{ "id": 8549483, "name": "INTERSTATE EQUIPMENT COMPANY v. C. CHRISTOPHER SMITH, RECEIVER FOR BOLLINGER CONSTRUCTION COMPANY, GREAT AMERICAN INSURANCE COMPANY, and NELLO L. TEER COMPANY (INC.)", "name_abbreviation": "Interstate Equipment Co. v. Smith", "decision_date": "1976-11-03", "docket_number": "No. 7622SC157", "first_page": "351", "last_page": "357", "citations": [ { "type": "official", "cite": "31 N.C. App. 351" } ], "court": { "name_abbreviation": "N.C. Ct. App.", "id": 14983, "name": "North Carolina Court of Appeals" }, "jurisdiction": { "id": 5, "name_long": "North Carolina", "name": "N.C." }, "cites_to": [ { "cite": "67 A.L.R. 1242", "category": "reporters:specialty", "reporter": "A.L.R.", "opinion_index": 0 }, { "cite": "67 A.L.R. 1241", "category": "reporters:specialty", "reporter": "A.L.R.", "opinion_index": 0 }, { "cite": "67 A.L.R. 984", "category": "reporters:specialty", "reporter": "A.L.R.", "year": 1928, "opinion_index": 0 }, { "cite": "143 S.E. 847", "category": "reporters:state_regional", "reporter": "S.E.", "year": 1928, "opinion_index": 0 }, { "cite": "195 N.C. 840", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8632331 ], "year": 1928, "opinion_index": 0, "case_paths": [ "/nc/195/0840-01" ] }, { "cite": "170 S.E. 643", "category": "reporters:state_regional", "reporter": "S.E.", "year": 1933, "opinion_index": 0 }, { "cite": "205 N.C. 185", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8627494 ], "year": 1933, "opinion_index": 0, "case_paths": [ "/nc/205/0185-01" ] }, { "cite": "138 S.E. 143", "category": "reporters:state_regional", "reporter": "S.E.", "year": 1927, "opinion_index": 0 }, { "cite": "193 N.C. 769", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 2217848 ], "year": 1927, "opinion_index": 0, "case_paths": [ "/nc/193/0769-01" ] } ], "analysis": { "cardinality": 557, "char_count": 15550, "ocr_confidence": 0.658, "pagerank": { "raw": 2.3404008414579807e-07, "percentile": 0.7921056401357762 }, "sha256": "e8a8c9a071a92df69c3be32e8b74a98c463150c07a292f54d94b2619e7e73cba", "simhash": "1:0c4ea13b09c6f1d3", "word_count": 2454 }, "last_updated": "2023-07-14T16:36:26.493722+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [ "Judges Britt and Morris concur." ], "parties": [ "INTERSTATE EQUIPMENT COMPANY v. C. CHRISTOPHER SMITH, RECEIVER FOR BOLLINGER CONSTRUCTION COMPANY, GREAT AMERICAN INSURANCE COMPANY, and NELLO L. TEER COMPANY (INC.)" ], "opinions": [ { "text": "BROCK, Chief Judge.\nIt has long been established that a person for whose benefit a promise is made to another, though not a party to the agreement or privy to the consideration, may maintain an action upon the promise, and one who has assumed or contracted for the payment of another\u2019s debt may be sued directly by the creditor. 2 Strong, N. C. Index, Contracts, \u00a7 14. The same principle applies to the intended beneficiaries of a contractor\u2019s or subcontractor\u2019s bond, and such a beneficiary may maintain an action in his own name against the surety on such bond. Glass Co. v. Fidelity Co., 193 N.C. 769, 138 S.E. 143 (1927). The problem in the present case is whether the plaintiff, Interstate, is a beneficiary under the bond upon which the defendant, Great American, is the surety.\nBoth parties, as well as this Court, view the contractor\u2019s bond given by Bollinger to Teer as one not required by statute, but rather as a private bond agreement. In a private contractor\u2019s bond the parties are free to agree at arm\u2019s length on the extent of coverage desired.\nThe bond executed by Bollinger and Great American as surety was a payment bond for the protection of those supplying labor and material. Plaintiff claims that this bond should cover the rental of equipment. In private contractor\u2019s bonds neither equipment nor rental of equipment is considered \u201cmaterials.\u201d 17 Am. Jur. 2d, Contractor\u2019s Bonds, \u00a7 7, p. 196. \u201cMaterials\u201d within a surety bond, conditioned upon the contractor paying those furnishing materials in the construction of a roadway, consist of articles necessary and indispensable to performance of the contract, which the parties must reasonably contemplate will be incorporated into the work and which lose their identity in the finished product. Hardware Co. v. Indemnity Co., 205 N.C. 185, 170 S.E. 643 (1933). Equipment, such as the Wabco scrapers in this case, is neither used up nor incorporated into the work but is rather a component of the contractor\u2019s plant.\nUnder the above-stated general principle, plaintiff\u2019s claims against the surety for amounts due on the equipment leases ($27,447.29) are invalid. Plaintiff argues, however, that if the contractor\u2019s bond is read in conjunction with the construction contract, the equipment leases would come within the coverage of the bond. We disagree.