Court Opinion

ID: 3837984
Source: CourtListenerOpinion
Date Created: 2016-07-06 08:06:58.145384+00
Date Added: 2024-06-11T08:41:38.630173
License: Public Domain

1. The contract entered into between Higgins and the plaintiff is not specifically set out in, or expressly made a *Page 16 
part of, the undertaking, and because of such omission it is argued by appellant's counsel that the only part of the agreement the performance of which was guaranteed by the indemnity company is indicated in the bond, to wit, that Higgins would construct for plaintiff a frame residence conformable to the drawings and specifications thereof, and that he fully complied with this stipulation; that the parties to the undertaking plainly omitted therefrom the clause in Higgins' contract to the effect that he would, at his own expense, furnish all material used in, and supply all labor employed on, plaintiff's building, and promptly pay therefor, so that when the house was finished no liens on account of such labor or material could be filed against the property; and that as the bond in question did not undertake to indemnify plaintiff against any liability she might incur in consequence of the filing of liens against her real property, or guaranty the performance of any of the conditions of Higgins' contract, except such as were incorporated in the undertaking, the court erred in admitting such agreement in evidence.
A text-writer, in discussing the liability incurred under an indemnity undertaking, says: "If the main contract is broader in its scope than the limits fixed in the bond, a reference to the contract will only incorporate so much of the same as is within the limits of the terms of the bond": Stearns, Law of Suretyship, § 143. This author further says: "In general, the liability upon a bond is limited to its recitals. The obligations cannot be enlarged or restricted by parol. The surety is entitled not only to the protection of the ordinary rules of evidence relating to written instruments, but to the additional protection of the statute of frauds, whereby no action can be maintained upon a promise to pay the debt of another unless the promise is in writing. * * Where the principal and the obligee enter into an agreement, and a bond is given to secure its *Page 17 
performance, and the bond recites some of the obligations of the main contract, but not all, the liability under the bond will be limited to the recitals, where the contract is not incorporated into the bond by reference": Stearns, Law of Suretyship, § 146.
In the case at bar it will be remembered that the preamble to the undertaking states when the contract between the plaintiff and Higgins was consummated, describes with particularity the real property upon which the frame residence was to be constructed, and specifies when the building was to have been completed. The stipulation in the bond in regard to the uncertain future event is as follows: "Now, therefore, the consideration of the foregoing obligation is such that if the said principal shall well, truly and faithfully comply with all the terms, covenants and conditions of said contract on his part to be kept and performed according to its tenor, then this obligation to be void; otherwise to remain in full force and effect." If the words "substance practically" had been omitted from the preamble, the liability of the indemnity company for a breach of the undertaking might probably have been limited to the contract purporting to have been set out therein; but, having made use of these words, the phrase "said contract" in the conditional clause undoubtedly refers to the entire agreement entered into between Higgins and the plaintiff, and not to the import thereof, as stated in the preamble clause. In Oberbeck v. Mayer, 59 Mo. App. 289, it is intimated that a contract, the performance of which was guaranteed by an undertaking, might be identified by the date specified in the bond, or by annexing thereto the agreement. In the case at bar the date of the contract and the description of its subject-matter, as specified in the undertaking, are, in our opinion, sufficient to identify the agreement; and reference in the bond, qualified *Page 18 
as it is by the use of the words "substance practically," is adequate to incorporate the contract into the undertaking, thereby rendering the indemnity company liable for a breach of any of the terms of the agreement. No error was committed in admitting the contract in evidence, the important clause of which is as follows: "The contractor shall pay for all labor and materials promptly, so that when the contract is finished no liens may be filed against the property on account thereof."
