Morgen Oswood v. U.S. Fid. Guar

No, 12943

I N THE SUPREME COURT O THE STATE O MONTANA F F

MORGEN & OSWOOD CONSTRUCTION CO,, I N C , , a Montana Corporation,

P l a i n t i f f and A p p e l l a n t ,

UNITED STATES FIDELITY AND GUARANTY COMPANY, a Maryland Corporation,

Defendant and Respondent,

Appeal from: D i s t r i c t Court of t h e Eighth J u d i c i a l D i s t r i c t , Honorable Truman G. Bradford, Judge p r e s i d i n g ,

Counsel of Record:

For Appellant:

J a r d i n e , Stephenson, Blewett & Weaver, Great F a l l s , Montana J a c k L, Lewis argued, Great F a l l s , Montana

For Respondent :

Berg, O'Connell, Angel and Andriolo, Bozeman, Montana Charles F, Angel argued, Bozeman, Montana

Submitted: A p r i l 25, 1975

Decided: MAY 1 4 1975 Nr. J u s t i c e Wesley C a s t l e s d e l i v e r e d t h e Opinion of t h e Court.

This i s an a p p e a l from an o r d e r of t h e d i s t r i c t c o u r t , Cascade County,changing venue from t h a t county t o G a l l a t i n County. P l a i n t i f f Morgen & Oswood C o n s t r u c t i o n Co., I n c . i s a g e n e r a l con- t r a c t o r w i t h i t s p r i n c i p a l p l a c e of b u s i n e s s i n Great F a l l s , Montana. P l a i n t i f f brought t h i s a c t i o n i n Cascade County a g a i n s t defendant United S t a t e s F i d e l i t y and Guaranty Company, a Maryland c o r p o r a t i o n , ( h e r e i n a f t e r r e f e r r e d t o a s USF&G), a s s u r e t y of one P a t r i c k A . H e r r i n g , t o r e c o v e r l o s s and damages i n c u r r e d a s a consequence of ~ e r r i n g ' sf a i l u r e t o perform a s u b c o n t r a c t f o r p l a i n - tiff. P l a i n t i f f ' s c o n t r a c t was on a p r o j e c t a t Montana S t a t e U n i v e r s i t y a t Bozeman. The s u b c o n t r a c t was t o perform l a b o r and furnish certain materials. The agreement r e q u i r e d H e r r i n g t o f u r n i s h a s u r e t y bond e q u a l i n an amount t o t h e c o n t r a c t p r i c e , c o n d i t i o n a l upon and c o v e r i n g t h e f a i t h f u l performance of t h e terms, p r o v i s i o n s and c o n d i t i o n s of t h e s u b c o n t r a c t agreement. H e r r i n g o b t a i n e d t h e bond w i t h p l a i n t i f f a s o b l i g e e , Herring a s p r i n c i p a l , and defendant a s s u r e t y . The c o n d i t i o n of t h e bond was: "a ;k 9~ That i f t h e s a i d P r i n c i p a l s h a l l w e l l and t r u l y perform and f u l f i l l a l l and e v e r y t h e c o v e n a n t s , condi- t i o n s , s t i p u l a t i o n s and agreements i n s a i d c o n t r a c t men- t i o n e d t o be performed and f u l f i l l e d , and s h a l l keep t h e s a i d Obligee harmless and indemnified from and a g a i n s t a l l and e v e r y c l a i m , demand, judgment, l i e n , c o s t and f e e of e v e r y d e s c r i p t i o n i n c u r r e d i n s u i t s o r o t h e r w i s e a g a i n s t t h e s a i d Obligee, growing o u t of o r i n c u r r e d i n , t h e p r o s e c u t i o n of s a i d work a c c o r d i n g t o t h e terms of t h e s a i d c o n t r a c t , and s h a l l r e p a y t o t h e s a i d Obligee a l l sums of money which t h e s a i d Obligee may pay t o o t h e r e r s o n s on account of work and l a b o r done o r m a t e r i a l s f u r n i s h e d on o r f o r s a i d c o n t r a c t , and i f t h e s a i d P r i n - c i p a l s h a l l pay t o t h e s a i d Obligee a l l damages o r f o r - f e i t u r e s which may be s u s t a i n e d by reason of t h e non- performance o r mal-performance on t h e p a r t of t h e s a i d P r i n c i p a l of any o f t h e c o v e n a n t s , c o n d i t i o n s , s t i p u l a - t i o n s and agreements of s a i d c o n t r a c t , then t h i s o b l i g a - t i o n s h a l l be v o i d ; o t h e r w i s e t h e same s h a l l remain i n f u l l f o r c e and v i r t u e . " (Emphasis added). According t o t h e terms and p r o v i s i o n s of t h e s u r e t y bond, H e r r i n g and USF&G agreed t h a t they were j o i n t l y and s e v e r a l l y bound under t h e bond unto p l a i n t i f f .

