Bross v. McNicholas

• Citation: 66 Or. 42,133 P. 782
• Parties: BROSS v. McNICHOLAS et al.
• Decision Date: 15 July 1913
• Court: Supreme Court of Oregon

133 P. 782

66 Or. 42

BROSS v. McNICHOLAS et al.

Supreme Court of Oregon

July 15, 1913

Department 2.

Appeal from Circuit Court, Multnomah County; W.N. Gatens, Judge.

Action by Albert Bross against Jas. H. McNicholas, the Pacific Surety Company, and another. Judgment for plaintiff, and defendant the Pacific Surety Company appeals. Affirmed.

This action is brought upon a surety bond given to the plaintiff by the defendant Jas. H. McNicholas, doing business under the firm name and style of the National Brick & Clay Company, as principal, and the Pacific Surety Company, a corporation, as surety. On the 8th day of February, 1911, the defendant Jas H. McNicholas entered into a contract with plaintiff, whereby McNicholas agreed to sell and deliver to plaintiff, at such points in Portland, Or., as plaintiff might designate from time to time, 500,000 bricks "of the kind and quality usually manufactured by the plants owned by defendant McNicholas," for the price of $5 per thousand aggregating the sum of $2,500, plaintiff paying at the time the purchase price of the bricks. As a part of the contract between plaintiff and defendant McNicholas, the latter agreed to assure the performance of the contract upon his part by supplying plaintiff with a surety bond, and to that end on said day defendant McNicholas and the Pacific Surety Company entered into an undertaking in the sum of $2,500, binding themselves to deliver the bricks to plaintiff in accordance with the terms of the contract, or in default thereof to pay plaintiff the sum of $2,500. By the terms of said bond, it is provided among other things: "That said surety shall be immediately notified of any breach of said contract by said principal, or of any act on the part of said principal, or his agent or employés, which may involve a loss for which said surety may be liable hereunder, immediately after the occurrence of such act shall have come to the knowledge of said owner, or his duly authorized representative or representatives who shall have the supervision of the completion of said contract; said notification must be in writing to the president of said surety, at its principal office in San Francisco, California." Plaintiff brings this action upon the undertaking, setting out in his complaint the contract and bond in question, alleging failure of McNicholas to deliver any of the bricks guaranteed by the undertaking, and prays for judgment in the full penal sum provided in the bond. The defendant McNicholas made default. The Pacific Surety Company denied any breach of the bond, and alleged failure on the part of the plaintiff to give immediate notice of the breach of the contract, as provided in the bond, and pleaded delivery by McNicholas to plaintiff of the bricks of the kind and quality contracted for at places designated in Portland. The allegations of affirmative matter in the answer were denied by the respondent. The issues thus made were tried by the court and jury, with the result that a judgment was rendered in favor of the plaintiff for the sum of $2,500, with interest and costs. From this judgment the defendant the Pacific Surety Company appeals.

Thos H. Crawford, of La Grande and Wilbur, Spencer & Dibble, of Portland, for appellant.

Rauch &amp Senn, of Portland, for respondent.

McNARY J. (after stating the facts as above).

The initial error assigned and relied upon by counsel for the defendant the Pacific Surety Company is founded upon the refusal of the court to instruct the jury that, "upon the undisputed facts in evidence in this case, you are directed to return a verdict for the defendant the Pacific Surety Company."

Fully to appreciate the ruling of the court, we deem important a résumé of the testimony, as this assignment of error gives rise to the most vital phase of the case. Prior to March 30 1911, the defendant McNicholas, doing business as the National Brick & Clay Company, was the owner of several brickyards in or near the city of Portland, Or. Plaintiff, who is a contractor operating in the city, gave testimony, and in corroboration thereof introduced in evidence two bills of sale, to the effect that he had purchased from McNicholas, at various times between December 29, 1910, and February 8th following, large quantities of bricks, aggregating 750,000, that plaintiff had received on account thereof only 566,744 bricks, and that no delivery had been made under the contract of February 8, 1912, the faithful observance of which was guaranteed by the defendant Surety Company. It is admitted that bricks purchased, as evidenced by the bills of sale, were not delivered until after the execution of the contract and bond under consideration. True, counsel for the defendant Surety Company insist the bricks delivered to plaintiff were in virtue of the contract underwritten by the surety, and, if applied as the wisdom of the law directs, would exculpate the Surety Company from liability.

While the authorities are not in harmonious accord, we think that as a general proposition, the surety cannot direct the application of payments made by the principal and the creditor, or either of them. However, this rule is applicable solely in those cases where the principal makes the payment from funds which are his own and are free from any equity in favor of the surety to have the money applied in payment of the debt of which the surety is liable, but where the specific money paid, or property delivered to the creditor, is the identical money or property for the payment and delivery of which the debtor and his surety obligated themselves by the contract and undertaking, the surety is not bound by an application of the money or property to some other debt for which the surety is not liable. In such cases the surety is equitably entitled to have the money paid, or the property delivered, applied to the payment of the debt or the liquidation...