M. H. Walker Realty Co. v. American Surety Co. of New York

• Decision Date: 15 September 1922
• Docket Number: 3768
• Citation: 211 P. 998,60 Utah 435
• Court: Utah Supreme Court
• Parties: M. H. WALKER REALTY CO. v. AMERICAN SURETY CO. OF NEW YORK

211 P. 998

60 Utah 435

M. H. WALKER REALTY CO. v. AMERICAN SURETY CO. OF NEW YORK

No. 3768

Supreme Court of Utah

September 15, 1922

Rehearing denied December 15, 1922.

Appeal from District Court, Third District, Salt Lake County M. L Ritchie, Judge.

Action by M. H. Walker Realty Company against the American Surety Company of New York. From a judgment for defendant, plaintiff appeals.

REVERSED with directions to enter judgment for plaintiff.

T Ellis Browne, Booth, Lee, Badger & Rich, and Van Cott, Riter & Farnsworth, all of Salt Lake City, for appellant.

Cheney, Jensen, Holman & Stephens, of Salt Lake City, for respondent.

THURMAN, J. CORFMAN, C. J., and WEBER, GIDEON, and FRICK, JJ., concur. GIDEON, J., concurring in part.

OPINION

THURMAN, J.

Plaintiff brought this action to recover the penalty of a bond executed by the defendant to insure the performance of a contract to install and keep in repair certain elevators in the Walker Bank building, Salt Lake City, Utah. The case was tried upon plaintiff's second amended complaint, defendant's answer thereto, and plaintiff's reply.

Before attempting to state the issues, we will briefly refer to some of the important features of the case. On October 28, 1911, plaintiff entered into a written contract with James Stewart & Co. of New York (hereinafter called the building company) for the construction of a bank and office building in Salt Lake City. Thereafter, on May 24, 1912, the building company entered into a written contract with the Van Emon Elevator Company of San Francisco (hereinafter called the elevator company), as subcontractors, for the installation of an elevator system in said building. The term "contract," as hereinafter used means the elevator contract above referred to unless otherwise stated. The American Surety Company (hereinafter called defendant), as surety for the elevator company, executed its bond for the faithful performance of said contract to the extent of the contract price, to wit, the sum of $ 30,000. Certain changes in the type of elevator contracted for were authorized in June and November of 1912 by the contracting parties, with the knowledge and consent of defendant. The "4 worm traction elevators" contracted for were changed to "3 standard gearless one to one traction elevators and 1 two to one traction elevator for safe-lifting purposes."

The first elevators were installed and commenced operation in the latter part of 1912. Difficulty in their operation was encountered at the very beginning. In 1913 a second set was installed, which also proved inefficient and unsatisfactory. Finally, in the summer of 1914, a third set was installed which the elevator company claimed was a substantial compliance with the contract. It demanded an acceptance by the architect and payment of the balance due, amounting to $ 20,000, $ 10,000 having been theretofore paid. On January 14, 1915, the architect gave to the elevator company his written acceptance, whereupon the plaintiff paid the building company, and the building company paid the elevator company the amount demanded--$ 20,000. Thereafter, the elevators still proving inefficient and unsatisfactory, the plaintiff, in 1916, removed them from the building and substituted others instead at an expense of more than the contract price. Plaintiff made demand upon defendant for the indemnity, which demand the defendant refused.

This action was commenced November 4, 1919. It is not necessary to state in detail the proceedings in court prior to filing the second amended complaint, upon which the case was finally tried. For convenience the second amended complaint will hereinafter be referred to as the "complaint." The complaint consists of two causes of action, in the first of which plaintiff sues in its own right. In the second it sues as assignee of the building company. The facts relied on in each cause of action are identical. One statement of the facts will suffice for both.

The pleadings are voluminous. We will not attempt to state their substance in consecutive order, but will, in proper connection, refer to such as are deemed material.

