Page images
PDF
EPUB

was erecting said apartment building as aforesaid, under the terms of which contract it was to furnish the labor and material for the metal ceilings on the balconies of said building for the sum of $178, and that on or about the 20th day of May, 1910, it completed said work in accordance with said agreement, and it is alleged in the petition that said plaintiff rendered to said defendant Nick J. Gaspard bills for the amounts due under said three contracts, amounting in all to $684, no part of which amount has been paid.

It is alleged in the petition that the defendants George E. Meier and Catherine Gaspard are sureties on a bond given by said defendant Nick J. Gaspard to the F. Zimmerman Realty Company, the owner of the apartment building, of which bond the following is a copy:

"Know all men by these presents: That N. J. Gaspard, George E. Meier and Catherine Gaspard of the city of Cleveland, county of Cuyahoga and state of Ohio, held and firmly bound unto the F. Zimmerman Realty Co. of Cleveland, Ohio, in the sum of six thousand dollars ($6,000.00) to be paid to the F. Zimmerman Realty Co., its successors or assigns, to which payment, well and truly to be made, we bind ourselves, our heirs, executors and administrators, and every one of them, firmly by these presents.

"Sealed with our seals, and dated this first day of Sept. in the year of our Lord, one thousand nine hundred and nine.

"The condition of this obligation is such that whereas the said N. J. Gaspard on the 17th day of Aug., A. D. 1909, entered into a written agreement with the said F. Zimmerman Realty Co., whereby he contracted to provide all the materials and perform all the work for the erection and completion of the carpenter work, wooden framing, frames, sash, doors, finish, flooring, roofing, sheet metal work, marble and mosaic, mantel and tile work, glass and glazing, rough and finished hardware for a three story brick apartment building to be erected on the northeast corner of E. 86th street and Birchdale avenue, Cleveland, O., and to furnish all tools, implements and cartage thereto as shown by drawings and specifications by architect, G. B. Bohm; and whereas said contract further provided as follows: 'As a condition of this contract to furnish the owner a satisfactory surety bond as agreed in the sum of six thousand dollars ($6,000.00) to guarantee the completion of the work comprehended in this agreement, and to further guarantee the payment of any claims there may be for the payment of material and labor required in the erection of this building'; and whereas, in lieu of a surety bond, it is agreed between the said parties that said N. J. Gaspard may furnish a bond signed by individuals: Now, therefore, if the said N. J. Gaspard shall well and truly perform all the terms and conditions contained in said contract and complete said work as therein provided and pay or cause to be paid all claims contracted in reference thereto for material and labor, then the above obligation to be void; otherwise the same shall remain in full force and virtue in law.

N. J. Gaspard. "Geo. E. Meier. "Catherine Gaspard. "Signed, sealed and delivered in presence of F. Zimmerman."

It is further alleged in the petition that, by the terms of said bond, the defendants George

the payment of all claims for material and labor furnished to said defendant Nick J. Gaspard in the erection of said building; that the material and labor furnished by plaintiff to defendant Nick J. Gaspard were used by him in the erection of said building; and that there is due plaintiff, for material and labor so furnished to said defendant Nick J. Gaspard in the erection of said building, the sum of $684, for which amount and interest from the 20th day of May, 1910, plaintiff asks judgment against the defendants.

The defendants George E. Meier and Cath. erine Gaspard demurred to this petition upon the ground that facts sufficient to constitute a cause of action against them, either jointly or severally, were not stated therein. The demurrer was sustained by the common pleas court, and, plaintiff not desiring to amend or further plead as to said two defendants, judgment was rendered against it and in favor of said defendants George E. Meier and Catherine Gaspard, which judgment was affirmed by the circuit court.

Plaintiff in error has filed a petition in error in this court, asking for a reversal of the judgment of the circuit court.

