Title: MORGEN OSWOOD v U S FID GUAR

State: montana

Issuer: Montana Supreme Court

Document:

No, 12943 I N T H E S U P R E M E C O U R T O F THE STATE O F MONTANA 1975 MORGEN & OSWOOD CONSTRUCTION CO,, INC,, a Montana Corporation, P l a i n t i f f and Appellant, UNITED STATES FIDELITY AND GUARANTY C O M P A N Y , a Maryland Corporation, Defendant and Respondent, Appeal from: D i s t r i c t Court of t h e Eighth Judicial D i s t r i c t , Honorable Truman G. Bradford, Judge presiding, Counsel of Record: For Appellant: Jardine, Stephenson, Blewett & Weaver, Great F a l l s , Montana Jack L, Lewis argued, Great F a l l s , Montana For Respondent : Berg, O'Connell, Angel and Andriolo, Bozeman, Montana Charles F, Angel argued, Bozeman, Montana Submitted: April 25, 1975 Decided: MAY 1 4 1975 N r . J u s t i c e Wesley Castles delivered t h e Opinion of the Court. This i s an appeal from an order of the d i s t r i c t court, Cascade County,changing venue from t h a t county t o Gallatin County. P l a i n t i f f Morgen & Oswood Construction Co., Inc. i s a general con- t r a c t o r with its principal place of business i n Great F a l l s , Montana. P l a i n t i f f brought t h i s action i n Cascade County against defendant United States F i d e l i t y and Guaranty Company, a Maryland corporation, (hereinafter referred t o a s USF&G), a s surety of one Patrick A . Herring, t o recover loss and damages incurred a s a consequence of ~ e r r i n g ' s f a i l u r e t o perform a subcontract f o r plain- t i f f . P l a i n t i f f ' s contract was on a project a t Montana S t a t e University a t Bozeman. The subcontract was t o perform labor and furnish c e r t a i n materials. The agreement required Herring t o furnish a surety bond equal i n an amount t o the contract price, conditional upon and covering the f a i t h f u l performance of the terms, provisions and conditions of the subcontract agreement. Herring obtained t h e bond with p l a i n t i f f a s obligee, Herring a s principal, and defendant a s surety. The condition of the bond was: "a ; k 9~ That i f the said Principal s h a l l well and t r u l y perform and f u l f i l l a l l and every the covenants, condi- t i o n s , stipulations and agreements i n said contract men- tioned t o be performed and f u l f i l l e d , and s h a l l keep the said Obligee harmless and indemnified from and against a l l and every claim, demand, judgment, l i e n , cost and fee of every description incurred i n s u i t s o r otherwise against the said Obligee, growing out of o r incurred i n , the prosecution of said work according t o the terms of the said contract, and s h a l l repay t o the said Obligee a l l sums of money which the said Obligee may pay t o other ersons on account of work and labor done o r materials furnished on o r f o r said contract, and i f the said Prin- c i p a l s h a l l pay t o the said Obligee a l l damages o r for- f e i t u r e s which may be sustained by reason of the non- performance or mal-performance on the part of t h e s a i d Principal of any of the covenants, conditions, stipula- tions and agreements of s a i d contract, then t h i s obliga- tion s h a l l be void; otherwise the same s h a l l remain i n f u l l force and virtue." (Emphasis added). According t o the terms and provisions of t h e surety bond, Herring and USF&G agreed t h a t they were j o i n t l y and severally bound under the bond unto p l a i n t i f f . Subsequently, Herring allegedly f a i l e d t o furnish a l l the labor, materials, s k i l l and instrumentalities and f a i l e d t o perform a l l t h e work necessary and incidentally required on the job of him under t h e terms and provisions of h i s subcontract with p l a i n t i f f . By reason thereof, pla.intiff t h e r e a f t e r i n i t i a t e d t h i s action against only USF&G a s surety of Herring f o r the damages incurred by p l a i n t i f f . By i t s complaint, p l a i n t i f f alleged the condition of USF&Gts surety bond was breached by ~ e r r i n g ' s f a i l u r e t o furnish the r e q u i s i t e labor, e t c . , and h i s f a i l u r e t o perform t h e necessary work, and t h a t a s a consequence USF&G owes p l a i n t i f f the damages and l o s s incurred by reason of ~ e r r i n g ' s breach. In i t s f i r s t appearance, USF&G f i l e d a l t e r n a t i v e motions t o dismiss the complaint f o r f a i l u r e t o join Herring a s a party, t o dismiss the complaint f o r f a i l u r e t o s t a t e a claim, and f o r change of venue supported by an a f f i d a v i t of Herring. By i t s motion f o r change of venue, USF&G sought t o have t h e place of t r i a l changed from t h e d i s t r i c t court i n Cascade County t o the d i s t r i c t court i n Gallatin County: "* * * on the grounds and f o r the reasons t h a t t h e action i n the i n s t a n t case a r i s e s out of a contract t o be performed by Patrick A. Herring, d/b/a Quality Roofing and Sheet Metal, of Bozeman, Montana, a t Bozeman, Gallatin County, Montana, and t h a t although the defendant has no residence i n Montana, residence f o r venue purposes should be considered t o be the residence of its insured, Patrick A . Herring, d/b/a Quality Roofing and Sheet Metal, whose residence is Bozeman, Gallatin County, Montana; t h a t under the provisions of Section 93-2904, Revised Codes of Montana, 1947, an action i s t o be t r i e d i n t h e county where the defendant resides a t t h e time of commencement of the action, o r i n the county i n which t h e contract was t o be performed. 