety Co. of N.Y. v. Haid, 329 Mo. 1220, 49 S.W.2d 41; St. Louis v. Maryland Casualty Co., 122 S.W.2d 20. (3) The conditions of the bond are clear and unambiguous, and there is, therefore, no room for any construction of them. State ex rel. Natl. Life Ins. Co. v. Allen, 301 Mo. 631, 256 S.W. 737. (4) Whether or not the labor bond in question be considered as one given under our statute, it covered and secured payment for labor or services when, and only when, such labor or services were performed or rendered "in the prosecution of the work provided for by the construction contract." R.S. 1939, sec. 3277; Camden Consol. School Dist. No. 6 of Camden County ex rel. Powell Lbr. Co. v. New York Cas. Co., 340 Mo. 1070, 104 S.W.2d 319; St. Louis to use of Contracting Supply Co. v. Hill-O'Meara Const. Co., 175 Mo. App. 555, 158 S.W. 98; Hilton v. Universal Const. Co., 202 Mo. App. 672, 216 S.W. 1034; St. Louis to use of Stone Creek Brick Co. v. Kaplan-McGowan Co., 233 Mo. App. 789, 108 S.W.2d 987. (5) The services performed by plaintiff, for which he was to be paid ten per cent (10%) of the profit on the project, were performed by him long prior to the award and execution of the construction contract, were not — in fact, could not have been — rendered "in the prosecution of the work provided for in said contract," and, therefore, were not covered by the bond. (6) Even if some of plaintiff's services, for which he was to be paid ten per cent (10%) of the profits on the project, should be regarded as coming within the bond, many of such services do not come within the bond, and, since the contract for the percentage of profit is an entire contract and does not apportion the bondable and nonbondable services, no recovery can be had on the bond for any of such services. Look v. City of Springfield, 292 Mass. 515, 198 N.E. 661; Adler v. World's Pastime Exposition Co., 126 Ill. 373, 18 N.E. 809; Libbey v. Tidden, 192 Mass. 175, 78 N.E. 313; Bennett v. Frederick R. Gerry Co., 273 Pa. 585, 117 A. 345; Boyle v. Mountain Key Mining Co., 9 N.M. 237, 50 P. 347; Edgar v. Salisbury, 17 Mo. 271; Nelson v. Withrow, 14 Mo. App. 270; Murphy v. Murphy, 22 Mo. App. 18; John O'Brien Boiler Works Co. v. Haydock, 59 Mo. App. 653; Knapp Bros. Mfg. Co. v. Kansas City Stockyards Co., 168 Mo. App. 146, 152 S.W. 119; Major v. McVey, 128 S.W.2d 347. (7) The error committed by the trial court in rendering opposing decisions as to the liability of the construction company and the surety company upon the labor bond, was error invited by, and favorable to, plaintiff, and, therefore, error of which plaintiff cannot complain. Furthermore, the surety company is not bound by the erroneous decision and judgment against the construction company, even though that decision and judgment are final as to the construction company because it has not appealed therefrom. United States to use of Fidelity Natl. Bank v. Rundle, 107 F. 227; United States to use of Vigilanti v. Pfeiffer-Neumeyer Const. Co., 25 F. Supp. 403. (8) The trial court committed no error in refusing to admit the oral testimony offered by plaintiff to vary, alter and modify the contractual provisions of plaintiff's written employment contract relating to the consideration for which he was to be paid the percentage of the profit on the project. 32 C.J.S., p. 887, sec. 956; Burk v. Walton, 337 Mo. 781, 86 S.W.2d 92; Ezo v. St. Louis Smelting Refining Co., 87 S.W.2d 1051; First Nat. Bank Trust Co. v. Limpp, 221 Mo. App. 951, 288 S.W. 957.
