Court Opinion

ID: 3838200
Source: CourtListenerOpinion
Date Created: 2016-07-06 08:07:11.359234+00
Date Added: 2024-06-11T13:57:04.942222
License: Public Domain

Action by James T. Logan against Grants Pass  Josephine Bank to recover on State Highway Commission warrant. The bank answered in equity, demanding judgment against the plaintiff and an accounting between plaintiff and Gilmore and Childers, two subcontractors. The lower court's decree was in favor of the bank and against the plaintiff. Also decree was entered in favor of Sophia Gilmore, administratrix of the estate of J.T. Gilmore, deceased subcontractor, against the plaintiff. The plaintiff appeals. Affirmed as to the defendant bank. Reversed as to the other defendants.
The plaintiff instituted an action at law against the defendant bank to recover $752.23 on a State Highway Commission warrant in favor of Albert Anderson, Grants Pass Banking Company, assignee, which the *Page 532 
commission had delivered to the bank. The bank admitted receiving the warrant, interposing an answer requiring the interposition of a court of equity, demanding judgment for $1,822.09 and interest and asking for an accounting between the plaintiff and Gilmore and Childers, two subcontractors, who were brought in as parties defendant for that purpose at the instigation of the bank.
The bank alleged that one Albert Anderson had contracts Nos. 150 and 178 for grading and macadamizing of the Pacific Highway, the first being known as Leona Drain Section and the other as Yoncalla; that Logan was surety on Anderson's bonds; that Logan financed Anderson who assigned to Logan all money due, or to become due, from the Highway Commission; that Gilmore and Childers entered into a written contract with Albert Anderson on August 9, 1919, to furnish the latter with 30,000 cubic yards of crushed rock, one mile south of Drain for $1.65 per yard.
The contract provided that "all sums of money to which the first party (Gilmore  Childers) shall be entitled, the second party (Anderson) shall pay into the Grants Pass Banking Company at Grants Pass, Oregon, to the credit of the first party." Gilmore and Childers, whom we will hereafter designate as "G. 
C." borrowed money from the bank to install a rock-crushing plant and to pay labor and material bills and gave the bank the following notes:
  "$2,000.00 August 11, 1919. 1,000.00 September 2, 1919. 2,500.00 September 24, 1919. 1,000.00 October 24, 1919 500.00 November 14, 1919. 3,300.00 November 26, 1919. 1,250.00 December 5, 1919." *Page 533
That on August 11, 1919, G.  C. entered into a written contract with the bank, which was accepted by Albert Anderson, to the effect, that all moneys due and to become due on G.  C.'s account should be transmitted to the bank for G.  C.'s credit and the proceeds should be applied upon their notes. That title to the G.  C. machinery should be held by the bank until their obligations are discharged. It is also alleged by the bank, and controverted by the plaintiff, that Logan orally promised to pay the G.  C. notes to the bank.
On December 1, 1919, Logan, the plaintiff, took over the work of G.  C. who assigned to Logan their contract with Anderson. This appears to have been done at the request of the bank as G. 
C. were behind in their payments of amounts due to the bank. This was done with the consent of Albert Anderson, the original contractor. The written assignment provided that in addition to all of G.  C.'s right, title and interest in their contract with Anderson, dated August 9, 1919, there was transferred to Logan, and the contract contained the following provisions:
"All moneys hereinafter to come due thereunder, subject to the rights of the Grants Pass Banking Company of Grants Pass Oregon therein, and that the party of the third part has and does hereby consent to such assignment, and that the party of the first part (Logan) has and does hereby assume said contract and agree to continue the same to completion in accordance with the terms and conditions thereof, subject, however, to the modifications thereof hereinafter agreed to by all of the parties hereto.
"It is further agreed by and between the parties hereto that all moneys becoming due the party of the first part under said agreement of August 9, 1919, as hereinafter modified shall be paid to the Grants Pass Banking Company of Grants Pass, Oregon, under the *Page 534 
terms of the agreement between the parties of the second part and said banking company entered into on the 11th day of August, 1919.
