103 Neb. 202 | Neb. | 1919
Lead Opinion
1. A building contractor entered into a contract to construct a building, and gave a bond for the faithful performance of the contract. This defendant was surety on the bond. The plaintiff furnished material to the contractor which was nsed in the construction of the building, and he brought this action against the-surety on the bond to recover the value of the material. The bond required the contractor to perform all of the conditions of his contract, and one of the conditions of his contract was that he should pay for all the materials which he used in the building. Therefore, this contractor’s bond contained an agreement for the bene
2. This bond contained the following provision: “That the said surety shall he notified in writing of any act on the part of said principal, which shall involve a loss for which the said surety is responsible hereunder, immediately after the occurrence of such act shall have come to the knowledge of the duly authorized representative or representatives of the obligee herein, who shall have the supervision of the completion of said contract.” It is conceded that no notice was given the surety as provided in the bond, and the serious, and perhaps difficult, question in this case is whether the third person, who is a beneficiary under this contract, can recover without having given the notice specified. In Doll v. Crume, supra, it was held: “That the contract between the city and Davis (the contractor) and his sureties, and the promises and liabilities of the latter thereon, were of a dual nature— a promise to the city that Davis should perform the work in the time and manner he had agreed, and a promise, in effect, to Crume to pay him for the labor he should perform for Davis.” This proposition of law is discussed at length in the opinion. In Knight & Jillson Co. v. Castle, 172 Ind. 97, 27 L. R. A. n. s. 573, it was held that under a similar contract the beneficiary could not recover without having given the notice provided for in the contract. The note in the L. R. A. is exhaustive, in which it is said: “A contractor’s surety bond to a public corporation is dual in its nature, being for the benefit and protection of the obligee against loss or damage from a failure of the contractor to perform his contract, and also for the
As said in Des Moines Bridge & Iron Works v. Marxen & Rokahr, 87 Neb. 684: “It is better that the law with respect to contracts should be certain than that it should in all particulars conform to the views of the courts of some of our sister states. The defendants in the case at bar must have contracted with reference to the law as announced in the, cited cases,
We think that, under our former decisions, the parties interested must know that the surety on a contractor’s bond, in which it is agreed that the contractor will pay laborers and materialmen, is directly liable for labor and material used by the contractor in the construction of the building under his contract; and we think we ought to adhere to that principle.
The judgment of the district court is
Affirmed.
Concurrence Opinion
concurring.
The basis of the conclusion reached by the majority of the court in this case is, that the bond in question contains a dual obligation, and that the obligee named in the bond is, as to laborers and materialmen, a mere trustee. Under the settled law of this state, it is immaterial whether such a bond is executed in pursuance of a statute, or whether it is a mere common-law bond.
Tbe bond contains two contracts, one with tbe owner, and the other for tbe benefit of those who supply labor or materials. “Tbe surety becomes bound for tbe performance of tbe work by tbe principal in accordance with tbe stipulations of tbe contract, and for the prompt payment of the sums due to all persons supplying labor and material in tbe prosecution of tbe work provided for in tbe contract.” Equitable Surety Co. v. United States, 234 U. S. 448, 34 Sup. Ct. Rep. 803. Tbe laborers and materialmen are tbe beneficiaries in tbe bond. A majority of tbe courts take tbe view that tbe conduct of tbe nominal obligee cannot affect their rights after tbe same are once fixed. 27 L. R. A. n. s. note on pages 596 et seq.
Tbe purpose of tbe bond would be defeated so far as tbe beneficiaries are concerned if, by some act or omission on tbe part of tbe obligee named therein, their rights should be destroyed. Their right of action, as said in Getchell & Martin Lumber & Mfg. Co. v. Peterson & Sampson, 124 Ia. 599, 615, “is not derived from, nor held under, tbe owner of tbe building, but is an independent right, of which they are not to be deprived save by their own act or default.”
Tbe following cases, in addition to tbe cases cited from this court, are in point upon tbe question whether any act or omission of a nominal obligee may release the surety as to laborers or materialmen for whose benefit such a provision is made in tbe contract. Texas & P. R. Co. v. Eason, 92 Fed. 553; United States Fidelity & Guaranty Co. v. Omaha Building & Construction Co., 116 Fed. 145; Griffith v. Rundle, 23 Wash.
The surety company entered into this contract with full knowledge and notice of the laws of this state as declared by the decisions of this court, and should abide by its terms.
Dissenting Opinion
dissenting.
The fact that the beneficiary is a laborer or material-man can, I take it, make no difference. If public policy or the status of laborers or materialmen is to give them rights superior to other beneficiaries under similar circumstances, the opinion should make that clear and tell the reason why.