On July 2, 1936, the State of Missouri accepted the bid of Boyle-Pryor Construction Company, a corporation, amounting to more than two million dollars, for the construction and repair of certain buildings at the state penitentiary. Prior to that time [728] the construction company had an arrangement with appellant whereby he had made an estimate of the cost of the labor and material for the job, negotiated with materialmen and subcontractors and had done all research and work involved in preparing the bid. Under this verbal understanding appellant was to receive no compensation for this preliminary work unless the contract should be finally awarded to the construction company, in which event he was to be employed to supervise the work of construction at a monthly salary and was also to receive a share of the profits. After the bid was approved a dispute arose between the State and the Federal government (which had made a grant in aid) as to the plans and specifications. Appellant assisted in adjusting this dispute which lasted for several months. In the meantime costs of material and labor had risen and after negotiations, in which appellant participated, the construction company was permitted to increase the amount of its bid. During all this time appellant received no compensation, but was reimbursed for expenses. On April 22, 1937, the construction company entered into a contract with the State and gave two bonds to the State, a "performance bond" and a "labor bond", both being signed as surety by the Hartford Accident and Indemnity Company. (Respondent) The "labor bond" secured payment for "all labor performed and services rendered in the prosecution of the work provided for in said contract."
On May 26, 1937, the construction company entered into a contract with appellant which, among other provisions, contained the following:
"1. First Party hereby employs Second Party to manage, supervise and direct for First Party all the business and construction operations required in connection with the contract for the construction of said Project. . . .
"4. For such services second party shall receive a salary of Five Hundred dollars ($500.00) per month. . . .
"6. As further compensation, and for and in consideration of the work done by Second Party in preparing estimate of cost of said work and in negotiating subcontracts therefor, First Party agrees to pay Second Party an amount equal to ten (10) per cent of the total profits made by First Party on said Project."
Paragraphs 8, 9, and 10 of the contract provided in substance that upon the death of appellant his salary should cease or, upon his disability to the extent of being unable to supervise the work, his salary should cease during such disability, and the construction company would have the right to hire another supervisor at a salary of not to exceed $500.00 per month which should be regarded as an item of cost. But upon the death or disability of appellant the construction Company would pay to him, or to his heirs, etc., the ten per cent of the total profits, the same as if he had been fully able to supervise the work.
Appellant performed his duties as supervisor and received his salary of $500.00 per month up to July, 1939. He also received $7,676.59 on his share of the profits. Final payment was made by the State to the construction company in 1941. Thereafter, the construction company tendered to appellant the sum of $8,711.72, which it claimed was the balance due on the ten per cent provision. This was refused by appellant who claimed and demanded the sum of $15,073.28.
For this latter sum appellant sued the construction company and respondent on the "labor bond." At the close of the evidence the court directed a verdict for respondent (Hartford Accident and Indemnity Company) and also directed a verdict in favor of appellant against the construction company for the full amount sued for. No appeal was taken by the construction company. Its charter has been forfeited and it seems to be insolvent. This appeal is from the judgment in favor of the respondent Indemnity Company.
Appellant has devoted considerable space in his brief, with citation of numerous authorities, in announcing rules which should govern us in construing the contracts involved herein. These suggested rules of construction are conceded to be correct by respondent and it is unnecessary to discuss the authorities supporting them.
Our decision must rest upon a construction of the "labor bond" and appellant's contract of employment. Incidentally, we are required to pass upon the trial court's action in rejecting testimony offered by appellant in aid of construing the contracts and upon the propriety of the court's action in directing a verdict in favor of one defendant and against the other.
[729] The "labor bond", upon which this suit is based, secured the payment of "all labor performed and services rendered in the prosecution of the work provided for in said contract", meaning the contract between the construction company and the State of Missouri. The work provided for in that contract related only to future work in the construction and repair of the buildings and did not relate to any work previously done by the construction company or its employees in making the necessary research and negotiations to prepare the bid.
Turning to appellant's contract of employment, paragraph 1 clearly employs appellant to perform future services in supervising construction and does not refer to any services previously performed. Paragraph 4 provides a salary of $500.00 a month for such future services. Thus far there is no controversy.
