Neilson v. Title Guaranty & Surety Co., 159 P. 1151

Neilson v. Title Guaranty & Surety Co.

159 P. 1151 | Or. | 1916

Mr. Justice Harris

delivered the opinion of the court.

In addition to what has already been stated a recital must be made of some of the facts found by the trial court, for the reason that the surety contends that it is entitled to a judgment on those facts. Neil-son paid $100 to Masters on September 5, 1911, $400 *425on October 3d, and $500 on November 1st, upon estimates of the work completed as provided in the contract. On November 18, 1911, however, Neilson departed for Boston and New York City, where he remained continuously until the following March, and while there he sent $500 to Masters on December 5th, $200 on December 11th and $1,200 on January 2d. In the language of the trial court all the ‘ ‘ payments made during Neilson’s absence were based upon estimates made by Neilson himself, and that said estimates so made by him were based solely upon his knowledge of the conditions of the work obtained before his departure for the east, together with information contained in the above letters from King and Masters, which said letters contained all and the only information Neilson received of the work completed during his said absence,” and the surety “did not consent to any payment other than as the contract provided. ’ ’

The letters referred to in the quoted finding embrace several communications from Masters and one letter from King, who “was Neilson’s sole agent about said work.” Under date of November 23, 1911, Masters wrote to Neilson for $700, saying that the necessary expenses will “keep me going somé to make that cover it,” and upon receipt of this letter Neilson sent a payment of $500 to Masters. On December 5th, Masters wired to Neilson that he needed $200 more to meet bills coming due, and Neilson then sent $200. On December 24th, Masters wrote to Neilson, giving a statement of his expenses for the month of December, and also stated that he would need $1,700, and on January 2, 1912, upon receipt of this letter, Neilson sent two drafts to King, one for $1,200 and the other for $500, with instructions to deliver the $1,200 draft to Masters, “and if the work is half done,” to deliver *426the $500 draft. The letter with which the drafts were inclosed concluded with a direction to King to “send me at once a detailed statement of the present condition of the clearing and your own estimate of the time necessary to complete it.” King “determined that one half of the work had not been completed,” and returned the $500 draft to Neilson. The single letter received from King was dated December 4, 1911, and did not contain any information which would enable Neilson to estimate the work completed. Masters breached the contract in various particulars, and finally abandoned the work, and “not one-eighth part of the work was ever done by him. ’ ’

1-3. The appeal is presented upon a record which embraces only the pleadings and findings made by the trial court, and consequently the only question involved is whether the judgment appealed from is supported by the facts ascertained by the Circuit Court and the admissions found in the pleadings: Miller v. Head Camp, 45 Or. 192 (77 Pac. 83); Humphry v. Portland, 79 Or. 430 (154 Pac. 897). The surety argues that it is discharged from liability because Neil-son made payments to Masters without making estimates and without regard to the work completed. It will be recalled that Neilson agreed to pay to Masters on or before the fifth day of each month “the amount then due for work completed,” and it was further stipulated that “the estimate shall be made by said William Neilson or his duly appointed agent.” The September, October and November payments, aggregating $1,000, were based upon estimates which were duly made by Neilson. On November 18th, Neil-son went to New York and Boston, and while there made the remaining payments, aggregating $1,900. He had no personal knowledge of the conditions exist*427ing after November 18th, and was without information concerning the progress of the work, except as revealed by the communications from Masters. The telegram and letters from the contractor were urgent appeals for money to meet expenses rather than statements of work done or estimates of work completed, and the remittances made by Neilson were based upon the indebtedness incurred by Masters rather than upon the work completed by him. The letter written by Neilson on January 2d, plainly shows that he was without knowledge of the conditions then existing, and could not make an estimate of the work completed; and yet, in spite of his lack of information concerning the work completed, he instructed King to deliver to Masters the $1,200 draft, with the result that when Masters abandoned the contract in the following February, Neilson had paid to him nearly one half of the entire contract price, notwithstanding “no part of the work was ever entirely completed,” and “not one-eighth part of the work was ever done. ’ ’

The rule of striciissimi juris, which is usually available to those who become sureties without compensation, is generally relaxed when applied to a paid surety, and in this, as well as in most jurisdictions, a hired bonding company must show that its rights have been injuriously affected before it can defeat its contract of suretyship: Bross v. McNicholas, 66 Or. 42, 48 (133 Pac. 782, Ann. Cas. 1915B, 1272); Atlantic Trust & Deposit Co. v. Town of Laurinburg, 163 Fed. 690 (90 C. C. A. 274). The contract between Neilson and Masters contemplated an approximate judgment of the work completed, and the agreement was” not observed when the owner made payments based on the expenses incurred by the contractor and without regard to the work completed: Fidelity & Deposit Co. v. Agnew, 152 Fed. 955 (82 C. C. A. 103); O’Neill v. Title *428Guaranty & Trust Co., 191 Fed. 570 (113 C. C. A. 211); Board of Commrs. v. Branham (C. C.), 57 Fed. 179. Payment of substantially one half of the entire contract price, when less than one eighth of the work had been done, is such an excessive overpayment “that it may be accepted as self-evident that the alteration by the plaintiff proved prejudicial to the surety”: Justice v. Empire State Surety Co., 218 Fed. 802, 804 (134 C. C. A. 490, 492). The contract undertaken by Masters was either a losing or a profitable venture, but in either event the excessive overpayment reduced the amount to be paid for work yet to be done, and to the extent of such excess impaired the security which was available to the surety when Masters abandoned the contract. By his own conduct Neilson not only weakened one of the incentives for Masters to complete his contract, but he also materially lessened the security to which the bonding company was entitled, and therefore by his own conduct the plaintiff has injuriously affected the rights of the bonding company, so that the latter is now released from liability: Calvert v. London Dock Co., 2 Keen, 638; Prairie State Bank v. United States, 164 U. S. 227 (41 L. Ed. 412, 17 Sup. Ct. Rep. 142); Black Masonry etc. Co. v. National Surety Co., 61 Wash. 471 (112 Pac. 517); Justice v. Empire State Surety Co. (D. C.), 209 Fed. 105; Id., 218 Fed. 802 (134 C. C. A. 490); O’Neill v. Title Guaranty & Trust Co., 191 Fed. 570 (13 C. C. A. 211); Fidelity & Deposit Co. v. Agnew, 152 Fed. 955 (82 C. C. A. 103); Wells v. National Surety Co., 222 Fed. 8 (137 C. C. A. 546). The judgment appealed from is reversed, and the surety is granted a judgment for its costs and disbursements. Reversed.

Mr. Chief Justice Moore, Mr. Justice Bean and Mr, Justice Benson concur.