2. It is maintained by appellant's counsel that the special period of limitation as to the time within which a suit should have been instituted against the indemnity company, as provided in the undertaking, had expired when this action was commenced, and hence an error was committed in sustaining a demurrer to the answer. It is argued by plaintiff's counsel, however, that an inspection of the complaint discloses that the alleged period of special limitation designated in the undertaking had expired when this action was begun, and that, as no demurrer to the complaint was interposed on that ground, the error complained of was waived. One of the grounds of demurrer that may be interposed to a complaint is as follows: "That the action was not commenced within the time limited by this Code": B.  C. Comp. § 68. The rule is settled in this State that where it appears on the face of a complaint that the action was not commenced within the time limited by the Code the objection must be taken by demurrer, and, if not so taken, the exception on that ground is waived: Spaur v. McBee, 19 Or. 76 (23 P. 818); Davis
v. Davis, 20 Or. 78 (25 P. 140); Hawkins v. Donnerberg, 40 Or. 97 (66 P. 691, 908). It is possible, however, that the method of challenging the sufficiency of a complaint by a demurrer is restricted by statute to the several periods of limitation regulated by the Code, and does not apply to a special limitation agreed upon by the *Page 19 
parties, so that the objection that the action was no commenced within six months from the first breach should have been taken, as it was, by answer, and not by demurrer.
3. However that may be, it will be remembered that the complaint alleges facts tending to excuse plaintiff's delay in not in not sooner instituting the action, and, if such averment is sufficient in law for that purpose, no error was committed in sustaining a demurrer to the separate defenses, for the allegation of the complaint is in the nature of a confession and avoidance, admitting that the tiem specified in the undertaking had run, but averring facts tending to show a waiver of the limitation prescribed. This allegation is to the effect that the Aetna Indemnity Company, in pursuance of plaintiff's notice that Higgins was not promptly paying for all the materials used in her building, "assumed full and complete control over the carrying out of said contract and the completion of said residence," and that plaintiff thereafter made to it the payments becoming due under the contract. These averments were denied in the answer, and on the issue thus framed the court found the facts as alleged in the complaint.
4. Though the contractual relation of a corporate suretyship to indemnify a party against loss occasioned by its principal's breach of an agreement is precisely the same as if the contract had been signed by a private party without compensation, the agreement is nevertheless like an insurance contract, in that it offers remuneration for damages caused by negligence, bad faith, and the breach of an agreement: Stearns, Law of Suretyship, § 250. The principle thus announced would probably a low a corporation organized to furnish indemnity for a consideration to invoke the rule applicable to a private surety who, for the accommodation of a friend, voluntarily guaranteed the performance of the terms of his agreement. If such *Page 20 
private surety, however, becomes subrogated to the rights of his principal in the undertaking, to which he is a party, because of the latter's failure to keep his agreement, he ought to be subjected to all the liabilities assumed by his principal, regardless of the original contractual relation. In other words, a corporation becoming a surety, may, like a private surety, by permitting its principal to make such default as he pleases, insist upon its strict legal right, and in an action to enforce its liability legally interpose any defense that a private surety may invoke under the same circumstances; but when a surety, either corporate or individual, in pursuance of the terms of an undertaking, "assumes" the performance of the principal's contract, such surety, by being subrogated to the rights of the principal thereunder, must necessarily become subject to all his liabilities.
5. The complaint alleges that after the indemnity company assumed the performance of the contract the plaintiff paid to it the sums of money becoming due to Higgins under the agreement. One of the terms of such agreement is that Higgins should promptly pay for all material used in plaintiff's building, so that when it was completed no liens could be filed against the property. In the lower court, when plaintiff had introduced her testimony and rested, appellant's counsel moved for a judgment of nonsuit, which having been denied, and an exception saved, the court found that the indemnity company "assumed" Higgins' contract, and it is contended that such finding is unsupported by the evidence. The bill of exceptions does not purport to contain all the testimony given at the trial prior to the interposition of the motion last mentioned, and, in the absence of the court's certificate that all such testimony is incorporated in the transcript, it will be assumed that the evidence was sufficient to uphold the findings made. *Page 21 
