BERNARD v. INDEMNITY INSURANCE COMPANY OF NORTH AMERICA (1958)

The plaintiffs herein have appealed from a judgment sustaining demurrers to the complaint and dismissing the action as against respondent surety. Defendants appeal from an order granting plaintiffs' motion to strike from defendants' memorandum of costs. The case involves the question of extent of the surety's liability on certain payment bonds furnished by a public works contractor, pursuant to sections 4200–4208 of the Government Code.

Plaintiffs, as trustees of the Carpenters Health and Welfare Trust for Southern California filed this action to recover the so-called health and welfare payments which the contractor, Hudson Construction Company was required to make into the trust fund administered by plaintiffs. The contractor was not served and did not appear in the action.

Involved herein is Article XXI of a Master Labor Agreement, negotiated in May, 1954, under which the Associated General Contractors, et al., and the United Brotherhood of Carpenters and Joiners, ‘agree to establish a joint Health and Welfare Trust Agreement.’ This agreement provides that effective September 1, 1954, ‘the Contractors shall make payment to the Health and Welfare Fund of 5¢ per hour worked per employee under this agreement,’ and that effective May 1, 1955, such payment ‘shall be increased 5¢ per hour.’

On or about August 27, 1954, the contractor Hudson executed a collateral bargaining agreement agreeing to be bound by the Master Labor Agreement. Hudson employed construction carpenters on four projects for various school districts, and thereafter defaulted in payment of the specified health and welfare contributions. Four separate payment bonds covering the different projects were furnished by Hudson, on which the respondent company was surety.

Section 4204 of the Government Code provides that ‘the contractor's bond shall provide that if the person or his subcontractors, fail to pay for any materials, provisions, provender or other supplies, or teams, used in, upon, for or about the performance of the work contracted to be done, or for any work or labor thereon of any kind, or for amounts due under the Unemployment Insurance Act with respect to such work or labor, that the surety or sureties will pay for the same, in an amount not exceeding the sum specified in the bond, * * * a reasonable attorney's fee, to be fixed by the court.’ (Italics added.)

It is appellants' contention that ‘The health and welfare contributions agreed to be paid are a part of the compensation of the carpenters with respect to whose work and labor they are payable, and until such contributions have been made such persons have not been completely paid for their work and labor.’

Appellants also call attention to the fact that section 4205 of the Government Code provides that, ‘the bond must be liable to claimants or their assigns,’ and argue that the trustees of the health and welfare fund are persons entitled to recover thereunder since they are the assignees of, or the general agents of, the carpenters who worked on the jobs in question. It is asserted that at least there is an ‘equitable assignment,’ making the trustees proper parties plaintiff.

Respondents, however, insist that there is no liability since ‘Statutory bonds incorporate the statutes under which they are executed and are limited in their coverage to the intended purposes of the legislature;’ that there can be no recovery since ‘such bonds did not cover health and welfare contributions;’ and that appellants are not persons entitled to bring the present action.

The position taken by the trial judge to the effect that the statutory bond in question did not, by its terms, make the surety company liable for the unpaid contributions to the health and welfare fund, appears to be correct. As stated in respondent's brief, ‘Unless some intent of the California Legislature can be found to demonstrate that the statutes and bonds in the within case were intended at the time the legislation was enacted to cover such health and welfare contributions, the bonds sued on in this case should not be interpreted to include such * * * payments.’ Such intent has not been made apparent either by briefs filed or by the cases cited.

In the instant case the language used in the bond statute hereinbefore cited is plain enough. It makes the sureties liable, so far as the present case is concerned, in respect to ‘any work or labor thereon of any kind.’ As pointed out in respondent's brief these contributions are made payable directly by the employer to the welfare fund and are not deducted from the employee's wages; and they ‘do not create specific funds for the benefit of specific employees, which such employee could collect or withdraw upon terminating his employment or withdrawing from membership in the union.’

The difficulties and dangers of indulging in a loose interpretation of statutory provisions are obvious. The result is judicial legislation—amending or rewriting a statute to suit the exigencies of the particular occasion. In no case can such dangers be greater than in reference to a statute which prescribes the conditions of a bond; the result being the imposition of liability for some obligation not stated in the statute or bond, and not contemplated by the legislature. It must always be presumed that the language of a statute was chosen with care, and that had the legislators desired a more extensive inclusion such intention would be found mirrored in the phraseology employed.

