Hill v. Alfalfa Seed & Lumber Co., Civil 2961

• Decision Date: 01 April 1931
• Docket Number: Civil 2961
• Citation: 38 Ariz. 70,297 P. 868
• Parties: G. A. HILL, Intervener-Appellant. v. ALFALFA SEED AND LUMBER COMPANY, a Corporation, Plaintiff-Appellee UNITED STATES FIDELITY AND GUARANTY COMPANY, a Corporation, Defendant,
• Court: Arizona Supreme Court

297 P. 868

38 Ariz. 70

G. A. HILL, Intervener-Appellant.

UNITED STATES FIDELITY AND GUARANTY COMPANY, a Corporation, Defendant, v. ALFALFA SEED AND LUMBER COMPANY, a Corporation, Plaintiff-Appellee

Civil No. 2961

Supreme Court of Arizona

April 1, 1931

APPEAL from a judgment of the Superior Court of the County of Yuma. Fred L. Ingraham, Judge. Reversed and remanded, with directions.

Messrs Foreman & Gray, for Appellant.

Mr William H. Westover, for Appellee.

OPINION

ROSS, J.

This appeal is from an order of the court refusing G. A Hill's application or motion to intervene in the above-entitled action. It appears that Hill contracted to construct a school building for Somerton school district No. 11 of Yuma county, for which the district agreed to pay him $57,542.60. To secure the faithful performance of the contract and to protect the district against claims for labor done and materials furnished by third parties to go into the building, Hill, as principal, and the United States Fidelity & Guaranty Company, as surety, executed to the district a joint and several bond, conditioned to save the district harmless. The Alfalfa Seed & Lumber Company, a corporation, claiming that it had furnished Hill, at his request, material that went into the building, of the value of $31,795.47, and that it received in payment therefor only the sum of $26,309.72, brought this action against the surety company alone for the balance of $5,485.75.

Some time before the case was called for trial, Hill moved for leave to intervene. The reasons urged in his motion for intervention were that he was the principal in the bond sued on; that he had a good and meritorious defense to plaintiff's action; that his liability, if any, over to the surety company could be finally determined, and a multiplicity of suits avoided. Attached to the motion for leave to intervene was a copy of his proposed answer to plaintiff's complaint. The substance of the defense set out in the proposed answer was that Hill and the plaintiff were associated together in obtaining said building contract, with the understanding and agreement that Hill would superintend the construction and receive as compensation therefor wages or a division of the profits; that, to that end, the plaintiff prepared the bid, upon figures and estimates of its own, made the required deposit accompanying the bid, delivered on the ground material to go into the building without orders from Hill. In other words, that the building contract was a joint venture of Hill's and the plaintiff's. It is also alleged that the plaintiff erroneously omitted from its estimates an item of 360 yards of concrete work specified in the plans, thereby entailing a loss on the contract of $5,040.

The right of intervention and the method to be pursued are governed by section 3793, Revised Code of 1928. Under such section, if a person has an interest in the subject matter of the litigation, which will be affected by the judgment, he may, on leave of the court, intervene at any time before the trial of the issues of fact.

While the intervention statutes of the states differ, there is a general concurrence in the decisions that the interest which entitles a person to intervene in a suit between other parties must be in the matter in litigation and of such direct and immediate character that the intervenor will either gain or lose by the direct legal operation and effect of the judgment. This is the test adopted by this court in Barnes v. Shattuck, 13 Ariz. 338, 114 P. 952.

According to the proposed answer in intervention the plaintiff was not a materialman, but a silent partner or coadventurer with Hill in the building contract. If that were true, plaintiff could not claim the protection of the bond, for the reason that plaintiff would not be materialman. The bond was given to protect materialmen who furnished material to the contractor to go into the building, and not to protect the contractor for material he himself put into the building. This defense, if proven, would defeat the action against the surety.

If Hill and plaintiff were partners or joint adventurers in the contract, any loss sustained should be shared between them. Plaintiff would not be entitled to a judgment against its associate in the enterprise for the total loss.

This being the situation, it would seem the intervention should have been allowed. A judgment obtained in a suit against the surety alone might not be binding on the principal, but the latter would be at a great disadvantage when calle upon to indemnify the surety for the amount of such judgment, and his defense thereto would likely not receive the same consideration as it would have received had he been joined with the surety or had he intervened and defended. Hill as principal was primarily and ultimately liable for a breach thereof and legally bound to indemnify the surety. He was vitally interested in the suit against his surety and in any judgment entered in such suit, more so than the surety because the loss ultimately is his. That the surety on a bond may know exactly its liability before discharging it, it is provided in section 3731, Revised Code of 1928, that no judgment can be entered against the surety except at the time, or before, judgment is entered against the principal, with one exception unimportant here. We have decided just recently, in United States Fidelity & Guaranty Co. v. Alfalfa Seed & Lumber Company, ante, p. 48, 297 P. 862, that the principal in the bond was a necessary party in a suit thereon against the surety.

Although the rule may not be a general one, we think it safe to say that, if the party seeking to intervene shows by his pleadings that he is primarily or ultimately the person liable for any judgment between the other litigants he should be allowed to intervene. 47 C.J. 105, § 201. Under common-law principles the surety on a bond is entitled to be indemnified by his principal for any outlays legally made on account of the suretyship. Under this rule it has been held that the principal has the right to intervene in actions against his surety alone. Nevins v. Fidelity & Casualty Co., 12 Misc. 77, 33 N.Y.S. 43; Kinney v. Reid Ice-Cream Co., 57 A.D. 206, 68 N.Y.S. 325; Feinburg v. American Surety Co., 33 Misc. 458, 67 N.Y.S. 868; McMillan v. School District No. 2, 200 Mich. 280, 167...