State v. American Surety Co. of New York

• Decision Date: 23 June 1931
• Citation: 137 Or. 394,300 P. 511
• Parties: STATE FOR USE AND BENEFIT OF PEGAN ET AL. v. AMERICAN SURETY CO. OF NEW YORK ET AL.
• Court: Oregon Supreme Court

300 P. 511

137 Or. 394

STATE FOR USE AND BENEFIT OF PEGAN ET AL. v. AMERICAN SURETY CO. OF NEW YORK ET AL.

Supreme Court of Oregon

June 23, 1931

Department 2.

Appeal from Circuit Court, Multnomah County; Louis P. Hewitt, Judge.

Action by the State, for the use and benefit of Albert Pegan and Joseph Gassman, against the American Surety Company of New York and others. Judgment for plaintiffs, and de fendants appeal.

Affirmed.

This action was prosecuted under section 2991, Oregon Laws 1920 in the name of the state of Oregon for the use and benefit of Albert Pegan and Joseph Gassman, plaintiffs, against American Surety Company of New York, a corporation, and J. W. Sweeney and Fred Sparth, individuals, and as copartners, doing business under the firm name and style of J. W. Sweeney Construction Company, defendants.

Among other things, the plaintiffs alleged that they "were joint adventurers doing business under the firm name and style of Pegan and Gassman," and that the defendant American Surety Company of New York was a New York bonding corporation, duly authorized and licensed to transact a surety business in the state of Oregon; that theretofore, and on August 11, 1925, the defendant J. W. Sweeney Construction Company had entered into a contract with the state of Oregon for the construction of unit No. 3 of the Roosevelt highway in Curry county, and, in the performance thereof, had sublet the culvert work and the masonry to the plaintiffs, the subcontract being referred to in the complaint and set out as Exhibit A; that, upon the execution of this subcontract plaintiffs entered upon the performance thereof, and proceeded in accordance with its terms, and performed the conditions thereof until November 17, 1926, when all of the work to be performed under the contract was completed "except putting in two or three pipe culverts and a few odds and ends, which could not be done or completed until several weeks or months thereafter"; whereupon it was mutually agreed between the plaintiffs and Sweeney Construction Company that the company would, for value, and it thereafter did, complete and charge to them the work yet to be done under the contracts; that the plaintiffs have fully and faithfully performed all the terms and conditions of their contract, and complied with the orders of the state highway commission with relation thereto; that, prior to the commencement of the action, payment of the sums due under their contract with the construction company was demanded of that company and of the American Surety Company of New York but that these defendants have not paid the same or any part thereof, except the sum of $28,342.77, paid by the construction company, and that there is now due and owing to plaintiffs under the contract the sum of $5,212.80, with interest thereon at 6 per cent. from August 29, 1927; that, within one year immediately following the completion of the contract and the acceptance of the work by the state of Oregon, the plaintiffs filed with the secretary of state a notice of claim for services performed and labor and material furnished by them on unit No. 3 of the Roosevelt highway, in Curry county, Or., pursuant to the contract hereinabove described, and for extra work and materials. Plaintiffs demanded judgment in the amount of $5,212.80, with interest thereon at 6 per cent. per annum from August 29, 1927, and for attorney's fees.

The defendant American Surety Company of New York denied that any sum was due to the plaintiffs from the Sweeney Construction Company, and alleged that that company had paid to plaintiffs the sum of $28,342.77, together with other sums of money, the exact amount being to the surety company unknown, and demanded that the action be dismissed.

Defendant Sweeney Construction Company, by answer, admitted that the plaintiffs performed some work under the alleged contract, and alleged that the terms of the contract were not completed by plaintiffs as agreed therein, or at all, and that it was necessary for the company to complete the work prescribed therein. This defendant denied the right of plaintiffs to recover attorney's fees in any sum whatsoever. It then filed five further and separate answers and defenses, and concluded by demanding judgment against the plaintiffs in the sum of $1,753.83, and costs and disbursements.

The respective parties having waived their right to trial by jury, the case was tried to the court.

The court found that, on September 26, 1925, the plaintiffs entered into the written agreement with the defendants as set out in the pleadings, which agreement was subject to all the terms and specifications of a certain contract theretofore entered into by and between the state highway commission and the defendant construction company, and subject to any and all changes deemed necessary by state engineers in charge of the work; that, after the execution of the contract, the plaintiffs entered upon the performance thereof in accordance with its terms, and duly performed all the conditions therein set forth until about November 17, 1926, when the work agreed to be performed by plaintiffs was completed, "except putting in two or three pipe culverts and a few odds and ends, which could not be done or completed until several weeks or months thereafter, whereupon it was mutually agreed between said Pegan and Gassman and said J. W. Sweeney Construction Company that said * * * Construction Company would, and thereafter did, complete it, and charge them for the expense and give them credit for the work to be done and performed by said Pegan and Gassman under their said contract, and said Pegan and Gassman have fully and faithfully performed all the terms and conditions of their said contract in strict compliance therewith and with the orders of the state highway commission and its engineers in charge of said work, except as modified as hereinbefore set out, and said work was performed satisfactorily to, and accepted by, the said state highway commission and its engineers."

The court found that, under the contract between the plaintiffs and the defendant construction company, payments were to be made by the company to plaintiffs when the work done by them was completed and accepted by the state highway commission, and that the plaintiffs had earned, and that there was due them under the contract, for work performed and labor provided by them, $32,677.18, that the plaintiffs had not abandoned the performance of their contract, and that they were entitled to recover reasonable attorney's fees.

The court denied the plaintiffs' claim for $102.50 for "hauling groceries," and likewise denied their right to recover on their claim for $450 for "tools and machinery converted."

The court further found that, prior to the expiration of one year immediately following the completion of the contract and an acceptance of the work by the state of Oregon through its duly authorized representatives, the plaintiffs filed with the secretary of state notices in writing, duly verified by them, as provided by statute; that, prior to commencing action, the plaintiffs made application to the state of Oregon, through its highway commission under whose direction the work had been prosecuted, by furnishing to that commission an affidavit that labor and materials for the performance of the work had been supplied by them, and that payment therefore had not been made, for certified copies of the contract and bond of Sweeney Construction Company under which the work was being prosecuted, and the highway commission furnished the plaintiffs with such certified copies as required by law.

With reference to counterclaims made by the Sweeney Construction Company, the court found:

That there was no agreement between plaintiffs and the defendant construction company regarding the building of any roads on the project covered by defendant's contract, or in connection therewith, and that the plaintiffs were not indebted to defendant in any amount on such account; that the counterclaim relating to a contract for the building of the rock crusher was without merit; that, during the course of their work, plaintiffs used and consumed tools belonging to the defendant company of the reasonable value of $25, and that the company was entitled to recover that sum from the plaintiffs therefor; that the construction company supervised the laying of some culverts in connection with plaintiffs' job, and that its services thus rendered to plaintiffs were of the value of $100, which amount it was entitled to recover; that the defendants advanced and paid to the Englehart Company on account of hauling done by that company for the use and benefit of plaintiffs the sum of $57 which remained wholly unpaid, and that the defendants were entitled to collect that sum therefor; that the defendants installed 237 feet of 12-inch pipe for pl...