Long v. American Surety Company

• Decision Date: 24 April 1912
• Citation: 137 N.W. 41,23 N.D. 492
• Court: North Dakota Supreme Court

137 N.W. 41

23 N.D. 492

LONG v. AMERICAN SURETY COMPANY

Supreme Court of North Dakota

April 24, 1912

On rehearing, June 29, 1912.

Appeal from the District Court of Sargent county; Allen, J.

Action upon a surety bond to recover damages caused by the alleged breach of subcontract to perform work. Verdict and judgment for plaintiff. Defendant appeals.

Reversed.

Reversed and remanded with directions.

Wolfe & Schneller and Kerr & Fowler, for appellant.

When a contractor abandons a contract absolutely, he then and there commits a serious default,--such a default as puts the contract in jeopardy and imperils his surety. State ex rel. Broatch v. Moores, 52 Neb. 770, 73 N.W. 299; Burrill v. Crossman, 16 C. C. A. 381, 35 U. S. App 608, 69 F. 752; 1600 Tons of Nitrate of Soda v McLeod, 10 C. C. A. 115, 15 U. S. App. 369, 61 F. 851; Watson v. DeWitt County, 19 Tex. Civ. App. 150, 46 S.W. 1061.

Written notice of any default is a condition precedent to recovery from the surety on the bond, and failure so to give notice entitled the surety to a dismissal of the suit against it, or a directed verdict in its favor. National Surety Co. v Long, 60 C. C. A. 623, 125 F. 887; California Sav. Bank v. American Surety Co. 82 F. 866, 87 F. 118; United States Fidelity & G. Co. v. Rice, 78 C. C. A. 164, 148 F. 206; George A. Hormel v. American Bonding Co. 112 Minn. 288, 33 L.R.A.(N.S.) 513, 128 N.W. 12; Van Buren County v. American Surety Co. 137 Iowa 490, 126 Am. St. Rep. 290, 115 N.W. 241; Frost, Guaranty Ins. 2d ed. pp. 535-540; Rice v. Fidelity & D. Co. 43 C. C. A. 270, 103 F. 427.

The provision of the contract giving Long the right to enter and complete the work cannot be ignored, as it was by the plaintiff in his offer of proof and in his actual proof. It secures a valuable right to the surety on Gentry's bond, of which it should not be deprived. American Surety Co. v. Woods, 45 C. C. A. 282, 105 F. 741; Hunt v. Oregon P. R. Co. 1 L.R.A. 842, 36 F. 481; Reichenbach v. Sage, 13 Wash. 364, 52 Am. St. Rep. 51, 43 P. 354; Texas & St. L. R. Co. v. Rush, 19 F. 239; Dermott v. Jones, 2 Wall. 1, 17 L.Ed. 762; Public Schools v. Bennett, 27 N.J.L. 515, 72 Am. Dec. 373; 3 Am. & Eng. Enc. Law, § 900, and note; Warren v. Stoddart, 105 U.S. 224, 26 L.Ed. 1117; Cunningham Iron Co. v. Warren Mfg. Co. 80 F. 878; Watson v. Kirby, 112 Ala. 436, 20 So. 624; 13 Cyc. 72, 73.

Plaintiff must allege in his complaint, and prove upon the trial, the performance by himself of all conditions precedent to a recovery, or waiver thereof, or excuse for their nonperformance. And any material breach of such conditions serve to relieve the defendant surety company from liability under its bond. United States v. American Bonding & T. Co. 32 C. C. A. 420, 61 U. S. App. 584, 89 F. 925; Morgan County v. Branham, 57 F. 179; Simonson v. Grant, 36 Minn. 439, 31 N.W. 861; First Nat. Bank v. Fidelity & D. Co. 45 Ala. 335, 5 L.R.A.(N.S.) 418, 117 Am. St. Rep. 418, 40 So. 415, 8 Ann. Cas. 241; United States Fidelity & G. Co. v. Thaggard, 130 Ga. 701, 61 S.E. 726; Cowdery v. Hahn, 105 Wis. 455, 76 Am. St. Rep. 921, 81 N.W. 882; Backus v. Archer, 109 Mich. 666, 67 N.W. 913; Shelton v. American Surety Co. 66 C. C. A. 94, 131 F. 210; Welch v. Hubschmitt Bldg. & Woodworking Co. 61 N.J.L. 57, 38 A. 824; National Surety Co. v. Long, 79 Ark. 543, 96 S.W. 745, and on second appeal, 85 Ark. 158, 107 S.W. 384; Frost, Guaranty Ins. 2d ed. §§ 199-203-214; 1 Brandt, Suretyship & Guaranty, 3d ed. §§ 439, 440; 2 Brandt, Suretyship & Guaranty, 3d ed. §§ 748-755; 4 Enc. Pl. & Pr. p. 643; International Cement Co. v. Beifeld (Ill.), 50 N.E. 716; American Bonding & T. Co. v. Gibson County, 76 C. C. A. 155, 145 F. 871, 7 Ann. Cas. 522, 62 C. C. A. 397, 127 F. 671.

Purcell & Divet, George W. Freerks, and P. L. Keating, for respondent.