What right can an entire stranger to a contract have in it? The English and Massachusetts courts say none. The contractual relation requires a meeting of minds and a consideration. Hence, only the parties or privies to a contract can enforce it, say they.
When the contract’s promise is to save the promisee from a possible loss, it may easily happen that its enforcement will be directly beneficial to a third person, because the promisee’s loss, provided against, may be the promisee’s liability to the third person. Many courts, including this, have, in such case, enforced the contract at the suit of the third party (beneficiary), the same as if he were a promisee or obligee named in the contract. They have likened the case to novation. Really, the right comes to the stranger to the contract by a sort of unexpected grace. The liability of the obligor to him can hardly be said to be contractual. The courts See in the situation and relation of the parties a duty- which the promisor ought not to refuse to perform, and they permit to be done by direct means the
Just as the stream can never rise higher than its source, nor the less include the greater, nor the accidental be more regarded than the intentional, nor one reap where he has not sown, so the promisor is never bound to more than his promise, and the stranger to the contract can have no better nor higher rights in the contract than the parties to it. He gets any possible right he may have through the promise made to the obligee, and that is the promise that must be left as made and only as made.
Such has been the holdings of these courts.
In this opinion we are announcing the law to be: That an entire stranger to a contract, who (probably) did not know of it when made, for whose fortunes neither of the parties eared except as his own interest might be affected, who never did a thing in reliance on the contract (save commencing this action), who paid no consideration for a promise, to whom none was made and who made none himself, may, notwithstanding these facts' (undisputed), not only recover on the contract, but recover regardless of its conditions.
Is there any precedent for this? None. In Getchell & Martin Lumber & Mfg. Co. v. Peterson & Sampson, 124 Ia. 599, cited, the promise was made in words to the third party as well as to the principal obligee, and the opinion states that material was furnished in reliance upon the promise.
In statutory bond cases the law makes the laborer and materialman, in terms, a party to the contract in his own, separate and independent right.
Municipal bond cases are distinguishable in this: The officials act in a representative capacity; the laborer or materialman has no lien for his protection. He should be protected by the municipality who gets the benefit of his work. It does no extreme violence to the contract to say that the parties must have in
In the instant case, no contention can be made but that the contract is a private contract, the parties at the time owing no duty to any third person.
Under the rule announced, if A, having faith in the character and ability of young Mr. B, who is seeking employment under C, promises C that, if he employs B, B will make the payments of funds coming into his hands from time to time to the persons to whom the funds should go, on the perfectly reasonable condition, however, that when C learns of a default of B he will inform A, and, if afterwards C neglects to give A the information of B’s default, which he knows, so that A is released from his promise to C, still A is liable to the persons to whom the payments should have been made by B. When one of such persons sues as beneficiary, and A sets up the promise that he should be notified of defaults, and shows that, with notice, he could have saved half, or all, of the loss, we are holding that the third person (beneficiary) makes a good reply as follows: “How could you expect me to give you notice? I never knew of your contract with B until immediately before commencing this action. ’ ’
It seems to me that the reasoning is unsound and the conclusion unjust. No court will adhere to the rule in its general application. The entertaining of doubts about a proposition, plain and simple in itself, always invites confusion. We should pray to be delivered from temptation to do so. Hard cases make bad' law.
.. When the meaning of a valid contract is plain, that is the law of the contract. When courts go contrary to its intent, they legislate. Once we agree that the promise defendant made to. the obligee was that the
But is there room for good-faith dispute that such ■was the promise made in terms only to the obligee and that notice was not given? One might, with some show of equity, argue (as has been held in certain insurance cases) that the condition precedent ought not to defeat plaintiff’s recovery unless the obligee’s breach damaged defendant. This contention, however, is not made. The defendant can complain: “I am held, contrary to the only promise I made, which was to the obligee, to save him harmless upon condition.”
The argument by analogy quoted in the opinion from Doll v. Crume, 41 Neb. 655, can have no possible application here. Here the promise, that “$10 which he owed to C” would be paid is unquestionably coupled with a condition, and is not absolute as in the supposed case. Besides, in the analogy quoted, the argument assumes A’s promise to C, made to the municipality as his agent or representative. In the case in hand, it cannot be said that more than one contract, more than one promise (which is what the opinion probably means), or more than two parties to the contract, were contemplated.
The right of the citizen to freely contract, and to be held' only in accordance with his promise as made, is one of' the foundations and safeguards of civil liberty.
Dissenting Opinion
dissenting.
