Am. Sur. Co. of N.Y. v. Sch. Dist. No. 64 of Douglas Cnty., No. 25876.

• Court: Supreme Court of Nebraska
• Writing for the Court: EBERLY
• Citation: 117 Neb. 6,219 N.W. 583
• Docket Number: No. 25876.
• Decision Date: 15 May 1928
• Parties: AMERICAN SURETY CO. OF NEW YORK v. SCHOOL DIST. NO. 64 OF DOUGLAS COUNTY.

117 Neb. 6
219 N.W. 583

AMERICAN SURETY CO. OF NEW YORK
v.
SCHOOL DIST. NO. 64 OF DOUGLAS COUNTY.

No. 25876.

Supreme Court of Nebraska.

May 15, 1928.

[219 N.W. 583]

Syllabus by the Court.

A school district is a creature of statute possessing no powers whatever beyond those given by the Legislature, and is unable to contract, ad libitum, as individuals may do, but only respecting objects, and to the extent, the laws permit.

To state a cause of action against a school district founded wholly on contract, it must affirmatively appear from the pleading that the contract in suit is one which the school district is empowered to make.

A written instrument incorporated as an exhibit and expressly made a part of a pleading, and a part of a cause of action or a defense therein stated, controls the allegations thereof which it contradicts or which are inconsistent therewith.

If a contract with a school district is entered into for the construction of a school building under lawful terms and conditions specified therein, and the contractor gives a bond, in substance, conditioned for the faithful performance of such contract, and as required by section 3224, Comp. St. 1922, the covenants and conditions of such bond as a secondary contract are not to be read into or construed as a part of the primary contract, or as effective to alter, narrow or limit or otherwise vary the legal obligations thereof.

The rule excluding parol evidence to vary or contradict a written instrument applies only between the parties to such instrument and those claiming under them. It has no application to controversies between a party to the instrument on the one hand and a stranger to it on the other.

“Subrogation” is the substitution of another person in place of a creditor so that the person in whose favor it is exercised succeeds to the rights of a creditor in relation to the defendant. But such subrogee can acquire no greater rights than the creditor had to whose rights he succeeds at the time of such payment made by him.

When an instrument consists partly of written (or typewritten) and partly of printed form, the former controls the latter where the two are inconsistent.

[219 N.W. 584]

Statutes, with reference to which contracts are made and entered into, become a part of such contracts.

Where the conditions of a statutory bond are separable and part are authorized by statute and part not authorized or even prohibited, and the statute does not expressly, or by necessary implication, declare it void as a whole, the conditions not authorized or prohibited may be rejected as surplusage, and the residue sustained as a good statutory bond pro tanto, the rule being the same as that applied to common-law bonds partly good and partly bad.

Where two clauses of a written instrument are so repugnant that they cannot stand together, the first will be retained and the second rejected, unless the inconsistency is so great as to avoid the instrument for uncertainty, and this rule is the more readily applied where the instrument is apparently carelessly drawn, or where the conflicting clause is on the back of the contract.

So far as the members of the board of a school district act, under section 3224, Comp. St. 1922, in exacting a bond for the benefit of laborers, mechanics and materialmen, they exercise statutory powers exclusively conferred upon them as trustees for the beneficiaries to be protected thereby, and do not act for, or in behalf of, the school district of which they are officers in accepting, taking and keeping this statutory bond.

The obligee of the bond, in view of the subject of the action in suit, appearing therein solely as a trustee and not as representative of the school district, defendant, and the terms of the bond sued upon imposing liability, if at all, on the obligee only, such bond affords no basis for a cause of action against the school district in its corporate capacity.

Appeal from District Court, Douglas County; Fitzgerald, Judge.

Action by the American Surety Company of New York against School District No. 64 of Douglas County. From a judgment for plaintiff, defendant appeals. Reversed and dismissed.

De Lamatre & De Lamatre and J. C. Travis, all of Omaha, for appellant.

Montgomery, Hall, Young & Johnsen, of Omaha, for appellee.

Heard before GOSS, C. J., DEAN, GOOD, THOMPSON, and EBERLY, JJ., and REDICK, District Judge.

EBERLY, J.