11 In h i s supporting a f f i d a v i t Herring s t a t e d t h a t he was a resident of Gallatin County, t h a t a t t h e times alleged i n p l a i n t i f f ' s complaint he had conducted business i n Gallatin County and t h a t h i s subcontract agreement with p l a i n t i f f was t o have been performed i n Gallatin County. In h i s a f f i d a v i t , Herring s t a t e s t h a t he may be required t o indemnify USF&G i f USF&G were t o be held l i a b l e t o plain- t i f f and t h a t he objects t o the venue being i n Cascade County. The d i s t r i c t court i n Cascade County granted USF&G's motion f o r change of venue and p l a i n t i f f appeals from t h a t order changing venue. The issue on appeal i s whether p l a i n t i f f can sue i n i t s county of residence a foreign corporate surety when the action i s on a bond assuring a subcontract which was t o be performed i n another county and the residence of the subcontractor i s i n another county. W e note here t h a t defendant USF&G urges another i s s u e i s whether Herring, t h e subcontractor, is an indispensable party; but, we r e j e c t t h a t immediately f o r reasons which appear herein- a f t e r . The surety bond s p e c i f i c a l l y and c l e a r l y s t a t e s t h a t the bond upon which p l a i n t i f f i n i t i a t e d t h i s action against USF&G i s a j o i n t and several obligation of Herring and USF&G. P a r t i e s I I having a j o i n t and severalf' obligation a r e bound j o i n t l y a s one party, and a l s o severally a s separate p a r t i e s a t the same time and a j o i n t and several contract i s a contract with each promisor and a j o i n t contract with a l l . 17A C.J.S. Contracts 5 355a. When a several obligation i s entered i n t o by two o r more i n one instrument, it i s the same a s though each had executed separate instruments, and each obligation furnishes a several cause of action. 17A C.J.S. Contracts 1 352a. Thus, although p l a i n t i f f could have i n i t i a t e d t h i s action against - both Herring and USF&G it chose t o sue only USF6G. Cole Manufacturing Co. v. Morton, 24 Mont. 58, 60 P. 587; Butte Machinery Co. v. Carbonate H i l l Milling Co., 75 Mont. 167, 242 P. 956. P l a i n t i f f had a r i g h t t o sue only USF&G without joining Herring because a contract of suretyship is a d i r e c t l i a b i l i t y of the surety t o the assured and when the principal (Herring) f a i l s t o perform, the surety becomes d i r e c t l y responsible a t once, a s it i s unnecessary f o r the assured t o e s t a b l i s h t h a t the principal f a i l e d t o carry out h i s contract before t h e obligation of the surety be- comes absolute. Cole Manufacturing Co. v. Morton, supra; Butte Machinery Co, v. Carbonate H i l l Milling Co. supra. It i s s t a t e d i n 72 C.J.S. Principal and Surety §264b, p. 712: 11 Since the surety i s j o i n t l y o r j o i n t l y and severally l i a b l e with the principal t o the c r e d i t o r , t h e surety may i n any case be joined with the principal i n an action by the c r e d i t o r , and, where the l i a b i l i t y i s j o i n t and several, the c r e d i t o r may sue anyone separately i f the court has jurisdiction of the e n t i r e case." (Emphasis added). Prior t o t h e adoption of ~ o n t a n a ' s present r u l e s of proce- dure, section 93-2822, R.C.M. 1947, was i n e f f e c t . It s p e c i f i c a l l y provided t h a t persons severally l i a b l e upon t h e same instrument, including s u r e t i e s , "may a l l o r any of them be included i n the same action, a t the option of the p l a i n t i f f . " Under t h a t s t a t u t e , t h i s Court held i n every case brought before it t h a t an action may be maintained against a surety without joining the principal. Comerford v. United States F i d e l i t y and Guaranty Co., 59 Mont. 243, 196 P. 984; Deer Lodge County v. United States F i d e l i t y & Guaranty Company, 42 Mont. 315, 112 P. 1060; Foster v. Royal Indemnity Co., 83 Mont. 170, 271 P. 609. Section 93-2822, R.C.M. 1947, has been superseded by Rule 20(a), M.R.Civ.P., which i n pertinent p a r t pro- vides: It* * * A l l persons may be joined i n one action a s defendants i f there is asserted against them j o i n t l y , severally, o r i n the a l t e r n a t i v e , any r i g h t t o r e l i e f i n respect of o r a r i s i n g out of t h e same transaction, occurrence o r s e r i e s of transactions o r occurrences and i f any questions of law o r f a c t common t o a l l defendants w i l l a r i s e i n the action 9~ * * Judgment may be given * 'v * against one o r more defendants according t o t h e i r respec- t i v e l i a b i l i t i e s . " (Emphasis added.) Thus, it i s s t i l l permissive f o r a p l a i n t i f f t o separately sue j o i n t and several obligors. Here, USF&G i s the sole defendant and a non-resident and under section 93-2904, R.C.M. 1947, may be sued i n any county the p l a i n t i f f designates. Foley v. General Motors Corp., 159 Mont. 469, USF&G argues i n i t s b r i e f about a lack of due process t o Herring. USF&G, however, has given notice t o Herring. Herring has every opportunity t o appear i f he desires. The order of the district court is reversed and the matter returned to the district court of Cascade County for fur- ther proceedings. 4 Justice 4 Me Concur: / . jP Chief Justice / Justices. !