Luikart v. Massachusetts Bonding & Ins. Co.

• Decision Date: 29 October 1935
• Docket Number: 29314-29321.
• Citation: 263 N.W. 124,129 Neb. 771
• Parties: LUIKART v. MASSACHUSETTS BONDING & INS. CO.
• Court: Nebraska Supreme Court

263 N.W. 124

129 Neb. 771

LUIKART v. MASSACHUSETTS BONDING & INS. CO.

Nos. 29314-29321.

Supreme Court of Nebraska.

October 29, 1935

Syllabus by the Court.

1. " It is of the very essence of a contract of bailment that it shall contemplate the return of the property bailed either in the same, or in an altered, form; or its delivery to some third person, with the express or implied consent of the bailor." 6 C. J. 1085.

2. " All contracts of bailment, whether the bailee's services are rendered gratuitously, as in the case of a naked bailment and simple deposit, or for hire, are supported by a sufficiently good and legal consideration, which consists in the detriment occasioned to the bailor by his yielding up the present possession or custody of the article bailed upon the faith of the engagement of the bailee to redeliver." 3 R.C.L. 82, § 11.

3. " Even though the instrument does not state any consideration or set forth what the consideration is, parol evidence may be admitted to show that there was a consideration, and of what it consisted." 22 C. J. 1169.

4. Under the circumstances of this bailment transaction, there being other consideration for the contract, mutuality of obligation was not essential.

5. " It is a general rule that, in the absence of an agreement to the contrary, the assignee for value of a note bill, judgment, decree or other evidence of indebtedness, for the payment of which the assignor holds collateral security is in equity entitled, by virtue of the assignment to him of the principal obligation or evidence of indebtedness, to the collateral as such, although not named in the instrument of assignment, and regardless of his knowledge or lack of knowledge of the existence of such collateral." Edwards v. Bay State Gas Co. (C. C.) 184 F. 979.

6. " In the absence of any provision to the contrary, the unqualified assignment of a chose in action vests in the assignee an equitable title to all such securities and rights as are incidental to the subject-matter of the assign ment; and he may enforce them although the assignee at the time was ignorant of their existence." 2 R.C.L. 633, § 43.

7. " It may be stated generally that, where a bond and another contract or instrument relate to and form one and the same transaction, or the bond refers to such other instrument or is conditioned for the performance of specific agreements set forth therein, such instrument with all its stipulations, limitations, or restrictions becomes a part of the bond, and the two should be read together and construed as a whole." 9 C. J. 36.

8. " Bonds guaranteeing the contracts of third persons, given by paid surety companies to indemnify the owners of property against loss from the failure of contractors to perform the conditions of building or other similar contracts, are essentially contracts of insurance, although they may resemble in form contracts of suretyship, since such corporations are in effect insurers, and the strict rules peculiar to contracts of suretyship do not apply in determining their rights and liabilities; rather, the rules of liberal construction and of construction against insurer, if an ambiguity exists, does apply." 5 Couch, Cyclopedia of Insurance Law, p. 4262.

9. If a bond is given to guarantee the performance of a contract, the holder of the bond, who has been injured by a breach of such contract, has an immediate direct cause of action thereon without first exhausting his remedies against the parties liable on the contract.

10. Evidence examined, and held ample to sustain the judgment of the trial court.

Appeal from District Court, Red Willow County; Eldred, Judge.

Action by E. H. Luikart, as receiver of the State Bank of Omaha, against the Massachusetts Bonding & Insurance Company. Verdict was directed for plaintiff, and, from an order overruling its motion for judgment on a motion for a new trial, defendant appeals. Eight cases between same parties were consolidated on appeal.

Affirmed.

Kennedy, Holland & De Lacy, of Omaha, Clarence A. Davis, of Holdrege, and Edward J. Svoboda, of Omaha, for appellant.

Stiner & Boslaugh, of Hastings, Butler & James, of Cambridge, F. C. Radke, of Lincoln, and L. R. Stiner, of Hastings, for appellee.

Heard before GOOD, EBERLY, DAY, PAINE, and CARTER, JJ., and MESSMORE and RYAN, District Judges.

EBERLY, Justice.