F. C. Hartman, of Cleveland, for plaintiff in error. Pomerene & Karch, of Barberton, for defendants in error.

NEWMAN, J. (after stating the facts as above). It is to be observed that plaintiff the Cleveland Metal Roofing & Ceiling Company, is not named in the bond, under the provisions of which it claims its right of recovery against the defendants George Meier and Catherine Gaspard, the sureties. The obligee named in the bond is the F. Zimmerman Realty Company. The bond recites the fact that the defendant Nick J. Gaspard on the 17th day of August, 1909, entered into a written agreement with the F. Zimmerman Realty Company to provide all the materials and perform all the work for the erection and completion of the carpenter work, wooden framing, frames, sash, doors, finish, flooring, roofing, sheet metal work, marble and mosaic, mantel and tile work, glass and glaz ing, rough and finished hardware for the apartment building. A personal bond was, by agreement, accepted in lieu of a surety bond. It is conditioned that the defendant Nick J. Gaspard shall well and truly perform all the terms and conditions contained in his agreement with the F. Zimmerman Realty Company and complete said work as therein provided and pay or cause to be paid all claims contracted in reference thereto for material and labor. The bond was executed on the 1st day of September, 1909. The contracts, under which plaintiff performed labor and furnished material for Nick J. Gaspard, were entered into subsequently thereto, namely, on November 10, 1909, April 20, 1910, and May 16, 1910, respectively. There is no

knowledge of the existence of this bond at the time it entered into the several contracts with Nick J. Gaspard or at the times it furnished the labor and material thereunder, or that it relied upon the provisions of the bond for the payment of its claims against Nick J. Gaspard. Plaintiff, so far as the petition discloses, at the time the bond was executed, was unknown to the parties to the instrument and had no claim of any kind against Nick J. Gaspard.

The question presented by the demurrer is whether plaintiff has a right of action against the sureties on the bond. It is urged that, under the settled law of this state that an agreement made on a valid consideration by one person with another, to pay money to a third, is enforceable by the latter in his own name, the right to proceed against the sureties on this bond exists in favor of the plaintiff.

An examination of the Ohio cases in which this rule is announced and approved will disclose the fact that in those cases there was an actual and fixed liability on the part of the promisee to such third person at the time the promise was made by the obligor, and the amount for which the obligation was made was either specified or then ascertainable. In the case of Crumbaugh v. Kugler, 3 Ohio St. 544, the grantor conveyed to the grantees certain lands, part of the consideration being an agreement by the grantees to pay the debts due by the grantor, and the debts were in existence and ascertainable at the time of the transfer. Thompson v. Thompson, 4 Ohio St. 333, was a case where the purchaser of real estate agreed to pay an existing mortgage indebtedness; in Bagaley & Co. v. Waters, 7 Ohio St. 359, where Crumbaugh v. Kugler and Thompson v. Thompson, supra, are approved, the purchaser of real estate agreed to assume and pay certain debts existing at the time.

its execution, that this particular lien of the plaintiffs upon the bridge was to be discharged by Emmitt. Its existence was known to them, and they seem to have left nothing to conjecture. Indeed, if Brophy and Potter had been expressly named as the lienholders, it is difficult to see how this would have added to the the intention of the parties. This seems to be definiteness of the bond or made more certain a conclusive answer to the suggestion that there is a want of privity between the immediate parties to the bond and the plaintiffs, which is chiefly relied upon by Emmitt as a defense."

Judge Spear, in the well-considered case of C., H. & D. R. Co. v. Bank, 54 Ohio St. 60, 42 N. E. 700, 31 L. R. A. 653, 56 Am. St. Rep. 700, discusses the rule under which plaintiff here is claiming its right to recover, cites the case of Emmitt v. Brophy, supra, with approval, and refers to the language of the court in that case which we have quoted above. The learned jurist calls attention to the fact that none of the cases announcing the rule carries the doctrine farther than it is carried in the Emmitt Case, and then uses this language:

"In no one of them is it held that a right to sue in a stranger can be raised by mere implication. Nowhere is it held that the obligation will attach in favor of future creditors not named and not known, and as to amounts not specified or then ascertainable, to the extent of giving to such creditors a right of action on the contract."

