Gray v. McDonald

By the Court, Cole, J. There would seem to be some defect in the law if the judgment in this case could not be sustained on some well settled principle. The case presents in brief this state of facts: One Rycraft had a contract with the state for the building and enlargement of the state capitol. In consideration of a certain sum to him paid by the citizens of Madison, he assigned this contract to one James Campbell. At the time of such assignment, Campbell executed to Rycraft a bond, which was signed by the parties to this suit, with others, as sureties, conditioned to pay the obligee sixty cents per cubic foot for all dimension stone at the railroad depot at Madison, and twenty-five cents per cubic foot for all dimension stone at the quarry near Prairie du Chien,' suitable for and required in the building of the capitol enlargement under the contract. Afterwards, with the full knowledge and consent of the sureties, Campbell assigned the building contract to McDonald, upon certain terms, among which was this condition, that McDonald was to perform all the undertakings and assume all the risks, liabilities and responsibilities imposed upon or assumed by Campbell as as-signee of the contract between the state and Rycraft. McDonald did not sign these conditions. But the jury found upon [216] the evidence that he accepted the assignment with' the terms imposed. He accepted the assignment, performed the work, received the benefits of the contract, but failed to pay for the dimension stone according to the condition of the bond given by Campbell to Rycraft. In consequence of this breach, Ry^ craft brought suit upon the bond, and recovered judgment against the respondent and some of the other sureties. McDonald was made a party to that action, and was requested by the sureties to take charge of it and conduct the defense. This he declined to do. The respondent paid the amount claimed in this suit, in paying the judgment and expenses of litigation. These are the leading facts stated in the complaint, and fully sustained by the proof on the trial. And the question is, can the action be maintained, and if so upon what ground ? The general equity ;of the case would seem to be clear and irresistible, but it is not so obvious upon what principle the liability of the appellant arises. The counsel for the respondent claim that a right of action is given by one or more relations which the parties held in respect to each other. First, it is claimed and insisted that the necessary result of the various transactions was to create the relation of principal and surety between McDonald and the other obligors in the bond; that McDonald really and truly stepped into Campbell’s shoes, acquired his rights and assumed all his liabilities, and consequently became primarily liable to pay the debt to Rycraft; that the relation of principal and surety thus existing between the parties, the respondent has his remedy against the appellant upon an implied promise to indemnify and make good the money paid for the appellant’s use and benefit; and further, that all rights and remedies of the creditor Rycraft enure by an equitable subrogation to the benefit of the respondent. Again, it is argued that the action is maintainable upon another ground, namely, the undertakings and promises entered into by McDonald with Campbell when he accepted the assign [217] ment of the building contract with the terms imposed, upon the principle that where one, for a valuable consideration, makes a promise to another for the benefit of a third person, such third person may maintain an action'upon such promise, as was done in Lawrence v. Fox, 20 N. Y., 274; Burr v. Beers, 24 id., 178, and analogous cases. Se also Kimball v. Noyes et al., 17 Wis., 695. Without stopping to affirm or deny the soundness of the latter proposition, it seems to me that the liability of the appellant may be safely and properly rested upon the former ground. Can it then be said that the relation of principal and surety existed between these parties, as the result of the various transactions above referred to ? If the substance and not the mere form of these transactions is regarded, the question must be answered in the affirmative. In the first place, these parties, with others, became sureties on the bond given by Campbell to Rycraft when the building contract was assigned by the latter to the former. The giving of this bond was doubtless a material part of the consideration for the assignment. Rycraft thereby obtained security for the payment of the dimension stone which he had procured for the building. Had Campbell gone on under the contract, he would have been primarily liable to pay for these stone. But he assigned the contract to McDonald, with the knowledge and consent of the sureties. That is, McDonald, who was before surety, saw fit, with the consent of all concerned, to become the principal, to step into Campbell’s shoes, accept the contract, assuming all his liabilities, and really becoming the principal debtor. He performed the work and derived whatever profit and advantage there was in the contract. It is true, the bond was not changed by inserting therein his name as principal in place of that of Campbell. But does this circumstance go so far as to control the effect of all the other facts and ciroumstances of the case, and destroy the legal consequences which would otherwise flow from them ? Suppose [218] Rycraft Rad collected the value of the dimension stone of McDonald: could the latter turn round upon the respondent for contribution ? Would a court of law or equity entertain such a claim a moment? Manifestly not; and why ? Because under the arrangement McDonald became primarily liable to pay for these stone. Suppose Rycraft had collected the judgment of Campbell: would not the latter have had a right of action against McDonald for the amount he had been compelled to pay? Undoubtedly, and for the same reason. The relations of the parties, then, have become changed; he who was at the outset merely a surety, has become the principal, and has incurred the obligation of that relation in respect to the other parties. The mere form of the transaction is immaterial if the intention is apparent, and certainly the rights and duties of the parties are to be determined upon matters of substance rather than upon technical grounds. The material question is, did not the acts of the parties give rise to the relation of principal and surety ? There is no difficulty in determining where the burden of paying for the dimension stone must ultimately rest. Although Rycraft might recover the value of such stone by judgment against the sureties on the bond given him by Campbell, yet McDonald is finally liable, because he has virtually assumed Campbell’s place. This is clear from the whole transaction. Why not fix upon him the duties and liabilities of Campbell, so far as the sureties are concerned, and enable them to proceed against him for indemnity upon the same ground they would have been permitted to proceed had they paid the debt for Campbell ? Had they paid the debt for Campbell, they could have immediately brought an action at law against him upon an implied promise to indemnify, or for money paid, laid out and expended for his use. The same equity, under our present system of practice, which would have enabled them, after payment, to recover the amount of Campbell, warrants them, under the facts and circumstances of this case, in recovering it of McDonald, [219] who, with tbe consent of all, became tbe principal debtor. And as between him and tbe sureties against whom the judgment was rendered, it was primarily his duty to pay Rycraft for the dimension stone. This view disposes of the case, and renders it unnecessary to notice the other points discussed by counsel. The judgment of the-circuit court is affirmed.