\nThe pertinent provisions of the contract relied on by the plaintiff are:\n\u201cYou [Bollinger] will fiance your operations in every detail and promptly, or upon demand, pay all indebtedness arising out of your operations hereunder.\u201d\n* * *\n\u201cYou are to furnish us satisfactory Payment bond being in the full amount of this subcontract.\u201d\n* * *\n\u201cYou will furnish all supervision, labor and materials, including equipment and incidentals, to do properly the items of work listed below at the designated unit prices and in accordance with the contract, plans, specifications, special provisions and directions of our representative who is in charge of the project.\u201d\nWhile it is certainly a correct rule of construction that the payment bond be read in conjunction with the construction contract, the provisions of a contractor\u2019s bond should not be extended beyond the reasonable intent of the parties gathered from the language and purpose of the bond. Lumber Co. v. Lawson, 195 N.C. 840, 143 S.E. 847, 67 A.L.R. 984 (1928). Furthermore, where the provisions of the bond conflict with those of the contract, the terms of the bond are controlling over those of the contract in determining the surety\u2019s liability. 17 Am. Jur.' 2d, Contractor\u2019s Bonds, \u00a7 4, p. 194.\nIn the case at bar the contract called for Bollinger to provide Teer with a \u201csatisfactory Payment bond.\u201d Bollinger and Great American as surety executed a bond conditioned simply on \u201cpayment to all persons supplying labor and material in the prosecution of the work provided in said contract.\u201d While the contract also required Bollinger to \u201cpay all indebtedness\u201d arising out of his operations, there is no wording in the condition of the bond that in any way extends coverage to include \u201call indebtedness.\u201d The language of the bond conflicts with that of the contract; therefore, the terms of the bond must control. Those terms encompass only labor and materials, and not equipment.\nPlaintiff argues that the provision requiring Bollinger to furnish \u201call supervision, labor and materials, including equipment and incidentals\u201d shows the intent of the parties to include equipment within the category of labor and materials. By reading the contract as a whole and thereby placing the provision in its proper context, it is evident that the provision is not intended to bring equipment within the category of materials. The provision comes at a point in the contract describing the items of work to be performed by Bollinger. The language of the provision is but a preface to the specific job description. It merely defines Bollinger\u2019s construction responsibilities. Furthermore, the contract itself makes the traditional distinction between equipment and materials. In the paragraph immediately after the provision for a satisfactory payment bond, the contract says:\n\u201cYou [Bollinger] shall immediately procure and prepare your materials and manufactured products to be incorporated in the completed work and advise us of your source of supply and delivery schedule of said materials. You shall have available the necessary workmen and equipment so as to be ready to begin work immediately following our direction to do so.\u201d (Emphasis added.)\nThe contract called for Bollinger to pay all indebtedness and provide a satisfactory payment bond. Bollinger and Great American as surety provided a payment bond simply covering labor and materials. Teer accepted this bond as satisfactory. These parties were dealing at arm\u2019s length and were free to agree on the extent of the bond\u2019s coverage. They could have easily included rental of equipment, and had they done so, the surety would have been liable. The parties did not affirmatively include equipment rental within the bond coverage, nor can their contract be properly construed to include such coverage. Summary judgment denying plaintiff\u2019s claims for amounts due on rental of equipment was proper.\nBesides its claims for lease payments, plaintiff also claims the cost of repairs made on the leased equipment ($1,304.08), a tire adjustment charge ($6,000.00) also claimed as a repair, and service charges ($4,419.46) on the overdue lease and repair accounts. As to the two items classed as repairs, the question is whether they are \u201clabor and materials\u201d within the coverage of the payment bond. The term \u201clabor and materials,\u201d as used in a payment bond, means such labor and materials as are necessary to construct the work in accordance with the contract. 