J. D. Halstead Lumber Co. v. Hartford Accident & Indemnity Co.

• Decision Date: 06 May 1931
• Docket Number: Civil 2986
• Citation: 298 P. 925,38 Ariz. 228
• Parties: J. D. HALSTEAD LUMBER COMPANY, a Corporation, Appellant, v. HARTFORD ACCIDENT & INDEMNITY COMPANY, a Corporation, Appellee
• Court: Arizona Supreme Court

298 P. 925

38 Ariz. 228

J. D. HALSTEAD LUMBER COMPANY, a Corporation, Appellant, v. HARTFORD ACCIDENT & INDEMNITY COMPANY, a Corporation, Appellee

Civil No. 2986

Supreme Court of Arizona

May 6, 1931

APPEAL from a judgment of the Superior Court of the County of Maricopa. Dudley W. Windes, Judge. Judgment affirmed.

Messrs Cunningham & Carson and Mr. A. S. Gibbons, for Appellant.

Mr Samuel White, Mr. J. L. B. Alexander and Messrs. Silverthorn & Van Spanckeren, for Appellee.

OPINION

LOCKWOOD, J.

On March 12, 1923, one Jay J. Garfield, hereinafter called the contractor, entered into a written contract with George H. M Luhrs and Catherina M. Luhrs, his wife, to construct a building in Phoenix. The Luhrs demanded that he furnish a building bond in the sum of $410,000 for the faithful performance of the contract, and he applied to the Hartford Accident & Indemnity Company, a corporation, hereinafter called plaintiff, for such bond. Before plaintiff executed the building bond it required the contractor and J. D. Halstead Lumber Company, a corporation, hereinafter called defendant, to execute in its favor an indemnity bond, agreeing to indemnify and save plaintiff harmless against any and all loss which it might sustain by reason of executing the building bond.

The contract for the building provided, among other things, as follows: "If at any time there shall be evidence of any lien or claim for which, if established, the owner of the said premises may become liable, and which is chargeable to the contractor, the owner shall have the right to retain out of any payment then due, or thereafter to become due, an amount sufficient to completely indemnify him against such lien or claim, should there prove to be any such claim. After all payments are made, the contractor shall refund to the owner all moneys that the latter may be compelled to pay in discharging any lien upon said premises made obligatory in consequence of the contractor's default."

When the building was completed, it appeared that there were a large number of persons who asserted lienable claims against it. The contractor was financially unable to pay these claims, and shortly before the completion of the building assigned and transferred to defendant all the moneys then due and to become due the contractor under the building contract. The Luhrs then had on deposit in the Bank of California National Association at San Francisco, California, for the sole purpose of payment of the building contract, the sum of $42,946.20, which was the amount still due under its terms.

Plaintiff had been advised about this time by the Luhrs that a number of the bills were unpaid and that it might become liable for a greater or lesser amount on the building bond. It therefore sent one J. H. Van Tassel, who was the attorney in charge of fidelity and surety claims in the Pacific department of plaintiff, to Phoenix, and, after investigation of the situation, he notified the Luhrs to either retain the final payment and apply it on lienable claims, or pay it to plaintiff for that purpose. They were willing to pay it to plaintiff, but the bank, having notice of the assignment by the contractor to defendant of his interest in this money, refused to release it to plaintiff until defendant agreed thereto. After some negotiations defendant executed the following document, and delivered it to Van Tassel: "Phoenix, Arizona, May 14, 1924. To the Bank of California National Association, San Francisco, California. The J. D. Halstead Lumber Company hereby requests and directs that the balance of $42,946.20 in your hands for final payment of contractor on Luhrs Building in Phoenix be paid to Hartford Accident and Indemnity Company for use by it in payment of lienable claims on Luhrs Building. J. D. Halstead Lumber Company. By J. R. Halstead, Vice-President. Assignee of Jay J. Garfield" -- and the money in the bank was turned over to plaintiff. Thereafter it applied this money to the payment of various lienable claims against the building, all of which payments were approved before they were made, by both the contractor and by defendant. After the funds thus obtained were exhausted there were a number of other claims outstanding in the form of liens against the building. Suit was filed on some twelve of these claims, and after litigation four were denied and eight finally established as valid liens against the property. Thereafter the Luhrs paid the judgments and brought suit on the building bond against plaintiff to recover from it the amount of the lien judgments against the building as aforesaid, which suit ended in a judgment in favor of the Luhrs in the sum of $15,602.77, and plaintiff paid it.

