Court Opinion

ID: 8031710
Source: CourtListenerOpinion
Date Created: 2022-09-09 03:16:17.957996+00
Date Added: 2024-06-11T16:36:59.588460
License: Public Domain

Dean, J.,
dissenting.
Plaintiff pleaded the bond and offered it in evidence, but it entirely ignored the requirement respecting notice. To state it another way: Plaintiff elected to accept the benefits of the contract sued on, but it repudiated its burdens. The situation is anomalous.
The surety bond contains this condition: “Provided, that the said surety shall be notified in writing of any act on the part of said principal, which shall involve a loss for which the said surety is responsible hereunder, *212immediately after the occurrence of such act shall have come to the knowledge of the duly authorized representative or representatives of the obligee herein, who shall have the supervision of the completion’ of said contract, and a registered letter mailed to the surety, at its principal office in Omaha, Nebraska, shall • be deemed sufficient notice within the meaning of this bond. ’ ’
The obligee named in the bond is a private corporation. The only contested point is whether service of notice by plaintiff, also a private corporation, on the surety as specified in the foregoing provision of the bond is a condition precedent to its right to recover. The bond is primarily for the benefit of the owner who is the sole obligee named therein. Fairly construed the bond requires plaintiff to perform the condition as to notice, because plaintiff stands in the place of and derives its rights under the bond from the obligee, and it follows can have no other or greater rights than the obligee. The consideration that supports plaintiff’s right to recover is that such recovery operates to release the obligee, the owner, from some contingent liability to the third party, in this instance the plaintiff. 71 Am. St. Rep. note at page 189 (Baxter v. Camp, 71 Conn. 245); Frerking v. Thomas, 64 Neb. 193.
In Barnett v. Pratt, 37 Neb. 349, Judge Irvine concisely states the reason for the third party rule: “The purpose of the American rules seems to have been largely to avoid circuity of action. It. may probably be assumed that, in order to permit such third person to sue, the contract must be one which might be enforced between the immediate parties thereto,- in fact, many of the cases state the rule in these terms.” In 2 Elliott, Contracts, sec.. 1415, it is said: “One is not entitled to the benefits of a contract máde in his behalf without complying with the conditions and assuming the liability that the original parties have attached thereto. The rights of a party for whose benefit a. *213promise is made must be measured by the terms of the agreement between the principal parties.”
The present case is distinguished from one where a surety bond is given by a contractor to a municipal corporation as in Doll v. Crume, 41 Neb. 655, and Des Moines Bridge & Iron Works v. Marxen & Rokahr, 87 Neb. 684, that are cited in the majority opinion. Both cases were suits on surety bonds given to guarantee the performance of building contracts entered into between building contractors and municipal corporations. Clearly they are not in point. In the Doll case it is said that a surety bond that guarantees the performance of a building contract entered into with a municipal corporation is dual in its nature; that there is a promise both to the municipality and to material-men. It is at once apparent that this is on grounds of public policy»' 21 R. C. L. 1016, sec. 64; Equitable Surety Co. v. United States, 234 U. S. 448. It is obvious that if the rule were otherwise, as applied to municipal corporations, the third party would be remediless because it is not permissible in this class of cases that the citizen should have a lien on the property of the sovereign. It seems that duality of contract has not been roeognized as the principle that permits the third person who is not a party to a contract to sue upon it, except in municipal corporation cases. The general principle that permits ■ a third party to sue is that a recovery will release the promisee from some liability to the third party, thus avoiding circuity of action.
The majority opinion exonerates plaintiff from giving notice because: “The plaintiff could not know when some act of the contractor came to the knowledge of the owner of the building. It would be impossible for the plaintiff to give the notice to the surety.” It is not altogether clear upon what theory the majority conclude, in an entire absence of pleading or proof to support the conclusion, that the plaintiff • could not bring *214“some act of the contractor” relating to nonpayment “to the knowledge of the owner of the building.” What was there to prevent plaintiff from informing the owner that the contractor was in default? Who knew better than plaintiff as to the time when the contractor failed to pay for the building stone? Who but the plaintiff, whose knowledge was first hand, would be expected to bring the fact of nonpayment “to the knowledge of the owner of the building?” Nor is it clear why, in the absence of proof, the court should conclude that there was something or that there was anything that made it “impossible for the plaintiff to give, the notice to the surety.”
Under a fair construction of the surety bond, and on principle and on authority, notice of the failure of the contractor to pay plaintiff should have been communicated by plaintiff to “the duly authorized representative or representatives of the obligee” having “supervision of the completion of said contract,” or to the owner itself. And in the event of the refusal or failure of the representative or of the owner to serve the required notice, plaintiff, standing in the place of the obligee, itself should have served the notice on the surety. Failing in this it should have been nonsuited. Notice in this class of cases is not an idle ceremony, but a matter of prime importance, a material part of the contract: Notice would have enabled the surety to have stopped the payment or to have caused the owner to pay plaintiff instead of paying the defaulting contractor. The provision for notice is reasonable, merely providing that “a registered letter mailed to the surety, at its principal office in Omaha, Nebraska, shall he deemed sufficient notice within the meaning of this bond.” And this the majority opinion concludes was impossible of performance by plaintiff. Escape from a plainly expressed obligation of a contract should not be permitted upon a pretext so trivial.
*215The majority opinion, cites no authority involving the question of notice that supports its conclusion. It may therefore he assumed that, aside from the majority opinion, there is no such authority. In 21 R. C. L. 986, it is said: “To entitle a materialman to maintain an action on the contractor’s bond, he must comply with a provision of the bond that notice in writing must be given to the surety of any act which may involve a loss for which the surety may be liable a certain time after the occurrence of the act, and the failure of a materialman to give such notice is not a matter of defense to an action on the bond, but he has the burden of showing compliance to make out his cause of action.” Knight & Jillson Co. v. Castle, 172 Ind. 97, 27 L. R. A. n. s. 573, is a leading case in point, and in which the reason for the rule requiring notice is admirably stated: “In adopting a part of the obligation as running to it, appellant was bound to adopt it according to its terms and conditions, upon the plainest principles of construction. In the absence of an agreement for time, the price of materials purchased by the contractor was due when delivery was made; if time was given, the price was due at the expiration of the time agreed. In either event, it was peculiarly within the knowledge of the appellant as to when the obligation was due which is here sought to be enforced against the surety, and there could be no adoption of so much as was favorable to appellant, and that which was for the benefit of'the surety be ignored.”
Men must be left free to make their own contracts, and in the absence of fraud or mistake the binding obligation of a lawful contract cannot be too insistently urged. The progress toward the attainment of a high type of civilization has been marked by an observance of this principle. The fathers of the Republic thought it worth while to provide that no state shall pass any law impairing the obligation of contracts. Doubtless those venerated men presumed that a general admonition on this point was sufficient.