Armijo v. National Surety Corporation

• Decision Date: 11 February 1954
• Docket Number: No. 5555,5555
• Citation: 58 N.M. 166,1954 NMSC 24,268 P.2d 339
• Parties: ARMIJO v. NATIONAL SURETY CORP. et al.
• Court: New Mexico Supreme Court

Page 339

268 P.2d 339

58 N.M. 166

ARMIJO v. NATIONAL SURETY CORP. et al.

No. 5555.

Supreme Court of New Mexico.

Feb. 11, 1954.

Rehearing Denied April 8, 1954.

Owen B. Marron, Alfred H. McRae, Albuquerque, for National Surety Corp.

Harry L. Bigbee, Donnan Stephenson, Santa Fe, for appellee.

SADLER, Justice.

The plaintiff recovered a money judgment in the District Court of Santa Fe County against defendant, National Surety Corporation, and its co-defendant, Hardy D. Moore, in the sum of $15,203.68. The building contract out of which the cause or causes of action sued upon arose was let on a low bid of $18,448.40. Both defendants appealed but the appeal of Hardy D. Moore was subsequently dismissed because not seasonably granted. Thus it is that we have before us only the two parties, the plaintiff below who is the appellee here and the defendant, National Surety Corporation, which feeling itself aggrieved by the judgment entered, challenges it as the appellant. He parties will be referred to as they aligned themselves in the lower court.

The plaintiff filed his complaint in the District Court of Santa Fe County on April 13, 1951, setting out five separate counts. The First Count alleged that on January 11, 1951, the defendant, National Surety Corporation, secured a general indemnity agreement from plaintiff in connection with the execution of a bond covering U. S. Government Construction Contract numbered At--(29-1)-1087; that said indemnity agreement was secured from plaintiff by fraudulent representations as to the financial condition of defendant Hardy D. Moore, the principal on the bond, and by fraudulently representing that the indemnity agreement operated only as to contract No. 1087, whereas, in fact, it was operative as to bonds theretofore or thereafter executed by the defendant surety corporation on contracts of the defendant Moore. The plaintiff prayed for rescission of the indemnity agreement in this Count.

The Second Count incorporated by reference the first three paragraphs of Count One and followed by the allegation that on December 26, 1950, the defendant Moore, as owner of Smith-Moore Construction Company had secured a contract from Atomic Energy Commission for the remodeling of a certain structure at Los Alamos for an agreed consideration of $18,448.40, the contract being designated as hereinabove shown but to be referred to hereinafter simply as contract No. 1087. A copy of the contract was not attached for the stated reason that its length would unduly incumber the pleadings and because each defendant was said to possess a copy thereof.

The Second Count then proceeds to allege that on January 18, 1951, the plaintiff and defendant Moore entered into a written contract, a copy of which was attached to the complaint whereby the plaintiff agreed to advance the money required for the performance of the above mentioned contract and defendant agreed to have all progress payments under the contract issued directly to the Santa Fe National Bank with instructions to place the same to the joint credit of the plaintiff and Moore with a proviso that all checks drawn on the account should bear their joint signatures. This Count further alleged that the contract bound the parties to complete performance of the contract and to furnish all the material and perform all the work incident to the proper completion thereof; and, further, that upon completion of the contract profits should be determined by the amount of money remaining on hand after payment in full of all obligations arising out of performance of the contract and that the plaintiff should have 60% of all such profits on the first $6,000, the remaining 40% thereof to go to Moore and that profits in excess of $6,000 should be divided equally between the parties.

The complaint went on to say in the Second Count that, thereafter, defendant surety company assumed control of contract No. 1087 after plaintiff had advanced for the performance thereof $2,049.55 in reliance upon an oral agreement with defendants that funds received from the government under the contract 'would be handled and disbursed in accordance with the provisions of the contract set out in the complaint,' and 'that plaintiff would be permitted to withdraw moneys advanced by him as rapidly as funds over and above those required to meet expenses were available'; that plaintiff had reimbursed himself $500 thus giving him a total investment in the contract of $1,549.55. That the defendant surety company in late January or early February, having assumed control of the contract, had induced defendant Moore to assign all payments under the contract No. 1087 to Albuquerque National Bank in violation of the provisions of the contract between plaintiff and Moore, set out in the complaint, and in violation of an alleged oral agreement between plaintiffs and defendant, resulting in loss of all control by plaintiff over the disbursement of funds to be received under the contract; that as a result of the assignment to Albuquerque National Bank, plaintiff had been unable to withdraw the aforesaid balance of $1,549.55 and defendant surety company had refused to release said funds to him. It was further alleged that the assignment by Moore of funds arising under the contract to Albuquerque National Bank was a breach by Moore of the contract as supplemented in Exhibits A. and B. attached to the complaint, and that defendant National Surety Corporation maliciously and wilfully induced Moore to breach the contract with intent to injury plaintiff.

