Court Opinion

ID: 8657250
Source: CourtListenerOpinion
Date Created: 2022-11-24 21:17:13.006288+00
Date Added: 2024-06-11T16:56:47.201829
License: Public Domain

On Application for Rehearing.
THURMAN, J.
Respondent assumes in its application and brief for a rehearing that the court was wrong on practically every question it attempted to decide. This is a sweeping indictment and were it not for the fact that it has almost become a customary proceeding, on the part of litigants against whom a case has been decided, to charge wholesale error on the part of the court, w'e would probably regard the charge in the instant case with deeper concern. The writer of the opinion, however, is not offended because of the drastic criticism applied to the opinion, for after more than 30 years of active practice in the courts of Utah before his elevation to the Supreme Bench, he does not now recall a single case decided against him by this court in which, on the first impulse, he did not conscientiously believe the court was wrong.
This has been a difficult case and in many of its aspects exceedingly interesting. It would not be strange or unusual in a case of such magnitude, involving as it does conditions without precedent and questions never before adjudicated, if the court on one or more of the questions involved should misconceive the law and arrive at an erroneous conclusion. The court makes no claim to infallibility. We gave to this case careful and unbiased consideration, as we endeavor to do in every case we are called upon to decide.
The first objection urged by respondent is that the court erred in holding that the release and discharge of the building company by the plaintiff did not operate to destroy whatever cause of action plaintiff may have had in its own right. This objection, in the opinion of the writer, is founded upon a misconception of the real grounds upon which the decision was based. In contradistinction to the doctrine of a debtor-creditor relationship, for which respondent contended and *481still contends, we based onr opinion upon the doctrine announced in Elliott on Contracts, § 1413, a portion of wbicb counsel for respondent quoted in tbeir original brief. There being no marks nor signs indicating an omission, we copied the matter from counsel’s brief instead of from the author’s work. An omission was made not vitally material in the instant case, but in justice to the author we deem it our duty to substitute his language for that which appears in the opinion, italicizing the words omitted, and thereby correct our mistake:
“It is a rule of practically universal application that there must exist on the part of the original parties to the contract a clear intent to benefit the third party, although a majority of the courts do not go so far as to hold with Connecticut that the contract must he for the sole and excltisive benefit of the third party. Many of the cases, in addition to holding that there must he an intent to benefit the third party, place a further limitation on the rule to the effect that the promisee must owe some obligation to the third party.”
After a careful consideration of the contracts and bond, the nature of the case and relationship of the parties, the court was driven to the conclusion that there existed a clear intent to benefit plaintiff, thus bringing the case squarely within the doctrine enunciated in the first sentence of the above quotation. An unbiased reading of the opinion will demonstrate that that was the ground upon which the court disposed of the third party question. In other words, the court concluded that the plaintiff had a cause of action it its own right because of the manifest intent of the parties to directly benefit the plaintiff. Besides this, we endeavored to make it clear in the opinion that, as to some of the warranties mentioned in the contract, the plaintiff not only had a right of action in its own name but it had the sole and exclusive right. There is no merit in respondent’s first objection.
The next objection is that the court erred in holding that plaintiff was not estopped from contending that its knowledge of defects in the elevators was immaterial after alleging in its complaint that it, in good faith, believed the terms of the contract had been complied with. This objection, as it is *482stated in tbe brief, is somewhat involved and our interpretation of counsel's meaning may be incorrect. In any event, the contention is that the court was wrong in holding that plaintiff was not estopped. Counsel rely on Morrison v. Atkinson, 16 Okl. 571, 85 Pac. 472, 8 Ann. Cas. pp. 487, 488, and Lebcher v. Lambert, 23 Utah, 1, 63 Pac. 628.
In Lebcher v. Lambert, supra, appellant objected to certain evidence offered by the adverse party in the court below. The court sustained the objection and the evidence was excluded. In this court appellant assigned as error the failure to prove the very facts which the excluded evidence would have tended to prove. This court held that appellant was estopped.