We concur in the view thus expressed by Judge Spear, and this limitation or qualification of the rule, we think, precludes a right of recovery in favor of plaintiff against the sureties on the bond here, for, at the time of the execution of the bond, plaintiff was not claimed in his petition to be due could not be named or known, and, of course, the amount specified and was not ascertainable.

The deduction to be drawn from the cases

person, it must appear that the contract was made and entered into directly or primarily for the benefit of such third person, and that there was a liability to such third person, on the part of the promisee, at the time of the execution of the contract. To illustrate, in Emmitt v. Brophy, supra, it was clearly the intention of the parties to the bond that the judgment creditors who held a lien on the bridge were to be directly benefited by the bond. And further there was a liability on the part of the purchasers of the bridge to discharge this judgment lien.

to which we have called attention, and from the great majority of the decisions of the courts of other states which give sanction to In the well-known case of Emmitt v. Bro- the rule under consideration here, is that, phy, 42 Ohio St. 82, the court, in commenting in order that the third person derive a beneupon the bond there under consideration, refit from the promise of the obligor to another fers to the fact that, by its express provisions, Emmitt, the obligor, agreed to "pay off and liquidate all claims and demands, liens, and debts, whether in judgment or otherwise, existing against said bridge." At the time the bond was executed, Brophy and Potter had reduced to judgment their claims against the Scioto Bridge Company, the former owner of the bridge, and caused an execution to be levied on the bridge. This levy was subsisting and in full force at the time the bridge was sold to the commissioners of the county. The bond in question was given to the state of Ohio, as nominal obligee, for the use and benefit of Pike county, by Em- der consideration here, the same were primamitt, who had owned a controlling interest rily for the benefit of the owner of the buildin the bridge company and who received the ing. It was a guaranty on the part of the entire purchase price of the bridge. obligors, among other things, of the payment "These facts," the court say, "are strongly of claims for material and labor required in suggestive that it entered into the contempla- the erection of the building, and was availation of the parties to this bond at the time of ble to the owner alone upon a showing that it

As we view the provisions of the bond un

true, were indirectly interested in the performance of the covenants in the bond, but, if they can maintain an action against the sureties, then an executory contract, under the terms of which one person agrees with another to advance money to the latter with which to pay his debts, could be enforced by any creditor of the person to whom the promise is made. No one would contend for such a doctrine.

In the case of Vrooman v. Turner, 69 N. Y. 280, 25 Am. St. Rep. 195, in which case the court reviews a number of New York cases bearing upon the rule being considered here, it was held that a mere stranger cannot claim the benefit of a contract between other parties; to entitle a third person to such benefit there must be either a new consideration or some prior right or claim against one of the contracting parties by which he has a legal interest in the performance of the agreement. In the case at bar, plaintiff, at the time of the execution of the bond, so far as the record discloses, had no right or claim against either of the parties to the bond.

had been required to pay these claims or had [ of its covenants. The persons who furnished suffered loss on account of their nonpayment. labor or material to Nick J. Gaspard, it is And, again, it does not appear that there was any liability on the part of the owner to pay any claim for material and labor furnished by plaintiff, or that any liability might arise against it in favor of plaintiff. The bond was conditioned not only for the payment of claims for material and labor, but also for the completion of the work comprehended in the contract between the owner of the building and Nick J. Gaspard. So far as the petition discloses, the owner of the building may have paid to Nick J. Gaspard, prior to the time the contracts between him and plaintiff were entered into, all that was due him under it (the owner's contract), and, in that event, plaintiff would have no claim against the building or its owner. It is true that, under the lien laws of this state, plaintiff could have asserted a claim to any funds in the hands of the owner due and owing to Nick J. Gaspard, and it might occur to one that the presumption is that plaintiff, with knowledge of the existence of the bond, proceeded upon the theory that it was amply protected thereby and that it was unnecessary to avail itself of the provisions of the lien law. But it must be borne in mind that this is an action against personal sureties on a bond, and there should be a strict inter-port their contention here. In a number of pretation of their obligations. Their liability is limited to the exact letter of the bond, and presumptions cannot be indulged in to aid plaintiff in enforcing a liability against them. | Recognizing, as we do, the right of a third person to enforce, in his own name, an agreement made by one person with another to pay money to such third person, nevertheless this rule is subject to the limitations and qualifications we have pointed out, making it inapplicable to the case at bar. We are not disposed to extend the doctrine so as to permit the maintenance of an action by a third person against sureties on a bond, where it does not appear that the bond was entered into directly or primarily for the benefit of such third person, or that there was a fixed or ascertainable liability on the part of the obligee to such third person at the time the bond was executed, or that the services and material were furnished by such third person with knowledge of or reliance on the bond. It does not appear from the petition here