"It is further agreed by and between the parties hereto that the stripping, quarrying and delivering of rock to the crusher may be sub-let by the party of the first part to any person not a party to this agreement, and that the crushing of rock and the delivery thereof to the bunkers shall be done by the parties of the second part, each of said parties to receive wages of $6.00 per day for each day worked."
Then follows a provision amending the contract of August 9, 1919, so as to change the price of crushing the rock from $1.65 to $1.75 per cubic yard. Then follows this provision:
"It is further agreed by and between the party of the first part and the parties of the second part that all costs, charges and expenses incurred by the party of the first part in completing the work provided for in said contract of August 9th, 1919, as herein amended and modified, shall be charged against the parties of the second part, and that, on the completion of said contract, settlement will be made between the party of the first part and the parties of the second part, and upon such settlement if it shall appear that any profit has been realized after paying all costs, expenses and charges of or in connection with the work, said profit shall be paid to the parties of the second part after paying the indebtedness due from them to the Grants Pass Banking Company, but if sufficient money has not been realized from the contract to liquidate all costs, expenses and charges of or in connection with the work and the indebtedness due said banking company, then it is agreed that the equipment used in connection with the work, belonging to the parties of the second part, or their assigns, consisting of the rock crusher, engine, boiler, compressor, etc., shall be sold by the party of the first part as he may see fit, subject to the rights or with the consent of the Grants Pass Banking Company, *Page 535 
and for that purpose the parties of the second part hereby make and constitute the party of the first part their attorney-in-fact and agent, and the proceeds shall be used to pay all indebtedness incurred on the work, including the indebtedness due said banking company and the overplus, if any, shall then be paid to the parties of the second part."
This contract was made with the consent of Albert Anderson, the original contractor.
At the time the G.  C. contract was assigned to Logan, G.  C. had produced 4,554 cubic yards of crushed rock and had paid out, according to the amounts drawn from the bank, $7,231.18 and was indebted to the bank in about the sum of $5,500.
The cause was tried as a suit in equity. The court appointed the court reporter to audit Logan's record and make a statement of account between Logan and G.  C. from the record of the testimony and the exhibits in the case. Albert Anderson assigned all money due, or to become due to him, from the State Highway Commission upon his contract, to J.T. Logan. Thereafter on September 3, 1920, Logan assigned and transferred all money due or to become due from the State of Oregon to Logan upon all estimates that might be prepared and approved during construction work; and all other sums to be paid by the State Highway Commission as provided in contract No. 178, hereinabove referred to, to secure the bank for advances to him.
After the assignment by G.  C. to Logan, Childers abandoned the enterprise and Gilmore assumed all of Childers' interest. Gilmore is now deceased and represented by his administratrix. Logan proceeded to finish the production of the balance of the 30,000 yards of crushed rock. Gilmore continued to assist at one of the crushers until about November, 1920. *Page 536 
His name is on the pay-roll as foreman, for July to October, 1920, both inclusive, at a salary of $180 per month. He commenced the performance of such duties in April of that year, during which month he stated he worked eleven days. For some reason his name was not on the pay-roll until July. Checks were drawn for Gilmore's pay. Gilmore also drew checks on Logan's account for labor and expenses. F.F. Childers worked a portion of the time and his name was on the pay-roll for the months of May to September as foreman or laborer at $6 per day. Gilmore and Childers were regularly paid for their services and there is nothing due them therefor.
On December 4, 1919, Logan sublet the quarrying of the rock for the crusher about one mile south of Drain to Mark Matyvich for 90 cents per cubic yard delivered at the Drain crusher. The quarry was operated by Matyvich and other Austrians until in July, 1920, when the work not being satisfactory to the highway engineer, Matyvich released his contract to Logan. After the 30,000 yards of rock were produced Gilmore requested Logan to furnish him with a statement of settlement.
On October 8, 1921, Logan furnished Gilmore a statement of the G.  C. matter, stating the number of yards of rock crushed by them under the contract and the amounts paid to and for them, showing that the Drain crusher and the Yoncalla crusher from December 1, 1919, to January 4, 1921, were run at a loss of $5,044.07. The Drain crusher was sold for $2,000 and the money turned over to Grants Pass Bank. This was under the contract referred to above. The sale was consented to by the bank. Logan in his statement said: "I still hold a note of G.  C. for *Page 537 
over $3,000, principal and interest, unpaid; balance due Logan approximately $7,500."
