School Dist. No. 1 ex rel. Lynch Co. v. A. G. Rushlight & Co.

389 P.2d 338, 236 Or. 463, 1964 Ore. LEXIS 298
CourtOregon Supreme Court
DecidedFebruary 13, 1964
StatusPublished

This text of 389 P.2d 338 (School Dist. No. 1 ex rel. Lynch Co. v. A. G. Rushlight & Co.) is published on Counsel Stack Legal Research, covering Oregon Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
School Dist. No. 1 ex rel. Lynch Co. v. A. G. Rushlight & Co., 389 P.2d 338, 236 Or. 463, 1964 Ore. LEXIS 298 (Or. 1964).

Opinion

GOODWIN, J.

This is an appeal from a judgment in the sum of $28,987.34, and costs, for a subcontractor in an action brought pursuant to ORS 279.536 on a statutory public-contract bond.

The school district is named on the relation of The Lynch Co., hereinafter referred to as “Lynch”, which performed sheet metal work on the John Marshall High School in Portland. The defendants-appellants are Ross B. Hammond Co., the general contractor on the high-school construction, hereinafter referred to as “Hammond,” and General Insurance Company of America, Hammond’s surety on the performance bond. A. G. Rushlight & Co., the mechanical subcontractor for whom Lynch, performed [465]*465the work, hereinafter referred to as “Rushlight,” is not involved in this appeal. (Judgment in the full amount demanded was entered against Rushlight in a former trial.)

Rushlight received payment from Hammond for the work done on the high school, but Rushlight failed to pay Lynch in full for the portion of that work done by Lynch. The challenged judgment is for the balance left unpaid when Rushlight’s funds were exhausted. Hammond and its bonding company defended this .action on the ground that Lynch had waived its right to recover against these defendants when it accepted certain payments by Hammond in exchange for a written waiver.

Although many of the facts are in dispute, it is agreed that Lynch, Rushlight, and Hammond executed a number of memoranda between February 6 and April 10, 1961.

For some time Lynch had been supplying labor and materials for another construction project, referred to in the memoranda as the Tektronix assembly buildings. As in the high-school project, Hammond and Rushlight again were the contractor and subcontractor, and Lynch performed a part of Rushlight’s subcontract. Because of unpaid claims against Rushlight on the Tektronix buildings (potential sources of liens that could embarrass Hammond), a meeting was called on February 6, 1961, between the three parties at Hammond’s office. Rushlight then was apparently in a depleted cash position.

On February 6, 1961, the first memorandum was executed, and a cheek for $25,000 was paid by Hammond to Lynch pursuant to the terms of the writing. Additional memoranda with similar wording (except for the amount of payment) were signed on Feb[466]*466rnary 8 and 9, on which occasions Lynch, received the sums of $40,162.81 and $14,136.90, respectively. The fourth and final such memorandum, again with wording substantially identical to that of the others, was made and executed on April 10,1961, when Lynch received $15,000 from Hammond. On April 10, 1961, Hammond owed Rushlight $41,563.01 on the Tektronix work, but owed Rushlight nothing further on the high-school construction project. Rushlight, meanwhile, owed Lynch money on both jobs.

Hammond and General Insurance pleaded only the memorandum of April 10, 1961, as. an affirmative defense to Lynch’s action. It reads:

“ AGREEMENT
“ April 10, 1961
“In consideration of the promises herein contained A. G. RUSHLIGHT & CO., herein called ‘Assignor’, ROSS B. HAMMOND CO., herein . called ‘Hammond’, and THE LYNCH COMPANY, INC., herein called ‘Assignee’, agree as follows:
“Assignor hereby assigns- to Assignee Fifteen-Thousand Dollars ($15,000.00) of money now due to Assignor on account of work done by Assignor for Hammond, and hereby authorizes Hammond to pay said sum to Assignee upon execution of this Agreement.
“Hammond consents to said assignment. Assignee accepts the same and hereby waives Assignee’s statutory and other rights to file a claim or take other action for labor and/or material furnished by Assignee on or to jobs wherein Assignor has performed work for Hammond.
“For this payment made hereunder by Hammond to Assignee, Assignor shall credit Hammond on account of work performed' by Assignor for [467]*467Hammond on Tektronix Assembly Buildings #300 and/or #400, and Assignee shall apply such payment only to the payment for labor and/or material furnished by Assignee on or to Tektronix Assembly Buildings #300 and/or #400 subsequent to February 9, 1961.
“This will not require Assignee to perform any of Assignor’s obligations to Hammond.”

The writing is signed by representatives of each of of the three parties.

In School Dist. No. 1 v. Rushlight & Co., 232 Or 341, 375 P2d 411 (1962), we reversed a judgment of involuntary nonsuit against Lynch and in favor of Hammond and General Insurance Company. The only question then before us concerned the sufficiency of notice under ORS 279.526.

On remand, the cause was tried to a jury. Lynch moved for a directed verdict. The motion was joined in by the defendants. Lynch then sought leave to withdraw its motion. Leave was granted. Lynch reopened the case and put on further testimony. Thereafter the court submitted certain factual issues to the jury. The defendants again moved for a directed verdict. The motions were denied. After a verdict for Lynch against both defendants, there were motions for a judgment n.o.v. and for a new trial. All these motions were denied. These rulings are the foundation for the principal assignments of error.

Lynch has contended throughout this litigation that the defendants were not entitled to rely upon the written instrument as a waiver by Lynch of the right to bring this action. The trial court adopted the first of the grounds alleged by Lynch in avoidance of the waiver, and held that the agreement of April 10, 1961, was not supported by consideration. [468]*468In so ruling, the trial court was of the opinion that the waiver was given by Lynch in exchange for payments that Hammond was already bound to make. The record reveals that this was not, however, the fact.

While Hammond owed Rushlight some money for work done by Rushlight on the Tektronix project, Rushlight was not entitled to demand payment from Hammond at the time Hammond made the partial payments to Lynch. Further, Hammond was not bound at law to honor Rushlight’s partial assignments made without Hammond’s consent. See Bank of Sheridan v. Heider, 139 Or 185, 195-196, 9 P2d 117 (1932); Little v. City of Portland, 26 Or 235, 243, 37 P 911 (1894). Thus, in giving consent and in paying over the funds pursuant thereto Hammond furnished consideration for Lynch’s agreement to waive its “statutory and other” remedies. A general contractor’s partial payment of one subcontractor’s debt to another is consideration for the promise of the party so paid not to file a lien, or, in this case, the public-contract equivalent of a lien.

Since the waiver agreement was supported by consideration, the next question is whether there was any other valid reason why Lynch should not be bound by it.

In addition to the alleged want of consideration, Lynch had pleaded two theories of equitable estoppel.

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Related

School District No. 1 Ex Rel. Lynch Co. v. Rushlight & Co.
375 P.2d 411 (Oregon Supreme Court, 1962)
State v. Claypool
28 P.2d 882 (Oregon Supreme Court, 1934)
Bank of Sheridan v. Heider
9 P.2d 117 (Oregon Supreme Court, 1932)
Little v. City of Portland
37 P. 911 (Oregon Supreme Court, 1894)
Moyer v. Ramseyer
359 P.2d 407 (Oregon Supreme Court, 1961)

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Bluebook (online)
389 P.2d 338, 236 Or. 463, 1964 Ore. LEXIS 298, Counsel Stack Legal Research, https://law.counselstack.com/opinion/school-dist-no-1-ex-rel-lynch-co-v-a-g-rushlight-co-or-1964.