Appellant says that the provision for sharing the profits, contained in paragraph 6, is also compensation for future services. We do not so read it. Certainly most, if not all, the services mentioned in paragraph 6 had been performed before the contract was executed. Paragraphs 8, 9, and 10 indicate that all of such services had been so performed for they provided that appellant should be entitled to receive the entire ten per cent even if he should be unable, through death or disability, to perform any part of his duties as supervisor of construction. Of course he could not collect his share of the profits until the work was completed and the amount of profits ascertained, but his right to such share did not depend upon his supervising construction even for one day. Also, in the event of appellant's death or disability, his successor would get only a salary up to $500.00 per month for the entire work of supervising construction and would get no part of the ten per cent share in the profits.
This construction is sustained by appellant's own testimony. He recites in detail the work he did in preparing the bid and procuring its acceptance and says: "during all this period of time, while I had no definite written agreement, there was a tacit understanding that I was to share in the profits and would get a salary of so much a month. There was no understanding of a definite amount." "The understanding was that if the contract was not awarded to them I was not to receive anything." He further testified that he "was willing to take a gamble" on his time in estimating the costs and if the construction company got the contract he would have a good job.
To us it seems clear that appellant's contract entitled him to a salary of $500.00 per month for all services to be performed by him thereafter in supervising the building operations called for by the contract between the construction company and the State; and that he was to receive a share of the profits for his services previously rendered under his contingent verbal agreement. His contract was valid as between appellant and his employer, but respondent agreed to secure payment only for services in carrying out the contract between the construction company and the State, and did not agree to stand responsible for payment for services rendered by appellant or any other employee of the construction company in procuring the contract with the State.
Since at least a part of the services mentioned in paragraph 6 were previously rendered and not covered by the "labor bond," we cannot separate them and adjudge liability for any part.
For construction of similar contracts see: Look v. City of Springfield, 292 Mass. 515, 198 N.E. 661; Libbey v. Tidden, 192 Mass. 175, 78 N.E. 313; Adler v. World's Pastime Exp. Co., 126 Ill. 373, 18 N.E. 809; Bennett v. Frederick R. Gerry Co., 273 Pa. 585, 117 A. 345.
Appellant offered as a witness the attorney for the construction company who drew the contract, and attempted to explain it by him. This was excluded on the objection that it was an attempt to vary the terms of the contract by parol testimony. Appellant then offered to prove by the witness that the consideration for the services to be rendered under the contract was $500.00 per month and ten per cent of the profits; that the words "the work done by Second Party in preparing estimates of cost" were put in to prevent plaintiff from making any claim for work done prior to the signing of the contract, and had nothing to do with the consideration for services to be rendered under the contract. This offer of proof was refused and appellant assigns error.
Appellant says that actual consideration may always be shown by parol evidence, [730] citing Williston on Contracts, Vol. I, Sec. 115B.
But here the actual consideration was stated in the contract, and appellant is trying to show by parol evidence that the actual consideration was for services different from what the written contract says. In other words, appellant is trying to defeat the legal effect and operation of a written contract by parol evidence. This cannot be done. [32 C.J.S., page 887, sec. 956; Burk v. Walton, 337 Mo. 781, 86 S.W.2d 92, l.c. 96.] Here the suit is between the parties to the contract. No fraud, accident or mistake is alleged. The contract is unambiguous and parol evidence is not admissible to vary its terms. Besides, appellant's offer of proof itself shows that appellant had, or might make, a claim for previous services and that the ten per cent provision was put in to take care of that very contingency.
Appellant says that the court erred in directing a verdict in favor of one and against the other defendant. This contention is technically correct. The court should have directed a verdict in favor of both defendants; for, while the construction company was liable to appellant in a proper suit, neither it nor the respondent was liable in this suit because appellant's claim is not covered by the "labor bond" upon which the suit is based. The judgment against the construction company is now final since no appeal was taken from it, and it is unnecessary for appellant to bring another suit against that company. The error is in plaintiff's favor. Certainly it cannot affect the rights of respondent.
Finding no prejudicial error, the judgment is affirmed. All concur.