Mr. Gilmore, on behalf of Gilmore  Childers, rendered a statement to Mr. Logan concerning the 30,000 yards of rock contract, containing the amount of rock produced, and other items, including $2,000 for machinery sold by Logan and paid to the bank above mentioned, claiming $2,000 for releasing the Upper Yoncalla crusher, claiming total credits in favor of Gilmore and Childers of $26,511.34, crediting Logan with amount of expenses in 1920, $8,695, notes paid by Logan $3,000, including amount owing by G.  C. to Grants Pass Bank, $15,078, making a total of $26,773, making a balance due Logan of $261.66.
After that time neither G. nor C. claimed anything from plaintiff Logan until they were brot in as parties defendant in this case at the suggestion of the bank. Thereafter the bank sued G.  C. and recovered judgment against them for the amount of the notes, less the cashier's certificate of $3,050 left with the bank as security by Gilmore and less $2,000 paid by Logan for the old machinery, and less the warrant for $752.23, upon which plaintiff brought suit. Logan paid the note of G.  C. of $3,300 with accrued interest at 8 per cent, the note of $1,250 with accrued interest, and the accrued interest on the remaining five notes to December 31, 1919. He later paid interest on those five notes to June 30, 1920, and on September 21, 1920, paid all of the accrued interest on all the G.  C. notes. Logan brought action obtaining a judgment against G.  C. for the amount of the note held by him against them for $3,000, principal and interest. G.  C. made no defense to the action.
The defendant Gilmore claims there was due G.  C. from the State Highway Commission on December 1, 1919, and shortly thereafter paid into the defendant *Page 538 
bank, either direct or through Logan, money enough to pay the G. C. notes; that this money had been earned by G.  C. between August 11, 1919, and December 1, 1919; that on December 1, 1919, Logan agreed with the bank and also Gilmore to pay the notes of Gilmore  Childers due the bank. That the bank applied the collateral security of $3,050 on the G.  C. notes, which Logan did not pay. That Logan was under contract with Matyvich to furnish rock from the Drain quarry to the crusher at 90 cent per cubic yard. Matyvich furnished 7,000 yards between December 1, 1919, and July 15, 1920, which should have cost $6,300, and which according to Logan's testimony, cost him $11,833.90, which he charged to G.  C.; that Anderson paid Logan about $5,000 for loss which Logan claimed he had sustained on account of the Drain crusher and quarry. That Logan agreed with Gilmore in June or July, 1920, to pay him $2,000 if he would surrender all the rights to the Yoncalla crusher and profits thereof. That there was a balance due for wages of Gilmore; that Logan has charged Gilmore with numerous items amounting to several thousand dollars which should be eliminated; that the note of Logan against G. 
C. for $3,109.95, which is called the $3,000 note as there is $109.95 not claimed by Logan as he paid $3,000 on machinery for G.  C., for which he obtained judgment, is involved in the account of this suit.
AFFIRMED AS TO THE DEFENDANT BANK. REHEARING DENIED. REVERSED AS TO THE OTHER DEFENDANTS.
The amount in dispute is mingled to a certain extent with road contract construction amounting to some $165,000. We have stated the main facts which seem to have bearing upon the issues in this suit. Only the contract of G.  C. with Albert Anderson for the production of 30,000 cubic yards of crushed rock at the bunkers is really involved in this suit.
After the operation, under the 30,000 yard contract had proceeded for a time, the highway department advised the installation of a second crusher.
The crusher near Drain was moved so as to make a much shorter haul and it was estimated that by such move $10,000 would be saved in hauling. The hauling of the crushed rock was done by Anderson, the original contractor. Logan advised Anderson that on account of such saving Anderson should pay the bank $2,000, to be credited on G.  C.'s notes. A contract was drawn in August, 1920, subletting the balance of the rock crushing by Logan to one H.H. Russell at $1.65 per yard consented to by G.  C. containing the following provisions.