and we are confined to its allegations in passing upon the demurrer-that plaintiff even had knowledge of the existence of the bond when it furnished the labor and material to Nick J. Gaspard, or that it relied thereon. Such matters cannot be read into the petition where the rights of sureties are involved.

To repeat, the bond was for the protection of the owner of the building. To entitle plaintiff to sue on this bond, it is not suffiIcient that there be a showing that a benefit

Counsel for plaintiff have cited numerous cases outside of Ohio, which, they insist, sup

these cases the contracts or bonds under which third persons were claiming are different in form and language from the one here. In other cases the facts disclosed by the record are unlike those presented here. In some it appears that the condition in the bond was inserted for the sole and express purpose of protecting all persons who should do work or furnish material, and that such persons did the work and furnished the material relying upon the provisions of the bond. Cases are cited in which a bond is given to a municipality under a statute for the benefit or security of persons not named as obligees, and where the statute expressly or by implication authorizes such persons to sue upon the bond. These cases are not in point here, and it is unnecessary to make further reference to them.

Our attention is directed to the case of American Surety Co. v. Raeder, Assignee, 15 Ohio Cir. Ct. R. 47, affirmed by this court, without opinion, 61 Ohio St. 661, 57 N. E. 1130. In that case, the bond was given by the contractor to the board of education for the building of a schoolhouse, and provided for the payment of all just and legal claims for labor performed and material furnished, and it was expressly provided in the bond that the undertaking should be for the use of any laborer or materialman having a just claim, as well as for the board of education. In that case the main question was whether the bond could be enforced in behalf of the laborers and materialmen. Counsel for the

My contention is that the judgment and syllabus in this case are contrary to the authority of modern precedent, contrary to the authority of reason, contrary to the intention of the parties to the bond, contrary to the progressive jurisprudence and the humanitarian spirit of the times.

given solely for the protection of the board | I set forth in some detail my reasons for of education, and inasmuch as the board was this dissent. under no legal obligation to pay a claim against the contractor for labor and material furnished, and was in no way indebted to the plaintiff in that case, no cause of action arose on the bond in his favor. The circuit court held that it was quite clear, from an examination of the language of the bond, that the parties intended to give a right of action on the bond for unpaid claims of the class of the plaintiff against the contractor. The absence in the bond here of a provision such as appeared in the bond in that case distinguishes the two cases.

In Buffalo Cement Co. v. McNaughton, 90 Hun, 74, 35 N. Y. Supp. 453 (affirmed on opinion of Supreme Court, 156 N. Y. 702, 51 N. E. 1089), the court denied the right of recovery even on a bond with a provision similar to the one in American Surety Co. v. Raeder, Assignee, supra, for the protection of materialmen, as it did not appear that they knew of the bond and relied on its provisions when they furnished the material. The court used the following language, which is in point here, and applies with more force for the reason that there is no express provision in the bond giving materialmen the right to bring an action in their own names: "In some of the states of the Union statutes have been passed giving a cause of action in favor of materialmen in such a case as this. A

like provision may be found in certain city charters. But these statutes will be found to contain provisions looking to the protection of the sureties in some instances by a short statute of limitations. The plaintiff is not aided by any such provision, either in our city charter or by any statute in our state. If the plaintiff is entitled to recover in this case, the bond being a sealed instrument, it would seem to follow that the 20 years' statute of limitations applies. If so, it would follow that the plaintiff, or any others who may have furnished material or labor upon the sewer, could at any time during that period maintain actions against the sureties to recover anything due them from the contractor. Such actions might have been brought before the completion of the sewer, and the penalty named in the bond exhausted, and the city thereby deprived of the protection which the bond was intended to give to it."

