State v. Cornwall

201 P. 1072, 102 Or. 220, 1921 Ore. LEXIS 222

• Court: Oregon Supreme Court
• Decided: November 22, 1921
• Status: Published

Opinion

BEAN, J.

At the commencement of the trial counsel for plaintiff moved the court for an order requiring defendants to elect whether they relied upon the bond given by Cornwall with Suetter as surety to E. E. Cummins, or upon the assignment of the contract made by George Cornwall to Philip Suetter. The motion was denied by the court, and plaintiff assigns such ruling as error.

1. It is contended upon behalf of plaintiff that the contract of assignment is inconsistent with the contractual liability of Suetter to the defendants on account of having signed the bond. It is practically conceded that the defendants could not he required to elect, unless the attempt to hold Suetter upon the bond he signed, and also as assignee of the Cornwall contract are inconsistent defenses.

By the execution of the bond by Suetter as surety he became liable for a breach of the contract on the part of Cornwall. This condition was maintained up to the time that Cornwall abandoned the contract. By the breach of the contract by Cornwall, Suetter was rendered liable for whatever damages E. E. Cummins was caused to suffer thereby. Cornwall’s contract called for the payment of 46 cents per cubic yard for excavating earth, and no more, except under the circumstances stipulated in the contract. The contract stipulated that Cummins would pay laborers and blacksmith bills every two weeks, which payments were to be treated as advancements on the payments to Cornwall. In order to perform this condition of the contract Cummins had to pay more than Cornwall earned, or more than Cornwall agreed to do the work for. Cummins was thereby damaged to that extent. Suetter, as Cornwall’s surety upon the bond, was liable for such damages. If Suetter had not attempted to complete the contract, and Cummins had then been forced to complete it, the damage Cummins would have suffered would have been the difference in the contract price for doing the work provided for in the Cornwall contract and what it actually cost him at market prices to complete the work. Cornwall would have been liable to Cummins for such damage as well as the amount of any overpayment made to laborers and for blacksmith bills pursuant to the Cummins-Cornwall contract. Suetter, as Cornwall’s surety, would have been liable for the same up to the amount of $4,000.

It appears from the testimony that Suetter and Cornwall each signed the contract of assignment of the subcontract to Suetter; that by the terms of this contract Suetter wás to take over the contract, release Cornwall, finish the work, and pay all bills and expenses incurred by Cornwall in the prosecution of the work up to about'September 6, 1919, the time of the execution of the contract of assignment, and in consideration of that, Suetter was to receive what might be due Cornwall for the work he had performed. “While the liability of Suetter upon the assignment would be in part the same as his responsibility as surety upon the bond, such liability as assignee would not be limited to the sum of $4,000 as provided in the bond. Such additional obligation assumed by Suetter as assignee was practically in the nature of a supplemental or additional agreement. The undertaking assumed by Suetter by virtue of the assignment was not inconsistent with his obligation as surety. Therefore the defendants could not properly be required to elect as requested by plalntifF, but were entitled to claim under both the bond and the assignment contract. There was no error in the ruling of the court.

2. Suetter asserts that he was led to believe that E. E. Cummins was S. E. Cummins, the father of the contractor. If Suetter had executed a bond as surety for Cummins this might have been material. George Cornwall was the man for whom Suetter was sponsor. The bond was given to E. E. Cummins, and if he complied with his part of the engagement, as the testimony tends to show he did, it does not matter whether Suetter understood his name was E. E. Cummins or S. E. Cummins.

The question of the nonliability of Suetter as claimed is asserted or raised by the demurrer to defendants’ answer, by the motion for a directed verdict in favor of plaintiff, and by an instruction to the jury requested by plaintiff to the effect that Suetter was not liable as surety upon the bond which was refused.

3. Objection is made by plaintiff that the Cornwall bond does not undertake to repay E. E. Cummins for any overpayments to Cornwall; that it is not an indemnity bond.