While it is undoubtedly true that such statutes and bonds should be given such a liberal interpretation as will effect the purpose of the legislature, it has been repeatedly held that they should not be construed to extend the coverage of the bonds beyond the intent of the legislature. It is essential that a claimant thereunder bring his claim squarely within the requisites of the statute and bond. See Miles v. Baley, 170 Cal. 151, 149 P. 45; Lamson Co. v. Jones, 134 Cal.App. 89, 24 P.2d 845.

Moreover, the instant statute furnishes internal evidence that the legislative intent was strictly limited to the situations therein mentioned. In addition to the liability imposed in respect to labor and materials, the surety's obligation is specifically extended to one other case, that of ‘amounts due under the Unemployment Insurance Act with respect to such work or labor.’ By the inclusion of this one additional obligation it is only reasonable to conclude that the legislature intended to exclude any other. Expressio unius est exclusio alterius.

There are apparently no decisions of the Supreme Court or the District Courts of Appeal of this state, dealing with the precise question here involved. Appellants, however, strongly rely upon the case of Sherman v. Achterman, 1955, in the Appellate Department of the Superior Court of San Francisco County, 36 L.R.R.M., included in the Appendix to appellants' opening brief. In that case the contractor also defaulted in payments to the Health and Welfare Fund. In an opinion concurred in by two judges of that court with a dissent by the other judge, it was held that the bond statute in question covering payment ‘for any work or labor’ could be deemed to include the Welfare Fund payments, and that the surety would therefore be liable for the contractor's default.

The holding of the Appellate Department of the Superior Court in the Sherman case is not deemed persuasive or controlling, and seems to unduly extend the meaning of the language used. Adherence thereto would judicially rewrite the statute in question—a function not within the jurisdiction of any court. Also, as pointed out in the respondent's brief, the employee has no right, title, interest or control in respect to payments to the welfare fund under the specific provisions of the original agreement and declaration of trust. Such payments are, in fact, in a class by themselves; they are exactly what they are called—‘contributions' required as a condition of supplying workmen to a contractor. If it is the desire of the legislature to add this liability to the surety's obligation, an amendment is in order, and is the only proper way of effecting such a change.

Other cases cited by appellants, such as United States for Benefit and on Behalf of Sherman v. Carter, 353 U.S. 210, 77 S.Ct. 793, 1 L.Ed.2d 776, interpreting a federal statute known as the Miller Act, 40 U.S.C.A. § 270a et seq., cannot be deemed controlling in respect to the California statute. Likewise, the question whether such contributions are entitled to priority in bankruptcy does not shed any light on the present question of legislative intent, which in the final analysis must be deemed the controlling and essential feature.

An examination of section 4205 of the Government Code discloses that the bonds in question inure to the benefit of any and all persons entitled to file claims or their assigns. Appellants' contention that the trustees of the health and welfare fund are the equitable assignees of the employees, and hence entitled to bring this action is not persuasive. Since the employees never had any right, title or interest in or to the contributions, and since such payments were not taken from their wages, it is difficult to see how there can be any assignment, equitable or otherwise. One cannot assign something in which he has no interest; something which is exacted by and fully controlled by some other person or persons. Such is the situation in the present case. Again it may be said that if such change in the law is desired, this is a matter within legislative and not judicial authority.

The Indemnity Insurance Company, as cross-appellant, claims that it is entitled to attorney fees under section 4207 of the Government Code, providing that ‘Upon the trial of the action, the court shall award to the prevailing party a reasonable attorney's fee, to be taxed as costs, and to be included in the judgment therein rendered.’ The amount of $1,500 was claimed in the defendant's memorandum of costs; plaintiffs challenged this item, no evidence was introduced to sustain the challenged item, and a motion to strike was granted.

In view of the language of the statute, and there being no evidence as to the reasonableness of the stated amount, there appears to have been no reversible error in the court's striking of such item. As said in City of Los Angeles v. Abbott, 129 Cal.App. 144, 153, 18 P.2d 785, the burden of proof is upon the party claiming the attorney fees.

The judgment and order are, and each is, affirmed.

DRAPEAU, Justice pro tem.

WHITE, P. J., and FOURT, J., concur.