Swasey v. Farr

• Decision Date: 26 August 1930
• Docket Number: 22136.
• Parties: SWASEY v. FARR et al.
• Court: Washington Supreme Court

290 P. 866

158 Wash. 299

SWASEY v. FARR et al.

No. 22136.

Supreme Court of Washington

August 26, 1930

Department 2.

Appeal from Superior Court, Pierce County; Ernest M. Card, Judge.

Action by George O. Swasey against P. E. Farr, the American Savings & Loan Association, the Columbia Casualty Company, and another. Judgment in favor of the loan association and George O. Swasey against the casualty company, and the casualty company appeals.

Reversed with directions.

Roberts Skeel & Holman, of Seattle, and Elwood Hutcheson, of Yakima for appellant.

E. R York, George O. Swasey, and William R. Lee, all of Tacoma, for respondents.

MITCHELL C.J.

Mrs. Ida B. Dennison, the owner of lot 6, block 2, of 'Map of Fern Hill, W. T.,' now a portion of Tacoma, Wash., on July 12, 1926, entered into a written contract with Mr. P. E. Farr, a contractor, by which he agreed to move a dwelling house to the rear of the lot and remodel the house, also to construct a new building on the front of the lot in consideration of $20,000, of which amount $6,500 was acknowledged to have been paid by Mrs. Dennison. The portion of the contract material here, upon enumerating the improvements to be made, recites they were to be made 'for the sum of Twenty Thousand ($20,000.00) Dollars payable as follows, to-wit: on said contract there has been paid by the party of the first part to the party of the second part the sum of Six Thousand Five Hundred ($6,500.00) Dollars, the receipt of which amount is hereby acknowledged by the party of the second part as part payment for said work. The balance of the consideration is to be paid as follows: A mortgage is to be placed on said property running to the American Savings and Loan Association of Tacoma, Washington, in the amount of Thirteen Thousand Five Hundred ($13,500.00) Dollars and said money is to be used exclusively on paying the balance of the consideration for said work, labor and material.'

The statement that $6,500 had been paid was not true, although it appears that Mrs. Dennison delivered to P. E. Farr some securities upon which he was to and did attempt to realize, without any success.

On August 6, 1926, carrying out the plan of the parties, Mrs. Dennison executed and delivered to the American Savings & Loan Association (hereinafter called the loan association) her mortgage on the property in the sum of $13,500, with the understanding that no money would be paid until the $6,500 was furnished by or on behalf of Mrs. Dennison and used in the improvements. This mortgage covered the property as it then existed, together with improvements to be put upon the property for the making of which this money was borrowed; the appraisal of the property as thus improved being fixed for the purpose of making the loan at the sum of $27,000. The mortgage was recorded on August 11, 1926, but no money was furnished thereon until all or a part of the money furnished later by Mr. George O. Swasey had been used on the building, within the knowledge of the loan association.

About September 1, P. E. Farr commenced making the improvements, and a week later, needing money to meet his pay roll, Mrs. Dennison not being able to furnish any, he applied to George O. Swasey for a loan of $3,000. The application was made to him by P. E. Farr at the suggestion of Mr. Mahaffay, of Mahaffay & Co., agents of the bonding company who furnished the bond involved in this controversy, that George O. Swasey was a money lender. George O. Swasey, upon being apprised of the terms of the building contract, that Mrs. Dennison had not supplied the $6,500 or any portion of it, that the $13,500 mortgage had been given by Mrs. Dennison, and that the contemplated contractor's bond had not been given, loaned $3,000 to the contractor to be used to meet the pay roll, as George O. Swasey testified, until Mrs. Dennison could raise the money that she was supposed to have advanced, while P. E. Farr testified that the $3,000 was in the nature of a personal loan to him, saying in one portion of his testimony that about all of it was used in meeting the pay roll on this building, and at another time testifying that more than half of it was so used. George O. Swasey testified that he was to be repaid out of the money obtained on the mortgage and insisted, before loaning the money, that his name be mentioned in the bond. Accordingly, on the 7th day of September, 1926, there was signed and delivered to George O. Swasey the following order:

'September 7th, 1926.

'To the American Savings and Loan Association:

'Please pay to the order of George O. Swasey Thirty-three Hundred ten Dollars, for money furnished to pay for material and labor used at Lot 6, Block 2, Fern Hill, Pierce County, and charge to Loan 722.

'[Signed] Name P. E. Farr,

'Address 131 Perkins Bldg.

'O. K. Ida B. Dennison.'

And at the same time as part of the same transaction George O. Swasey was advised of and shown the bond given by the Columbia Casualty Company (hereinafter called the casualty company), involved in this suit, which is as follows:

'Lien Bond

'Know all men by these presents: That we, P. E. Farr, an individual, as Principal, and the Columbia Casualty Company of New York, as Surety, are held and firmly bound unto Ida B. Dennison, George O. Swasey and American Savings and Loan Association in the penal sum of Thirteen Thousand Five Hundred and No/100ths Dollars ($13,500.00) for the payment of which, well and truly to be made, we hereby bind ourselves, our heirs, administrators and legal representatives.

'In witness whereof, we have hereunto set our hands and seals at Tacoma, Washington, this 7th day of September, A. D. 1926. 'The Condition of the above obligation is such, that whereas the said P. E. Farr has entered into a contract to build and complete the business block, dwelling house and improvements for the said Ida B. Dennison, George O. Swasey and American Savings and Loan Association, free from liens on lot Six (6), Block Two (2), Fern Hill, Tacoma, Washington.

'Now, therefore, the condition of this obligation is such that if the said Principal, P. E. Farr, shall complete the business block, dwelling house and improvements upon the above described property, according to plans and specifications now approved by Ida B. Dennison, and shall pay and discharge all liens and claims arising against said premises, for the construction and completion of said business block, dwelling house and improvements, and shall hold the said George O. Swasey and American Savings and Loan Association, of Tacoma, Washington, harmless from any loss, cost or damage by reason of any such liens or claims, within nine months from date hereof, then this obligation shall be null and void, otherwise to remain in full force and effect.

'P. E. Farr, Principal.

'The Columbia Casualty Company

'By R. E. Mahaffay, Attorney in Fact.'

George O. Swasey did not take any note from Mrs. Dennison or P. E. Farr.

Upon receiving the order on the loan association, George O. Swasey commenced on September 8 to furnish money to P. E. Farr and continued to do so until September 27, in the total sum of $3,000. After getting the order, and about September 15, he notified the loan association of it. The loan association refused to honor the order except upon condition that that much of the $13,500 mortgage loan should be left after the building was completed, stating that they did not propose to pay any side loans to Mrs. Dennison or P. E. Farr out of the mortgage money. Again, on September 27, Mrs. Dennison assigned in writing the $13,500 mortgage loan to P. E. Farr and he indorsed on the assignment an order on the mortgagee to pay George O. Swasey the sum of $3,310, which assignment and order the mortgagee, the loan association, refused to accept and approve. On September 16, George O. Swasey notified the mortgagee that he would expect payment after the mortgagee was satisfied that all lien claims and costs of construction had been paid, and again on January 27, 1927, not having received payment, he demanded in writing that the loan association pay his claim and that he would hold it responsible for such payment. Some time the latter part of November or during the month of December, 1926, the buildings being incomplete, the contractor failed and refused to further perform the contract. Upon notice to...