Municipal Bond Co. v. Balboa Construction Co.

SCOTT, J., pro tem. During the years 1928 and 1929 Balboa Construction Company, one of the defendants, was engaged in paving streets in the city of San Diego. The general business arrangement under which it operated was as follows: Money for that company to do business was loaned to it by plaintiff, and statutory and other bonds which it required were executed by defendant Indemnity Insurance Company. As security for the money so loaned by plaintiff to defendant Balboa Construction Company the latter assigned to plaintiff the warrant and other documents which the construction company was to receive from the city in payment for its work, and in addition thereto defendant indemnity company executed a finance bond agreeing to indemnify plaintiff against loss. Subject to plaintiff’s rights under such assignment of the contract by Balboa Construction Company, the contract was assigned to defendant indemnity company to secure it against loss on its bonds so executed for the benefit of the Balboa company.

In January of 1929 the president of Balboa Construction Company and one Homer, attorney-in-fact for defendant indemnity company, came to the office of plaintiff and requested a loan of $25,000, which was needed to complete some subcontracts. Homer stated that his company' would [59]give plaintiff a surety bond for that amount, and such a bond was executed in plaintiff’s favor on January 30, 1929, in the following terms: “Know all men by these presents that we, Balboa Construction Co., a corporation, under the laws of the State of California, having its principal place of business at San Diego, California, as principal, and the Indemnity Insurance Company of North America, a corporation, under the laws of the State of Pennsylvania, having its principal place of business at Philadelphia, Pa., as surety, are held and firmly bound unto the Municipal Bond Co., as obligee, in the penal sum of Twenty-seven Thousand Five Hundred and no/100 ($27,500.00) Dollars, lawful money of the United States of America, for the payment of which, well and truly to be made, we bind ourselves, our heirs, executors, administrators, successors and assigns, jointly and severally, firmly by these presents. Whereas, the said Municipal Bond Co. is about to loan the said principal the sum of Twenty-five Thousand and no/100 ($25,000.00) Dollars for six months. Now therefore, the condition of the above obligation is such that if the aforesaid principal shall repay the said Municipal Bond Co. the said sum of Twenty-five Thousand and no/100 ($25,000.00) Dollars on or before the maturity of said loan this obligation shall be null and void; otherwise it shall remain in full force and effect and be payable upon demand for the amount of said sum ($25,000.00) or any unpaid balance thereof, together with accrued interest and all costs of collection including attorneys’ fees.”