City of Montpelier v. National Surety Co

• Decision Date: 03 October 1923
• Parties: CITY OF MONTPELIER v. NATIONAL SURETY CO
• Court: Vermont Supreme Court

122 A. 484

97 Vt. 111

CITY OF MONTPELIER v. NATIONAL SURETY CO

Supreme Court of Vermont

October 3, 1923

November Term, 1922.

ACTION OF CONTRACT against the surety on a bond. Answer, denying liability and setting up special defenses. Trial by jury at the March Term, 1922, Washington County, Butler, J presiding. Verdict for the plaintiff, motion to set aside the verdict overruled, and judgment for the plaintiff. The defendant excepted. The opinion states the case.

Judgment affirmed.

NOTE:--MILES, J., having retired took no part in the disposition of the case.

Edward H. Deavitt for the defendant.

George L. Hunt for the plaintiff.

Present WATSON, C. J., POWERS, TAYLOR, MILES, and SLACK, JJ.

OPINION

TAYLOR

This is an action on a bond to the plaintiff executed by Barre & Montpelier Traction & Power Co. as principal and the defendant as surety, in the penal sum of $ 10,000, to secure compliance by the Traction Company with the provisions of the franchise under which it was permitted to operate a street railway in the City of Montpelier. The trial was by jury with verdict and judgment for the plaintiff. The defendant argues exceptions to the refusal of a directed verdict, to the refusal to set aside the verdict of the jury, to the admission and exclusion of evidence and exceptions relating to the charge.

The condition of the bond was such that if the Traction Company should well and faithfully perform all and singular the duties and obligations imposed upon it under its franchise, the obligation was to be null and void; otherwise, to remain in full force and effect. The franchise gave permission to the Traction Company, "its successors and assigns," to construct and for a term of years to operate an electric street railway in certain streets, including Main and State Streets, the locus of the matters here in controversy. It was stipulated as a condition of the granting of the franchise that the Traction Company and its successors and assigns should at all times protect the plaintiff by a $ 10,000 bond with surety satisfactory to the city council, conditioned upon the faithful performance of the duties and obligations thereunder. Section 1 of the franchise specifies the terms and regulations under which the railway should be maintained and operated. Subsection (5) requires the Traction Company to restore any highway, sidewalks or cross walks that it may disturb in repairing or maintaining its roadbed or equipment; and subsection (7) relates to the removal of snow and ice from its tracks. Subsection (6) provides a track area including the portions of the highways between the rails, and for a distance of two feet on each side thereof, which the Traction Company is required to keep at a specified grade and in as good condition for travel as the adjacent street, "with the same kind of material as that used on that part of the highway where said rails are laid." Subsection (8) provides: "If the company fails to meet the requirements of sections (5), (6), and (7), the city may, after reasonable notice to the company, do the work necessary to meet such requirements and charge the reasonable cost thereof to the company," etc. Subsection (9) provides: "If at any time the city paves or regrades any highway occupied by the company's tracks, the company shall at the same time pave or regrade, with the same kind of material the portion of said highway between its rails and for a distance of 2 feet outside thereof, as provided in section (6) hereof. If the company fails to meet the requirements of this section, the city may do the work necessary therefor and from time to time, during the progress of said work, charge the reasonable cost thereof to the company, which shall be paid by the company upon the certification thereof by the city treasurer; and the company shall be given reasonable opportunity to verify said cost." Another section of the franchise provides that its terms and regulations are subject to change by agreement between the city council and the Traction Company.

In the summer of 1920 the plaintiff paved a section of State Street west from the Rialto bridge, so-called, adjacent to the tracks of the Traction Company with cement. No notice thereof was given to the company. In December, 1920, on the petition of a creditor, the court of chancery appointed a receiver of all the assets of the Traction Company including its franchises; and, among other things, ordered the receiver to continue the operation and management of the railroad and take all necessary steps to that end with full power to receive all the income thereof and pay the operating expenses and make the necessary contracts and expenditures for repairs of the road, "such as shall be necessary for the operation of said road," until further order of the court. The parties to the suit were enjoined from interfering in any manner with the property of the Traction Company and the management thereof by the receiver. The plaintiff was not a party to that proceeding until it appeared therein specially and filed a statement of its position. In 1921, and while the Traction Company was still in the hands of the receiver, the plaintiff undertook the work of laying a permanent pavement on Main Street and on State Street in addition to the work done in the summer of 1920. On Main Street and on State Street east of the Rialto bridge the construction was of granite paving blocks on a cement foundation. On State Street west of the Rialto bridge the construction was of reenforced cement. The authorization of this work was adopted by the city council in three sections. The work on Main Street was authorized in May, 1921. Notice of the action taken and that the city council required the performance of the duties and obligations imposed upon the Traction Company by subsections (6) and (9) of paragraph 1 of the company's franchise was given to both the receiver and the Traction Company. No claim seems to be made but that the company received this notice. Later the city council voted to lay granite block paving on State Street from Main Street to the Rialto bridge and instructed the clerk to notify the Traction Company thereof and that the company was expected to make arrangements to do its part in accordance with its franchise. The clerk mailed to the Traction Company a notice to this effect indorsed as requiring the attention of the receiver. Still later the city council instructed the clerk to notify both the receiver and the Traction Company that the city proposed to lay pavement on State Street between Rialto bridge and Western Avenue and expected them to get their tracks in readiness without delay; and that it was the sense of the council that they would not call upon the Traction Company to pave its section with reenforced concrete, but that bituminous macadam or its equivalent would be acceptable. Copies of such notice were mailed to the receiver and to the Traction Company. It is claimed that all the notices, other than the first, addressed to the Traction Company were received by the receiver and were not turned over by him to any official of the company. Neither the receiver nor the Traction Company did the work of paving the track area required by the notices, but the work was done by the city. The evidence tended to show that the employees of the Traction Company, who had continued in their employment following the appointment of the receiver, and the receiver himself, cooperated during the progress of the work by way of removing, replacing, and aligning the railway track, and installing additional guide rails where granite blocks were laid. The track area on Main Street and

east of the Rialto bridge on State Street was paved with granite blocks--the same construction as that used on the adjacent highway. The track area on

State Street west of the Rialto bridge was paved with asphaltic concrete, an equivalent of bituminous macadam. This construction was less expensive than

the reenforced concrete used on the adjacent highway, and was agreed upon by the receiver and the city council.

The cost to the city for doing the work required of the Traction Company in each section was certified as required by the franchise, the items aggregating $ 9,348.25. The plaintiff has never been paid anything on account of this work. Before bringing this suit the plaintiff demanded payment of the defendant on the ground that failure to do the work or pay the cost thereof was a breach of the condition of the bond.

The defendant's claims stated in oral argument were (1) that the defendant was not surety for the receiver; (2) that the use of different material west of the Rialto bridge was not within the terms of the contract--was such a change as would release the defendant from liability; (3) that proper notices were not given. The defendant's main contention is that it was surety for the Traction Company only which could not be charged with a breach of the franchise agreement, and so there was no breach of the bond since the Traction Company was in the hands of a receiver during the time the paving work was going on, and besides was strictly enjoined from interfering with the property or its management. Most of the exceptions argued are directed to some phase of this question. It is argued that the defendant's obligation under the bond is limited to securing the performance of the terms of the franchise by the Traction Company; that the receiver was not an assignee of the company; nor its successor, in contemplation of certain sections of the franchise; referred to, and so there has been no valid assignment of the franchise; that the receivership was involuntary, so far as the Traction Company was concerned; that the receiver was not the Traction Company, but an officer of...