"And the party of the fourth part (Albert Anderson) in consideration of the benefits accruing to him by the installation and the operation of the rock crusher hereinbefore described, hereby agrees to pay the sum of $2,000 to the Grants Pass Banking Company at Grants Pass, Oregon, to be credited upon the notes of the parties of the third part now held by said *Page 540 
bank; and hereby consents to the covenants and agreements between the party of the first part and the party of the second part, hereinafter contained."
This contract was signed by Logan, Russell and G.  C., but Anderson refused to execute the same. The writing appears to have served as between Logan and Russell, his subcontractor, but never was completed and never became effective as to the $2,000 proposition.
The testimony does not show that Logan ever promised to pay G. C. or Gilmore $2,000 or any sum for releasing their or his interest in the Yoncalla or Upper Crusher works or contract. This defendant has not sustained the burden of proof in this respect. It is in direct opposition to the written contract of December 1, 1919, between Logan and G.  C.
Mr. G.M. Raymond, the official reporter, was appointed by the court as referee. A portion of the testimony was taken before him as such referee and a portion thereof was taken before Mr. W.J. Looker, reporter pro tem.; the finding of G.M. Raymond, referee, shows in effect, that J.T. Logan in taking over and operating the contract calling for the getting out of 30,000 yards of rock, after paying all expenses in connection therewith, had a surplus or profit of $2,426.37. This finding was more particularly set forth in schedule "A" attached, and contains the following totals:
Revenue: 30,000 yards of rock at $1.65 per yard .................................... $49,500.00 Payrolls  miscellaneous expend. as shown by cancelled checks .....................  47,073.63 __________ Making surplus or profit of ..... $2,426.37
Mr. Looker, as an accountant after the testimony was taken before him as reporter pro tem., reported *Page 541 
that the total expenditure, as shown by the referee's report, should be increased as follows:
"Total expenditures shown by the referee   $47,073.63 Add items which are properly included in No. 12 ...................... $7.577.83 Add No. 11 ........... $2,000.00 Less sale of elevator and screen ........    750.00  1,250.00 Add defendant's Ex. D and E ......  420.00 ________ Total additions ....................   9,247.83
Which would bring total expenditures to .. $56,321.46"
The report of W.J. Looker, so corrected, shows in detail all of the transactions under the contract, expenses for labor and supplies and sums paid out by checks, or otherwise, by G.  C. up until January 1, 1920, and also thereafter under the management of Logan, with G.  C. supervising a portion of the work. The report is too lengthy to summarize. The total expenditures and credits relating to the crusher at Drain are:
Total expenditures ...................... $46,595.40 22,499 yards at $1.65 per yard ..........  37,123.35 Loss, Drain crusher .....................   9,472.05 And at Yoncalla — Total expenditures ...................... $15,720.12 7,500 yards at $1.65 ....................  12,375.00 __________ Loss Yoncalla crusher ...................   3,345.12 Loss both crushers ...................... $12,817.17"
We do not understand that the court adopted either of the reports to which we have referred so far as the claim of G.  C. is concerned. In regard to the Gilmore claim, the court found, in part, as follows:
"The court finds that there was necessity for an accounting for the purpose of determining whether a profit was made from the operations of the Drain *Page 542 
quarry by the plaintiff, Logan, between December 1, 1919, and the termination of the contract, as fulfilled through the operation of the Drain quarry and crusher and the plaintiff, Logan, made a profit from such operations. That such operations were carried on in an extravagant manner, and that any showing of loss is overcome by the extravagance in the operations of the plaintiff and the court further finds that any loss claimed by the plaintiff, Logan, was overcome by the extravagant and unwarranted expenditure on account of his operations and the payment to him of $4,980.00 by Albert Anderson and the plaintiff's retention of $2,027.83, the same, being the difference between the amount due Gilmore and Childers from the State Highway Commission, to wit: $6,577.83, and $4,550.00 thereof applied by the plaintiff to the retirement of the Gilmore and Childers' notes for $3,000.00 and $1,250.00 and his failure to pay the defendant, Gilmore, wages agreed upon and his attempt to charge for the loss on account of powder amounting to $2,233.00 and other numerous items not properly chargeable to the plaintiff's operations of the Drain quarry and that there was no actual loss on account of such operations."
