Commercial Insurance Co. v. Hartwell Excavating Co.

407 P.2d 312, 89 Idaho 531, 1965 Ida. LEXIS 397
CourtIdaho Supreme Court
DecidedOctober 27, 1965
Docket9508
StatusPublished
Cited by28 cases

This text of 407 P.2d 312 (Commercial Insurance Co. v. Hartwell Excavating Co.) is published on Counsel Stack Legal Research, covering Idaho Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Commercial Insurance Co. v. Hartwell Excavating Co., 407 P.2d 312, 89 Idaho 531, 1965 Ida. LEXIS 397 (Idaho 1965).

Opinions

[535]*535KNUDSON, Justice.

Shortly prior to November 11, 1960, respondent, Hartwell Excavating Co., Inc., was seeking to establish a line of bonding credit in anticipation of bidding for a contract with the City of Idaho Falls (hereinafter referred to as “City”) to construct a public works project known as The West Side Sewer System (hereinafter referred to as “Project”). During said period respondent, through its president, George A. Hartwell, contacted appellant through its agent, Kenneth J. Dehnert, and for the purpose of establishing such credit submitted to appellant respondent’s financial statement.

Under date of November 11, 1960, respondent completed an application form furnished by appellant entitled “Application for Contract Bond.” Some irregularity occurred regarding the name of the company to which the application was addressed; however, it is admitted that the application was made to and acted upon by appellant.

Pursuant to said application appellant, by and through its agent Dehnert, supplied to respondent a bid bond for the project. This bond together with respondent’s bid was submitted to the City for consideration in awarding a contract relative to the construction of the project. Respondent was thereafter notified that it was the successful bidder and was requested to submit a performance bond together with an executed contract for the construction of the project. Respondent thereupon requested appellant, through its agent Dehnert, to provide the required performance bond.

At the request of appellant an abstract of the bids relative to the project was furnished by respondent. Upon learning that respondent’s bid was substantially lower than the engineer’s estimate and $43,658.76 below the next low bid, appellant proceeded to make further investigation concerning re[536]*536spondent and its bid. Thereafter appellant demanded as a condition to the issuance of the performance bond that respondent furnish additional collateral security in the amount of approximately $40,000.00. Respondent was unable to provide such security and consequently could not obtain a performance bond from appellant. Respondent’s being unable to meet the requirement of furnishing a performance bond made it impossible for it to enter into the contract for the construction of the project.

Pursuant to demand made upon appellant by the city attorney, appellant paid to the City, pursuant to its obligation under the bid bond, the sum of $8,770.10. Appellant thereafter made demand upon respondent to indemnify appellant for the sum so paid to the City. Respondent denied liability therefor and appellant commenced this action seeking recovery of said amount against respondent allegedly under the indemnification provisions contained in the application. Trial was had before the court sitting without a jury. Judgment was entered denying recovery to appellant, from which judgment this appeal is taken.

Appellant has enumerated twenty-three assignments of error, the substantial portion of which may be grouped into three principal contentions as follows:

(1)The trial court erred in finding that custom or usage was applicable to the factual situation in this case.

(2) The court erred in finding that appellant’s agent Dehnert had apparent authority to make representations to respondent and in concluding that appellant was estopped to deny its agent’s apparent authority.

(3) The court erred in concluding that respondent was not obligated to reimburse appellant for payments made by appellant to the City.

In considering the first mentioned contention we find that in respondent’s answer as an affirmative defense it is alleged:

“That at all times mentioned in the complaint there existed in the construction business in Idaho Falls, Idaho, and vicinity a well established and well understood custom and usage to the effect that if a surety executes a bid bond in favor of a principal and the principal is the successful bidder, that the surety will execute a performance bond on behalf of the principal for the performance of said contract, all as plaintiff well knew and understood.”

This allegation is sufficient to put in issue the practice of the business here involved as it existed in the area of Idaho Falls and vicinity. Appellant raises the issue as to whether the alleged usage or custom was shown to exist in the area alleged.

[537]*537It is generally recognized that a custom or usage which may affect the rights of a party to a contract must he one that has existed for such length of time as to become generally known and practiced in the area in question or in reference to the particular trade or business with which it is connected. 55 Am.Jur., Usages and Customs, §§ 4-9.

The foundation for the introduction of evidence of usage or custom is a showing of a series of acts of a similar character performed at different times. Ames Mercantile Co. v. Kimball S.S. Co., D.C.N.D.Cal.1903, 125 F. 332. Evidence of a habit of doing a thing in the course of business is, if clearly shown as a definite course of action, admissible as indicating that, on a particular occasion, the thing was done as usual. Roberts Distributing Co. v. Kaye-Halbert Corp., 126 Cal.App.2d 664, 272 P.2d 886; 31A C.J.S. Evidence § 180, p. 457. In the case of Romero v. H. A. Lott, Inc., 70 N.M. 40, 369 P.2d 777, the court had under consideration an issue as to whether the handrail on a platform was a safety device in general use in the building construction industry and stated:

“We have held that custom or usage is a matter of fact and not of opinion. * * * but, that proof of the fact may be established either by testimony of specific uses, * * * or by evidence of general practice of contractors, * * *.”

In the instant case respondent called Mr. Arrington, a resident of Idaho Falls, who had been engaged in the general contracting business for twenty-eight years, doing work in Montana, Wyoming, Utah and Idaho. He testified that a custom existed in the Idaho Falls area in this type of business relative to the issuance of performance bonds by a bonding company when the contractor to whom the bonding company has issued a bid bond, is successful in being offered the contract bid on; essentially the custom is, to paraphrase the testimony, that you arrange for a performance bond at the time you apply for a line of credit and if you are awarded the contract you get the performance bond, the bid bond being incidental to the situation. He further testified that:

“Q Now Mr. Arrington, in your experience what is the custom if a bid bond has been issued relative to the following through with a performance bond?
“A In our experience, over 28 years, the performance bond has been forthcoming immediately for every job that a bid bond has been issued.”

The witness Harold Shydler, a resident of Idaho Falls, engaged in the general contracting business most of his life, and in Idaho about twelve years, testified that he [538]

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Bluebook (online)
407 P.2d 312, 89 Idaho 531, 1965 Ida. LEXIS 397, Counsel Stack Legal Research, https://law.counselstack.com/opinion/commercial-insurance-co-v-hartwell-excavating-co-idaho-1965.