WAITE HARDWARE COMPANY vs. ARDINI & PFAU, INC. & others.

CUTTER, J. One Orlando (the prime contractor) made a contract with the Massachusetts Turnpike Authority (the authority) for bridge and highway construction. Ardini & Pfau, Inc. (the subcontractor), took a subcontract for a part of this work. The plaintiff, who supplied to the subcontractor materials used in the turnpike work, brings this bill in equity against the authority, the prime contractor, the subcontractor, and Hartford Accident and Indemnity Company (Indemnity) to recover the amount due for the materials and to obtain payment of the amount from a "payment bond" [Note 1] executed on March 31, 1955, by the prime contractor and Indemnity in connection with the contract and on the same day as the execution of a performance bond [Note 2] given by them. Each bond named only the authority as obligee.

The bill alleged these facts and also (a) that the subcontractor owed the plaintiff $2,363.25 plus interest of $141.80 for the materials; (b) that the prime contractor and Indemnity by the payment bond "made an offer of a unilateral contract to . . . [the plaintiff] to pay for materials . . . used . . . in the construction of the . . . [t]urnpike . . ." and that the "offer was accepted by . . . [the plaintiff] by furnishing" the materials; (c) that the payment bond was "held by the . . . authority in trust for the benefit

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of" the plaintiff and others similarly performing labor and furnishing materials "in reliance" upon the bond; (d) that the plaintiff "knew of and relied upon" the bond; and (e) that on January 25, 1956, the plaintiff filed with the authority a sworn statement of its claim, within sixty days after it last furnished materials. Demurrers were filed by the prime contractor, by Indemnity, and by the authority on the ground, among others, that the bill failed to state any case for equitable relief. The demurrers were sustained. A final decree ordered the subcontractor to pay the amount owed by it and dismissed the bill as against the other defendants. The plaintiff appealed.

1. The payment bond was not a statutory bond. General Laws c. 149, Section 29 (as amended through St. 1938, c. 361), was in effect on March 31, 1955. Although Section 29 was amended by St. 1955, c. 702, Section 2, [Note 3] so that thereafter a statutory payment bond would have been required, in connection with contracts with the authority, for the benefit of persons in the position of the plaintiff, [Note 4] this amendment did not become effective until after the execution of the bond here under consideration. No such bond was required by Section 29 prior to the 1955 amendment, for certainly the authority was not a "county, city or town."

Similarly no such bond was then required by G. L. c. 30, Section 39, which was amended by St. 1955, c. 702, Section 1, in respects

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not here material, for Section 39 required a bond only from officers "or agents contracting in behalf of the commonwealth for the construction . . . of . . . public works." [Note 5] The authority, although a "public instrumentality" performing "an essential governmental function" (see St. 1952, c. 354, Section 3), is not the Commonwealth itself. See Opinion of the Justices, 334 Mass. 721, 734. Contracts of the authority are not made "in behalf of the commonwealth" in the sense in which that term is used in Section 39, which we interpret as meaning contracts upon which the Commonwealth itself is directly liable in some manner. See Duteau v. Salvucci, 330 Mass. 531, 537. Under St. 1952, c. 354, Section 2 (see also Section 3), expenses of the authority "shall be payable solely from funds provided under the authority" of c. 354, and these funds are to be obtained from toll revenues and revenue bonds upon which (Section 3) the Commonwealth is not to be liable.

2. The payment bond took effect only as a common law bond. Johnson-Foster Co. v. D'Amore Constr. Co. 314 Mass. 416, 419-420. See Robinson Clay Prod. Co. v. Beacon Constr. Co. of Mass. Inc., ante, 406, 409. The bond, however, does not contain any provision, like that considered in the two cases just cited, showing that the bond was given for the benefit of all persons furnishing labor and materials on account of the prime contract. The Johnson Foster Co. case, supra, at pp. 420-422, allowed suppliers to enforce in equity the "Obligations of the makers of the bond springing into existence after the original delivery of the bond." These obligations arose by the acceptance by the suppliers of "the offer of a unilaterial contract" contained in the bond, in reliance upon the offer and the bond. See Corbin, Contracts, Section 826, esp. n. 6. Here there is no offer in the bond in terms, comparable to the provision relied on in the Johnson-Foster Co. case, running to suppliers of labor and material, unless it can be implied from the fact that the usual purpose of a payment bond is to assure the payment of

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such suppliers, particularly where, in the case of public works, there is a broad area of freedom, for the property involved, from statutory mechanics' and suppliers' liens. See G. L. c. 254, Sections 1, 4; Lessard v. Revere, 171 Mass. 294, 295; Massachusetts Gas & Elec. Light Supply Co. v. Rugo Constr. Co. Inc. 321 Mass. 20, 22-23. In the light of the Massachusetts precedents, we think that we should not imply an obligation or offer by the makers of the bond to suppliers merely (a) because it may be difficult to see any purpose of taking the bond if no such obligation was intended, or (b) because in the case of a precisely similar bond required by the Commonwealth, a county, a city, or a town, such an obligation would be imposed under the applicable statute. The decisions in Massachusetts have interpreted the range of obligees and beneficiaries of such bonds narrowly, except where, as in Johnson-Foster Co. case, 314 Mass. 416, supra, there is shown a specific intention to benefit suppliers or to make an offer to them. Unless suppliers have been given benefits under the bond by statute (see e.g. A. L. Smith Iron Works v. Maryland Cas. Co. 275 Mass. 74, 76; Williston, Contracts [Rev. ed.] Section 367, p. 1072, but see Section 372) suppliers, not within a class of beneficiaries mentioned in the bond, have been held to have no enforceable rights under it. See e.g. Central Supply Co. v. United States Fid. & Guar. Co. 273 Mass. 139, 142-145. Even rights created by statute have been held to be available only to those classes of suppliers specifically mentioned as beneficiaries of the bond in the statute. See e.g. Claycraft Co. v. John Bowen Co. 287 Mass. 255, 257.

If the parties had intended to create rights in the suppliers, it would have been natural for them to say so in essentially the language considered in the Johnson-Foster Co. case, 314 Mass. 416, supra. We interpret the payment bond as intended to confer no enforceable benefit upon suppliers. Accordingly, there is no merit to the plaintiff's suggestion that the bond was designed to make the authority trustee of the bond for the benefit of all suppliers.

3. General Laws c. 149, Section 29A, inserted by St. 1949, c. 185,

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gives to the plaintiff no direct right of recovery upon the bond. That section purports to give suppliers such direct rights where a surety bond is "given in connection with any written contract for the erection . . . of any . . . structure upon privately owned land" if the bond contains "a condition for the payment of all labor and material used." The land of the authority is held for public use and cannot aptly be described as "privately owned land." See Opinion of the Justices, 334 Mass. 721, 734.

4. The interlocutory decrees sustaining the demurrers and the final decree are affirmed.

So ordered.