6. This brings us to a consideration of the question whether or not such findings of fact, based on a material issue, support the judgment rendered, notwithstanding the action was not commenced to recover the damages sustained within the time specified in the undertaking. InStout v. City Fire Ins. Co., 12 Iowa, 371 (79 Am. Dec. 539), an interest in real property, consisting of a mechanic's lien, was insured under a policy which provided that no action could be maintained against the insurer unless it was commenced within twelve months after a loss of such property by fire. The property having been so destroyed, it was held that proof of loss could not be made until the lien was established by a decree of foreclosure, and that the stipulation in the policy prescribing a special limitation was inoperative. In deciding the case, Mr. Justice BALDWIN, speaking for the court, says: "The point once settled that the interest insured was a mechanic's lien, and the conditions of the policy such that the assured or his assignee is required, before the commencement of his suit on the policy, to prove to the company the value of the interest that he may have in the building insured, and if this cannot be done in the ordinary proceedings in courts necessary to be pursued, or if such proof cannot be made in a legitimate way within one year after loss, then this condition requiring suit to be commenced within one year is rendered inoperative by the parties themselves." In Longhurst v. Star Ins. Co., 19 Iowa, 365, in a suit on an insurance policy given as indemnity against loss by fire of property subject to a mechanic's lien, it was held to be competent for the parties to provide for a special limitation within which an action on the policy might be maintained after a loss; but such condition would not be enforced when so necessarily inconsistent with the nature of the interest insured as to render a recovery unobtainable by the exercise of due *Page 22 
diligence. "If," says Mr. Justice HARLAN in Thompson v. Phenix Ins.Co., 136 U.S. 287 (10 Sup. Ct. 1019, 34 L. Ed. 408), in referring to the delay in bringing an action on an insurance policy within the time agreed upon by the parties, "the failure of the plaintiff to sue within the time prescribed by the policy, computing the time from the date of the fire, was due to the conduct of the company, it cannot avail itself of the limitation of twelve months." The parties to a contract may stipulate that an action for a breach of an agreement must be brought within a certain period, and, if such limitation is reasonable, it will be upheld: 1 Wood, Lim. (2 ed.) § 42.
7. When plaintiff paid to the indemnity company the money due Higgins under the contract, it was incumbent upon the corporation promptly to pay for the material used in the construction of the building; but, not having done so, liens were filed against plaintiff's property, the just amount of which probably could not have been determined until such liens were foreclosed. Until these decrees were rendered, plaintiff could not ascertain in what sum she had been damaged, and, as these liens were not foreclosed until more than six months after the first breach had occurred in the performance of the terms of the contract, the stipulation in the undertaking prescribing a limitation of six months is unreasonable, and therefore inoperative.
8. So, too, the indemnity company, having received from plaintiff the money due under the contract, but failed promptly to pay for the material used in the construction of the building, and allowed liens to be filed against the property, thereby waived the stipulation in the undertaking limiting the time within which an action should have been brought.
From these considerations it follows that the judgment should be affirmed, and it is so ordered. AFFIRMED. *Page 23 
ON PETITION FOR REHEARING.
MR. JUSTICE MOORE delivered the opinion of the court.
9. A petition for a rehearing having been filed, defendant's counsel insist that a statement in the opinion announced in this case, that the bill of exceptions did not purport to contain all the testimony given at the trial prior to the interposition of a motion for a judgement of nonsuit, is not borne out by the record. A reexamination of the transcript shows that the opinion inadvertently refers to the motion for a nonsuit, when it should have specified a motion for findings and a judgment in defendant's favor. The bill of exceptions sets out certain exhibits introduced in evidence by defendant, and then contains the following recital:
"That this was all the testimony offered by the plaintiff to sustain the allegations of her complaint and of the pleadings, and thereupon the Ætna Indemnity Company acting by its counsel, moved the court for an order of nonsuit as follows [stating the reasons therefor] The motion for a nonsuit is denied. Defendant allowed an exception.
That at the close of the case, no more testimony having been introduced on behalf of plaintiff, the defendant moved for findings and judgment in favor of defendant the Aetna Indemnity Company as follows [giving the grounds relied upon]. The motion is overruled. Defendant expects.
The foregoing bill of exceptions is hereby settle and allowed.
Arthur L. Frazer, Judge
The statement in the bill of exceptions, after the order overruling the motion for a nonsuit, "that at the close of the case, no more testimony having been introduced on behalf of plaintiff," etc., does not negative the fact that the defendant may have introduced testimony upon which the findings are based. *Page 24 
We adhere to the assumption announced in the former opinion, which is corrected only in respect to the particular motion intended, and a rehearing is denied.
AFFIRMED: REHEARING DENIED.
 *Page 459