25 P.2d 429 | Cal. | 1933
The following statement of facts is taken from the opinion rendered in this action by the District Court of Appeal:
"This is an action brought against the contractors and the surety on a bond furnished by them, to recover for materials used in the erection of an apartment house. The complaint alleged that materials of the value of $31,282.61 were furnished between May 1, 1927, and September 27, 1927, in pursuance of a contract between the plaintiff and the defendant contractors; that the defendant contractors agreed to pay for the same; that only the sum of $3,138.37 has been paid; and that the balance unpaid is $28,144.24. It was also alleged that the defendant surety company entered into a bond or undertaking conditioned for the payment of labor and material claims which by its terms was made to inure to the benefit of labor and material claimants. The defendant surety company answered, denying all of the allegations of the complaint which are material here, and setting up several separate defenses, including one to the effect that the bond had been issued in connection with a contract providing for the erection of a building upon certain terms, while the building had been erected under another and different contract, and upon completely changed terms. As another defense, it was alleged that the entire transaction had been fraudulent, that the owner and contractors after entering into one from of agreement had later pretended to enter into another form of agreement for the purpose of obtaining a bond from this defendant, and that, thereafter, they had returned to the original form of agreement and proceeded in accordance therewith, all without the knowledge or consent of this defendant. *164
"Four findings were made by the trial court. In finding number one it was found that the contractors ordered the materials as alleged in the complaint and agreed to pay for the same; that they were furnished for and used in the construction of the building; that their agreed value was $31,282.61; and that the balance due and unpaid was $28,144.24. In number two it was found that the defendant surety company entered into an undertaking conditioned upon the payment by the defendant contractors for all materials used in the erection of said building, and that this undertaking was by its terms made to inure to the benefit of all persons furnishing such materials. Finding number three is to the effect that while the defendant contractors had delivered to the plaintiff their promissory note in the sum of $37,500, this note was not delivered nor accepted in payment for materials to be delivered and did not estop the plaintiff from recovering in this suit. In finding number four it was found that all of the allegations of the defendant surety company's second, third and fourth separate defenses are untrue. Judgment was entered against the defendant contractors and against the defendant surety company, from which judgment both have appealed."
[1] The findings of the court having been in favor of the plaintiff, the evidence must be construed most strongly against the appellant and in favor of the respondent. All evidence tending to establish the correctness of the findings as made must be accepted as true and the prevailing party must be given the benefit of all inferences which might reasonably have been drawn by the trial court. Every substantial conflict in the evidence must, under the rule which has always prevailed in this court, be resolved in favor of the finding. (Bancroft-Whitney Co. v.McHugh,
The present controversy is directly and solely between the plaintiff as a materialman and the contractors and their sureties, the Globe Indemnity Company.
[2] The only claim made by the contractors against the demand of the plaintiff is that the $37,500 note, secured as above stated by the assignment of the $60,000 promissory note and trust deed was given by the contractors and accepted by the plaintiff as payment for the materials covered by plaintiff's claim. While there is direct evidence to support the contractors in this contention, there is equally positive and persuasive evidence to the contrary. This was one of the contested issues at the trial and, as the trial court resolved this conflict in the evidence upon this point in favor of the plaintiff, it is not within the province of this court to disturb that finding, even if we were so inclined. As we read the evidence, however, it appears to us that the *168 great weight thereof is in favor of the plaintiff. It seems unlikely that the officers of plaintiff, who are evidently experienced business men, would accept in payment of plaintiff's claim for materials furnished for the construction of said building, a second lien upon the land upon which said building was being erected. That they did not do so is confirmed by the uncontradicted evidence that they refused to deal with the contractors or with Dr. Bancroft, who represented the owner, and refused to furnish any material for said job unless the parties procured a surety bond which would inure to the benefit of persons furnishing labor and materials for the construction of said building. The question naturally arises, if plaintiff had accepted payment of its claim for materials which it had agreed to furnish to the contractors, why would it concern itself regarding a bond to secure the payment of these same materials? There can be no logical answer to this question. We are satisfied that there is no merit in the appeal by the contractors, McConville and Perryman.
The appellant, the Globe Indemnity Company, also relies upon the claim that the plaintiff in accepting the securities it did accepted them in payment of said materials. No further consideration need be given to this claim in addition to that already stated in connection with the appeal of the contractors.