We are unable to concur in the above finding of the learned trial judge. G.  C. were deeply in debt to the bank after running the contract business for comparatively a short time. It is plain from the record that they were unable to further carry on alone. Logan as surety for Anderson was interested in a successful termination of the whole construction. At the request of the bank and with the consent of G.  C. he took over the work of completing the G.  C. contract work. Nevertheless he retained both Gilmore and Childers as foremen, and their experience and skill, together with Logan's management of the financial end of the business, and in a general way of the *Page 543 
operation, he being on the ground occasionally, combined to carry on the contract.
In letting the contract for quarrying to the Austrians and other subcontractors, it appears he acted in entire good faith and did the best he could. Whatever contract, or how low a price was named to a subcontractor, the labor and running expenses had to be first paid by him. All this was done with G.  C. on the work nearly all of the time and there was no apparent murmur of complaint from either of them.
To make a general finding of extravagance to wipe out a loss and show a profit for Gilmore is not borne out by the record. When bills were presented to Logan for labor, supplies, hardware, powder, parts for machinery and the like, furnished for the work he was compelled to and did pay them. This he could do at the time or pay more at the end of lawsuits, and Gilmore had no reason to complain. Logan and Gilmore settled the accounts between them. Both made a statement to the other. The law favors such a settlement. Gilmore was as well acquainted with all the transactions as Logan was and ought to have known more about the work than Logan. They appeared to be satisfied until brought into court by the bank. We think Logan and Gilmore were in a better position to settle and adjust their accounts when the matters were fresh in their minds and could arrive at a better result than any court can after years have elapsed.
Mr. F.C. Bramwell, the then cashier of the bank, testified that it was the understanding that Logan would pay the G.  C. notes but there is no testimony to show that Logan ever stated that he would be responsible for such notes, except from the proceeds *Page 544 
of the contract. This is material as to the claim of Gilmore's estate, if not as relating to the bank.
Logan brought action against G.  C. and obtained judgment on their note. They made no defense. They had their day in court. This is not a suit to set aside that judgment. Neither Gilmore nor the firm of Gilmore  Childers is entitled to any equitable relief against Logan.
It was very easy for Mr. Gilmore, and is for anyone, where work like this is being done, after the plant is installed and everything is running smoothly, to make a rough estimate without taking into consideration the many items of necessary expenses and figure out on paper a profit.
Gilmore has no legal or equitable claims against Logan on account of the certificate of deposit or security given by him to the bank. Such claim is preposterous. Logan, as shown by the testimony, never promised or agreed with either G.  C. or undertook in any way to pay the notes of G.  C. to the bank except as he received the money from the proceeds under the rock contract.
Gilmore claims $1,233 against Logan which was allowed by the trial court by reason of loss on account of powder. Black powder was purchased and after drilling a large hole in the rock quarry in the shape of a "T," this enormous quantity was loaded therein and fired, and while it was enough to make one tremble, it failed to take effect. This was not the fault of Logan and he was compelled to pay for the powder. This was not the first blast with powder that failed to function. Afterward giant powder was used. Gilmore had no reason to complain in this regard. All of the rock operations were carried on by Logan in the usual and businesslike manner and in *Page 545 
good faith. There is not one dishonest transaction on his part shown by the evidence.
Whether all the money drawn from the bank by G.  C. went into the works is a question. It is stated they had another contract. There was a large loss on the machinery purchased by G.  C. Everyone knows that a used car or any kind of machinery depreciates rapidly. It would seem that it was fortunate that there was as much realized on the old machinery as there was.
Taking up the matter between plaintiff Logan and the defendant bank, it involves, among other things, a construction of the written contracts. We are not certain that our views will harmonize with those of counsel on either side, or of the learned circuit judge.