The allegations of the Second Count continued by saying that as a result of the actions of defendants in removing funds from the contract beyond plaintiff's control and in refusing to reimburse him the balance of $1,549.55, he had been unable to discharge his obligations for materials purchased by him and that his credit, essential in operating his business of building contractor, had been impaired to his damage in the sum of $5,000; that he had thereby been rendered unable to undertake construction work as he otherwise would have been able to do with a resulting loss of profits of $10,000; that he was informed and believed that his share of profits under the contract would amount to $3,600. Accordingly, he prayed for (1) $1,549.55 as the moneys he had invested in the contract; (2) for $3,600 as his share of the profits under the contract; (3) the sum of $15,000 damages for impairment of his credit and loss of profits; and, finally, (4) for $50,000 punitive damages. So much for the allegations of the Second Count.

In the Third Count the plaintiff incorporated by reference paragraphs 1, 2 and 3 of the First Count and paragraphs 2 to 14, both inclusive, of the Second Count and, in brief, set up an alleged oral agreement between him and the surety company to turn over supervision of the contract to him, the breach of said oral agreement and damages in the sum of $15,000 for the claimed breach of the oral agreement.

The Fourth Count is something altogether aside from contract No. 1087. It alleges an oral agreement with the defendant surety company to employ plaintiff as superintendent of a separate and distinct contract between Moore and the surety company for certain construction work undertaken by Moore in connection with playground facilities in a recreation area at Los Alamos, for which work as superintendent the plaintiff was to receive $500. Breach of agreement is alleged and damages in the sum of $500 are prayed for.

In the Fifth Count the plaintiff complains again of acts by defendants in connection with contract No. 1087. He incorporates by reference paragraphs 1, 2, 3, 4, 5a and 5b of the First Count and paragraphs 9, 10, 11, 12, 13 and 14 of the Second Count, as fully as if set out in the Fifth Count at length and charges the defendants with wantonly and maliciously having conspired together to defraud plaintiff, as thereinafter more particularly alleged, the overt acts claimed to have been committed in pursuance of the conspiracy by the alleged frauds set out in paragraphs 5a and 5b of the First Court in connection with the General Indemnity Agreement, the assignment of contract No. 1087 to Albuquerque National Bank, the inducement of plaintiff to advance moneys for the performance of contract No. 1087, with the intention that the moneys should not be reimbursed and, further, that defendants fraudulently represented to the plaintiff that he would be entitled to his share of the profits under said contract, intending at all times that he should not have his share of such profits.

The cause was put at issue by an answer filed by National Surety Corporation denying all material allegations in the complaint. It then proceeded to set out a counterclaim on its own part by alleging that plaintiff and defendant Moore had requested it to execute payment and performance bonds under contract No. 1087 as required by the Miller Act, 40 U.S.C.A. Sec. 270a et seq.; that it refused to execute such bonds because of a claim it had received from Loudermilk Brothers on an earlier bond executed on a contract performed by Moore; that thereupon the plaintiff and counter-defendant himself agreed to pay the $3,500 to Loudermilk Brothers and, that the surety company, in reliance on said agreement of plaintiff (counterdefendant) executed the bond for contract No. 1087; that the plaintiff failed and refused to pay Loudermilk Brothers the $3,500 and that counterclaimant (the surety company) thereupon paid the full amount of the Loudermilk claim in the sum of $6,832.93. The prayer of the Fifth Count prayed judgment against counter-defendant in the amount of $3,500. Defendant Moore also answered and counterclaimed. The plaintiff answered the counterclaim of defendant National Surety Corporation denying the material allegations and raising certain legal defenses and answered the counterclaim of defendant Moore. With the cause thus at issue it proceeded to trial....