We are somewhat surprised that this case shonld be cited as a parallel case and insisted upon as controlling in the case at bar. The question here is controlled by the doctrine announced in Lindsay Land & Live Stock Co. v. Smart Land & Live Stock Co., 43 Utah, 554, 137 Pac. 837, a case cited by appellant. Without reviewing the case at length it is sufficient to say that plaintiff alleged more in his complaint than was necessary to prove. Mr. Justice Frick, speaking for the court at page 560 of 43 Utah, at page -840 of 137 Pac., says:
“The case, therefore, is one where the complaint alleged more than the plaintiff was required to prove in order to recover. This is often the case, and where, as in the case at har, the allegation does not relate to a matter of description; that is, to matters of identity, hut refers to matters of substance, it is not necessary to prove more than the law requires, although more is alleged. This is elementary doctrine, and needs no citation of authorities. The court, therefore, did not err in omitting the word ‘willfully’ from the charge.”
We have not deemed it necessary to review the eases cited in 8 Ann. Cas., supra. We have no doubt that such as support respondent’s contention are founded on reasons similar to those controlling in the Lebcher-Lambert Case, supra, and, if so, they are not controlling in the instant case.
The third objection, while deficient in clarity, seems to be a criticism of the opinion for applying the rule of liberal construction to matters other than provisions of the contract. *483To be more specific, counsel complain tbat tbe court applied the rule to the question o£ plaintiff’s knowledge of defects .at the time it made the final payment.
Again we are forced to conclude that counsel misconceive the scope and meaning of the opinion. Not only that: They seem to either misunderstand, or entirely disregard, the logic of their own position in the case. The very contention they make in the case, that knowledge of defects in the elevators at the time of payment therefor by the plaintiff operated as a discharge of the surety, implies on its face that counsel are attempting to apply the rule strietissimi juris in favor of the surety. There is no provision in the contract which says or even implies-that knowledge of defects at the time of payment operates to discharge the surety unless we apply thereto the rule in favor of gratuitous sureties. Whence comes the assumption that the surety should be discharged if plaintiff paid with knowledge that the contract had not been performed? The truth seems to be that surety companies have become so accustomed to regarding themselves as favorites of the law that they instinctively construe every ambiguous or doubtful provision in their own favor, without realizing that they are applying rules of construction. If the contract nowhere forbids payment for the elevators because plaintiff has knowledge of defects therein, then, in our opinion, under the rule applicable to paid sureties the surety company has no right to read into the contract an assumption that payment with such knowledge operates as a discharge of the surety.
Much is said in respondent’s brief concerning the question of good faith and the special finding of the jury that plain-, tiff did not in good faith believe that the contract had been performed. This finding of the jury was set aside by the trial court as not sustained by the evidence. The opinion is criticized for ignoring this feature as if it were a controlling question in the case. The truth is, when we assumed without question that plaintiff had knowledge of defects in the elevators when it made the final payment therefor, we assumed every possible fact necessary to a fair and candid discussion of the legal' question involved. We assumed that plaintiff *484bad knowledge and beld tbat knowledge was immaterial under the peculiar facts of the case. This proposition is supported in the opinion by abundant authority.
The fourth objection is to our interpretation of subdivision XII of the contract. Respondent’s contention is that subdivision XII created a fund in which the surety company had an equity, and that payment of 'the purchase price prior to substantial performance of the contract operated to discharge the surety. Our view of the case is that it was neither so expressed nor implied in the contract. It is quite common in this class of cases for a surety company to expressly provide that all or a certain percentage of the purchase price should be retained until the contract is fully performed. There is no such provision in either the elevator contract or bond in the instant case. On the contrary, it is expressly provided that—
“No payment made under the contract shall operate as an admission on the part of the contractor or the architect that this contract or any part thereof has been complied with in- case the facts shall he otherwise, or so as to preclude any action for damages against the subcontractor, should the work and materials hereby required not be performed and furnished in a substantial and workmanlike manner, and of proper quality, or should this contract not be faithfully executed in every respect,” etc. (Italics ours.)
