Founders' Insurance v. Lanco Development Corp.

NOURSE, J. pro tem.

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This is an action on an agreement of indemnity executed by respondents Sayan under which they indemnified appellant against loss on a performance bond executed by it. This faithful performance bond recited that Lanco Development Corporation, hereinafter called Lanco,

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had entered into a written contract with North American Aviation, Inc., hereinafter called North American, “for the construction of a semi-public pool in North American Employees Park-Valley, spec. No. 2084.” Under this bond appellant became surety in the sum of $12,604.87 for the performance by Lanco of a contract stated to have been entered into by it with North American, the obligee named in the bond.

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The indemnity agreement sued upon recited that appellant had been requested to execute on behalf of Lanco a $12,604.87

Performance

bond to North American Aviation, Inc. for construction of semi-public swimming pool at 8500 Fallbrook avenue, Canoga Park, Calif, executed June 11, 1959.” (Italics added.)

The evidence established that Lanco had not entered into any contract with North American but had entered into a contract for the construction of a swimming pool on the property referred to in the bond and the indemnity agreement with the owner of that property, North American Aid, a corporation, hereinafter called Aid, the stock of which was held by North American and an association of its employees.

Respondents did not see the construction contract or the bond until after the commencement of this action.

' Lanco did not complete its contract and was declared in default. At the time of its default Lanco had received from Aid all but $5,088.44 of the total contract price

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and there were then outstanding claims of labor and materialmen in the sum of $7,758.39.

Upon Lanco’s default respondents on the demand of appellant took ove'r the work and completed the pool. They were not then advised that no contract existed between Lanco and North American. Respondents refused to pay any part of the outstanding claims of labor and materialmen. Appellant received from Aid the balance of the contract price and paid the outstanding labor and material claims and brought this action to recover the excess of those claims over the balance