Sykes v. Sperow

• Decision Date: 25 March 1919
• Parties: SYKES v. SPEROW ET AL.
• Court: Oregon Supreme Court

179 P. 488

91 Or. 568

SYKES v. SPEROW ET AL.

Supreme Court of Oregon

March 25, 1919

Department 2.

Appeal from Circuit Court, Multnomah County; J. P. Kavanaugh, Judge.

Action by A. E. Sykes against G. F. Sperow and another. Judgment for defendants, and plaintiff appeals. Reversed and remanded.

The plaintiff, who is a contractor, took the contract for building an office building at La Grande, Or. He subcontracted the cement work and the plastering to the defendant Sperow at the agreed price of $1,300. One of the conditions of this subcontract was that Sperow was to protect the plaintiff against all future liens and claims of like nature. To secure the plaintiff on this contract, the said defendant Sperow furnished plaintiff a surety bond, executed by himself and the defendant the National Surety Company. This bond was in the sum of $650.

The defendant Sperow lived at Portland, Or., and did not go to La Grande, but proceeded with the work through an agent sent to that city. According to allegations of the complaint, the defendant Sperow did not protect plaintiff against liens on the building, and it is alleged that the plaintiff, in order to comply with his contract to the owners, was compelled to and did pay out, on such liens and lienable claims, the sum of $541.70. To recover said sum, this action is brought against the defendant Sperow and the defendant the National Surety Company, jointly.

The bond in question contained the following provisions:

"(2) The obligee shall, at the times and in the manners 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 in this instrument, or in said contract agreed or required to be performed by the said obligee, the company shall thereupon be relieved from all liability hereunder.

"(3) 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, the obligee shall immediately so notify the company. * * *

"(7) 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 duly attested. * * *

"(9) 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 New York."

When it became apparent that the defendant Sperow would not be able to, or would not, comply with his contract, the plaintiff, through his agent, prepared notices in writing and mailed them in a registered letter,43 addressed to the National Surety Company, New York, care of Frank E. Smith & Co., Portland, Or.

Frank E. Smith & Co. were the general agents of the defendant surety company in the state of Oregon, duly appointed under the statute. This general agent seems to have taken the notices from the post office at Portland and signed the returned registered receipt. What was done with them, and whether or not they were forwarded to the surety company at New York, is not directly disclosed by the evidence, and is a matter of inference and presumption.

The defendant claims that the bond was forfeited by reason of the failure to send these notices direct to the surety company at its home office in New York, as provided by the contract. The plaintiff, on the other hand, claims that Smith, the general agent of the company, waived the manner of serving the notices, by requesting the plaintiff to send them through him, and introduced direct testimony, that there was such an arrangement between Smith and himself, and that the notices were sent in the way they were, in compliance with that arrangement. He also claims that, because it was the duty of the agent, upon receiving the notices, to forward them immediately to the principal, the presumption arises that he performed his duty, and that the notices were actually sent to the defendant's home office, and received there by it.

There was a motion for a nonsuit, which was sustained by the court, apparently upon the ground that the contract was forfeited by the failure of the plaintiff to forward the notices to the defendant company, in the manner specified in the contract.

The important question presented here is whether or not the general agent of the company in the state of Oregon could, under the provisions of such a contract, waive the manner of serving the notices, and agree to a service upon him as its agent in Portland, and whether the mailing of these notices, directed to the defendant at its home office in care of its agent at Portland, was a sufficient compliance with the contract.

George C. Johnson, of Portland (David P. Mathews, of Portland, on the brief), for appellant.

Harrison Allen, of Portland (Griffith, Leiter & Allen, of Portland, on the brief), for respondents.

BENNETT, J. (after stating the facts as above).

It is our judgment that the motion for nonsuit should have been denied.

We might place our conclusion in this regard upon the presumption that the agent had performed his duty and actually forwarded the notices to the home office. In Dight v. Chapman, 44 Or. 278, 75 P. 589, 65 L. R. A. 793, the court in discussing the rule that notice to agent is notice to his principal, says:

"The reason for this rule is based on the theory that it is incumbent on the agent to impart to his principal all information that he may obtain which would affect his interest, and by invoking the presumption that such obligation has been performed the conclusion is reached that the principal is chargeable with notice thereof."

Assuming, then, that the notice actually reached the surety company at its home office in proper time, any difference in the mere manner of transmitting it, from the method provided in the contract, would have been merely technical and trivial, and could have caused no injury or prejudice to the defendant. In Bross v. McNicholas, 66 Or. 48, 133 P. 784, Ann. Cas. 1915B, 1272, the court says:

"The law of suretyship has undergone a considerable change in late years. The day of personal suretyship is fast slipping away, and in its stead comes the corporate surety for profit. This new condition has brought about a new construction of the law. The rules as applied to the insured have been softened, while the rules applicable to the surety have been drawn more stringently. The reason, therefore, lies in the very nature of the transformation. Formerly, a surety was an individual, or collection of individuals, actuated by beneficent motives to carry the burden of suretyship, receiving no profit or benefit, and, in consequence thereof, the law dealt tenderly with him or them. But in this day and age of corporate sureties, when the burden is lightened by the payment of adequate premiums, and their final liabilities ofttimes secured by counter indemnity, the strictness of the old rule is relaxed, and the modern day surety company must show some injury done before they can be absolved from the contracts which they clamor to execute."

And in Leiter v. Dwyer Plumbing Co., 66 Or. 482, 133 P. 1183, it is said:

"In order for the surety company to escape responsibilty, it should appear that such company has been prejudiced by a breach of the contract. The breach must not have been merely technical, but a substantial one, working a pecuniary disadvantage to the surety company, or depriving it of some protection or privilege reserved in the bond."

But in addition to this it is our opinion that the general agent of the company had authority, under the circumstances in this case, to waive or qualify a provision like the one in this contract, providing for the manner of serving notice of the default upon the surety company--assuming, of course, that the testimony of the plaintiff as to what occurred was accurate and correct.

According to testimony offered by the plaintiff, Smith was the general agent of the surety company for the state of Oregon, both in fact and in law. Section 4675, L. O. L., authorizing surety companies to do business in the state of Oregon, provides: "That it must * * * appoint a resident general agent on whom legal service, if any necessary, may be made and to whom all other agents of the company in the state shall make reports, * * * and to whom a general power of attorney shall be executed."

It is conceded that Smith was designated as such general agent, and in addition to this the testimony on the part of the plaintiff tended to show that he was such general agent in fact. It is well settled that such a general agent is the alter ego of the principal, and can perform any act or do anything that the principal itself could do or perform.

This is and must be especially true of a foreign corporation, having no corporate existence within the state, and necessarily doing business in the state, solely through its agents, and having no power to perform any act or do anything in any other way. To say that such a corporation (in the absence of direct legislative power) may, by an obscure provision on the back of its contract, or indeed by any provision on the contract, entirely upset the general principles of the law of agency, declared by the statute or by the common law, and make a statute of frauds of its own, create "a law unto itself," and so tie the hands of itself and its general agents, that there is, and can be, no power within the entire state which can waive or modify the mere mode or manner in which a notice of default is to be transmitted to its home office,...