Ladd v. Chamber of Commerce, 60 P. 713

Ladd v. Chamber of Commerce

60 P. 713 | Or. | 1900

Lead Opinion

Mr. Justice Bean,

after making the foregoing statement of facts, delivered the opinion.

Although the record and briefs are voluminous, and the argument of counsel has taken a wide range, the real merits of the controversy lie within a narrow compass. The plaintiff’s claim against Hughes is predicated upon the bond to the New York Life-Insurance Co., which he, W. S. Ladd and others executed as sureties for the Chamber of Commerce on May 16, 1891. The contention is that the sureties on such bond, in effect, undertook and agreed that they would, if their principal did not, complete, or cause to be completed, within two years, a stone building for its use and benefit, to cost not less than $480,000, according to certain plans and specifications, and, therefore, to use the language of counsel, they were “bound to.procure, and, if necessary, to borrow, the money to complete this building within the time specified; and, if a part of the sureties paid out money in the performance of this obligation, the other sureties are liable for contribution.” In short, the position of the plaintiffs is that by signing the bond the sureties entered into an independent obligation upon their part to procure and furnish the necessary funds to erect and complete the building within two years from the date thereof. But we do not so understand the contract of the sureties. The obligation is an ordinary penal bond, with the Chamber of Commerce as principal and certain persons as sureties, to be void in case the obligor and principal thereof shall erect and construct a certain building on property belonging to it, at a cost of not less than $480,000, within a certain time, *61and pay all liens or claims which might become liens thereon. The only independent covenant on the part of the sureties is that, in case liens of any nature shall be filed against the property during the construction of the building, or after its completion, “upon notice thereof, and the request by the attorney of the said New York Life Insurance Co.,” they will “deposit with the County Clerk of Multnomah County, Oregon, the amount of such lien or liens and accrued costs thereon, within ten days from the date of such notice and demand upon them.” It is not pretended that there was any breach of this stipulation, and it need not be further considered in the case.

1. As to the other conditions of the bond, the agreement of the sureties is, in legal effect, to pay to the insurance company such damages as it might sustain in case of a breach thereof by their principal. They did not obligate themselves to perform such conditions. That was the contract and duty of the principal alone, and the sureties were only liable to the obligee in case it failed to perform them. Nor did they undertake or agree to erect the building, or to pay the contractors or material men, but only to answer to the insurance company for such damages as it might sustain if the Chamber of Commerce failed to do so. Their liability was to the insurance company alone, and there is neither allegation nor proof that it ever made or had any claim for damages under the bond. But it is argued a breach of the bond and consequent damages to the insurance company would have occurred if certain of the sureties had not pledged their individual credit for money with which to complete the building. This may be true, although it does not appear, except inferentially, that the Chamber of Commerce could not have provided sufficient funds for that purpose on its own credit if it had been requested to do so. The *62finance committee, composed principally of sureties on the bond, seems to have voluntarily borrowed the money, and paid the obligations of the Chamber of Commerce upon their own responsibility, and without consulting their principal. But, assuming that, if they had not done so, there would have been a breach of the bond, it does not follow that the action of a part of the sureties in borrowing money for the Chamber of Commerce to use in the construction of the building would bind a nonparticipating surety. The borrowing sureties could determine for themselves the necessity or desirability of doing so, but they had no authority to determine that question for Hughes, and bind him by their acts. There was no agreement between the sureties by or under which such authority was granted, nor anything in the bond authorizing one surety to act in this regard for another, or the majority for all. Each surety had a right to stand upon the letter of his contract, and, in case of a breach or threatened breach of the bond, to exercise his own judgment as to whether it was better for him to suffer default and. answer in damages to the obligee in the bond, or to become liable on a new obligation. His cosureties could not determine that question for him. They were not his agents in any sense of the word. By signing the bond, he became liable, as before stated, to the New York Life Insurance Co. in case of a breach thereof, and not to his cosureties, except under the doctrine of contribution. Neither the obligee nor the obligor in the bond could vary or enlarge the liability of a surety; ■ and there is certainly nothing in the relation of cosureties, one to the other, which to any extent, or on any ground, authorizes one to act for or bind the other.