For the reasons we have given, plaintiff in error did not, in its petition, state facts entitling it to relief against the sureties on the bond, and the circuit court did not err in affirming the judgment of the common pleas court on the demurrer to the petition, and the judgment of the circuit court is therefore affirmed.

Judgment affirmed.

SHAUCK, DONAHUE, and WILKIN, JJ., concur. NICHOLS, C. J., and JOHNSON, J., dissent.

WANAMAKER, J. I dissent from the judgment and syllabus of this case. Due respect for the majority opinion as well as for the importance of this case requires that

The majority opinion concedes the doctrine laid down in American Surety Co. of New York v. Raeder, Assignee, et al., 15 Ohio Cir. Ct. R. 47, which was affirmed without opinion in 61 Ohio St. 661, 57 N. E. 1130. The syllabus of the case reads as follows:

"Where, in a contract with a board of educatractor was required to and did give a bond for tion for the building of a schoolhouse, the conthe faithful performance of the contract, providing also that he should pay all just and legal claims for labor performed upon, and for maing that the undertaking should be for the use terial furnished for, the work, and also agreeof any laborer or materialman having a just claim as aforesaid, as well as for the board of education, such obligation, so far as laborers and materialmen are concerned, is not beyond the powers of the board of education, but is valid, and may be enforced against the sureties on such bond by any laborer or materialman for labor performed or material furnished in who has a legal claim against such contractor the erection of the building."

The bond in that case, among other provisions, contains the following:

"The condition of this obligation is such that whereas the said Peter J. Black did, on the 27th day of May, A. D. 1895, enter into the foregoing agreement with said board of education, which said agreement is made a part of this bond, the same as though fully set forth herein, now, if the said Peter J. Black, designated as said party of the second part, in the said foregoing agreement, shall well and truly perform all and singular the stipulations of said agreement by him to be performed, and shall pay all just and legal claims for labor performed upon, and for materials furnished for, the work specified in said agreement, the same shall remain in full force and virtue in law; otherwise, then this obligation shall be void. We hereby agreeing and consenting that this undertaking shall be for the use of any laborer or materialman having a just claim as aforesaid, as well as for said board of education."

The very able and conclusive opinion by Judge Hale in this case of the circuit court of Cuyahoga county might well be sufficient to justify this dissent.

The old doctrine that a third party, stranger to the instrument or contract, might not sue under the contract because of there being no "privity" between him and the other parties to the contract has long been disregarded.

"In most of the states the English doctrine that, where a person makes a promise to another for the benefit of a third person, the latter cannot maintain an action upon it is not recognized to the full extent, but it is held, subject to the qualification hereafter stated, that the action may be maintained. This is now the prevailing doctrine in the United States. This is sometimes based on general principles of law and sometimes, as in the code states, on the provisions of the Code of Procedure that every action shall be prosecuted

in the name of the real party in interest.'" Cyc. 377 et seq.

9

"By the weight of authority the action cannot be maintained merely because the third person will be incidentally benefited by performance of the contract; but he must be a party to the consideration, or the contract must have been entered into for his benefit, and he must have some legal or equitable interest in its performance. If the person for whose benefit a contract is made has either a legal or equitable interest in the performance of the contract, he need not necessarily be privy to the consideration." 9 Cyc. 380.

Some of the states, New York for instance, have adhered very closely to the old English rule and have relaxed it only to a very limited degree, while the central and western states' decisions, as well as our federal decisions, have repudiated the English doctrine almost entirely.

