Johnson v. Gallegos Construction Co.

785 P.2d 1109, 125 Utah Adv. Rep. 35, 1990 Utah LEXIS 4
CourtUtah Supreme Court
DecidedJanuary 9, 1990
Docket870104, 870108 and 870361
StatusPublished
Cited by2 cases

This text of 785 P.2d 1109 (Johnson v. Gallegos Construction Co.) is published on Counsel Stack Legal Research, covering Utah Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Johnson v. Gallegos Construction Co., 785 P.2d 1109, 125 Utah Adv. Rep. 35, 1990 Utah LEXIS 4 (Utah 1990).

Opinion

HOWE, Associate Chief Justice:

These three consolidated cases raise the issue of whether rental charges for equipment used on a public construction project were within the scope of coverage of Utah Code Ann. § 63-56-38 at the time the charges were incurred in 1985.

The Utah Department of Transportation (UDOT) selected Kiewit Western Company to be the general contractor for a state highway construction project. Kiewit was required by the Utah Procurement Code to obtain a payment bond “in an amount equal to 100% of the price specified in the contract, ... for the protection of all persons supplying labor and material to the contractor or its subcontractors for the performance of the work provided for in the contract.” Utah Code Ann. § 63 — 56—38(l)(b) (Supp.1983) (emphasis added).

Aetna Casualty & Surety Company executed the bond, dated January 7, 1985. The bond contained boilerplate which referred to Utah Code Ann. § 14-1-5 (1953) (as amended) and incorporated all the provisions of chapter 1, title 14 (public contractor’s bond statute) “as if [chapter 1] were copied at length herein.” Section 14-1-5 had in fact been repealed five years earlier. 1980 Utah Laws ch. 75, § 5. It had been replaced by chapter 56, title 63 — the Utah Procurement Code. 1980 Utah Laws ch. 75, § 1. Only a few sections of chapter 1, title 14 remained in effect in 1985 and applied “only to those political entities not subject to the provisions of Chapter 56, Title 63.” Utah Code Ann. § 14-1-17 (Supp.1983, 1986). UDOT is subject to chapter 56 of title 63.

Kiewit contracted with Gallegos Construction Company to supply gravel to the project. Gallegos in turn rented equipment from the three plaintiffs, Johnson, Biorn, and Smith. It would have made no difference to plaintiffs at the time the bond was issued, January 7, 1985, whether they were covered by title 14 as the bond indicated or title 63 as the Code provided. Both statutes protected persons supplying labor and material to subcontractors. The notice provisions in case of default by Gallegos were the same — written notice to the contractor within a ninety-day period. § 14-1-14(2) (Supp.1983); § 63-56-38(3) (Supp.1983). However, effective April 29, 1985, the notice provision of section 63-56-38(3) changed. An amendment to that section required written notice within ninety days to the contractor and the surety company. 1985 Utah Laws ch. 202, § 1.

Subsequent to the effective date of the amendment, Gallegos became delinquent in its payments to the three plaintiffs, who sought recovery under the bond in separate suits. Two plaintiffs complied with the notice provisions of chapter 1 of title 14 per the bond, but not with section 63-56-38(3), the statute applicable to UDOT contracts. Smith gave timely notice to both contractor and surety. However, the district court granted summary judgment to Kiewit and Aetna against Smith on a finding that rent for equipment was not “labor and materi *1111 al” within the scope of the coverage of section 63-56-38(l)(b) (Supp.1985). Johnson gave timely written notice to the contractor but not to the surety. He telephoned the surety, Aetna, who told him to write to the contractor. Biorn gave timely written notice to the contractor but untimely written notice to the surety. These two latter eases were tried.

In the Johnson case, the district court concluded as a matter of law that section 63-56-38(3) (1985) was the applicable statute; that Aetna was estopped from asserting that proper notice had not been given; that rental equipment fell within the scope of section 63-56-38; but that Gallegos was simply a materialman rather than a contractor or subcontractor and therefore fell outside the scope of section 63-56-38(3) (1985).

In the Biorn case, the judge concluded as a matter of law that rental equipment fell within the protection of the statute; that a materialman was a subcontractor for the purposes of the statute; that strict compliance with the notice provision^was required; and that Biorn had not provided Aetna with timely notice.

The parties seek resolution of the following issues: (1) whether section 63-56-38 or section 14-1-14 applies for notice purposes, given the misleading information on the bond; (2) whether strict compliance is required if section 63-56-38 applies; (3) whether Gallegos is a “subcontractor” for the purposes of section 63-56-38; and (4) whether rent for equipment is “labor and material” within the scope of the coverage of section 63-56-38. Because we hold that section 63-56-38 is the applicable statute and that rental equipment is not covered by that statute, we need not reach the other issues.

The Utah Procurement Code states in pertinent part:

[A] payment bond ... [shall be] executed by a surety company ... for the protection of all persons supplying labor and material to the contractor or its subcontractors for the performance of the work provided for in the contract.
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Any person who has furnished labor or material to the contractor or subcontractor for the work provided in the contract ... may sue on the payment bond....

Utah Code Ann. § 63-56-38(l)(b), (3) (Supp. 1985) (emphasis added).

Plaintiffs contend that the language “labor and material” should be construed to include rental equipment. We recently examined similar language in the private contractor’s bond statute, section 14-2-1. Graco Fishing and Rental Tools, Inc. v. Ironwood Exploration, Inc., 766 P.2d 1074 (Utah 1988). In that case, the plaintiff contended that rental charges for equipment fell within the protection of section 14-2-1, which provided: “[A]ny person who has furnished materials or performed labor ... shall have a direct right of action against the sureties upon such bond for the reasonable value of the materials furnished or labor performed.... ” Id. at 1078 (citing Utah Code Ann. § 14-2-1 (Supp.1985)).

In view of the common purpose,of the private contractor’s bond and the mechanic’s lien statutes, we compared their provisions as suggested in an earlier decision, King Brothers, Inc. v. Utah Dry Kiln Co., 13 Utah 2d 339, 341, 374 P.2d 254, 255-56 (1962). Our comparison in Graco Fishing showed:

Prior to 1981, neither statute contained express language which made rental charges lienable....

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Bluebook (online)
785 P.2d 1109, 125 Utah Adv. Rep. 35, 1990 Utah LEXIS 4, Counsel Stack Legal Research, https://law.counselstack.com/opinion/johnson-v-gallegos-construction-co-utah-1990.