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FROMMEYER v. L. & R. CONSTR. CO.

March 27, 1956

Augustus C. FROMMEYER, Charles M. Foley, and Joseph E. Murphy, co-partners doing business as Frommeyer and Company, a partnership, and United States of America for the use of Augustus C. Frommeyer, Charles M. Foley and Joseph B. Murphy, co-partners doing business as Frommeyer and Company, a partnership, Plaintiffs,
v.
L. & R. CONSTRUCTION CO., Inc., a corporation, American Surety Company of New York, a corporation, Wortmann & Sons, Inc., a corporation, and Seaboard Surety Company, a corporation, Defendants



The opinion of the court was delivered by: FORMAN

The complaint in this case alleges, among other things, that:

On January 28, 1953 the defendant Wortmann & Sons, Inc. entered into a contract as prime contractor with the United States for the construction of Air Force Bachelor Officers Quarters at the McGuire Air Force Base at Wrightstown, New Jersey. Wortmann gave both the payment and performance bonds required by the Miller Act *fn1" with itself as principal, the United States as obligee and the defendant Seaboard Surety Company as surety.

Subsequently, Wortmann entered into a subcontract with the defendant L. & R. Construction Company whereby L. & R. bound itself to do all concrete work for the project. Wortmann exacted the following bond from L. & R.:

 'Know all Men by these Presents, That we L & R Construction Co., Inc. of Camden, New Jersey called the Principal, and American Surety Company of New York, called the Surety, are held and firmly bound unto Wortmann & Sons of New York City called the Owner, in the sum of One hundred ninety nine thousand dollars -- -- -- Dollars ($ 199,000.00), for the payment whereof said Principal and Surety bind themselves firmly by these presents.

 'Whereas, the Principal has, by written Agreement, dated March 11, 1953, entered into a contract with the Owner for Furnishing of concrete work and installation of reinforcing steel in connection with construction of Air Force quarters McGuire Air Force Base, Wrightstown, New Jersey.'

 a copy of which is by reference made a part hereof;

 'Now, Therefore, the condition of this obligation is such, that if the Principal shall faithfully perform the contract on his part, free and clear of all liens arising out of claims for labor and materials entering into the construction, and indemnify and save harmless the Owner from all loss, cost or damage which he may suffer by reason of the failure so to do, then this obligation shall be void; otherwise to remain in full force and effect.'

 L. & R. then subcontracted with a partnership, Frommeyer and Company, plaintiff herein, in an agreement in which the plaintiff promised to furnish labor and supply materials on the project. It is alleged that L. & R. has defaulted in payment under its contract with the plaintiff, which has brought this suit joining as defendants Wortmann and Seaboard Surety in an exercise of the right of action given by the Miller Act; L. & R. Construction Company in an action founded on the contract between L. & R. and the plaintiff; and the American Surety Company in an action on the bond the terms of which are set forth above.

 American has moved to dismiss the complaint as to it on the ground that, regardless of the liability of L. & R., it cannot be sued on the bond by anyone other than Wortmann. The specific argument is that the promise in the bond to pay money is solely a promise made to Wortmann and that American makes no promise that can be construed as giving a right of action on the bond to one not a party to it. The bond, it is said, exists for the single benefit of Wortmann, and not for the benefit of suppliers of L. & R. *fn2"

 We may begin with the Restatement of Security. Section 165 provides:

 'Where a surety for a contractor on a construction contract agrees in terms with the owner that the contractor will pay for labor and materials, or guarantees to the owner the promise of the contractor to pay for labor and materials, those furnishing labor or materials have a right against the surety as third party beneficiaries of the surety's contract, unless the surety's contract in terms disclaims liability to such persons.'

 It is obvious that American's bond is not covered by this section. American has not agreed with Wortmann that L. & R. will pay for labor and materials, nor has it guaranteed a promise of L. & R. to pay those furnishing labor and materials, since neither the bond nor any of the agreements it incorporated by reference contains such a promise attributable to L. & R. Thus, the agreements presently involved in this case meet none of the conditions section 165 imposes as necessary prerequisites to the right of laborers and materialmen to sue the contractor's surety on the latter's bond.

 Section 166 of the Restatement defines the conditions under which the right of a supplier to sue a contractor's surety does not exist. It provides:

 'Where a surety guarantees the performance of a contract by a contractor who does not promise the owner to pay those furnishing labor or materials but agrees to complete the work free of liens or to furnish labor and materials, ...


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