*1 21, Argued February part; affirmed in reversed 14, August part denied June reconsideration September petition allowed 1979 for review INC., GRAVEL COPELAND SAND AND Appellant, v. OF INSURANCE COMPANY al, AMERICA, et NORTH Respondents. 11238) (No. 75-414-L, CA P2d 623 *2 Argued 21, and submitted February 1979. Benjamin Pass, E. Freudenberg, argued Grants appellant. cause for With him on the briefs was Bal- derree, Nelson, Killoran & Pass. Grants Collins, Medford,

Hugh B. argued the cause Collins, With him on the brief was Velure respondent. Heysell, & Medford. Schwab, Tanzer, Richard- Judge,

Before Chief Roberts, Judges. son and

ROBERTS, J.

ROBERTS, J. River con- City Rogue In September, W) (R & Company R & with W Construction tracted Defendant system. of a sewer the construction (INA) sure- of North America Company Insurance June, 1974, R & W In bond. performance on R & W’s ty city of its contract performance ceased contract INA. assigned rights under Thereafter, under payments all city made made or directly turn and INA and subcontractors. authorized with the being notified of R & difficulties W’s Upon Tobin, engaged INA defendant project, construction (TCM), Mikolavich, firm of local & Inc. a Crawford INA the situation for adjusters, to assess insurance services, including transmittal and to various perform and suppliers. to subcontractors subcontractor, June, Tru- engaged *3 Mix, the on INA’s behalf. to "administer” construction in part Tru-Mix recites The contract between INA and that: a between the

"As result of certain differences Co., Rogue City of River and R & W Construction complete said contract on undertaking [INA] is of R & W Construction Co. behalf [INA] and experienced "Tru-Mix an contractor assist retain the services of Tru-Mix to desires to completion [INA] [R W’s] in in & contract.” of INA and Tru- August, the contract between consent, by and one of Mix was terminated mutual by INA to engaged of R & W resumed or was partners management project. direct provide directly to INA. payments continued to make or to subcon- payments continued to make authorize included suppliers. tractors These not W, of were partners although partners two R & no formally project payroll included on the to them. were withheld from the amounts Plaintiff alleges that it has paid by not been defend- services, ants for certain material and equipment provided which were by plaintiff during and after September, although plaintiff did receive pay- ment from defendants for services and supplies pro- vided before that that, time. Plaintiff contends June, 1974, INA assumed R & W’s role as contractor of the project and was responsible obligations for all incurred by time, the project after that notwithstand- ing the limits of INA’s bond surety. as Plaintiff fur- ther TCM, contends that as INA’s agent, gave plaintiff assurances of payment, which constituted an agree- ment the two defendants pay plaintiff or which estopped the defendants from denying responsi- their bility payment. argue not, defendants that INA did as a matter fact,

of assume the contractor; role of the project obligations pay subcontractors limited by the amount of its ex bond —which was hausted at the time and services in question provided; were there was substantial evidence trial court’s findings to the ef foregoing fect; and that TCM either did give not the purported assurances or that to do so would have exceeded the scope of agency court, TCM’s for INA.1 The trial sit ting without a jury, found in favor of defendants. We affirm the judgment in favor of TCM and reverse the judgment in favor of INA.

The general rule is that surety of limited to the amount However, of its bond. when principal defaults or fails to perform, surety may, where permitted by contract or with the acceptance the other party contract, to the principal assume the role of its principal purposes performing obligation which it surety has bonded. When the does *4 so, it becomes responsible performance for of the prin cipal contract and for obligations all incurred in con nection performance, with notwithstanding special findings.

1The trial court made no

[834] v. Aetna Ausplund of the bond. limits (1905); Co., 577, P 12 Or 81 P 82 Indemnity 47 al., P Or 201 1072 Suetter v. Cornwall et 102 402, 284 P2d (1921); Andrew, v. 133 2d App Caron Cal 1955). (DCA District, 3rd whether sum, the in this case is In issue city R with the INA assumed & W’s role as contractor and, so, if INA perform, after R & failed to whether W and services responsible was assignor. sup and provided by plaintiff plaintiff’s questions to these of its that answer port position in the record yes, plaintiff to the evidence points rights that R & W under the construction assigned its its made city that thereafter of the throughout INA remainder Tru performance period, contracted with INA engaged Mix and other and various subcontractors contract, complete and that INA city authorized payments suppliers. to subcontractors assumed the argue

