Morro Palisades Co. v. Hartford Acc. & Indem. Co.
| Decision Date | 24 June 1959 |
| Citation | 52 Cal.2d 397,340 P.2d 628 |
| Court | California Supreme Court |
| Parties | MORRO PALISADES COMPANY (a Corporation), Appellant, v. HARTFORD ACCIDENT AND INDEMNITY COMPANY (a Corporation) et al., Respondents. L. A. 25357. |
Charles E. Ogle, Morro Bay, for appellant.
A. H. Brazil, San Luis Obispo, for respondents.
This action is brought by plaintiff corporation as assignee of San Luis Obispo County. By such action the assignee seeks to have an allegedly assigned faithful performance bond reformed and to recover on it as reformed. The trial court sustained an amended demurrer to the complaint, without leave to amend, and ordered judgment of dismissal. Plaintiff appeals. We have concluded that defendant is correct in its contention that the bond could not properly be assigned to plaintiff, that no right of plaintiff to recover on the bond appears, and that the dismissal should be upheld.
The bond in question names defendant The Hartford Accident and Indemnity Company as surety, defendant Westfall as principal, and the County of San Luis Obispo as obligee, and purports to assure that Westfall would improve all of the streets and roads situated within a certain 34.7 acre tract of land subdivided by him in 1953 into 110 lots, and would 'indemnify * * * the Obligee from all cost and damage which the Obligee may suffer by reason of failure so to do and shall fully reimburse * * * the Obligee all * * * expense which the Obligee may incur in making good any such default * * *'
Besides alleging assignment of the bond to plaintiff the complaint avers that in June, 1953, defendant Westfall, acting as owner and subdivider of the tract, 'caused the Board of Supervisors of San Luis Obispo County to accept a final subdivision map' of the tract in consideration of Westfall's promise that he would, as provided in county subdivision ordinance No. 184, 1 within a reasonable time improve all of the streets and roads in the tract as shown on the subdivision map, and that he would post with the county a sufficient bond to insure his faithful performance of the work.
About ten days later Westfall, pursuant to his agreement with the county, delivered the bond in question, a copy of which is attached as an exhibit to the complaint. It is in the amount of $28,000 and recites that 'Whereas, the Principal (Westfall) has entered into a certain written contract with the Obligee, dated the 29th day of June, 1953 to Complete Roads, Los Osos Highlands, No. 2, Subdivision * * * which contract is hereby referred to and made a part hereof as fully * * * as if copied at length herein.
'Now, Therefore, the condition of this obligation is such that, if the Principal shall faithfully perform the contract on his part, and shall fully indemnify and save harmless the Obligee from all cost and damage which the Obligee may suffer by reason of failure so to do and shall fully reimburse and repay the Obligee all outlay and expense which the Obligee may incur in making good any such default, and shall pay all persons who have contracts directly with the Principal for labor or materials, then this obligation shall be null and void, otherwise it shall remain in full force and effect.' (Italics added.)
The complaint further alleges that 'by mutual mistake of the parties thereto the bond * * * did not fully and truly express the intention and meaning of the parties * * * in that the bond recites that the principal entered into a written contract * * * on the 29th day of June, 1953, whereas in truth and fact the principal * * * entered into an oral contract with the obligee on or about the 20th day of June, 1953.'
It is further pleaded that Westfall commenced improving the roads but abandoned all work about the middle of December, 1953; the county road commissioner has estimated that it will cost $22,030 to complete the road work; the obligee county, in March, 1956, made written demand on defendant surety to perform the obligation of the bond, but the surety refused; plaintiff presently owns more than fifty per cent of the land in the tract; in October, 1957, the obligee county assigned its rights in the bond to plaintiff. The purported assignment is in writing and states that 'In consideration of the execution, concurrently herewith, of Forbearance to Sue' by plaintiff, the county assigns to plaintiff 'all of its right, title and interest, legal or equitable, as obligee, to enforce the provisions' of the bond. No document purporting to constitute a covenant not to sue anyone for anything appears in the record, nor are any terms or conditions of any such agreement alleged.
The complaint, filed October 21, 1957, seeks judgment against both the principal and the surety in the sum of $22,030. It does not appear from the complaint whether Westfall still owns land in the tract or has sold or conveyed to others the portions thereof not owned by plaintiff. Neither does plaintiff allege the means by which it became owner of the 'more than fifty per cent' of the land which it claims. It does not appear that plaintiff is the only person (if any) who may or might have a claim against the county because of the principal's default.
Defendant contends, among other things, that the complaint fails to state a cause of action in that the alleged assignment of the county's rights in the bond is illegal and ultra vires. This contention is meritorious.
The rule is that rights and liabilities under a surety bond are to be determined from the language of the bond read in the light of applicable statutes. (See County of Placer v. Aetna Casualty and Surety Co. (1958), 50 Cal.2d 182, 186(1), 323 P.2d 753; Fernelius v. Pierce (1943), 22 Cal.2d 226, 245(7), 138 P.2d 12; Milliron v. Dittman (1919), 180 Cal. 443, 445(1), 181 P. 779; Hub Hardware Co. v. Aetna Accident & Liability Co. (1918), 178 Cal. 264, 267, 173 P. 81; 8 Cal.Jur.2d 620-621; 46 Cal.Jur.2d 236-237.) The statutes applicable here are to be found in the state Subdivision Map Act (Bus. & Prof.Code, §§ 11500-11628), and in the county subdivision ordinance. That act provides (§ 11611) that following filing of the final subdivision map for approval the governing body shall approve the map if it conforms to legal requirements, and 'shall at that time also accept or reject any or all offers of dedication and shall, as a condition precedent to the acceptance of any streets or easements, require that the subdivider, at his option, either improve or agree to improve the streets or easements in accordance with standards established by such governing body by local ordinance.' In section 11612 it is provided that 'In the event an agreement for the improvement of the streets or easements is entered into, the...
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