Where one surety is compelled, by the maturity of an obligation and the failure of the principal to perform, to pay or discharge a common debt he has a right of con*63tribution from his cosurety; but this right rests on principles of natural justice, and not contract: Durbin v. Kuney, 19 Or. 71 (23 Pac. 661); Thompson v. Dekum, 32 Or. 506, 513 (52 Pac. 517, 755). There is no contractual relation between sureties enabling one to discharge a common obligation at his own pleasure and in his own way, and thereby bind the other. The whole right of contribution rests upon the doctrine of compulsory payment. Where one surety is compelled to pay, the nonpaying surety is required to contribute in proportion to the benefit received by him. But this obligation is raised by the necessity which the paying surety was under of making the payment, and therefore he can have no contribution unless his payment was compulsory : Halsey v. Murray, 112 Ala. 185 (20 South. 575); Bancroft v. Abbott, 3 Allen, 524 ; Skrainka v. Rohan, 18 Mo. App. 340 ; Hollinsbee v. Ritchey, 49 Ind. 261. In making the payment, or otherwise assuming to discharge the common obligation, a surety acts for himself alone, and at his own risk. If his payments are made under certain circumstances and conditions, a court of equity will require his cosurety to contribute his proportionate share of the amount of such payment. But, before the right of contribution arises, the cosureties are mere strangers, one to the other, and one has no right or authority to make contracts for another. Now, in this case, there was no breach of the bond, and no claim for damages thereunder was ever made by the insurance company. Had a claim matured on the bond in favor of the insurance company, and been paid by part of the sureties, they might, perhaps, compel contribution from the nonpaying sureties without the recovery of a judgment for breach of the bond, by making it appear that they had no means of preventing a judgment against them. But they could not voluntarily *64borrow money for their principal, and bind a nonparticipating surety. • •

2. It is claimed, however, that'the resolution of April 13 in some way changed or modified the rules ordinarily applicable to the relation of cosureties, and, in effect, made the sureties on the bond joint contractors or principals. But the object of this resolution is apparent. It was to place the signers of the bond in full control of all funds derived from the insurance company, and of the construction and erection of the building, so that they might protect themselves, as sureties on the bond, against liability for the acts of other persons. ' It did not in any way change their relation to the insurance company, or to one another as sureties. It only defined their rights and powers while acting as agents of the Chamber of Commerce. Their liability to the insurance-company was fixed by the terms of the bond which they signed, and, as between themselves, by the law of suretyship. By the resolution they became agents of the Chamber of Commerce for the construction and erection of the building, and not of one another as sureties on the bond. Nor were' they bound by such resolution, or the terms of the bond, to advance money for, or loan their individual credit to, the Chamber of Commerce, to enable it to perform its contract with the insurance company. It was not their duty, even under the resolution, to pay the material men and contractors for the building, or to provide funds for that purpose, but only to disburse and distribute the money received from the New York Life Insurance Co., and such other funds as their principal, the Chamber of Commerce, might provide for the erection of the building. Upon the fulfillment of the terms and conditions of the bond, their liabilities as sureties ceased; and as the appellant Hughes is not a party to any of the notes in controversy, except those to Green and Breck, and his *65cosureties had no authority to bind him by the execution thereof, it seems necessarily to follow that he is not liable to contribute to the payment of such notes.

3. It is claimed that Hughes, by his letter of December 30, 1893, to the finance committee, ratified and confirmed the acts of his co-obligors on the bond to the insurance company in the construction of the building and borrowing money for that purpose. But, as they did not assume to act for him, or to bind him in any way, there was no contract or pretended contract on his part which he could ratify. The letter is an offer to bind himself on all contracts and obligations theretofore executed by the committee, and connected with the erection of the Chamber of Commerce Building, “by signing such contract or obligation as a party to and co-obligor therein,” when he should return “in the spring or summer of 1894,” upon certain conditions, which do not seem to have been fulfilled.