Defendants that whether principal’s responsibilities under the construction con- adversely decided question tract of fact which was court, the trial and that there plaintiff The diffi- finding. substantial evidence with defendants’ that certain of culty argument law are as a matter facts to which adverts of aas fact, with INA’s status rather than inconsistent of assumption its only are with surety and consistent role under R & W’s contract the contractor’s of the as- acceptance INA’s city. combination of W, acceptance R & its signment rights contract, the principal from the under for con- a subcontractor engaging paying duties contractor’s performance original tinued shows the evidence under contract —all of which the legal had dispute and INA does not occurred— R W. of & place contractor making effect of INA the al., supra. See Suetter v. Cornwall et *5 The next question is whether INA remained the contractor after the Tru-Mix subcontract was ter minated in August, partner 1974 and the R & W resumed in The R participation project. the & W part ner’s involvement after 1974 was not August shown be different in Tru-Mix’s the during substance from two months preceding, and INA made to the partners R& W city paid out of the sums the pursuant to the contract. The California court in Ca Andrew, ron v. supra, quoted approval: "* * * However, if company, upon the the default contractors, work, complete undertook to the event, different presented. case is then In the that company, by undertaking, such new put itself in the place of the contractors moment new from undertaking, and became liable for the costs of com- pleting building, without reference to amount words, signed surety. for which it had as other event, on, that that company moment occu- pied position of contractor and became liable * * (Emphasis supplied.) P2d at 549-50. We do not hold that once a has surety assumed the role of the principal original principal contractor can never resume its role as such. We do hold that at when, here, least as assumption by there has been an surety of the principal obligations, contractor’s there is no evidence that the other to the party prin- cipal contract has for the agreed original principal re-assume those obligations or the current them, be relieved of responsible latter remains the performance of its obligations. assumed argue plaintiff’s goods defendants do not provided services were not to the construction project.2 dissent states: 2 The defendants’ brief states: job by the "All materials and services use on the were ordered Wj.” [referring

contractor to R & job period in judge that R & W all orders for the The trial "assumed” made during agent question. or of INA’s R & W was of course a subcontractor period. "* * * made a new is no evidence that INA There with R & W the with the or a contract third-party was a which either terms of beneficiary. *” * * App at 839. 40 Or having sight that, of the fact That statement loses principal contractor, INA became assumed role any it, or and services liable for for all accepted agents ordered, or subcontractors, of its or project. The used in connection with the construction Supreme Co. Court stated Johnson Contract *6 State v. (1927): 120 Or 253 P 520 al., et statute, by "It is made so an obvious that unless work, original of public contractor on the absence authorization, express responsible things not for an is by things pur- purchased his unless the subcontractor are the contract way chased in some referable * * supplied.) 120 Or at (Emphasis between them 635. option suppliers goods

INA had no and as to whether third-party project services for the benefi- would be capacity, ciaries of its in that contracts as principal;, INA’s is direct. parties stipulated to the value of

The at trial by goods plaintiff it which furnished services statutory compensated, together with not has been judgment part in favor of the interest. We reverse of INA and remand the matter to the trial court with plaintiff judgment instructions against to enter stipulation. with that INA in accordance against respect plaintiff’s TCM, we action With Although which there was evidence affirm. TCM contracted trier of fact have found could by supplied directly and services for some sup plaintiff, port evidence was also there substantial appar contrary finding trial court which disposition ently its As did make. demonstrated against plaintiff’s not INA, did trial court action legal However, apply principles case. in this correct the trial us that of the record satisfies our review court’s misunderstanding did not cause it to misper- — ceive the question regarding relevant factual TCM TCM, whether acting agent, directly as INA’s con- tracted with plaintiff and plaintiff’s assignor for the goods and supplied thereby services either became individually or jointly payment. liable with INA for The record contains sufficient support evidence to finding TCM’s favor.

Affirmed in part; reversed and remanded in- in part. structions

SCHWAB, J., dissenting. C. plaintiff’s contention is that its if through agent, promised plaintiff would performing continue subcontract W, with & appeal R Since the prime contractor. law, judgment from a in an action tried without a at jury, question evi- whether there substantial dence to support the trial court’s there finding holds, such no I independent promise. opinion think correctly, there was substantial evidence to finding trial court’s on this question.

However, then that as a matter of opinion holds *7 responsibility principal law INA assumed the contract, therefore, under the construction not withstanding finding in favor general the trial court’s INA, in pay INA is liable to sums excess of the performance stated maximum. bond’s Three the four reasons of that given not, conclusion do that INA my opinion, establish undertook to perforin as the contractor. Those general assigned right stated reasons are that R & its to W progress receive the that payments city INA, and that thereafter made city payments INA payments supp authorized to subcontractors matter, any As a under a practical surety liers.1 performance bond who that his is realizes payable The W were in form of checks to R & and INA. have trouble, progress to have will starting the disburse- may to it in that it monitor made order point at that that apparent funds because ment of it to be also. surety’s will have used money some of facts, however, surety a general These not make the do contractor. reason, namely that INA contracted fourth only Tru-Mix one of complete job, law to might factors said as a matter of

four which be over a conclusion INA intended take require that R to the of & W. Tru-Mix project exclusion INA indicates that that what probably contract at this intend- intended time. or not was Whether made ed is immaterial. There is no evidence a new contract with or a with R & W third- by the terms of which either above, party Further, out beneficiary. pointed as judge trial its against plaintiff found on contention it its changed position detriment or other- wise in upon reliance INA. promises have INA’s increasing

We thus reached a result any reason. good contractual absent I foregoing For dissent. respectfully reasons