Forsyth v. New York Indem. Co.

• Decision Date: 20 November 1930
• Docket Number: 22646.
• Citation: Forsyth v. New York Indem. Co., 159 Wash. 318, 293 P. 284 (Wash. 1930)
• Parties: FORSYTH et al. v. NEW YORK INDEMNITY CO.
• Court: Washington Supreme Court

293 P. 284

159 Wash. 318

FORSYTH et al. v. NEW YORK INDEMNITY CO.

No. 22646.

Supreme Court of Washington

November 20, 1930

Department 1.

Appeal from Superior Court, King County; John A. Frater, Judge.

Action by Arthur T. Forsyth and others against the New York Indemnity Company. Judgment for defendant, and plaintiffs appeal.

Affirmed.

Frank R. Jeffrey, John C. Bowen, and Meier &amp Meagher, all of Seattle, for appellants.

Caldwell & Lycette and W. H. Brinker, all of Seattle, for respondent.

HOLCOMB J.

This case is on appeal upon findings of fact, conclusions of law and judgment in favor of respondent upon stipulated facts. The facts as stipulated by the parties were adopted by the trial court as its findings of fact. The only questions raised on appeal relate to the propriety of the conclusions of law drawn by the court from the stipulated facts and its refusal to sign and enter conclusions of law proposed by appellants.

The findings of fact, being somewhat lengthy though essential to the determination of the controversy, will be summarized as briefly as possible.

About May 1, 1928, McNeal-Taylor Company entered into a written contract with the Northern Life Insurance Company to furnish plumbing and heating for the building known as the Northern Life Tower. Pursuant to that contract, McNeal-Taylor Company gave a contractor's bond to the Northern Life Insurance Company conditioned as follows:

'Now therefore, the condition of this obligation is such that if the principal shall faithfully perform the contract on his part, and satisfy all claims and demands, incurred for the same, and shall fully indemnify and save harmless the owner from all cost and damage which he may suffer by reason of failure so to do, and shall fully reimburse and repay the owner all outlay and expense which the owner may incur in making good any such default, and shall pay all persons who have contracts directly with the principal for labor or materials, then this obligation shall be null and void otherwise it shall remain in full force and effect.

'Provided, however, that no suit, action or proceeding by reason of any default whatever shall be brought on this bond after twelve months from the day on which the final payment under the contract falls due.

'And provided, that any alterations which may be made in the terms of the contract, or in the work to be done under it, or the giving by the owner of any extension of time for the performance of the contract, or any other forbearance on the part of either the owner or the principal to the other shall not in any way release the principal and the surety or sureties, or either or any of them, their heirs, executors, administrators, successors or assigns from their liability hereunder, notice to the surety or sureties of any such alteration, extension or forbearance being hereby waived.'

These appellants furnished materials to the contractor and certain balances therefore remained due them. On some day prior to May 8, 1929, McNeal-Taylor Company became and was in failing circumstances and its creditors were threatening to take legal proceedings against it; thereupon respondent undertook to and did direct McNeal-Taylor Company in carrying out the agreement theretofore made by a creditors' committee of McNeal-Taylor Company as to the manner in which money derived from the contract should be applied in payment of obligations incurred in connection therewith. On May 8, 1929, the Indemnity Company addressed to each and all appellants a written communication which is as follows:

'May 8, 1929.

'Warren Webster Co.,

'326 Columbia St.,

'Seattle.

'Gentlemen: Re McNeal Taylor Co., Northern Life Tower Construction.

'The McNeal Taylor Co., and its creditors on the Northern Life job are desirous of reaching some early agreement with the New York Indemnity Company concerning the payment of balances due on the Northern Life Tower.

'In order to facilitate an early agreement we are anxious to have accurate information concerning all claims. We therefore request that you immediately send us a statement showing the following information: (1) total claim, (2) amount of material, (3) amount of labor, (4) whether or not furnished under contract, if so, salient features of contract, (5) date commenced furnishing labor and/or materials, (6) date completed, (7) was a lien notice furnished to the Northern Life Tower--if so, send copy, (8) payments made, (9) any offsets against claim, (10) exact balance due.

'Please furnish detailed and accurate information as we wish to avoid controversies after checking with our present records from the McNeal Taylor Company.

'It is believed that all legitimate claims, regardless of lienability or perfection of liens, can be guaranteed and paid at a reasonably early date, if the co-operation of creditors is given.

'Send all communications to the undersigned at 1311 Alaska Building, Seattle,

'Yours truly,

'Caldwell & Lycette

'By John P. Lycette,

'Attorneys for New York Indemnity Company.'

Certain payments were thereafter made pursuant to such agreement under the direction and with the approval of the indemnity company as above stated.

A stipulated fact was that if McNeal-Taylor Company had gone into bankruptcy, or if all the moneys due from the Northern Life Tower to McNeal-Taylor Company at the time mentioned (that is the time of insolvency) had been applied to the valid lienable claims then existing against the Northern Life Tower and created by McNeal-Taylor Company under its contract, then and in that event each of appellants herein would have received a smaller sum than they were actually paid under the conditions and arrangements referred to in that finding. None of appellants or claimants herein nor their assignors at any time sent the Northern Life Insurance Company, the owner of the Northern Life Tower, any notice of the commencement or delivery of materials and intention to claim a lien. At all the times stated McNeal-Taylor Company was carrying on other similar construction jobs with which the indemnity company had no connection, direction, or control.

Under the arrangement made by the creditors' committee, respondent turned over all money received under the several contracts of NcNeal-Taylor Company, and they were applied as payments in connection with the obligations incurred therewith, by reason of which the creditors, including appellants, received about 60 per cent. of their total claims.

None of appellants nor their assignors perfected any right to file a materialman's lien against the building that was being constructed for materials so furnished. In other words, they had lost their lien rights.

As stated by appellants, all claims of error raise the one question of whether appellants have a cause of action against respondent upon the bond furnished by it pursuant to the construction contract. As stated by respondent, the question is: Is there any privity of contract between appellants and respondent?

Appellants specially emphasize and rely upon the condition in the bond after the provision for reimbursement to the owner for all outlay and expense incurred by it, reading:

'* * * And shall pay all persons who have contracts directly with the principal for labor or materials.'

To sustain their contention appellants rely chiefly upon McDonald v. Davey, 22 Wash. 366, 60 P 1116; Puget Sound State Bank v. Gallucci, 82 Wash. 445, 144 P. 698, Ann. Cas. 1916A, 767; Du Pont De Nemours & Co. v. Columbia Casualty Co., 150 Wash. 362, 273 P. 181, and...