In our interpretation of this portion of subdivision XII we used the following language: ,
“If, however, payment should be made and the work or material proved to be substantially defective and not according to the contract, such payment should not be taken as an admission that the contract had been complied with if the fact is otherwise; nor should such condition preclude an action for damages.”
Counsel for respondent make the most of the inapt expression of the court and attempt to turn the words “proved to be” as meaning “discovered after payment was made.” This seems to be “grasping at straws” and is hardly fair to the court. Lest others, hypercritically inclined, should in the future attempt to distort the meaning of the court as to the language above quoted the opinion will be modified by substituting the following which, in our judgment, more accurately reflects the meaning of the contract:
*485“If, however, payment shall be made and the work or material is substantially defective and not according to the contract, such payment shall not be taken as an admission that the contract has been complied with, nor shall such condition preclude an action for damages.”
With the above modification we have but little further to add to what is said in the opinion respecting the meaning of subdivision XII. Inasmuch as the contract does not say,' either expressly or by implication, that the money shall be withheld until the contract is substantially performed, and inasmuch as the contract further provides, in effect, that payment without substantial performance shall not preclude an action for damages, it is difficult to see the force of respondent’s contention, unless we apply the rule strictissimi juris in favor of the surety.
The fifth contention is that the court erred in holding that the surety company is not discharged by alterations made in the contract without its consent, by plaintiff and the elevator company, in respect to matters for which respondent furnished the bond. Nothing new is offered under this objection, consequently the matter may well stand as we left it in the opiinion. This much, however, may be said in addition: This action was brought to recover damages for breaches of the contract originally entered into and executed by the parties. Not a single demand is made against the surety company on account of changes or alterations, if there were any, and no extra burden is attempted to be imposed upon respondent because of the alleged changes or alterations. If there were changes or alterations made in the contract they were entirely disregarded by plaintiff in bringing its action. All it claims or demands is just what it is entitled to under, the original contract as executed by the parties.
But it is contended by respondent that the liberal rule of construction as applied to paid sureties, as adopted in the opinion, is at variance with decisions heretofore rendered by this court. The following cases are relied on: Blyth-Fargo Co. v. Free et al., 46 Utah, 233, 148 Pac. 427; Christensen et al. v. Hamilton Realty Co., 42 Utah, 70, 129 Pac. 412; Smith v. Bowman, 32 Utah, 38, 88 Pac. 687, 9 L. R. A. (N. S.) 889; *486Daly v. Old, 35 Utah, 79, 99 Pac. 460, 28 L. R. A. (N. S.) 463.
Tbe decision in tbe Blyfh-Fargo Case is tbe last expression of tbe court previous to tbe decision in tbe instant case. Counsel for respondent quote tbe following excerpt from the opinion at pages 240 and 241 of 46 Utah, at page 430 of 148 Pac.:
“Counsel contend that in.view that the appellant is engaged in the business of furnishing such bonds for profit, and for the reason that it determines upon the language and phraseology that is used therein, therefore such bonds are to be liberally construed in favor( of the beneficiary. A number of cases are cited in support of the contention. While some courts use the expression that bonds given under such circumstances are to be liberally construed in favor of the beneficiary, yet that is not precisely what the courts mean. The rules or canons of interpretation which are resorted to by the courts to aid them in arriving at the meaning or intention of any written document, instrument, contract, or statute, are precisely the same in every case.”
If counsel bad.taken tbe trouble to move forward a few lines on tbe same page, they might bave quoted tbe following language more to tbe point in tbe same opinion:
“Although a surety under such a bond is entitled to have the meaning and intention of the parties determined by the same rules that the meaning and intention of parties to other instruments are determined, yet in case of an ambiguity in the language used, or if a doubt arisés by reason of the use of a particular term or phrase, the doubt may be, and usually is, resolved against the surety for profit, whereas it may be, and usually is, otherwise as against a voluntary surety.”