The contract and bond plainly provide that Cornwall would perform the work of construction within a certain time, and that if he failed to do so the obligation should remain in full force and effect: Ausplund v. Aetna Indemnity Co., 47 Or. 10 (81 Pac. 574, 82 Pac. 12). According to the testimony Suetter well understood the nature of his obligation as surety, and he is bound by the instrument. The jury so found. It is unnecessary to discuss the conflicting testimony. That matter is settled by the verdict. Any payments made by Cummins for labor and blacksmithing, pursuant to the Cornwall contract, were legitimate expenses in the construction of the highway for which Cornwall and his surety were responsible. The claim that Cornwall should receive the benefit of all of the contract price of the work in excess of the cost, if there were such an excess, without being liable for any excess of cost over the contract price, is not tenable. We do not so read the plain letter of the contract and bond.

4. When Cornwall failed to carry ont his contract, and abandoned the work about September 6,1919, Cummins notified Suetter of the fact, and Suetter said that he would have to take over the contract and complete the work. Thereupon Suetter obtained an assignment of the contract from Cornwall, and assumed the indebtedness incurred by Cornwall in thus far prosecuting the work.

Where a contractor assigns the contract to one of his sureties with the consent of the obligee, the assignee assumes the character and responsibilities of the principal: 32 Cyc. 38; 5 C. J., p. 874, §44; Ausplund v. Aetna Indemnity Co., 47 Or. 10 (81 Pac. 574, 82 Pac. 12); Gray v. McDonald, 19 Wis. 213, 229. Such surety, upon the default of the principal and with the consent of the creditor obligee, may complete the contract, and in such case he will be subrogated to all the rights of the principal as well as subjected to the liabilities of the principal under the contract: 32 Cyc. 233; Derby v. United States Fidelity & Guaranty Co., 87 Or. 34 (169 Pac. 500); American Bond Co. v. Regents, University of Idaho, 11 Idaho, 163 (81 Pac. 604); Rohde v. Biggs, 108 Mich. 446 (66 N. W. 331); First Nat. Bank v. School Dist., 77 Neb. 570 (110 N. W. 349). It was therefore appropriate for Suetter to take an assignment of the contract.

In Ausplund v. Aetna Indemnity Co., 47 Or. 10 (81 Pac. 577), Mr. Justice Moore said:

“If such private surety, however, becomes subrogated to the rights of his principal in the undertaking, to which he is a party, because of the latter’s failure to keep his agreement, he ought to be subjeeted to all the liabilities assumed by his principal, regardless of the original contractual relation. In other words, a corporation becoming a surety may, like a private surety, by permitting its principal to make such default as he pleases, insist upon its strict legal right, and in an action to enforce its liability legally interpose any defense that a private surety may invoke under the same circumstances: But when a surety, either corporate or individual, in pursuance of the terms of an undertaking, ‘assumes’ the performance of the principal’s contract, such' surety, by being" subrogated to the rights of the principal thereunder, must necessarily become subject to all his liabilities.”

5. At the time of the assignment the matter was complicated by the following arrangement. Cornwall had obtained a contract from the county of Yamhill to grade the gateways approaching to the highway, and keep them even with the grade of the highway as constructed. The work for the county amounted-to $225. This work was not included in the CumminsCornwall contract. It had been done at the same time as the work of construction of the highway and by the same men and teams, and it was impossible to segregate the labor on the county work from that upon the highway. Cornwall refused to make the assignment unless he was paid for the county work. Suetter assented to this, and directed Cummins to pay Cornwall for the county work, which he paid at that time. Suetter now claims that a portion of the work charged to Cornwall and his surety was not included in the Cornwall-Cummins contract. This matter of extra work which was done for the benefit of Cornwall, and which Suetter was then in a position to obtain the benefit of by requiring the $225 to be paid to him, having been adjusted and settled by an agreement between the parties and paid for according to the direction of Snetter, is as we view it no longer an element in this case. The consent of Snetter, the surety, healed any departure from the strict letter of the contract in this respect.

6, 7. It is claimed by plaintiff that Cummins did not perform his contract in the matter of payments to Cornwall, and on this account Cornwall was unable to continue the work. Objection was also made by plaintiff to the testimony of E. E. Cummins as a witness for defendants, for the reason that in testifying in order to refresh his memory, he referred to an itemized statement or schedule, prepared by him and furnished to plaintiff, of the several amounts paid for Cornwall during the time he was at work under the contract, of the amounts paid for Suetter while he was carrying on the work after he took charge thereof pursuant to the assignment, and of the items of expenditure made by Cummins toward the completion of the work after Suetter abandoned the work. The statement was prepared from the time-book, check-book, and bills and memoranda of labor, materials and expenses such as are usually kept in the performance of such work.

