Inhabitants of Wakefield v. American Surety Co. of New York ( 1911 )

Rugg, J.

This is an action brought for the breach of three bonds, each executed by Minaban and Gosta, partners, as principals, and the defendant as surety, to secure faithful performance by said partners of contracts between them and the plaintiff to construct portions of its sewer system. The execution of the contracts and bonds was admitted. The case was sent to an auditor,^* who found that the work to be done under the contract was abandoned by said partners, and that thereby there was a breach of the condition of each of the bonds. Each contract provided that the co-partners “ will not assign . . . any portion of the said work, unless by the previous consent of the board [of sewer commissioners of the plaintiff], to be signified by indorsement on this agreement.” The auditor found that no previous assent to any assignment was so given, and that no assent was indorsed on the contracts or given in any manner, and that the contracts were in fact assigned by the partners to the Conway Contracting Company. He also found that there had been no advance payment made by the plaintiff to the partners, and found generally for the plaintiff. The case then was tried with a jury in the Superior Court.^* In addition to the auditor’s report testimony was introduced from several witnesses to the effect that after the assignment of the contract neither of the partners was upon the work or had anything to do with it, but that it was prosecuted to the knowledge of and without objection by the sewer commissioners wholly by the assignee claiming under the assignment. After the assignee had been at work about six months, the work was stopped by notice to the effect that it was not being prosecuted as required, and that it would be completed by the plaintiff as provided in the contract. The work was so completed at a cost greater than the contract price. At the close of the evidence in the Superior Court, the defendant having admitted that proper notices of discontinuance of the work by Minaban and Costa and of claim for excess cost over contract price were sent and no question being raised as to the amount of the damages, a verdict was directed for the plaintiff.^†

Since it was admitted that proper notice of discontinuance of the contract was given, a decisive point is whether there was an assignment of the contract by the partners assented to by the plaintiff. Upon this issue the auditor, as above stated, made definite findings in favor of the plaintiff to the effect that there had been assignments which were never at any time assented to by the plaintiff. It is plain under the terms of the contract that an assignment without such assent constituted a breach of the contract. The auditor does not set out the facts or evidence upon which he based this finding. The effect of an auditor’s report under such circumstances is stated in Anderson v. Metropolitan Stock Exchange, 191 Mass. 117, at 121, by the present Chief Justice as follows: “ The auditor’s report, finding generally for the plaintiff, and 'finding specially these facts, is prima facie evidence which requires a verdict for the plaintiff, unless there is other evidence, either in the report or outside of it, to control the findings.” In substance, the same proposition was laid down in Phillips v. Cornell, 133 Mass. 546, in these words: “ While the burden of proof is not shifted by the auditor’s report, yet, as it makes out a prima facie case, it is incumbent on the other party to meet and control it, or it will be conclusive against him.” To the same effect is Fisher v. Doe, 204 Mass. 34, 40. The result of these decisions is that where the auditor makes a simple finding in favor of one party without reporting the testimony, and there is no other evidence, a verdict should be directed in accordance with his finding. The case does not stand as it does upon uncontradicted evidence of witnesses, for there the jury may disbelieve the testimony. The statute has clothed an auditor’s report with a special evidential character, which, in the absence of controlling evidence either stated in the report or put in outside the report, must be accepted by court arid jury as final. Where only one conclusion is p'ossible as matter of law, a verdict must be directed.