This is tbe rule we have attempted to announce in tbe case at bar. As before stated, it is' tbe last expression of tbe court prior to tbe instant case, and as shown in tbe opinion is supported by tbe overwhelming preponderance of judicial opinion in nearly every jurisdiction of tbe country. Even counsel for respondent, to their credit be it said, bave not the temerity to contend that tbe rule announced by Mr. Justice Frick in the excerpt last quoted is not tbe prevailing doctrine in both the federal and state jurisdictions of tbe United States.
It is not necessary to review tbe former decisions of tbe court referred to by counsel. If they are not in harmony *487witb the last expression, of the court, they are by' implication overruled. But in fairness to counsel it is our duty to say their contention is that there is no ambiguity in the contract between the parties and therefore no reason for resorting to the rule in question. There is, in our opinion, a conclusive answer to this contention. The very fact that counsel disagree with the members of this court as to what the contract means concerning the substantial rights of the parties implies the existence of ambiguity and uncertainty in the contract. Because of the ambiguity and uncertainty there arises a doubt as to what the parties intended. The court applied the rule in question in order to solve the doubt.
This disposes of all the objections raised by respondent which the court, from any point of view, considers material. We might with propriety have summarily disposed of many of the objections for the reason that the argument offered in their support was, in substance, merely a repetition of the argument made in the original brief. But because of the novelty as well as the importance of many of the questions involved, and the apparent earnestness of counsel in their insistence that the court has grievously erred, we have devoted more time and attention to the objections urged than we otherwise would have done, especially in view of the extraordinary length of the original opinion.
We cannot, in justice to ourselves, conclude this opinion without referring to the fact that respondent’s counsel in ' arguing the questions involved have assumed a self-opinionated attitude wholly incompatible with a calm dispassionate discussion of new and doubtful questions. If the court were not disposed to mate liberal allowance for the zeal of counsel and cover their extravaganzas with the mantle of charity, some of the expressions used might be deemed offensive. The concluding paragraph of their brief, which we publish herewith, is a fair sample of their attitude toward the opinion of the court:
“The business of suretyship is' a legitimate pursuit. It is recognized as such by law. It is a misfortune that it should be struck down as, by the recognition of appellant’s doctrines, it is struck down in this decision. That sureties cannot continue in business if *488creditors and principals need not deal with them in good faith, if they are to be deprived of the benefit of. the fund doctrine, and if their contracts are to be altered without their consent; is clear. But the consequences of this decision reach far beyond the single business of suretyship. The decision refuses to carry the law of strangers’ suits on contracts to its logical end, and has thus left that law in doubt. It has held knowledge and good faith in respect to the rights of third parties immaterial. It has made trial court issues of no consequence on appeal. It has threatened the right of trial by jury. It has transcended the law of contracts. All of the business of men and courts is vitally affected by this decision.”
Under tbe decision rendered in this case, surety companies bave tbe right to make sucb reservations and fix sucb limitations as tbey may deem necessary for tbeir safety and protection. Tbis proposition bas been affirmed by practically every decision heretofore rendered by tbis court relating to tbe rights and obligations of sureties. If tbey fail to adopt sucb precautions, either through their neglect or a fear of driving business away, it is not within tbe just power of judicial tribunals to afford them relief. If tbey cannot do business under tbe law as interpreted in practically every jurisdiction of tbe country it will be unfortunate for them but' irremediable by tbe courts. As regards tbe direful consequences which will befall business in general, pessimistically foreshadowed by respondent’s counsel, tbe court sees no occasion for alarm. It believes that the business of tbe country will not be disturbed or thrown into confusion because of our opinion, but will move on the same as heretofore.
"We see no i*eason for modifying our opinion except as here-inbefore set forth.
Tbe application for a rehearing is denied.
CORFMAN, C. J., and WEBER, and FRICK, JJ., concur.