Odegard v. General Casualty & Surety Co.

• Decision Date: 08 September 1930
• Docket Number: No. 8677.,8677.
• Citation: 44 F.2d 31
• Parties: ODEGARD v. GENERAL CASUALTY & SURETY CO.
• Court: U.S. Court of Appeals — Eighth Circuit

44 F.2d 31 (1930)

ODEGARD v. GENERAL CASUALTY & SURETY CO.

No. 8677.

Circuit Court of Appeals, Eighth Circuit.

September 8, 1930.

H. V. Mercer, of Minneapolis, Minn. (E. L. McMillan, of Princeton, Minn., and E. J. Lien, of Minneapolis, Minn., on the brief), for appellant.

F. H. Stinchfield, of Minneapolis, Minn. (Merriam & Wright, R. F. Merriam, Stinchfield, Mackall, Crounse & McNally, and Thomas P. Helmey, all of Minneapolis, Minn., on the brief), for appellee.

Before KENYON, BOOTH, and GARDNER, Circuit Judges.

BOOTH, Circuit Judge.

This is an appeal from a judgment dismissing plaintiff's action on the merits at the close of a trial. The suit was against the Skeena Lumber Company, Limited, and the appellee, upon a bond given to appellant by the lumber company with appellee as surety, to insure the performance of a contract between the Lumber Company and appellant. Brought originally in the state court, the suit was removed to the federal court on petition of both defendants on the ground of diversity of citizenship.

The contract, to secure the performance of which the bond was given, provided, in substance, for the sale of lumber and lumber products by the lumber company to appellant, Odegard, to be ordered and specified by him, of the aggregate value of $8,000, and to be paid for as follows: Odegard was to advance to the lumber company the full sum of $8,000, and to receive in return its promissory notes of $500 each, aggregating $8,000. The notes were to be paid by shipments of lumber under the contract. The notes were payable, respectively, on November 1, 1925, and on the 1st of each month thereafter until all were paid. The contract further provided:

"10. It is further covenanted and agreed by and between the said parties that the said party of the second part shall ship to the said party of the first part at Santiago, Minnesota, or to such other point or points as said party of the first part shall direct, lumber as ordered and specified by the party of the first part of the value of Five Hundred Dollars at the prices aforesaid, on or before the first day of November, 1925, and lumber of the value of Five Hundred Dollars at such price on or before the first day of each succeeding month thereafter until lumber of the value of such price of the said sum of $8,000.00 shall have been so shipped by said second party to said first party.

"11. It is further agreed between said parties that the party of the first part shall, on or before the first day of October, 1925, specify and order from the second party the different kinds of lumber that the said party of the first part desires to have shipped and delivered on or before the first day of November, 1925, and to make up said $500.00 shipment, and monthly thereafter said orders shall be placed by the said party of the first part with such party of the second part for the different kinds of lumber said party of the first part desires shipped on or before the first day of the following month to cover the amount of said shipments as herein specified.

* * * * * *

"13. It is further covenanted and agreed that the said second party shall not be responsible for delays or failure to make its shipment within the terms of this contract on account of any condition arising from strikes, inability to secure railroad transportation, riots or civic commotion or any act of God beyond the control of said party of the second part."

The bond accompanying the contract contained the following provisions:

"Now, Therefore, the condition of this instrument is such, that if the principal indemnifies the obligee against loss or damage directly arising by reason of the failure of the principal faithfully to perform the above mentioned contract, then this instrument shall be null and void; otherwise to remain in full force and effect; provided however, and this instrument is executed by the Company, as surety, upon the following express conditions, which shall be precedent to the right of recovery hereunder.

"1. The obligee shall, at the times and in the manner specified in said contract, perform all the covenants, matters and things required to be by the obligee performed; and if the obligee default in the performance of any matter or thing agreed or required in this instrument or in the contract, to be performed by the obligee, the Company shall thereupon be relieved from all liability hereunder.