4. The letter can have no effect in determining his liability under the bond to the New York Life Insurance Co., and hence, as stated by counsel for plaintiffs, the real and only question in the case is, “Have the plaintiffs a right to claim contribution from the defendant as one of the signers of the bond to the New York Life Insurance Co. for moneys borrowed and used in the construction of the Chamber of Commerce Building?” And this question must, in our opinion, be answered in the negative. It is admitted that Mr. Hughes signed the Green and Breck notes. He claims, however, that he is a mere surety for the plaintiff Charles E. Ladd and the other makers. But, however this may be, this suit cannot be maintained, because the notes have not been paid by the plaintiff, and are now owned by one F. B. Pratt, who is not a party. It is elementary law that, except under *66peculiar circumstances, a suit for contribution cannot be maintained by one of several joint obligors until payment of tbe joint obligation has been made, or something done equivalent thereto : Backus v. Coyne, 45 Mich. 584 (8 N. W. 694); Shoemake v. Stimson, 16 Wash. 1 (47 Pac. 218); Weidemeyer v. Landon, 66 Mo. App. 520 ; Huse v. Ames, 104 Mo. 91 (15 S. W. 965). It follows that there is no ground for the interposition of a court of equity at the suit of the plaintiffs, so far as the Green and Breck notes are concerned. The decree of the court below must, therefore, be reversed, and the complaint, as to the appellant, Hughes, dismissed, and it is so ordered.

Reversed.

Rehearing

Decided 15 August, 1900.

On Petition for Rehearing.

Per Curiam.

5. The able and forcible petition for rehearing, as well as the importance of the case, has. impelled us to re-examine the questions involved with the utmost care, notwithstanding which we are constrained to adhere to the former opinion. A surety may, in some instances, in a proper proceeding, without payment, compel his principal to pay, and the creditor to receive, the debt for which he has made himself liable : 7 Am. & Eng. Enc. Law (2 ed.), 345. But such remedy is not available here. The Chamber of Commerce is not a party to, nor is it liable to pay, the Green note ; and, moreover, neither the owner nor holder of that or the Breck note is a party to the suit. So, also, one joint obligor may, under special circumstances,—as where the debt has been reduced to judgment, and the liability of the judgment'debtors as between themselves is unascertained and undetermined, as in Thompson v. Dekum, 32 Or. 506 (52 Pac. 517, 755), — without having actually paid the debt, proceed in equity to ascertain the rights *67of tlie parties, and compel a co-obligor to pay Ms portion of the common obligation. But this case presents no special features to take it out of the general rule. Indeed, on the whole, it is difficult to conceive what decree the court could make if it should entertain jurisdiction and find the defendant Hughes liable on the Green and Breck notes. It could not require the owner and holder of the notes to accept payment, because he is not a party to the suit; and, if he were, the court could not compel him to accept partial payment, or prevent him from enfoi’cing collection from 'any of the joint makers, if he so chose; nor could we order Hughes to pay his portion of the debt to the plaintiff, for the plaintiff could not give him a discharge, nor has he yet paid more than his proportion of the obligation. So we are of the opinion that, on the record, the court ought not to entertain jurisdiction so far as the Green and Breck notes are concerned. The other matters are sufficiently considered in the former opinion. There is no difference in principle, so far as we can see, between Hughes’ liability on the notes given directly to the contractors and those given for money borrowed to aid in the construction of the building. In either case his liability depends upon the interpretation of the bond given by the Chamber of Commerce to the New York Life Insurance Co., and we have sufficiently indicated our views upon that question. The petition for rehearing is therefore denied. Rehearing Denied.

Decided 17 September, 1900.

On Motion to Recall Mandate.

Per Curiam.

The motion to recall the mandate is overruled. The statement in the opinion on the petition for rehearing that ‘ the Chamber of Commerce is not a party to, nor is it liable to pay, the Green note,” was in. *68tended to refer to its liability upon the face of the note, and not to the rights, equitable or otherwise, of the makers thereof against it for indemnity or reimbursement. In Wolmershausen v. Gullick, 62 Law J. Ch. 773, unlike the case at bar, the principal creditor was proceeding against the plaintiff alone for the full amount of the debt, and had established his claim by judgment, or what was deemed equivalent thereto. ' But, whether such fact is material or not, we are unwilling to follow the doctrine of that case. The conclusion therein that the surety against whom the claim was established could, before actual payment, maintain a suit in equity against a co-surety, and obtain a prospective order directing the defendant, upon payment by the plaintiff of his own share, to indemnify him against further liability, is reached, as stated by the court, in the “absence of express authority,” and is contrary to American adjudications, as we understand them. Motion Overruled.