A contract to be performed in futuro is not to be considered as broken and the obligor thereunder in default until its time limit has passed; Stanford v. McGill, 6 N.D. 536, 38 L.R.A. 760, 72 N.W. 938.

Plaintiff, upon breach of the subcontract, Exhibit F, had the duty to minimize damages in any way reasonably within his power, but there was no time or opportunity for him to minimize damages, and any action on his part was neither available nor possible. Davis v. Bronson, 2 N.D. 300, 16 L.R.A. 655, 33 Am. St. Rep. 791, 50 N.W. 836; Danforth v. Walker, 37 Vt. 239, 40 Vt. 257; Moline Scale Co. v. Beed, 52 Iowa 307, 35 Am. Rep. 272, 3 N.W. 96; Nebraska v. Nebraska City Hydraulic Gaslight & Coke Co. 9 Neb. 339, 2 N.W. 870; Clark v. Marsiglia, 1 Denio, 317, 43 Am. Dec. 670; Butler v. Butler, 77 N.Y. 472, 33 Am. Rep. 648; Gibbons v. Bente, 51 Minn. 499, 22 L.R.A. 80, 53 N.W. 757; Stanford v. McGill, 6 N.D. 536, 38 L.R.A. 760, 72 N.W. 938; Southern Cotton Oil Co. v. Heflin, 39 C. C. A. 546, 99 F. 345; Peck v. Kansas City Metal Roofing & Corrugating Co. 96 Mo.App. 212, 70 S.W. 169.

OPINION

BRUCE, J.

This is an action on a bond and against the defendant surety company to recover damages for the breach of a subcontract to excavate a portion of a drainage ditch. The principal contract was made on October 3, 1906, between the plaintiff, Long, and the tri-county drainage board of Ransom, Sargent, and Richland counties, and an extension thereof was made on April 6, 1908. The subcontract for the faithful performance of which this bond was given, was made between Long and the subcontractor, Chas. C. Gentry, on May 12, 1908, and the bond sued upon was executed by the defendant on August 6, 1908, Gentry has defaulted under his contract, and the plaintiff sues on the bond to recover damages for his loss.

The principal contract of October 3, 1906, fixed the price to be paid Long by the commissioners, at 17 cents per cubic yard. The subcontract of May 12, 1908, fixed the price to be paid Gentry by Long at 13 1/2 cents per cubic yard. The so-called extension agreement of April 6, 1908, reduced the price to be paid Long from 17 to 15 cents per cubic yard, but provided "that if the said C. A. Long shall comply with all the conditions herein contained, and within the times herein mentioned, time being declared as the essence of this contract, the parties of the first part agree to pay to C. A. Long, as a bonus, an additional 1 1/2 cents per cubic yard for contract excavation upon completion of said drain." The extension agreement provided that the drain should be completed by January 1, 1909, and the same provision was contained in the subcontract between Long and Gentry. Both the principal contract and the subcontract contained the provision that "if the party of the second part fails to proceed with said work with reasonable diligence, the said party of the first part may enter upon the work and complete the same, holding said party of the second part liable for all costs and expenses in finishing said ditch, over and above the amount of the contract price hereinbefore referred to," while the extension agreement also contained the provision that "in the event the conditions herein are not complied with in the manner herein specified, and within the times herein specified, then, and in that event, this extension agreement and the original contract are declared forfeited and determined, and all rights to continue work under said original contract and this extension are ended." There is some question as to the validity of this so-called extension agreement, except in so far as its extension of time to January 1, 1909, was concerned. The obligation of the bond was that the principal should "faithfully perform said contract on his part according to the terms, covenants, and conditions thereof," and the contract referred to was the contract of May 12, 1908, between Long and said Gentry, and a copy of both the contract between Long and Gentry and the principal contract between Long and the drainage board, of October 3, 1906, was attached to the bond. There were also provisions in the bond "that, in the event of any default on the part of the principal in the performance of any of the terms, covenants, and conditions of said contract, written notice thereof, with a verified statement of the particular facts showing such default and the date thereof, shall within fifteen days after such default be delivered to the surety at its office in the city of Minneapolis; and in case of any such default, all moneys which, but for such default, would be due, or would thereafter become due to the principal, shall be held by the obligee and by him applied for indemnification of the surety. . . . The obligee shall retain not less than 15 per cent of the value of all work performed and materials furnished in the performance of such contract, until the complete performance by said principal of all the terms, covenants, and conditions thereof on said principal's part to be performed."

The defense of the surety company was that the plaintiff had failed and neglected to make payments to said Gentry as provided for in his contract with him, and having violated his contract in that behalf, could not insist upon its performance; that the plaintiff, after the default, had not entered upon and completed the work, and therefore could not recover any damages based thereon; that the plaintiff had failed to notify the defendant within fifteen days after the default; that the plaintiff had hindered and delayed Gentry in the performance of his work; that the plaintiff did not furnish Gentry with proper plans and profiles, and, from time to time, required Gentry to make alterations in the work not provided for in the contract. There was also a claim that the defendant made and executed the bond sued upon, relying upon the representations in the contract between the plaintiff and Gentry, and with the understanding that the...