"2. If said principal shall in any manner default in the performance of any matter or thing in said contract specified to be by said principal performed, or in the event said principal shall abandon the work provided by said contract to be done by said principal, the obligee shall immediately so notify the Company and thereafter the Company shall have the right at its option to assume and sublet said contract and to proceed thereunder as if no default or abandonment had occurred."

"6. * * * Nor shall the Company be liable under this instrument unless the consideration to be paid the principal by the terms of said contract shall be cash."

"8. * * * The obligation of the Company is and shall be construed strictly as one of suretyship only."

"9. No action, suit or proceeding shall be had or maintained against the Company on this instrument unless the same be brought or instituted and process served upon the Company therein within six months after the principal shall cease performing the work mentioned in said contract and in no event after six months after the date, time or period fixed in said contract for the completion of the work mentioned therein."

"11. All notices and other evidence required by this instrument to be furnished by the obligee to the Company shall be in writing, and shall be forwarded by registered letter addressed to the Company at its principal offices in the city of Detroit, Michigan.

"12. None of the conditions or provisions contained in this instrument shall be deemed waived by the Company unless the written consent to such waiver be duly executed by its President or Vice-President and its seal be thereto affixed and duly attested."

The action was commenced in July, 1927. The complaint alleged default in the performance of the contract and breach of the condition of the bond. The answer of the surety company alleged (1) that the consideration for the contract and bond was not paid in cash as was provided in the bond; (2) that plaintiff had failed to give the defendant surety company immediate notice of default, as required by the bond; (3) that plaintiff had failed to commence suit within the time limited in the bond; and (4) that the contract and bond did not constitute the entire agreement of the parties, but that, as a part of the agreement, the lumber company and plaintiff entered into another contract whereby the lumber company agreed to pay a further sum of $8,000, secured by notes maturing at the identical dates and in the same amounts and to be paid by delivery of lumber in the same manner as under the contract attached to the complaint, but said purchase price of said lumber to be applied upon the purchase price of land to be conveyed to the lumber company. The reply admitted the land contract, but alleged that it was entirely independent of the bond and the contract, known as the cash contract, which the bond accompanied.

By stipulation in writing, duly signed and filed, a jury was waived, and the case tried to the court without a jury.

The defendant lumber company withdrew its answer and stipulated that judgment might be entered against it.

At the close of the trial the court found generally for the defendant surety company and dismissed the action.

On the appeal in this court, a number of matters are discussed by counsel in their briefs. We find it necessary to consider at length two only: (1) The alleged default in performance of the contract, and failure to give notice of the default; (2) the alleged waiver of notice.

There was substantial evidence tending to establish the following facts: Mr. Odegard gave orders to the lumber company for shipment as provided in the contract, and received one car of lumber in October, 1925. Two other cars, which had been shipped to another party but refused, were taken over by Mr. Odegard in December, 1925. These three cars amounted to slightly more than $500; and the first note under the cash contract was canceled and returned, and the balance applied on the first note under the land contract. No further lumber was shipped under the cash contract secured by the bond. One other car was received in March or April, 1926, but this was under the land contract. Orders were given by Mr. Odegard for December, 1925, delivery; and later other orders were given, some written, some oral, but the lumber did not arrive. In December Mr. Odegard began to be worried about the nonarrival. He visited the lumber company's office in Minneapolis and interviewed one or more of the officers of the company. He did this frequently, at least weekly, in December and January. He was told the latter part of January or the first part of February, 1926, that the company had been unable to ship the lumber on account of a flood. This same excuse was offered several times. Finally, at some time between January 1 and March 31, 1926, Mr. Odegard went to the office of Mr. Schunk, agent of the surety company and attorney in fact for it in Minneapolis to sign bonds, and talked to him about the delay and the flood. Mr. Schunk verified the report as to the flood and expressed his opinion that the lumber would be shipped. Mr. Schunk testified that he told Mr. Odegard not to rely on his statements and thereby lose any legal rights; this testimony is in dispute. There was no affirmance or denial by Mr. Schunk of any liability of his company upon the bond. Almost weekly until June Mr. Odegard visited the office of the lumber company to inquire about the lumber. Sometimes he received evasive answers to his inquiries; sometimes promises...