Union Asphalt, Inc. v. Planet InsuranceUnion Asphalt, Inc. v. Planet Insurance
Opinion
Here we hold that Civil Code 1 section 3267 does not preclude third tier subcontractors and material suppliers from a right of action on a payment bond.
Riverglen Investments, Ltd., sought to develop a subdivision in the City of El Paso de Robles (the City). The subdivision agreement with the City required the construction of certain offsite public improvements for which Riverglen was required to provide performance and payment bonds. Planet Insurance Company provided the bonds. The bonds were substantially in the form set forth in Government Code sections 66499.1 and 66499.2. 2
Riverglen entered into a contract with Spiess Construction to construct the improvements. Spiess subcontracted 100 percent of the work to Swift Tectonics. Swift subcontracted portions of the work to Union Asphalt and contracted for materials with Southern Paсific Milling and Westburn. Riverglen stopped paying its contractors in 1990.
Union, Southern Pacific and Westburn filed complaints alleging they were entitled to recover under the bond. Planet moved for and obtained summary judgment in its favor on the ground that third tier subcontractors werе not entitled to recover under Planet’s bond.
Union and Southern Pacific appeal. We reverse. Southern Pacific and Union raise the same contentions. We refer to both appellants as Union for convenience.
Discussion
Union contends that the express language of the bond shows it runs in favor of Union. Union cites a portion of the bond stating Planet agrees to be bound to “. . . all contractors, subcontractors, laborers, materialmen and other persons employed in the performance of the aforesaid agreement [to install public improvements]. . . .”
Planet, on the other hand, relies on a different portion of the bond which provides, “[i]t is hereby expressly stipulated and agreed that this bond shall inure to the benefit of any and all persons, сompanies and corporations entitled to file claims under Title 15 (Commencing with Section 3082) . . . of the Civil Code. . . .”
This leads to to an obvious question. Is there something in title 15 beginning with section 3082 that limits the rights of any subcontractor or supplier to bring an action for recovery on a bond?
Planet argues the section limits claims on its bond to first tier material suppliers and second tier subcontractors. Because Riverglen was the principal on the bond and the City’s prime contractor for the work of public improvement, Union and Southern Pаcific would be third tier subcontractors after Spiess and Swift Tectonics.
No case interprets section 3267, but Planet cites California Surety and Fidelity Bond Practice (Cont.Ed.Bar Supp. 1992) section 8.11, page 57-58. There the author states: “
We are puzzled by this interpretation. There appears no good reason why our Legislaturе would cut off suppliers and subcontractors at the second tier for payment bonds, but give suppliers and subcontractors of any tier the right to a mechanic’s lien. It would be unreasonable to draw such an arbitrary line.
In interpreting statutes, we must presume our Lеgislature intended reasonable results. Where there are two possible constructions, one leading to mischief or absurdity and the other to a result consistent with justice and common sense, the choice is self-evident. (See
Shoemaker
v.
Myers
(1992)
Further, an interpretation of
Section 3110 lists all those who have mechanic’s lien rights, including materialmen and subcontractors. Section 3110 does not limit those who have lien rights to second tier materialmen and subcontractors. Thus, the only reasonable сonstruction of section 3248, subdivision (c) is that it requires public works payment bonds to inure to the benefit of materialmen and subcontractors of any tier.
If
In fact, the bond itself, which is substantially in the form provided in Government Code section 66499.2, states it inures to the benefit of “all. . . subcontractors . . . [and] materialmen. . . .” We presume Government Code section 66499.2 was drafted with
Section 3104 defines a subcontractor as “a contractor who has no direct contractual relationship with thе owner.” Under this definition, subcontractors at every level may be considered to be the bond principal’s subcontractors. Thus, the phrase “one of his [the principal’s] subcontractors” as used in
What then is the purpose of
Thus, for example, architects, engineers and land surveyors who perform work prior to or otherwise outside the scope of the construction contract
Planet requests that we take judicial notice of
The original bill spеcified that an “architect registered engineer, or licensed land surveyor” had no claim on the bond unless the work was performed for the bond principal or one of his subcontractors. (Sen. Bill No. 229 (1971 Reg. Sess) § 1.) The bill also stated that the act was not intendеd to change substantive law. (Id. at § 3.)
The substitution of “any person” for the more specific “architect, registered engineer, or licensed land surveyor” does not signal a change in the purpose of the bill. The substitution simply recognizes that there is no reason to allow anyone who does not perform work under the construction contract to recover on the bond.
Planet points out, however, that the bill was also amended to eliminate the provision that it was not intended to change substantive law. That is insufficient to convince us the Legislature intended to change the purpose of the bill from one limiting recovery to those who worked under the construction contract to one limiting recovery to first and second tier subcontractors.
Planet also points to a legislative counsel’s opinion on
That the definition of a subcontractor “embraces” all persons who agree with the original contractor, does not mean other contractors are excluded. Neither the opinion nor the cases cited therein stand for the proposition that only those who agree with the original contractor are subcontractors. The plain language of section 3104, defining subcontractor, contains no such limitation.
Section 270b of the Miller Act provides in part: “Every person who has furnished labor or material in the prosecution of the work provided for in such contract, . . . shall have the right to sue on such payment bond ....
Provided, however,
That any person having direct contractual relationship with a subcontractor but no contractual relationship express or implied with the contractor furnishing said payment bond shall have a right of action upоn the said payment bond upon giving written notice to said contractor within ninety days. . . .” (
If the interpretation of
The United States Supreme Court, however, interpreted the section as limiting payment bond claimants at the second tier by adopting a narrow definition of subcontractor. The court noted that the Miller Act does not define subcontractor.
(Clifford F. MacEvoy Co.
v.
United States, supra,
We are unconvinced the United States Supreme Court’s interpretation of the Miller Act should be applied to California statutes. Unlike the Miller
The judgment is reversed. Appellants are awarded costs on appeal.
Yegan, J., and Willard, J., * concurred.
Notes
All further statutory references are to the Civil Code unless otherwise specified.
These sections deal with forms for surety bonds issued pursuant to the Subdivision Map Act.
Section 3091 provides in part: “ ‘Ninety-day public works preliminary bond notice’ ” means a notice which must be given by any claimant other than one of the following:
“(a) A claimant who performs actual labor for wages or an express trust fund as described in Section 3111.
“(b) A claimant who has a direct contractual relationship with the original contractor.
“The notice is required only on public works, and is a necessary prеrequisite to enforcement of a claim on a payment bond. . . .”
Section 3252 provides: “In order to enforce a claim upon any payment bond given in connection with a public work, a claimant must give the 90-day public works preliminary bond notice as provided in Section 3091.”
Retired judge of the Ventura Superior Court sitting under assignment by the Chairperson of the Judicial Council.