Case Name: STATE for Use and Benefit of PEGAN et al. v. AMERICAN SURETY CO.
Court: Oregon Supreme Court
Jurisdiction: Oregon
Decision Date: 1931-06-23
Citations: 137 Or. 394
Docket Number: 
Parties: STATE for Use and Benefit of PEGAN et al. v. AMERICAN SURETY CO.
Judges: Bean, C. J., Belt and Campbell, JJ., concur.
Reporter: Oregon Reports
Volume: 137
Pages: 394–409

Head Matter:
Argued June 12;
affirmed June 23;
rehearing denied September 22, 1931
STATE for Use and Benefit of PEGAN et al. v. AMERICAN SURETY CO.
(300 P. 511, 2 P. (2d) 1116)
Plowden Stott and P. J. Gallagher, both of Portland (Collier, Collier & Bernard, Wm. G. Smith, Plow-den Stott, and P. J. Gallagher, all of Portland, on the brief), for appellants.
George F. Alexander and Bartlett Cole, both of Portland, for respondents.

Opinion:
BROWN, J.
Section 2991, Oregon Laws 1920 (§ 67-1101, Oregon Code 1930), upon which this prosecution is based, in so far as the same is applicable to this cause was enacted by the Legislative Assembly of 1903 as House Bill 213, and was entitled:
"An act to protect subcontractors, materialmen, and laborers furnishing material for doing work upon public buildings, structures, superstructures, or other public works. ' '
Section 1 thereof reads:
"Hereafter any person or persons, firm or corporation entering into a formal contract with the state of Oregon, or any municipality, county, or school district within said state, for the construction of any buildings, or the prosecution and completion of any work, or for repairs upon any building or work, shall be required, before commencing such work, to execute the usual penal bond with good and sufficient sureties, with the additional obligations that such contractor or contractors shall promptly make payments to all persons supplying him or them labor or materials for any prosecution of the work provided for in such contracts ; and any person or persons making application therefor, and furnishing affidavit to the proper officer of such state, county, municipality, or school district, under the direction of whom said work is being or has been prosecuted, that labor or materials for the prosecution of such work has been supplied by him or them, and payment for the same has not been made, shall be furnished with a certified copy of said contract and bond, upon which said person or persons supplying such labor or materials shall have a right of action,' and shall be authorized to bring such in the name of the state of Oregon, or any county, municipality, or school district within such state, for his or their use and benefit against said contractor and sureties, and to prosecute the same to final judgment and execution."
This statute, being remedial in its nature, should be liberally construed to effectuate its purpose: Columbia County v. Consolidated Contract Co., 83 Or. 251 (163 P. 438); Portland v. O'Neill, 98 Or. 162 (192 P. 909); Fitzgerald v. Neal, 113 Or. 103 (231 P. 645); State ex rel. v. U. S. Fidelity & Guaranty Co., 125 Or. 13 (265 P. 775).
The first assignment of error relates to the denial by the court of the defendant surety company's motion for judgment of nonsuit, which reads:
"If Your Honor please, the defendant, the American Surety Company of New York, at this time moves the court for a judgment of nonsuit herein, first, on the ground and for the reason that the plaintiff has failed to prove a case sufficient to be submitted to the court, sitting as a jury. This motion is made generally on the ground that this motion is based on the proposition that the case of the plaintiff here has proven, and it is undenied, that all of the laborers, materialmen or persons furnishing labor or material in the prose cution of this work had been paid, and as we read section 2991, Oregon Laws, there cannot be a recovery against the surety unless there is evidence before the court that the laborers or materialmen or persons furnishing labor or material in the prosecution of this work have not been paid. ' '
We agree that, when a cause of action against the principal on a bond is barred, the right of action upon the bond ceases to exist: Oregon v. Davis, 42 Or. 34, 38 (71 P. 68, 72 P. 317); State ex rel. Sinclair Provision Co. v. Warren Construction Co., 129 Or. 58 (276 P. 260).
In the case at bar, the state highway commission exacted from the contractor such a bond as was authorized by sections 2991 and 6718, Oregon Laws 1920. Section 6718 provides:
"Every contract made with the state, county, school district, municipality, municipal corporation or subdivision shall contain a condition that the contractor shall promptly, as due, make payment to all persons supplying to such contractor labor or material for the prosecution of the work provided for in such contract, _ * and a penal bond, with good and sufficient sureties, shall be required of each and every such contractor, to secure the faithful performance of all of the obligations of such contract."
This section was originally section 1 of an act adopted by the people at a general election held on November 5, 1912, and is entitled, "An Act to protect sub-contractors, materialmen and laborers * '."
According to the findings of the trial court, and these findings are supported by the testimony, there is a balance due the subcontractors for labor and materials supplied to the general contractor under the contract at the contract price. The motion for nonsuit was properly denied: State ex rel. Trojan Powder Co. v. Johnson Contract Co. et al., 120 Or. 633 (253 P. 520); State ex rel. v. U. S. Fidelity & Guaranty Co., supra; State ex rel. Sinclair Provision Co. v. Warren Construction Co. et al., 129 Or. 58 (276 P. 260), and cases therein cited.
The defendants attacked the sufficiency of the complaint on the ground that it failed to state a cause of action. This contention is based upon the fact that the original contract was finally modified, in this: That, under the contract as modified,' the general contractor completed some unfinished details of the subcontractors' work, and the defendants contend that the modified contract is invalid for want of a consideration therefor.
From 13 C. J., at page 592, section 607, we read:
"A modification of a contract being a new contract, a consideration is necessary to support the new agreement, as, for example, where it is to extend the time for performance , or to release one of the parties from performance."
It is pleaded by the plaintiffs and established by the testimony that there was a valid consideration for the modified contract. The principal contractor was indebted to the subcontractors in the amount of several thousand dollars, an amount many times greater than the sum agreed to be paid by the subcontractor to the general contractor for the completion of the work, which was but putting in "two or three pipe culverts and a few odds and ends, which could not be' done or completed until weeks or months thereafter" because the general contractor had not completed the grading. The consideration paid for the completion of the work was, in accord with the contract, deducted from the sum due the subcontractors from the general contractor.
The defendants object to the allowance of attorney fees. The law above ref erred, to as adopted by the people was amended by the Legislative Assembly so as to provide for the recovery of attorney fees by the prevailing party. See chapter 342, General Laws of Oregon 1921, codified as section 49-702, Oregon Code 1930.
We have made no attempt to weigh the evidence submitted; for, in case a trial by jury is waived, the findings of fact by the court have the effect of a special verdict and cannot be set aside when there is some competent evidence to support each material allegation of the complaint: Cannon v. Farmers' Union Grain Agency, 103 Or. 26, 40 (202 P. 725), and local citations; Maeder Steel Products Co. v. Zanello, 109 Or. 562 (220 P. 155). See, also, Or. Const. Art. 7, § 3c.
From a careful consideration of the questions brought here for review, we have discovered no reversible error. Hence we direct an affirmance of the judgment entered by the trial court, with interest from the date of entry thereof.
Bean, C. J., Belt and Campbell, JJ., concur.
Petition for rehearing denied September 22, 1931