Plaintiff pleaded the bond and offered it in evidence, but it entirely ignored the requirement respecting notice. To state it another way: Plaintiff elected to accept the benefits of the contract sued on, but it repudiated its burdens. The situation is anomalous.
The surety bond contains this condition: “Provided, that the said surety shall be notified in writing of any act on the part of said principal, which shall involve a loss for which the said surety is responsible hereunder,
The obligee named in the bond is a private corporation. The only contested point is whether service of notice by plaintiff, also a private corporation, on the surety as specified in the foregoing provision of the bond is a condition precedent to its right to recover. The bond is primarily for the benefit of the owner who is the sole obligee named therein. Fairly construed the bond requires plaintiff to perform the condition as to notice, because plaintiff stands in the place of and derives its rights under the bond from the obligee, and it follows can have no other or greater rights than the obligee. The consideration that supports plaintiff’s right to recover is that such recovery operates to release the obligee, the owner, from some contingent liability to the third party, in this instance the plaintiff. 71 Am. St. Rep. note at page 189 (Baxter v. Camp, 71 Conn. 245); Frerking v. Thomas, 64 Neb. 193.
In Barnett v. Pratt, 37 Neb. 349, Judge Irvine concisely states the reason for the third party rule: “The purpose of the American rules seems to have been largely to avoid circuity of action. It. may probably be assumed that, in order to permit such third person to sue, the contract must be one which might be enforced between the immediate parties thereto,- in fact, many of the cases state the rule in these terms.” In 2 Elliott, Contracts, sec.. 1415, it is said: “One is not entitled to the benefits of a contract máde in his behalf without complying with the conditions and assuming the liability that the original parties have attached thereto. The rights of a party for whose benefit a.
The present case is distinguished from one where a surety bond is given by a contractor to a municipal corporation as in Doll v. Crume, 41 Neb. 655, and Des Moines Bridge & Iron Works v. Marxen & Rokahr, 87 Neb. 684, that are cited in the majority opinion. Both cases were suits on surety bonds given to guarantee the performance of building contracts entered into between building contractors and municipal corporations. Clearly they are not in point. In the Doll case it is said that a surety bond that guarantees the performance of a building contract entered into with a municipal corporation is dual in its nature; that there is a promise both to the municipality and to material-men. It is at once apparent that this is on grounds of public policy»' 21 R. C. L. 1016, sec. 64; Equitable Surety Co. v. United States, 234 U. S. 448. It is obvious that if the rule were otherwise, as applied to municipal corporations, the third party would be remediless because it is not permissible in this class of cases that the citizen should have a lien on the property of the sovereign. It seems that duality of contract has not been roeognized as the principle that permits the third person who is not a party to a contract to sue upon it, except in municipal corporation cases. The general principle that permits ■ a third party to sue is that a recovery will release the promisee from some liability to the third party, thus avoiding circuity of action.
The majority opinion exonerates plaintiff from giving notice because: “The plaintiff could not know when some act of the contractor came to the knowledge of the owner of the building. It would be impossible for the plaintiff to give the notice to the surety.” It is not altogether clear upon what theory the majority conclude, in an entire absence of pleading or proof to support the conclusion, that the plaintiff • could not bring
Under a fair construction of the surety bond, and on principle and on authority, notice of the failure of the contractor to pay plaintiff should have been communicated by plaintiff to “the duly authorized representative or representatives of the obligee” having “supervision of the completion of said contract,” or to the owner itself. And in the event of the refusal or failure of the representative or of the owner to serve the required notice, plaintiff, standing in the place of the obligee, itself should have served the notice on the surety. Failing in this it should have been nonsuited. Notice in this class of cases is not an idle ceremony, but a matter of prime importance, a material part of the contract: Notice would have enabled the surety to have stopped the payment or to have caused the owner to pay plaintiff instead of paying the defaulting contractor. The provision for notice is reasonable, merely providing that “a registered letter mailed to the surety, at its principal office in Omaha, Nebraska, shall he deemed sufficient notice within the meaning of this bond.” And this the majority opinion concludes was impossible of performance by plaintiff. Escape from a plainly expressed obligation of a contract should not be permitted upon a pretext so trivial.
Men must be left free to make their own contracts, and in the absence of fraud or mistake the binding obligation of a lawful contract cannot be too insistently urged. The progress toward the attainment of a high type of civilization has been marked by an observance of this principle. The fathers of the Republic thought it worth while to provide that no state shall pass any law impairing the obligation of contracts. Doubtless those venerated men presumed that a general admonition on this point was sufficient.