Eight cases in which E. H. Luikart appears as receiver, plaintiff, and the Massachusetts Bonding and Insurance Company, as defendant, were by stipulation of parties argued and presented to this court as one cause. While the transactions involved are not identical, they involve facts of similar legal import. All result from a particular course of business observed by Robert Z. Drake, which each transaction in litigation discloses as substantially identical. A careful consideration of the records, the briefs and arguments of the parties impels us to the view that in each case the judgment of the trial court is to be affirmed. The reasons for these conclusions we will proceed to state, with special reference to case No. 29314 for convenience. The language employed applies to each of the other cases, which likewise will be ruled by the conclusions herein stated.

The plaintiff alleges, as his cause of action, ownership by purchase, for a valuable consideration, of a written instrument consisting of four parts, viz.: A certificate, a draft, an acceptance indorsed on the face of the draft, and a bond. The following is a true copy of this instrument, together with indorsements on each part thereof:

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The plaintiff alleges nonperformance of the obligations contained in the written instrument, the failure of the defendant to perform the conditions of the bond, the bankruptcy of Drake, the failure to deliver the lumber as required, and the value of the lumber at the time and place of delivery as to which default was made.

The defendant's answer admits substantially the general method of doing business of the parties involved, and admits that it executed, as surety, the bond in suit; but " al leges that the certificate contract referred to in said bond was void for lack of mutuality as between Mountain Timber Company and Standard Sesoning Society, and * * * was likewise void for lack of consideration, and that, the certificate being void, the bond was likewise void."

Issues were joined by the plaintiff and a trial to a jury resulted in a directed verdict for the plaintiff. From the order of the district court overruling its motion for judgment on the motion for a new trial, the defendant appeals.

The evidence in the record is to be considered in the light of the following facts:

It appears without dispute that Drake was a bankrupt, duly adjudged as such prior to the institution of this action; that the lumber was never delivered as required by the " certificate; " and that the " trade acceptance" was wholly unpaid.

All of the instrumentalities concerned were largely owned and substantially controlled by Robert Z. Drake. The Standard Bridge Company is merely a trade name under which Mr. Drake was then carrying on his business of building bridges and selling bridge materials, particularly bridge lumber. Of necessity, Mr. Drake dealt generally with states, counties, or municipalities which had bridges to construct and maintain. The Standard Sesoning Society is also merely a trade-name under which Mr. Drake operated a plant in Oregon for the processing and conditioning of green lumber for the market. He had patented the method of " processing" employed, and the lumber so cured, as is disclosed by the undisputed evidence, was tougher, lighter, and generally better for market than lumber not thus treated. The Mountain Timber Company is a Nebraska corporation of which Mr. Drake was president, chief stockholder, and the owner of practically all of its $1,000,000 bond issue outstanding. It had formerly owned timber lands, and had been engaged in the lumbering and milling business, but for some time prior to the occurrences in suit it had discontinued these operations and restricted its business activities to the purchase and sale of lumber from various producers thereof. The Sherman Brothers Lumber Company is an Oregon corporation, and was at one time an independent company operating a mill and doing a lumber business on the west coast. Prior to the dates here in question, stock control of this company had been secured by Drake through the agency of the Mountain Timber Company. The moneys employed in the purchase of its stock were furnished by Drake. All the lumber business of Mr. Drake (operating under trade-names), the Mountain Timber Company, and the Sherman Brothers Lumber Company was carried on pursuant to Mr. Drake's direction, and, it appears, under his unlimited and paramount control.

The evidence adduced in the case now being considered, and which is typical of the other cases now presented to this court supports the following conclusions as to the facts which constitute the transaction here in suit: On or prior to June 9, 1931, Geary county, Kansas, contracted with Robert Z. Drake to purchase 24,000 feet of lumber at $37.50 per thousand, to be delivered f. o. b. Junction City, Kansas, by November 11, 1931. The terms of this contract were then transmitted to the Mountain Timber Company, together with necessary funds, and that corporation purchased sufficient green lumber of proper kind and description to fill this Geary county contract. Upon purchase, this lumber was delivered to the seasoning house at Cottage Grove, Oregon (then operated by Robert Z. Drake as sole proprietor). It was received, appropriated to the Geary county contract by marks affixed to each piece, and the " processing" commenced. On...