Ore-Ida Potato Products, Inc. v. United Pacific Insurance , 87 Idaho 185 ( 1964 )

McFADDEN, Justice

(concurring in part, and dissenting in part).

I concur in the portion of the majority opinion dealing with the issue of whether appellant’s acceptance of the promissory note affected a material alteration of the suretyship contract, and also concur in that portion of the opinion pertaining to the necessity of a compensated surety showing prejudice. I also concur that the cause should be remanded for a new trial. However, I dissent from that portion of the opinion determining that no recovery could be had for the two carloads (truckloads) of potatoes represented by Exhibits 4 and 5.

The question presented is whether appellant Ore-Ida Potato Products, Inc., a corporation qualified to do business in Idaho, as the consignor, may sue upon a $2,500 bond issued Black Canyon Produce, Inc., an Idaho corporation, which bond was posted by respondent in order that Black Canyon could do business as an Idaho farm produce dealer.

It is the general rule that in the absence of limitations or restrictions contained in the surety contract, the liability of the surety is co-extensive with that of the principal. State Athletic Comm’n. v. Massachusetts Bonding & Ins. Co., 46 Cal.App. 2d 823, 117 P.2d 75 (1941); Bloom v. Bender, 48 Cal.2d 793, 313 P.2d 568, 574 (1957); 72 C.J.S. Principal & Surety § 92, p. 572 n. 48. This being a statutory bond, however, in order to determine the extent of the surety’s liability, its terms must be construed in light of the statute. Lebrecht v. Union Indemnity Co., 53 Idaho 228, 22 P.2d 1066, 89 A.L.R. 640; Morro Palisades Co. v. Hartford Acc. & Indem. Co., 52 Cal.2d 397, 340 P.2d 628, 630 (1959). It is the position of the majority opinion that since the statute does not expressly provide for extra-territorial application, the statutory bond which does not purport to be more inclusive in its coverage than the minimum requirements of the statute, does not cover transactions such as the sale and delivery to Black Canyon of the potatoes represented by Exhibits 4 and 5.

Once the consignor has shown occurrence of the contingency upon which the surety is liable, the burden of showing a restriction in, or an exception to that liability (in this case the limitations of the statute) is upon the surety. Zach v. Pond, 50 Idaho 685, 687, 299 P. 666. The trial' court found that the transactions involved in the exhibits 4 and 5, “ * * * were fully, wholly and entirely consummated between the parties in the State of Oregon, and that said transactions did not occur in the State of Idaho, * * * ”. It is my conclusion that this finding is not wholly sustained by the evidence, for the record is devoid of any evidence as to how or where the initial offer and acceptance between the parties was made, or whether the transaction arose by reason of Black Canyon Produce Inc’s., status as an Idaho farm produce dealer. If such initial offer, or its acceptance, occurred in Idaho, or from the Idaho offices of the parties to the contract, the transaction would have been one contemplated by the statute and covered by the bond, and thus there is no extra-territorial application of the statute. Pyrke v. Standard Accident Insurance Co., 144 Misc. 53, 258 N.Y.S. 869, aff’d sub nom. Baldwin v. Standard Accident Ins. Co., 237 App.Div. 334, 261 N.Y.S. 507, aff’d 262 N.Y. 575, 188 N.E. 71. See also: Wickham v. Champlain Creameries, Inc., (Sup.Ct.N.Y.1963) 245 N.Y.S.2d 688.

Even assuming that there was sufficient evidence to sustain the court’s finding that these transactions were wholly consummated in Oregon, the surety still has the affirmative of showing that this bond did not cover the out of. state transactions. Zach v. Pond, 50 Idaho 685, 687, 299 P. 666. This the surety failed to do. If it had desired to raise this as a defense it should have timely raised this issue as an affirmative defense.

It is my conclusion that the transactions represented by exhibits 4 and 5, were covered by the bond, which contained no exceptions beyond those fixed by the statute itself.

KNUDSON, C. J-, concurs.