Mr. Cummins testified, in part, to the purport that, while Cornwall was at work he was there every few days and kept a memorandum of how many men were working every day. Cornwall gave him “the time every two weeks from his time-book,” and he “checked it up.” During the first part of the work Cummins and Cornwall would compare the amount of labor, and Cummins would give Cornwall a check for the amount. Later Cummins issued checks direct to the laborers and kept an account of the payments for labor and materials. Over the objection and exception of counsel for plaintiff, Cummins was permitted to refresh his memory from the itemized statement, and to give the total amounts so paid out as follows:

Paid for Cornwall for labor and board of men and blacksmith bills and materials up to September 6, 1919____.■. $5,821.75

Paid for Suetter from the time he took contract from Cornwall until he quit work for the same purposes........$1,201.95

Expended toward the completion of the contract work to January 29, 1920 ..............................$5,248.92

The statement furnished to plaintiff contains the names of various persons to whom the several amounts were paid and the amount paid to each. Cummins testified plainly that the various amounts were paid for the construction of the highway embraced in the Cummins-Cornwall contract. The proof does not depend upon the itemized account or schedule as primary evidence, but upon the sworn testimony of the witness. Our attention is not directed to any evidence of double payments, or any prejudice to the rights of the surety by reason of the manner in which Cummins conducted the business, and we find none. Some of the payments.for labor and materials for the construction while Cornwall was on the job were paid by Cummins after Cornwall assigned the contract to Suetter. It does not appear that Suetter was in any way injured by reason of this. The testimony indicates, and the jury was warranted in finding, that all of the payments made by Cummins on account of Cornwall were applied for labor, blacksmith bills, and materials for the construction of the highway, in accordance with the terms of the subcontract and bond.

It was proper for the witness to refresh his memory from a memorandum or summary prepared under Ms direction and supervision: Bartels v. McCullough, 201 Pac. 733, decided November 15, 1921. In view of the many items of account in the case and the manner in which memoranda or records of the transactions pertaining to the highway improvement were as usual kept, it was necessary and proper for the defendants to introduce in evidence, for reference by the jury, a summary of the items of expenditure, a duplicate of which was furnished plaintiff by defendants prior to the trial. It was the only possible way in which the figures could be given to the jury, so that the jury would understand the same. For a precedent in the use of schedules and summaries of details pertaining to construction work of the nature involved in the present case, see the opinion and record in the case of Sweeney v. Jackson County, 93 Or. 96 (178 Pac. 365, 182 Pac. 380). We do not recall that such procedure was challenged by counsel in that case.

8, 9. Suetter complains because Cummins did not pay Cornwall the 85 per cent of the monthly estimates of the work made by the district engineer. It is disclosed by the evidence that on August 16, 1919, such an estimate was made, and it appears therefrom that in addition to the amounts already paid by Cummins for labor as per the contract, 85 per cent of the estimate of work done by Cornwall would include a balance of $170. It was necessary to forward such estimate to the state highway engineer at Salem for approval. Before the estimate was approved and returned about September 1st, Cummins had advanced to Cornwall in payment for labor, as required by the subcontract, money in excess of the amount then due. Therefore Cummins was not in default in this respect, and Suetter has no cause for complaint in this regard. Suetter afso contends that Cummins overpaid Cornwall in violation of the rights of the surety. The testimony purported that the overpayments made by Cummins were for labor and blacksmithing, which by the plain letter of the contract Cummins was required to make as an advancement to Cornwall to enable him to carry on the contract work. There was no violation of the contract or bond in this respect.

The facts in this case, owing to the provisions of Cornwall’s contract, differ from those in the case of Dobbins v. Higgins, 78 Ill. 440, and in similar cases cited by plaintiff. In the Illinois case the obligee withheld money with which to pay certain labor claims and claims for material, instead of paying the contractor as required by the contract bond. In -the present case the testimony tended to show, and the jury evidently found, that Cummins performed his part of the contract. In short, the testimony tended to sustain the allegations of the answer and to support the verdict.