The question presented is whether there was any evidence to control the auditor’s finding to the effect that the contracts had been assigned by the original contractors, and that at no time had such assignments been assented to by the plaintiff. If this finding stands there was a breach of the contract. The plaintiff’s officers knew of the assignments, and they permitted work to proceed by the assignee. But there was a considerable correspondence between the attorney for the plaintiff and the defendant, in which the former repeatedly asserted that the town would not assent to the assignments except upon conditions which never have been complied with. The checks of the town in payment for work done all were made to the order of the original contractors, and none to the assignee. There was no evidence of any express assent. Disbelief of denials of facts which a party must prove is not the equivalent of affirmative testimony in support of those facts. Lonergan v. Peck, 136 Mass. 361. Hyslop v. Boston & Maine Railroad, 208 Mass. 362. Knowledge on the part of the officers of the plaintiff of the assignments and of the performance of the work by the assignee is all that remains. But this under the circumstances disclosed is not enough to show their assent to the assignment of the contracts, in the face of the correspondence refusing to assent. The highest effect which can be attributed to this fact is that, pending negotiations as to an assent to the assignments by the town, the assignee went on with the work. Whatever may have been the effect of the assignments as between the parties to them, they did not affect the rights of the plaintiff. Pike v. Waltham, 168 Mass. 581. Fuller v. New York Fire Ins. Co. 184 Mass. 12. For the same reasons there was no evidence of waiver of this clause of the contract, novation, or substitution of the assignee for the assignor. Paris v. Hamburg-Bremen Fire Ins. Co. 204 Mass. 90, 94. Moore v. Duggan, 179 Mass. 153, 158. Stowell v. Gram, 184 Mass. 562. Illinois Car & Equipment Co. v. Linstroth Wagon Co. 112 Fed. Rep. 737.

It becomes unnecessary to consider whether the auditor’s finding as to abandonment was met in any way.

There was no obligation on the part of the plaintiff to keep the defendant as surety constantly advised as to the state of the work under the contract. The surety must protect his own interest to the extent of seeing that his principal performs the duty which he has guaranteed. Watertown Fire Ins. Co. v. Simmons, 131 Mass. 85. Welch v. Walsh, 177 Mass. 555.

The defendant contends that there was a payment made by the plaintiff to the original contractors in advance of any that was due under the contract, and that, its security being in some degree diminished thereby, it is discharged under the principle laid down in Calvert v. London Dock Co. 2 Keen, 638, and Prairie State Bank v. United States, 164 U. S. 227. The auditor found that there was no such advance, but reported some of the evidence upon this point. In addition to the auditor’s report there was testimony from one Morgan, upon whose certificate as chief engineer of the plaintiff the payment now claimed to be an advance payment was made. The contract provided that on or before the tenth day of each month the engineer should make an approximate estimate of the value of the work done, and that upon this payments should be made. In one such estimate was included an item for excavation, and also an item for lumber used as sheeting in trenches under a clause in the contract which required payment for “ all lumber in trench, used for sheeting and shoring left in place by order of the engineer.” The amount certified had not been so left in place and all the excavation had not been completed by the units required by the contract, although a very large amount of work had been done. In subsequent estimates, deductions were made for these payments, so that ultimately the town received the value for ah payments. The contract provided that the engineer should be the “ referee, in ah cases, to decide upon the amount, quality, acceptableness and fitness of the several kinds of work and materials which are to be paid for under this contract, and upon ah questions which may arise relative to the fulfilment of the contract. .. and his estimates and decision shah be final and conclusive.” The auditor found that the contested estimate was given by the engineer in good faith, and the defendant did not contend that he was actuated by bad faith. Under these circumstances such estimates were binding upon ah the parties, and it cannot be contended that the payments based on them were made in advance. Handy v. Bliss, 204 Mass. 513, 520, and cases cited. Loftus v. Jorjorian, 194 Mass. 165. There was no issue of fact open in this regard not concludéd by the auditor’s report.

J. P. Leahy, (F. T. Leahy with him,) for the defendant. M. E. S. Clemons, for the plaintiff.

Several questions of evidence are raised. They ah become immaterial in view of the ground upon which the decision is based. But it does not appear that any error of law was committed in respect of them.

Exceptions overruled.

* Samuel C. Bennett, Esquire.

* Before Lawton, J.

† There was one count on each of the three bonds. The judge ordered the jury to find on each count for the plaintiff in the penal sum of the bond. He ordered judgment to be .entered for $33,000, which was the total amount of the penal sums of the three bonds. Afterwards the judgments were amended so as to bear interest from the date of the writ, which was March 24, 1903. The judge ordered that execution should issue for the sum of $39,149.80, with interest from the date of the order, which was December 3, 1908.