Subsequently, Herring a l l e g e d l y f a i l e d t o f u r n i s h a l l t h e l a b o r , m a t e r i a l s , s k i l l and i n s t r u m e n t a l i t i e s and f a i l e d t o perform a l l t h e work n e c e s s a r y and i n c i d e n t a l l y r e q u i r e d on t h e job of him under t h e terms and p r o v i s i o n s of h i s s u b c o n t r a c t w i t h p l a i n t i f f . By reason t h e r e o f , p l a . i n t i f f t h e r e a f t e r i n i t i a t e d t h i s a c t i o n a g a i n s t only USF&G a s s u r e t y of Herring f o r t h e damages i n c u r r e d by plaintiff. By i t s complaint, p l a i n t i f f a l l e g e d t h e c o n d i t i o n o f USF&Gts s u r e t y bond was breached by ~ e r r i n g ' sf a i l u r e t o f u r n i s h t h e r e q u i s i t e l a b o r , e t c . , and h i s f a i l u r e t o perform t h e n e c e s s a r y work, and t h a t a s a consequence USF&G owes p l a i n t i f f t h e damages and l o s s i n c u r r e d by reason of ~ e r r i n g ' sbreach. I n i t s f i r s t appearance, USF&G f i l e d a l t e r n a t i v e motions t o d i s m i s s t h e complaint f o r f a i l u r e t o j o i n Herring a s a p a r t y , t o d i s m i s s t h e complaint f o r f a i l u r e t o s t a t e a c l a i m , and f o r change of venue supported by an a f f i d a v i t of Herring. By i t s motion f o r change of venue, USF&G sought t o have t h e p l a c e of t r i a l changed from t h e d i s t r i c t c o u r t i n Cascade County t o t h e d i s t r i c t c o u r t i n G a l l a t i n County: "* * * on t h e grounds and f o r t h e r e a s o n s t h a t t h e a c t i o n i n t h e i n s t a n t c a s e a r i s e s o u t of a c o n t r a c t t o be performed by P a t r i c k A . Herring, d / b / a Q u a l i t y Roofing and Sheet Metal, of Bozeman, Montana, a t Bozeman, G a l l a t i n County, Montana, and t h a t although t h e defendant has no r e s i d e n c e i n Montana, r e s i d e n c e f o r venue purposes should be considered t o be t h e r e s i d e n c e of i t s i n s u r e d , P a t r i c k A . Herring, d / b / a Q u a l i t y Roofing and Sheet Metal, whose r e s i d e n c e i s Bozeman, G a l l a t i n County, Montana; t h a t under t h e p r o v i s i o n s of S e c t i o n 93-2904, Revised Codes of Montana, 1947, an a c t i o n i s t o be t r i e d i n t h e county where t h e defendant r e s i d e s a t t h e time of commencement of t h e a c t i o n , o r i n t h e county i n which t h e c o n t r a c t was t o be performed. 11 I n h i s s u p p o r t i n g a f f i d a v i t Herring s t a t e d t h a t he was a r e s i d e n t of G a l l a t i n County, t h a t a t t h e times a l l e g e d i n p l a i n t i f f ' s complaint he had conducted b u s i n e s s i n G a l l a t i n County and t h a t h i s s u b c o n t r a c t agreement w i t h p l a i n t i f f was t o have been performed i n G a l l a t i n County. I n h i s a f f i d a v i t , Herring s t a t e s t h a t he may be r e q u i r e d t o indemnify USF&G i f USF&G were t o b e h e l d l i a b l e t o p l a i n - t i f f and t h a t he o b j e c t s t o t h e venue b e i n g i n Cascade County. The

d i s t r i c t c o u r t i n Cascade County g r a n t e d USF&G's motion f o r change o f venue and p l a i n t i f f a p p e a l s from t h a t o r d e r changing venue. The i s s u e on a p p e a l i s whether p l a i n t i f f can s u e i n i t s county of r e s i d e n c e a f o r e i g n c o r p o r a t e s u r e t y when t h e a c t i o n i s on a bond a s s u r i n g a s u b c o n t r a c t which was t o be performed i n a n o t h e r county and t h e r e s i d e n c e of t h e s u b c o n t r a c t o r i s i n a n o t h e r county. W n o t e h e r e t h a t defendant USF&G u r g e s a n o t h e r i s s u e i s e whether Herring, t h e s u b c o n t r a c t o r , i s an i n d i s p e n s a b l e p a r t y ; b u t , we r e j e c t t h a t immediately f o r r e a s o n s which appear h e r e i n - after. The s u r e t y bond s p e c i f i c a l l y and c l e a r l y s t a t e s t h a t t h e bond upon which p l a i n t i f f i n i t i a t e d t h i s a c t i o n a g a i n s t USF&G i s a j o i n t and s e v e r a l o b l i g a t i o n of Herring and USF&G. Parties II having a j o i n t and s e v e r a l f ' o b l i g a t i o n a r e bound j o i n t l y a s one p a r t y , and a l s o s e v e r a l l y a s s e p a r a t e p a r t i e s a t t h e same time and a j o i n t and s e v e r a l c o n t r a c t i s a c o n t r a c t w i t h each promisor and a j o i n t contract with a l l . 17A C.J.S. C o n t r a c t s 5 355a. When a s e v e r a l o b l i g a t i o n i s e n t e r e d i n t o by two o r more i n one i n s t r u m e n t , i t i s t h e same a s though each had executed s e p a r a t e i n s t r u m e n t s , and

