Court Opinion

ID: 4000598
Source: CourtListenerOpinion
Date Created: 2016-07-06 10:57:29.0856+00
Date Added: 2024-06-11T14:18:55.090465
License: Public Domain

It seems to me that the majority misconstrue our opinion in the case of Western Const. Co. v. Austin, 3 Wash. 2d 58,99 P.2d 932, which was decided in favor of respondent Sherman (who in that case was appellant). Concerning the former case, the majority opinion states: *Page 256 
"Because the creditors of Austin failed to establish their claims in compliance with 40 U.S.C.A., § 270b, and because appellant failed to prove that either it or its bond was liable for Austin's obligations, we held that Sherman, as guarantor, was under no contractual duty to discharge them. Regardless, then, of whether or not the bank is a privy, appellant is barred from employing Sherman's alleged breach as a defense."
As I understand that opinion, we simply held that Western Construction Company (the plaintiff and respondent in that action) could not recover from Sherman, because in contemplation of law it had not been damaged. It was not held that Sherman had not breached his contract of guaranty, but merely that Western Construction Company (which will hereinafter be referred to as Western) could not recover against Sherman because it had not been damaged. Western did not ask for nominal damages, and the question of the allowance of such damages was not in the case. Possibly such damages would have been allowed if asked for. McCormick on Damages, p. 88.
The contract between Sherman and Western, by which the latter agreed to "acknowledge" the assignment to Sherman's bank, contains the following agreement by Sherman:
"The Sherman Plumbing Supply Company guarantees that all bills for labor and material will be paid under the terms of the contract."
If by this contract Sherman had agreed only to indemnify Western on account of losses which it suffered, then it could well be held, in the light of the prior case, that Sherman had not breached his contract with Western. As I read the contract, however, Sherman positively agreed to pay all bills for labor and material, and, as admittedly many of these bills were not paid, Sherman breached his contract. This breach, however, under the circumstances, resulted, as matter *Page 257 
of law, in no damage to Western for which the latter could recover judgment against Sherman.
In the case of Purdy v. Massey, 306 Pa. 288, 159 A. 545, the supreme court of Pennsylvania, considering a somewhat similar matter, said:
"Is this bond one of guaranty or merely an indemnity against loss? `The distinction between the two agreements is simply that between an affirmative covenant for a specific thing, and one of indemnity against damage by reason of the nonperformance of the thing specified': Weightman v. Union Trust Co., 208 Pa. 449. In answering this question, the language of the bond itself should first be considered."
It seems to me that, in the case at bar, the language of the contract between the parties states "an affirmative covenant for a specific thing," and does not amount to a mere contract of indemnity.
In the case of Moore v. Capital Nat. Bank of Lansing,274 Mich. 56, 264 N.W. 288, the supreme court of Michigan stated the definition between a contract of indemnity and one of guaranty, in the following language:
"The contract of guaranty or suretyship requires three parties, the principal, the obligee and the guarantor or surety. One of indemnity requires two parties, the indemnitor and the indemnitee. The indemnitor undertakes to save the indemnitee against loss arising from an unknown or contingent event. The contract of indemnity is one of insurance."
The distinction is also noted in Stearns on The Law of Suretyship (4th ed.), p. 37, footnote.
In the case of Sherman, Clay  Co. v. Turner, 164 Wash. 257,2 P.2d 688, we said:
"No different rule is to be invoked in construing a guaranty than in construing any other agreement or contract." *Page 258 
By the contract between Sherman and Western, the former guaranteed "that all bills for labor and material will be paid under the terms of the contract." Sherman did not merely agree to indemnify Western in case of loss, but undertook that all bills of the classes referred to would be paid.
In the case of Wood v. Canfield Paper Co., 117 Tex. 399,5 S.W.2d 748, the court held that a party, who agreed that he would "personally guarantee the payment of your bills for paper ordered by the Popular Finance Publishing Corporation to the extent of $6,000," was liable as a guarantor. Sherman admittedly did not pay certain bills for labor and material, and he thereby breached his contract with Western.
In the case at bar, Sherman relies upon several authorities, but examination of those cases discloses that they concerned actions on indemnity bonds. Those cases, therefore, it seems to me are not in point.
Sherman also argues that, even though he did breach his contract with Western, such breach did not go to the essence of the contract, and is therefore no defense in this action. There is here no question of substantial performance, Sherman having breached his contract in its entirety.
Sherman, having failed to perform his part of the contract, cannot sue Western, claiming performance by it. In the case ofPower v. Chadwick, 166 Wash. 398, 7 P.2d 24, we said:
"In order to maintain a suit upon a contract, a party must first show that he himself has performed the terms and conditions of the contract."
In the later case of Downs v. Smith, 169 Wash. 203,13 P.2d 440, is found the following:
"It is true that one who seeks to enforce the terms of a contract against another or to recover damages for the breach of a contract by another must show that there has been no breach on his own part. This *Page 259 
is on the theory that one who has himself breached a contract can not thereafter enforce the contract against the other party.Reddish v. Smith, 10 Wash. 178, 38 P. 1003, 45 Am. St. 781, and many cases following."
The general rule is stated in 17 C.J.S. 932, § 452, as follows:
"Where the covenants or promises in a contract are dependent, only one who has performed, or tendered performance on his part, can enforce the contract."
In the prior suit between the parties, several times above referred to, this court held that Sherman enjoyed the protection of a shield as against an attack by Western. In the case at bar, Sherman seeks to use the shield, which this court held protected him, as a sword to attack Western. This, in my opinion, he should not be allowed to do.
If Sherman cannot recover in this action against Western, neither can respondent bank, which was awarded judgment by the superior court not merely upon the assignment to it by Sherman, but upon the provisions of a document entitled "consent, acceptance and approval," by which Western acknowledged Sherman's assignment to the bank and promised to pay to the bank any moneys due. Sherman's assignment to the bank bears date February 9, 1938. Western received a duplicate of this assignment February 11th. On the latter date, Sherman executed, in favor of Western, his guaranty of payment in consideration of the acknowledgment by the latter of the assignment. The document entitled "consent, approval and acceptance" was executed March 23rd. It is manifest that the last dated instrument was based upon Sherman's contract of guaranty, which anticipated the subsequent acknowledgment of the assignment as consideration. The documents follow each other in orderly sequence, and clearly constitute one transaction. *Page 260 
The bank, as Sherman's assignee, acquired no greater rights to the benefit of the contract than Sherman acquired.
In the recent case of Sibbald v. Chehalis Savings  LoanAss'n, 6 Wash. 2d 203, 107 P.2d 333, we stated:
"It is a cardinal rule of construction that a writing shall be interpreted as a whole, and all writings forming a part of the same transaction should be considered together."
The same rule is contained in the Restatement of the Law of Contracts 319, § 235, subd. (c). Several other decisions of this court to the same effect might be cited.
The trial court apparently based its decision upon the terms of the "consent," and failed to consider the transaction as a whole.
Respondents (Sherman and National Bank of Commerce) are not entitled to recover judgment against appellant, Western Construction Company, and I accordingly dissent from the conclusion reached by the majority.
BLAKE, J., concurs with BEALS, J. *Page 261