17 Am. Jur. 2d, Contractor\u2019s Bonds, \u00a7 7, p. 196. Whether the labor and parts used in repairing equipment are within the bond depends on whether the repairs are major or incidental. Major repairs add materially to the value of the equipment and render it available for other work. The replacement of tires falls into this category. 67 A.L.R. 1241. Thus, the tire adjustment charge claimed by the p\u2019aintiff as a repair does not fall within the labor and materials covered by the bond.\nNon-major repairs are those which are incidental to the carrying on of the work. They consist of labor and parts which are needed to keep the equipment operational during the construction period, which are not of a permanent nature, and which do not appreciably add to the value of the equipment. 67 A.L.R. 1242. The only materials before Judge Collier concerning repairs, other than the tire adjustment considered above, show that the repair charges claimed by plaintiff were for work done after the equipment had been returned to plaintiff. The repairs in question were not needed to keep the equipment operational during the construction work. The defendant as surety is not liable on the bond because the repairs claimed were not necessary for the construction and therefore not within the covered category of \u201clabor and materials.\u201d\nSince Great American is not liable as surety on the lease payments or repair charges, it follows that Great American is not liable for the service charges attached to Bollinger\u2019s failure to pay those claimed amounts.\nThe judgment of the Superior Court of Iredell County denying plaintiff summary judgment and granting defendant summary judgment is\nAffirmed.\nJudges Britt and Morris concur.", "type": "majority", "author": "BROCK, Chief Judge." } ], "attorneys": [ "Raymer, Lewis, Bisele & Patterson, by Douglas G. Eisele, for the plaintiff.", "Haywood, Denny & Miller, by John C. Martin, for Great American Insurance Company." ], "corrections": "", "head_matter": "INTERSTATE EQUIPMENT COMPANY v. C. CHRISTOPHER SMITH, RECEIVER FOR BOLLINGER CONSTRUCTION COMPANY, GREAT AMERICAN INSURANCE COMPANY, and NELLO L. TEER COMPANY (INC.)\nNo. 7622SC157\n(Filed 3 November 1976)\n1. Principal and Surety \u00a7 10 \u2014 contractor\u2019s bond \u2014 intended beneficiaries \u2014\u25a0 action against surety\nThe intended beneficiaries of a contractor\u2019s or subcontractor\u2019s bond may maintain actions in their own names against the surety on such bond.\n2. Principal and Surety \u00a7 10\u2014 private contractor\u2019s bond\nIn a private contractor's bond the parties are free to agree at arm\u2019s length on the extent of the coverage desired.\n3. Principal and Surety \u00a7 10 \u2014 highway construction bond \u2014 meaning of \u201cmaterials\u201d \u2014 equipment rental\nIn a surety bond conditioned upon the contractor paying those furnishing \u201cmaterials\u201d in the construction of a highway, \u201cmaterials\u201d consist of articles necessary and indispensable to performance of the contract which the parties must reasonably contemplate will be incorporated into the work and which lose their identity in the finished product; therefore, such a bond does not cover amounts due for the rental of equipment.\n4. Principal and Surety \u00a7 10 \u2014 private construction bond \u2014 consideration with contract \u2014 intent of parties\nWhile a construction contractor\u2019s payment bond should be read in conjunction with the construction contract, the provisions of the bond should not be extended beyond the reasonable intent of the parties gathered from the language and purpose of the bond.\n5. Principal and Surety \u00a7 10\u2014 terms of bond in conflict with construction contract\nWhere the provisions of a bond conflict with those of a contract, the terms of the bond control over those of the contract in determining the surety\u2019s liability.\n6. Principal and Surety \u00a7 10 \u2014 highway construction bond \u2014 conflict between bond and contract \u2014 bond for \u201clabor and materials\u201d \u2014 rental of equipment\nWhere a highway construction contract required the subcontractor to \u201cpay all indebtedness\u201d arising out of its operations and to provide a \u201csatisfactory Payment bond,\u201d and the bond provided by the subcontractor covered only \u201cpayment to all persons supplying labor and material,\u201d the language of the bond conflicted with that of the contract and the terms of the bond controlled the liability of the bond surety; therefore, the surety was liable only for amounts due for labor and materials and not for amounts due for the rental of equipment.