each o b l i g a t i o n f u r n i s h e s a s e v e r a l c a u s e of a c t i o n . 17A C.J.S. C o n t r a c t s 1 352a. Thus, although p l a i n t i f f could have i n i t i a t e d - t h i s a c t i o n a g a i n s t b o t h Herring and USF&G i t chose t o s u e only USF6G. Cole Manufacturing Co. v. Morton, 24 Mont. 58, 60 P. 587; B u t t e Machinery Co. v. Carbonate H i l l M i l l i n g Co., 75 Mont. 167, 242 P. 956. P l a i n t i f f had a r i g h t t o sue o n l y USF&G without j o i n i n g Herring because a c o n t r a c t of s u r e t y s h i p i s a d i r e c t l i a b i l i t y of t h e s u r e t y t o t h e a s s u r e d and when t h e p r i n c i p a l (Herring) f a i l s t o perform, t h e s u r e t y becomes d i r e c t l y r e s p o n s i b l e a t once, a s i t i s unnecessary f o r t h e a s s u r e d t o e s t a b l i s h t h a t t h e p r i n c i p a l f a i l e d t o c a r r y o u t h i s c o n t r a c t b e f o r e t h e o b l i g a t i o n of t h e s u r e t y be- comes a b s o l u t e . Cole Manufacturing Co. v. Morton, s u p r a ; B u t t e

Machinery Co, v. Carbonate H i l l M i l l i n g Co. supra. It i s s t a t e d

i n 72 C.J.S. P r i n c i p a l and Surety §264b, p. 712: 11Since t h e s u r e t y i s j o i n t l y o r j o i n t l y and severally l i a b l e with the principal t o the c r e d i t o r , t h e s u r e t y may i n any c a s e be j o i n e d w i t h t h e p r i n c i p a l i n an a c t i o n by t h e c r e d i t o r , and, where t h e l i a b i l i t y i s j o i n t and s e v e r a l , t h e c r e d i t o r may sue anyone s e p a r a t e l y i f t h e c o u r t has j u r i s d i c t i o n of t h e e n t i r e case." (Emphasis added). P r i o r t o t h e adoption of ~ o n t a n a ' sp r e s e n t r u l e s of proce- d u r e , s e c t i o n 93-2822, R.C.M. 1947, was i n e f f e c t . It s p e c i f i c a l l y provided t h a t persons s e v e r a l l y l i a b l e upon t h e same i n s t r u m e n t , i n c l u d i n g s u r e t i e s , "may a l l o r any of them be included i n t h e same a c t i o n , a t t h e o p t i o n of t h e p l a i n t i f f . " Under t h a t s t a t u t e , t h i s Court h e l d i n every c a s e brought b e f o r e i t t h a t an a c t i o n may b e maintained a g a i n s t a s u r e t y without j o i n i n g t h e p r i n c i p a l . Comerford v. United S t a t e s F i d e l i t y and Guaranty Co., 59 Mont. 243, 196 P . 984; Deer Lodge County v. United S t a t e s F i d e l i t y & Guaranty Company, 42 Mont. 315, 112 P. 1060; F o s t e r v. Royal Indemnity Co., 83 Mont. 170, 271 P. 609. Section 93-2822, R.C.M. 1947, has been superseded by Rule 2 0 ( a ) , M.R.Civ.P., which i n p e r t i n e n t p a r t pro- vides: It* ** A l l persons may be j o i n e d i n one a c t i o n a s defendants i f t h e r e i s a s s e r t e d a g a i n s t them j o i n t l y , s e v e r a l l y , o r i n t h e a l t e r n a t i v e , any r i g h t t o r e l i e f i n r e s p e c t of o r a r i s i n g o u t of t h e same t r a n s a c t i o n , occurrence o r s e r i e s of t r a n s a c t i o n s o r occurrences and i f any q u e s t i o n s o f law o r f a c t common t o a l l defendants w i l l a r i s e i n t h e a c t i o n 9~ ** Judgment may b e given * 'v * a g a i n s t one o r more defendants according t o t h e i r respec- tive liabilities." (Emphasis added.) Thus, i t i s s t i l l permissive f o r a p l a i n t i f f t o s e p a r a t e l y s u e j o i n t and s e v e r a l o b l i g o r s . Here, USF&G i s t h e s o l e defendant and a n o n - r e s i d e n t and under s e c t i o n 93-2904, R.C.M. 1947, may be sued i n any county t h e p l a i n t i f f d e s i g n a t e s . Foley v. General Motors Corp., 159 Mont. 469,

USF&G argues i n i t s b r i e f about a l a c k of due p r o c e s s t o Herring. USF&G, however, has given n o t i c e t o Herring. Herring h a s every o p p o r t u n i t y t o appear i f he d e s i r e s .

The order of the district court is reversed and the matter returned to the district court of Cascade County for fur- ther proceedings.

Justice 4 4

Me Concur: jP / .

Chief Justice / Justices. !