The causes of action are predicated upon breaches of the elevator contract in various respects, and especially in regard to the warranties above referred to. The warranties are expressed in subdivisions XXIV, XXV, and XXVI of the contract, but, in view of the contentions made several other provisions appear to be material to the issues involved. Omitting such provisions are are immaterial, we quote the following subdivisions of the contract:

"Know all men by these presents: That whereas, on the 28th day of October, 1911, the undersigned, James Stewart & Co., and M. H. Walker Realty Company entered into a certain contract in writing, whereby the said James Stewart & Co. undertook to furnish certain work and material required in the erection of a bank and office building, corner Second South and Main Streets, Salt Lake, known as the Walker Bank building, in accordance with the plans and specifications prepared by Eames & Young (hereinafter referred to as the architect) and referred to in said contract and made a part thereof, and whereas, James Stewart & Co. has engaged with Van Emon Elevator Company, a corporation existing under the laws of the state of California, to furnish the portion of said material hereinafter set forth:

"Now, therefore, this agreement made and entered into this 24th day of May, 1912, in the city of Salt Lake, by and between James Stewart & Co., party of the first part, hereinafter referred to as the contractor, and Van Emon Elevator Company, party of the second part, hereafter referred to as the subcontractor witnesseth:

"I. That the subcontractor, its heirs, administrators, successors, or assigns, in consideration of the covenants and agreements hereinafter entered into by the contractor, hereby covenants and agrees to and with the contractor, that it will well and sufficiently furnish and provide all work and materials necessary or required to fully do, perform, and complete, and will completely furnish in place, four worm-gear traction electric passenger elevators, in accordance with specifications hereto attached; all in a good and workmanlike manner, in accordance with the plans and specifications referred to as a part of the first-mentioned contract, which, together with the general conditions of the specifications, are made a part of this contract; which plans, specifications and the site, have been examined by the subcontractor prior to the execution of this contract; the subcontractor hereby covenants and agrees to provide, at its own expense, all material of every kind of good and sound quality, and all tools, tackle, implements, scaffolding, and machinery of every sort which may be necessary to properly execute this contract and perform and furnish all other materials and things necessary or usual in the premises, and finish the said work in a good, substantial, and workmanlike manner, fully complete and perfect in every respect, to the satisfaction of the architect and contractor, on or before the 1st day of September, 1912, * * *"

IV (in part). "The contractor may at any time during the progress of the work require any deviation from, addition to or omission in the specifications and plans, without giving notice to the surety and the subcontractor agrees to make such changes as a part of this contract, and such change or changes shall in no manner impair, affect or avoid this agreement, and this clause shall be construed without any limitations or restrictions whatsoever as to extent or character of such changes, omissions or additions."

X (in part). "The subcontractor agrees to fully do and perform this work and in all things execute and complete this contract within the time above limited for that purpose or within said term as it may be extended by reason of delays, changes, additions or other reasons caused or allowed by the contractor or architect, and should such subcontractor fail to complete the work, or deliver its material within the time agreed upon, the subcontractor agrees to pay and will pay to the contractor for each and every day of such delay beyond the time of completion of work or delivery of material as above defined the sum of seventy-five dollars ($ 75.00)."

"XI. Immediately upon the execution of this contract the subcontractor shall and will furnish the contractor with a bond made by the subcontractor as principal and a surety company as surety, both the form of the bond and the surety company to be satisfactory in every respect to the contractor, in the sum of thirty thousand dollars ($ 30,000.00) conditioned that the subcontractor will perform all terms and covenants of this contract, and will immediately pay to the contractor all expenses incurred by or judgments entered against, the contractor, by reason of any injuries to persons or property caused as set forth in article V of this agreement.

"XII. The contractor agrees that, if the subcontractor shall well and faithfully fulfill this contract to the satisfaction of said architect, and keep every covenant on its part herein contained, then the contractor will pay to the subcontractor the sum of thirty thousand dollars ($ 30,000.00) for all this work and material in place complete and accepted by the architect under this contract.

"No payment made under this contract shall operate as an admission, on the part of the contractor or the architect that this contract or any part thereof has been complied with, in case the fact shall be otherwise, or so as to preclude any action for damages against the subcontractor should the work and materials hereby required not be performed and furnished in a substantial and workmanlike manner,...