\n7. Principal and Surety \u00a7 10 \u2014 highway construction bond \u2014 contract provision\u2014 no intent to include equipment as \u201clabor and materials\u201d\nProvision of a highway construction contract requiring a subcontractor to furnish \u201call supervision, labor and materials, including equipment and incidentals\u201d did not show an intent by the parties to include equipment within the category of labor and materials in the subcontractor\u2019s bond covering \u201cpayment to all persons supplying labor and material.\u201d\n8. Principal and Surety \u00a7 10\u2014 payment bond \u2014 meaning of \u201clabor and materials\u201d\nAs used in a payment bond, \u201clabor and materials\u201d mean such labor and materials as are necessary to construct the work in accordance with the contract.\n9. Principal and Surety \u00a7 10 \u2014 payment bond for \u201clabor and materials\u201d \u2014 equipment repairs\nWhether labor and parts used in repairing equipment come within a payment bond for \u201clabor and materials\u201d depends on whether the repairs are major or incidental; major repairs add materially to the value of the equipment and render it available for other work while incidental repairs consist of labor and parts which are needed to keep the equipment operational during the construction period, which are not of a permanent nature, and which do not appreciably add to the value of the equipment.\n10.Principal and Surety \u00a7 10\u2014 payment bond for \u201clabor and materials\u201d \u2014 repairs to leased equipment \u2014 tire adjustment charge\nThe cost of repairs made on leased equipment after the equipment was returned to the lessor and a tire adjustment charge were not incidental repairs and did not come within the coverage of a payment bond for \u201clabor and materials.\u201d\nAppeal by plaintiff from Collier, Judge. Judgment entered 6 February 1976 in Superior Court, Iredell County. Heard in the Court of Appeals 27 May 1976.\nPlaintiff originally instituted this action against Bollinger Construction Company, Nello L. Teer Company, and Carolina Power and Light Company. After institution of this action, Bollinger Construction Company was placed in receivership in Robeson County and C. Christopher Smith was appointed receiver. The receiver was made a party in lieu of Bollinger.\nSummary judgment has been entered against the receiver of Bollinger in favor of plaintiff, but plaintiff has recovered nothing under its judgment against the receiver. Plaintiff has entered voluntary dismissals of its action against Nello L. Teer Company and of its action against Carolina Power and Light Company. Therefore, the only parties to this appeal are plaintiff and Great American Insurance Company. Great American was the surety on Bollinger\u2019s payment bond.\nThe controversy between the parties arose fo\u2019lowing the construction of a public highway project in the State of Virginia. Adams Construction Company, Roanoke, Virginia, was prime contractor on the project. Nello L. Teer, Durham, North Carolina (Teer), was a subcontractor of Adams Construction Company on the project. Bollinger Construction Company, Lum-berton, North Carolina (Bollinger), was a subcontractor of Teer for a part of the grading work on the project. Plaintiff, Interstate Equipment Company, Statesville, North Carolina (Interstate), leased grading equipment to Bollinger, which was used by Bollinger on the Virginia project. Interstate contends that Bollinger is indebted to it for the leased equipment, repairs thereto, and service charges in the total sum of $39,670.83.\nTeer required Bollinger to furnish a payment bond in connection with the contract between Teer and Bollinger. Great American Insurance Company (Great American), the remaining defendant, became the surety on Bollinger\u2019s payment bond. The payment bond executed by Great American contains the following language:\n\u201cNow, therefore, the condition of the foregoing obligation is such that if the Principal shall well and truly perform and promptly make payment to all persons supplying labor and material in the prosecution of the work provided for in said contract, and in all duly authorized modifications of said contract that may hereafter be made, then this obligation shall be void, otherwise it shall remain in force.\u201d\nPlaintiff seeks recovery from Great American under the terms of the foregoing bond for $39,670.83 \u2014 plaintiff\u2019s total claim against Bollinger. Both plaintiff and Great American moved for summary judgment. The trial judge denied plaintiff\u2019s motion and granted summary judgment in favor of Great American. Plaintiff appealed.\nRaymer, Lewis, Bisele & Patterson, by Douglas G. Eisele, for the plaintiff.\nHaywood, Denny & Miller, by John C. Martin, for Great American Insurance Company." }, "file_name": "0351-01", "first_page_order": 379, "last_page_order": 385 }