Gardner Bros. & Glenn Const. Co. v. American Sur. Co. of New York

• Citation: 95 Colo. 456,37 P.2d 384
• Decision Date: 10 September 1934
• Docket Number: 13160.
• Parties: GARDNER BROS. & GLENN CONST. CO. v. AMERICAN SURETY CO. OF NEW YORK.
• Court: Supreme Court of Colorado

37 P.2d 384

95 Colo. 456

GARDNER BROS. & GLENN CONST. CO. v. AMERICAN SURETY CO. OF NEW YORK.

No. 13160.

Supreme Court of Colorado

September 10, 1934

Rehearing Denied Oct. 29, 1934.

In Department.

Error to District Court, Moffat County; Hon. Charles E. Herrick Judge.

Action by Gardner Brothers and Glenn Construction Company against the American Surety Company of New York. Judgment of dismissal, and plaintiff brings error.

Affirmed.

Henry H. Clark and Frederick Sass, both of Denver, for plaintiff in error.

Edgar McComb, Milton D. Green, and Walter E. Schwed, all of Denver for defendant in error.

HILLIARD Justice.

Action on surety bond. A general demurrer to the complaint was sustained. An amendment to the complaint was stricken. A further amendment was filed, to which, and to the amendment previously stricken, a motion to strike and a motion to dismiss were interposed. The court treated these latter motions as a general demurrer and sustained them. Plaintiff elected to stand on its complaint and amendments, and suffered judgment of dismissal. Error is assigned.

It appears from the complaint that September 25, 1929, plaintiff entered into contract with the state, whereby it agreed, at its 'own cost and expense,' to construct a certain highway; that April 21, 1930, in furtherance of its work plaintiff contracted with one Biskup for a supply of gravel, which Biskup agreed to excavate, crush, and place in bin for plaintiff's use; that April 28, 1930, in assurance of Biskup's fulfillment, defendant executed the bond which is the basis of the action; that by its bond defendant promised to indemnify plaintiff 'against loss or damage directly arising by reason of the failure of the principal to faithfully excavate, crush and place such materials in a bin, in accordance with said contract'; that August 19, 1930, plaintiff notified defendant that Biskup was not providing gravel in quantity agreed and required, and advised that unless Biskup 'promptly resumed and diligently carried forward' his undertaking in accordance with his contract, plaintiff would be unable to complete its contract with the state in the time limited, 'and for the loss occasioned thereby' defendant would be held responsible; that thereupon defendant assured plaintiff that 'Biskup should thereafter faithfully and diligently prosecute the work specified in his contract'; that 'Biskup resumed the excavating, crushing, and placing in the bin of gravel for surfacing said highway project, as required to be done by said contract, and carried the same on until the completion of said project by plaintiff under the principal contract'; that upon completion of the principal contract it developed that in carrying out his contract Biskup had incurred, and not paid, obligations above the percentage reserved by plaintiff on account of the Biskup contract, which, in consonance with the principal contract, the state paid and charged to plaintiff; that in due form, and timely, plaintiff advised defendant of the Biskup defaults, and demanded payment.

By amendments plaintiff pleaded that the things set forth in the complaint were known to defendant as they severally transpired, and in its transactions with Biskup and plaintiff, defendant interpreted and construed Biskup's contract with plaintiff 'as though it contained an express obligation on the part of said Biskup to pay for all labor, supplies and materials employed or used by him in carrying out' his contract; that pursuant to plaintiff's notice of Biskup's first default, defendant investigated the matter, made inquiry of 'Biskup's financial condition, checked over his then unpaid accounts * * * and insisted that he, Biskup, should pay the same and that all future obligations of the same character that might arise under his said contract should be promptly paid by him, not only by reason of his liability therefor under said contract, but also by reason of his being the principal obligor on the bond above referred to, and so advised plaintiff'; that Biskup at all times recognized it as 'his duty and obligation to pay for all such labor, supplies and materials used or furnished in carrying out the work specified in said contract, the same to all intents and purposes as if the same had been expressly set forth therein,' and, with the 'consent and approval' of defendant, 'paid out money therefor'; that at Biskup's request, and with the knowledge and consent of defendant, plaintiff made direct payment to certain laborers and materialmen; that at Biskup's and defendant's request, plaintiff deposited certain funds in a bank for the purpose of paying same out to the laborers employed by Biskup or to others furnishing supplies or materials, and the same was paid out with the knowledge, consent, and approval of defendant; that defendant at no time advised it would assert that under the terms of his contract Biskup was not required to make said payments; that after defendant was advised of Biskup's unpaid claims, it failed to advise the state or plaintiff that it would not be responsible therefor, by reason whereof the state paid certain claims found to be correct out of plaintiff's funds; that on certain other claims action was brought against plaintiff and Biskup, of which action defendant had knowledge, but made no appearance, by intervention or otherwise, and permitted judgment to be entered against plaintiff and Biskup, which was paid by the state out of plaintiff's funds, by reason whereof defendant was concluded and bound quite as if it had been made defendant in the said action and judgment had gone against it; that plaintiff relied on the conduct of defendant as being intended to evidence its 'intention in good faith to recognize * * * liability for the payment of whatever sums of money might finally be ascertained to be due' from Biskup as incurred in performance of his contract, and to repay plaintiff whatever it was required to pay on account of Biskup's default; that by defendant's conduct plaintiff was lulled into a sense of security, and that had defendant intimated it would not be responsible for the bills incurred by Biskup under his contract, plaintiff 'could and would have immediately cancelled and terminated the contract and itself have taken over the performance of the work * * * and saved itself from further loss'; 'that by reason of defendant's aforesaid conduct plaintiff permitted said Biskup to proceed with the work * * * notwithstanding his several defaults and breaches.'

In a contract with the state, within a limited time and at its own cost and expense, as we have seen, plaintiff agreed to 'furnish all materials and do all work * * * necessary or incidental to the complete construction' of a highway. It arranged with Biskup for gravel, Biskup's promise being to 'excavate, crush and place in the bin the gravel for...