Action in the district court for Douglas county, Nebraska, by the American Surety Company of New York (hereinafter referred to as surety company) against School District No. 64, Douglas county (hereinafter designated school district) on an alleged covenant in writing contained in a builder's bond executed by the surety company only, which, by delivery to, alleged acceptance of, and retention by, the school district, became the obligation of the latter. This alleged covenant provides in express terms that:

“The obligee (school board of School District No. 64 of Douglas county, Nebraska) shall retain * * * not less, however, in any event, than ten per centum of (the value of all work performed or materials furnished in the prosecution of such contract).”

There was judgment for the surety company for the amount of its claim, and from this judgment the school district appeals.

The plaintiff, as part of its petition in the trial court, set forth copies of certain specifications in writing for the construction of the proposed school building; the written proposal or bid of one Gustafson based thereon, wherein it was stated that the “amount of the bid on the specified work” is an amount named and certain (without any further or other specifications as to times and conditions of payment); the acceptance of such bid in writing on May 31, 1924, by “school board of School District No. 64, Douglas county, Nebraska,” and also a copy of the builder's bond (identified as Exhibit D and expressly made a part of plaintiff's petition) executed in behalf of Gustafson by the surety company only. In this bond the “school board of School District No. 64, Douglas county, Nebraska,” is the sole obligee named. The penalty of the bond is $10,300. It is dated June 2, 1924. It identifies the primary contract to which it is collateral and sets forth the terms and conditions thereof in the following language:

“Whereas, the principal has entered into a written contract dated May 31st, 1924, with the obligee, for erection of new school building according to the plans and specifications attached,

[219 N.W. 585]

a copy of which is hereto annexed: Now, therefore, the condition of this obligation is such that, if the principal shall indemnify the obligee against any loss or damage directly arising by reason of the failure of the principal to faithfully perform said contract, and if the principal shall pay off and settle in full with the person or persons entitled thereto all accounts and claims that may become due by reason of laborers' or mechanics' wages, or for materials furnished or services rendered to the principal in executing or performing the obligations of said contract, so that each of such persons may receive his just dues in that behalf, then this obligation shall be void; otherwise to remain in full force and effect.

“Provided, however, and upon the express conditions, the performance of each of which shall be a condition precedent to any right to recovery hereon:

“First: That in the event of any default on the part of the principal, a written statement of the particular facts showing such default and the date thereof shall be delivered to the surety, by registered mail, at its office in the city of Omaha, Nebraska, promptly and in any event within ten (10) days after the obligee or his representative, or the architect, if any, shall learn of such default; that the surety shall have the right within thirty (30) days after the receipt of such statement to proceed, or procure others to proceed, with the performance of such contract; shall also be subrogated to all of the rights of the principal; and any and all moneys or property that may at the time of such default be due, or that thereafter may become due to the principal under said contract, shall be credited upon any claim which the obligee may then or thereafter have against the surety, and the surplus, if any, applied as the surety may direct.

“Second: That no claim, suit or action by reason of any default shall be brought against the principal or surety after the twenty-fifth day of February, 1925, nor shall recovery be had for damages accruing after that date; that service of writ or process commencing any such suit or action shall be made on or before such date; that the principal shall be made a party to any such suit or action, and be served with process commencing the same if the principal can with reasonable diligence be found; that no judgment shall be rendered against the surety in excess of the penalty of this instrument.

“Third: That the surety shall not be liable for any damages resulting from strikes or labor difficulties, or from mobs, riots, fire, the elements, or acts of God, or for the repair or reconstruction of any work or materials damaged or destroyed by any such causes; nor for damages from injury to person, or for the death of any one; nor under or by virtue of any statutory provision for damages or compensation for injury to or for the death of any employee; nor for the nonperformance of any guaranties of the efficiency or wearing qualities of any work done or materials furnished or the maintenance thereof or repairs thereto; nor for the furnishing of any bond or obligation other than this instrument; nor for damages caused by delay in finishing such contract in excess of ten per centum of the penalty of this instrument.

“Fourth: That the obligee shall faithfully perform all the terms, covenants and conditions of such contract on the part of the obligee to be performed; and shall also retain that proportion, if any, which such contract...