Defendant had been requested by plaintiff to defend both the lien suits and the suit by Luhrs against it, but failed and refused to do so, and plaintiff therefore employed attorneys to defend them. Thereafter plaintiff brought this suit to recover the amount of the judgment so paid by it, the sum of $275 for traveling expenses incurred by its representatives in checking up the lien claims, $122.55 costs, $1,530 attorney's fees paid in defending the suits aforesaid, and $1,470 additional attorney's fees claimed to be a reasonable amount for the prosecution of the present case.

There is no dispute as to these facts. The sole defense made in the action was that Van Tassel, in consideration of the assignment to plaintiff by defendant of the $42,946.20 in the bank as aforesaid, executed the following release:

"Phoenix, Arizona, May 14th, 1924. "J. D. Halstead Lumber Company,

"Phoenix, Arizona.

"Gentlemen: In further consideration of your signing an order directing the Bank of California National Association to pay to the Hartford Accident & Indemnity Company the sum of $42,946.20, the balance due on the Luhrs Building and also agreeing to waive your lien rights against said Luhrs Building, we agree to cancel your liability on bond of indemnity which you signed for J. J. Garfield, Contractor, on Luhrs Building, Phoenix, Arizona.

"Yours truly."

This release, according to defendant, was signed,

"The Hartford Accident & Indemnity Company, by J. H. Van Tassel." After the evidence was in, plaintiff moved for an instructed verdict, which motion was by the court granted, and the jury was directed to return a verdict in favor of plaintiff for the amount paid on the judgment, the expenses and costs incurred by plaintiff as aforesaid, the $1,530 already paid by it as attorney's fees, and for the $1,470 which it claimed was a reasonable attorney's fee for the present case. Judgment was rendered on the verdict, and the usual motion for a new trial was made. The court became convinced, after investigation, that it was error to instruct a verdict for the amount of the attorney's fee not yet paid, and therefore ordered that plaintiff remit the $1,470 aforesaid, or a new trial would be granted. The remittitur having been filed, the motion for a new trial was overruled, and, from the judgment and order overruling such motion, this appeal has been taken.

There is but one question for our consideration on this appeal, and that is whether or not on the facts as stated above the court was justified in instructing a verdict in favor of plaintiff. The original release was not offered in evidence; defendant, however, offered what it claimed to be a copy thereof, contending that the original had been lost in some manner, and supported this copy by the testimony of several witnesses. Plaintiff disclaimed all knowledge of such release, and Van Tassel, whom defendant claimed had signed it, absolutely denied that he had ever done so. It is the contention of defendant that this raised an issue of fact for the jury. It is urged by plaintiff, on the other hand, that, regardless of whether or not such a release ever was executed by Van Tassel, it was immaterial for two reasons: (1) Because it was outside of the scope of his authority, and there was no evidence that plaintiff had ever ratified the same, or had any knowledge thereof. (2) Because, even if it was within the scope of Van Tassel's authority, or had been ratified by plaintiff, it was without consideration, and therefore void.

It is of course, the unquestioned rule of law that, when a person executes a contract as agent, in order to bind his principal it must appear that it was either within the express or implied scope of his authority to make such a contract. Brutinel v. Nygren, 17 Ariz. 491, L.A.R. 1918F 713, 154 P. 1042; 2 C.J. 834, and notes. The contract in question was one of a release of liability on an indemnity bond. The only evidence in the record as to the authority of Van Tassel is that he was the attorney representing the plaintiff in regard to fidelity and surety claims. It is the rule, supported by the great weight of authority, that an attorney has no right to compromise or release a claim, or enter into an accord and satisfaction thereof, in the absence of express authority...