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Kroeger v. Union Indemnity Company

Supreme Court of Arizona

September 17, 1932

CHARLES H. KROEGER and KATIE A. KROEGER, His Wife, Appellants,
UNION INDEMNITY COMPANY, a Corporation, Appellee

APPEAL from a judgment of the Superior Court of the County of Pima. Dave W. Ling, Judge. Judgment reversed and cause remanded, with instructions to grant a new trial.

Messrs. Conner & Jones and Mr. Samuel L. Pattee, for Appellants.

Messrs. Mathews & Bilby, Mr. T. K. Shoenhair, and Mr. Manning W. Heard, for Appellee.


[40 Ariz. 468] LOCKWOOD, J.

Charles H. Kroeger and Katie A. Kroeger, his wife, hereinafter called plaintiffs, brought suit against Union Indemnity Company, hereinafter called defendant, to recover on a bond guaranteeing the performance of a certain building contract. Defendant answered admitting the execution [40 Ariz. 469] of the bond, but claimed as its principal defense that it was given to secure the performance of an entirely different and distinct contract from the one which plaintiffs allege to have been breached. The case was tried to a jury, but, at the conclusion of the evidence, the trial court sustained a motion for an instructed verdict

Page 259

in favor of defendant, and an appeal has been taken to this court.

There are a number of assignments of error, but we think the appeal can and should be determined on the question of whether or not the bond secured the performance of the contract alleged by plaintiffs to have been breached, or of some other contract. If the latter be true, the action of the court in instructing a verdict was of course proper. If the former is the correct situation, then the court erred in not submitting the case to the jury.

In order that we may pass on this question, it is necessary that we consider the evidence in the strongest light in favor of the theory of plaintiffs. So taken the facts may be stated as follows: Plaintiffs were the owners of certain real estate situated in Tucson and decided to erect a hotel building thereon. They therefore entered into negotiations with the T.C. Triplett Company, a corporation, hereinafter called the contractor, and finally made a certain written contract with it which was dated and executed on the twenty-first day of April, 1928. This contract, so far as we need consider it for the purposes of this case, contains the following provisions:

"The said hotel building shall be constructed according to plans and specifications which shall be known as Plan No. 1678. It is agreed between the parties hereto that the said hotel building shall not be started before the plans and specifications have been approved by the owner in every detail and identified by the signatures of the parties hereto. When completed and approved, said plans and specifications [40 Ariz. 470] shall become and be a part of this agreement as though copied at length herein. Until said plans and specifications are completed, a brief outline of the proposed plans and specifications is hereto attached and made a part hereof.

"The said building is to be completed and ready for occupancy on the 15th day of October, 1928; it being understood, however, that the builder is to be given one hundred and fifty (150) working days after the first mortgage hereinafter mentioned has been placed. . . .

"In consideration of the erection and construction of said building by the builder as herein mentioned, the owner agrees to pay to said builder for the completed building, the sum of One Hundred Forty Three Thousand Six Hundred Seventy-five & no/100 ($143,650.00) lawful money of the United States of America, in the following manner, to-wit:

"(a) $110,000.00 by the execution of a first mortgage and note by the owner herein, covering the above-described property, running for a period of five years with interest at the rate of 8% per annum, payable semi-annually, which mortgage is to be drawn in such manner that the builder may draw on funds derived therefrom as the construction of said building progresses; provided, however, said mortgage shall not be executed or delivered by the owner until said plans and specifications have been completed and approved by owner and the bond of builder approved as hereinafter mentioned.

"(b) $33,650.00 by the execution of a second mortgage and note by the owner in favor of the builder.

"It is understood and agreed between the parties hereto that the builder will arrange for and pay for the placing of the first mortgage hereinbefore mentioned, and shall pay all interest and other charges incurred in the placing of said mortgage, up to the completion of said building.

"It is agreed by the parties hereto, that the owner will execute and deliver a second mortgage in favor of the builder, in an amount of $33,650.00 at the time of the execution of the first mortgage. . . .

[40 Ariz. 471] "It is further agreed that in the event of the failure of the builder to secure funds to be secured by the first mortgage hereinabove mentioned within sixty days, this contract shall be null and void and the parties ...

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