The majority opinion cites with approval the Ohio cases of Crumbaugh v. Kugler, 3 Ohio St. 544, Thompson, Adm'x, v. Thompson, 4 Ohio St. 333, Bagaley & Co. v. Waters, 7 Ohio St. 359, as announcing the doctrine that a third party can sue only where there is an existing indebtedness. It must be conceded on all hands that that is not the law to-day in respect to bonds. Bonds generally relate entirely to the future and in no wise to the past. They are given expressly to guarantee the faithful performance of future personal duties, trust duties, and official duties, to provide against future defaults and defalcations. And if this be sound doctrine-that an existing indebtedness had to be the basic predicate of the right of a third party to sue -then all such contracts in futuro would be mere nullities, so far as third parties are concerned. Now there is no more reason in principle why there should be an existing indebtedness to support an action by a third party than in case of the first or second party to a contract. Raeder Case, supra.

In line with these old cases is also the case of Emmitt v. Brophy, 42 Ohio St. 82, in which again the existing indebtedness is emphasized as an essential qualification of the bond. This last case is cited with approval in the case of C., H. & D. Railroad Co. v. Bank, 54 Ohio St. 60, 42 N. E. 700, 31 L. R. A. 653, 56 Am. St. Rep. 700. Great emphasis is laid upon this last case by the majority, and Judge Spear's opinion is specially commended. The syllabus in that case reads as follows:

"An action cannot be maintained against a bank by the holder of a check for refusal to pay it unless the check has been accepted, although there stands to the credit of the draw er on the books of the bank a sum more than sufficient to meet the check."

This syllabus is absolutely without any relevancy to the case at bar, and I further contend and maintain that it is not sound doctrine as applied to existing commercial transactions with a modern-day bank, in which all checking accounts are expressly made subject to the payment of all checks

positor in his own favor but issued in favor of third parties, so long as the bank has the funds with which to pay. This agrees with the progressive business spirit of the times. Certainly the owner, holder, or payee of the check is the real party in interest, and I cannot believe that such a decision would receive the sanction of this court in the year 1914. Who is the "real party in interest" if not the payee of the check? Judge Spear, in that opinion, uses this language:

"Nowhere is it held that the obligation will attach in favor of future creditors not named and not known, and as to amounts not specified or then ascertainable, to the extent of giving to such creditors a right of action on the con

tract."

And yet this very court in affirming the Raeder Case, supra, four years later, repudiated the foregoing doctrine that third parties not named could bring suit and for an amount not then ascertainable.

Now it must be conceded that the intention of the parties to be determined from what they have said and done shall be the polestar in interpreting all written instruments, whether simple contracts, checks, bonds, and even statutes and constitutions. jority opinion is strangely silent on the question of what was the intention of the parties to the bond.

The ma

The intention in the Raeder Case, supra, is manifest from the express terms of the contract, and that, too, without the aid of the last three lines of that bond. Is the intention of the parties not equally manifest from the terms of the bond in the case at bar? The part of the bond pertinent to this inquiry is as follows:

"The condition of this obligation is such that whereas the said N. J. Gaspard on the 17th day of Aug., A. D. 1909, entered into a written agreement with the said F. Zimmerman Realty Co., whereby he contracted to provide all the materials and perform all the work for the erecwooden framing, frames, sash, doors, finish, tion and completion of the carpenter work, flooring, roofing, sheet metal work, marble and mosaic, mantel and tile work, glass and glazing, rough and finished hardware for a three-story northeast corner of E. 86th street and Birchbrick apartment building to be erected on the dale avenue, Cleveland, O., and to furnish all tools, implements and cartage thereto as shown by drawings and specifications by architect, G. B. Bohm, and whereas said contract further provided as follows: As a condition of this contract to furnish the owner a satisfactory surety bond as agreed in the sum of six thousand dollars ($6,000.00), to guarantee the completion of the work comprehended in this agreement, and to further guarantee the payment of any claims there may be for the payment of material and labor required in the erection of this building'; and whereas, in lieu of a surety bond, it is agreed between the said parties that said N. J. Gaspard may furnish a bond signed by Gaspard shall well and truly perform all the individuals: Now, therefore, if the said N. J. terms and conditions contained in said contract and complete said work as therein provided and pay or cause to be paid all claims labor, then the above obligation to be void; contracted in reference thereto for material and otherwise the same shall remain in full force

« PreviousContinue »