The contract between G.  C. and Albert Anderson for producing 30,000 cubic yards of crushed rock was made and dated August 9, 1919, and contained the following clause:
"All sums of money to which the first parties (G.  C.) shall be entitled the second party shall pay into the Grants Pass Banking Company at Grants Pass, Oregon, to the credit of the first parties."
The contract of August 11, 1919, between G.  C. and the bank stipulated in part, as follows:
"It is mutually agreed by and between the said J.T. Gilmore and F.F. Childers, as parties of the first part, and the Grants Pass Banking Company, as party of the second part, that the said parties of the first part will transmit for their credit to said bank all moneys received by them under their contract and apply so much of the proceeds upon their note, or notes, as will not be actually required to meet current bills and payrolls during their operations in the production of said crushed rock until the full sum of *Page 546 
their obligations to said bank has been fully discharged, * *"
The contract of December 1st, 1919, between Logan and G.  C. consented to by Anderson provided that any profits realized after paying all expenses of completing the 30,000 yards of rock contract, and the indebtedness to the bank, should be paid to G. C.
A further provision is made by the contract, that if sufficient money had not been realized to pay all expenses and the indebtedness due the bank, then the equipment used in connection with the work should be sold for such purposes, overplus, if any, to be paid to G.  C.
Logan assumed G.  C.'s contract and agreed to continue to completion in accordance with the terms of the contract of August 9, 1919. The contract of December 1, 1919, as will be seen above, contains the following:
"It is further agreed by and between the parties hereto that all moneys becoming due the party of the first part (Logan) under said agreement of August 9, 1919, as hereinafter modified, shall be paid to the Grants Pass Banking Company of Grants Pass, Oregon, under the terms of the agreement between the parties of the second part and said banking company, entered into on the 11th day of August, 1919."
According to the contract of August 11, 1919, between G.  C. and the bank, all sums paid by the state for the credit of G. 
C. not "actually required to meet current bills and pay-rolls" should be applied upon the G.  C. notes. The plain requirement of the contracts was that all rock proceeds not immediately necessary to pay for labor and like bills should be applied on the G.  C. note. The contract of G.  C. with the bank demanded this and the *Page 547 
assignment contract G.  C. to Logan called for the same thing.
Bluntly expressed, the time to square up the G.  C. obligation to the bank was December, 1919, or as soon as the money was received for the work already done by G.  C. The bank was not required to wait until the rock contract was completed to ascertain if there would be money available belonging to G.  C. to pay their notes. It was not contemplated, as shown by the writings and the whole plan, that the bank should be deferred until the machinery and all other indebtedness should be paid. Logan, soon after he took over the contract received as the proceeds of the rock crushed by G.  C. prior to that time the sum of $6,577.83, he paid the bank for G.  C. one note, $3,300, and another $1,250, leaving a balance available to be paid to the bank on G.  C. notes of $2,027.83, which was sufficient to satisfy the notes of G.  C. to the bank.
The testimony tends to show that Logan was permitted by the bank to use the money for a time. It was thot by the interested parties during a portion of the time of the operations until a certain decision was rendered by this court that as Logan was the surety for Anderson, he was liable for G.  C. as Anderson's subcontractors.
We do not understand that the referee or accountant exactly balanced up the G.  C. account to December 1, 1919, or January 1, 1920. We feel that this is an equitable adjustment. An exact figure to that time cannot be obtained. There was rock quarried, not crushed. The quarry had been stripped and one plant installed at a cost of about $1,400, a portion of which expense should equitably be borne by or charged to the later operations. We have carefully *Page 548 
read all of the testimony and considered several points not mentioned in this memorandum on account of space. We regret that at the closing of the rock contract the evidence shows a large loss.
Therefore the decree in favor of the Grants Pass and Josephine Bank and against plaintiff J.T. Logan is affirmed.
The decree in favor of Sophia Gilmore, administratrix of the estate of J.T. Gilmore, deceased, is reversed and the cross-complaint of this defendant is dismissed.
AFFIRMED AS TO DEFENDANT BANK. REVERSED AS TO OTHER DEFENDANTS.
COSHOW, C.J., and BELT, J., concur.
BROWN, J., took no part in the consideration of this case.