10. Plaintiff assigns error in the court permitting E. E. Cummins to testify over plaintiff’s objection relative to his damages sustained by reason of the delay of Cornwall and Suetter to carry out the contract and complete the work within the time specified. It is in evidence that the rainy season in that locality commenced soon after Suetter abandoned the work, and on account of the work not being then completed additional expense was caused Cummins in obtaining and hauling gravel for a certain fill covered by the Cornwall contract. It is common knowledge that it is more difficult to transport such material after the fall rains begin in that county, and this was evidently one of the reasons for the stipulation in the contract that Cornwall should perform the work on or before a specified time. We think snch damages are such as would naturally arise from a breach of the contract. The circumstances were fairly within the contemplation of the parties at the time of the execution of the contract and bond. The objection is not well taken.

The damages recoverable for a breach of contract are such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract, as a probable result of a breach of it: Blagen v. Thompson, 23 Or. 239 (31 Pac. 647, 18 L. R. A. 315; 8 R. C. L. 455).

In addition to general damages, the injured party is entitled to recover special damages which arise from circumstances peculiar to the particular case, where those circumstances were communicated to or known by the other party at the time the contract was made: Blagen v. Thompson, supra.

11. Plaintiff objected and excepted to the testimony of defendant E. E. Cummins relative to the contents of the alleged assignment between Cornwall and Suetter. It appears from the testimony that the memorandum of the assignment was not available, and the contents thereof were testified to by E. E. Cummins, and the attorney who represented Suetter and the attorney who represented Cornwall at the time the same was written. There was no error in admitting such testimony.

12. Counsel for plaintiff contend that the measure of the defendants’ damage was not what E. E. Cummins may have paid toward the completion of the contract work, but was ■ the reasonable cost and expense of procuring the labor to be done, and purchasing the necessary materials in order to make the work conform with the provisions of the contract; citing Seaside v. Sandals, 92 Or. 650 (180 Pac. 319). Counsel for defendants say that this rule is correct. This raises a question of fact. E. E. Cummins, after detailing the several payments made by him for work and material upon the highway contracted to Cornwall, testified as follows:

“Q. * * I will ask you how you paid, whether you paid the contract and ordinary price of labor, or whether you paid more than the workmen asked, how did you pay in that respect?

“A. I paid the rate — the prevailing price for wages. What I could secure men for.

“Q. In reference to materials, state whether you paid the market price or a price in excess to the market price.

“A. I paid the market price.

‘ ‘ Q. On all these materials.

“A. All these materials.”

The jury had a right to believe the testimony of Cummins. The testimony in the case does not warrant the objection made by plaintiff.

13. Plaintiff assigns that the court erred in refusing to instruct the jury as requested by plaintiff to the effect that the liability of the surety is only commensurate with the liability of the principal.

In the case at bar it appears Suetter, the surety by virtue of a contract executed by him with Cornwall in consideration of the benefits of the subcontract accruing to Cornwall at the date of the assignment, stepped into Cornwall’s shoes, so to speak, and for all practical purposes became the principal in the contract, with the assent of Cummins. Suetter placed a foreman in charge of the work on the highway and proceeded to carry out the contract. He is not in a position to assert that the contract of assignment with Cornwall has been annulled. The requested instruction, under the facts in this case, would only tend to confuse the jury, and was properly refused.

14. Suetter furnished horses which performed labor on the work, and by a requested instruction claims that he is entitled to be paid for such labor. As heretofore pointed out, Suetter being responsible as surety upon the bond and as the assignee of Cornwall for the completion of the work as per the contract, it would be idle to allow him to be paid as a laborer, and then require Cummins to collect the same amount back from Suetter as such surety and assignee. The instruction was properly refused.

Exceptions were saved to instructions of the court to the jury, as to the measure of damages. The court fully explained the issues and charged the jury in plain language in accordance with the law as above stated, and which in substance is contained in plaintiff’s brief. The case was fairly submitted to the jury. We have carefully examined all of the instructions to the jury and find no error therein. It appears that Mr. Suetter, unfortunately for him, signed Cornwall’s bond. There is some conflict in the testimony in regard to the conditions of the assignment. This controversy was thoroughly presented to the jury by the court’s charge, and determined by the verdict.

We find no error in the record. The judgment of the trial court is affirmed. Aeeirmed.

McBride, Harris and Brown, JJ., concur.