[3] Said appellant further contends that the evidence is insufficient to sustain the findings of the court as to the defense set up in its answer that the entire transaction between the owner and contractors for the construction of said building was fraudulent in that they first entered into a cost plus contract, and after finding that they could not procure a labor and material bond for a contract of that character, pretended to enter into a contract for the construction of said building at a fixed price under which they secured the bond from said surety appellant and thereafter they returned to the original cost plus contract for the construction of said building. The gist of this defense was the alleged fraud of the owner and contractors in procuring said bond from the surety company under the circumstances alleged. This matter was gone into most thoroughly by the trial court. All the parties to the transaction were called as witnesses and examined and cross-examined by counsel *169 for the respective parties hereto, and at the conclusion of the trial the court found that no fraud had been committed against the appellant surety company. As we review the testimony we fail to find any substantial evidence that the parties in the first instance entered into any cost plus contract. They had discussed such a contract, and were inclined to favor that method of constructing the building. But no contract, written or oral, was ever agreed to by the parties before the bond was executed and delivered that the building would be constructed on a cost plus basis. After calling upon the plaintiff, and being informed by its officers that plaintiff would not furnish any materials for the building unless a labor and material bond was given, Dr. Bancroft and the contractors then discussed and finally agreed upon a contract for the construction of the building for a fixed price. Under this contract the bond was given and the parties began the erection of the building, or, at least, made preparations therefor by excavating for its foundation. The manner in which they came to change back to a cost plus contract has already been narrated in the language of Dr. Bancroft in a previous part of this opinion. We are in entire agreement with the trial court in its conclusion that there was no proof of fraud in the transactions between the owner and the contractors. Whether the materialmen may recover from their surety under this state of facts is another question. We are now dealing only with the claim that the parties acted fraudulently and for that reason the surety was never bound by its undertaking under the bond. The trial court having found against such a claim upon evidence before it which failed to substantiate the allegations of fraud, its findings, of course, must stand.
[4] It is next contended by the surety that it was released by plaintiff when it accepted from the contractors the promissory note for $60,000, and trust deed, as security for its claim for materials to be furnished. This promissory note and trust deed for $60,000 was given by the owner to the contractors in part payment of said sum of $100,000, the contract price of said building. This contract provided that the contract price of said building should be paid in seven payments of $14,285.72 each, payable as the work of constructing said building progressed. The execution and delivery of said promissory note and trust deed to the contractors, *170
it is claimed, was a premature payment by the owner to the contractors and released the surety from its obligations under said bond, and when the plaintiff accepted said note and trust deed as security for its claim, the surety was thereby released from its obligation to the plaintiff. The bond involved herein was given in accordance with the requirements of section
A premature payment is in effect nothing more nor less than a modification of the terms of the contract, and consequently will not avail, in the face of the inhibition contained in said section
[5] The final contention of the appellant surety company is that it is exonerated from all liability by reason of the fact that the contract for the construction of said building was changed from a contract to construct said building for a definite fixed sum to what is known as a cost plus contract. That this change was made, there can be no question from the evidence in the case. It is equally clear from the evidence that plaintiff knew nothing of said change but furnished said materials for the building which was constructed as originally contemplated by the parties, though the manner of payment was radically different.
In support of its contention that this change in the terms of the contract between the owner and the contractors released the surety of its obligations under its bond to the plaintiff and other materialmen, the Globe Indemnity Company has cited some sixteen cases. These cases all involve the liability of a surety to a party to the contract on a bond given to secure the payment or performance of said contract, and none of them relates to the liability of a surety to a materialman on a bond given under section
In that case it was held that, although the parties to a builder's contract had departed from its terms by the owner making and the contractor receiving advance or premature payments on the contract, which money the contractor used, not to pay for labor or materials used in the construction of the building, but to pay his own personal debts, the rights of the laborers or materialmen under the bond given under section
In a later case, Western Brick Co. v. Smith,
These cases clearly hold under the rule as modified by section
We do not find it necessary to discuss other matters considered in the briefs of the parties, as those we have considered constitute the main points of controversy between said parties.
The judgment is affirmed.
Thompson, J., Shenk, J., Langdon, J., Preston, J., Seawell, J., and Waste, C.J., concurred.
Rehearing denied. *175