OPINION OF THE COURT BY LEWIS, J.
By this appeal, taken by defendant Shuman Lumber & Supply Co., Inc., surety on a contractor's bond, hereinafter referred to as "surety" or "Shuman," the surety (1) contests its liability to plaintiff, Honolulu Roofing Company, Ltd., which supplied materials and labor for sanding of floors, floor covering, and ceramic tile work in the construction of a residence for Albert M. Felix and his wife, hereinafter referred to as the "owners"; and (2) contests its liability to the owners.
The contractor, Edward M. Kirk, the principal on the bond, has made no appearance in the action. Service on the contractor by registered mail was ordered on the basis of an affidavit that he was residing outside the State, and the court found in its decision that this service was made. We have no occasion to consider the judgment that was entered against the contractor.
Liability of Surety to Plaintiff.
The judgment appealed from awarded plaintiff judgment against the surety for plaintiff's $935 claim, plus interest and an attorney's fee. But plaintiff sued to foreclose Mechanic's Lien No. 61, which was filed against the owners' property on February 26, 1963, after an affidavit of publication of notice of completion of contract was filed pursuant to R.L.H. 1955, § 193-42, the mechanic's lien law, on January 14, 1963. Plaintiff sought personal judgment against the contractor and surety on the bond if it should be adjudged that the lien was not valid, or if a deficiency should remain after sale of the property and application of the proceeds to the lien. There has been no adjudication of invalidity of the lien. Nor has there been an ascertainment of a deficiency or provision for ascertainment thereof, if any. Judgment has been entered in favor of the plaintiff against the surety on the bond without foreclosure of the lien.
We note that by its decision the court ruled, not only that judgment should be rendered against the surety, but also that: "As to Defendants Felix, the remedy against them is for the enforcement of lien." However, no provision for enforcement of the lien was made in the judgment entered on the decision.
The surety's amended specification of error 4(b)
The owners conceded in their brief in this court that "in its Decision filed on July 14, 1964, the Trial Court did grant the Materialman's prayer for foreclosure." This was in connection with the surety's argument that plaintiff's "primary allegation is for the foreclosure of lien," and that plaintiff "having a valid lien, the lien should have been foreclosed." The owners made no contention in their brief that the lien was not valid — their contention was that the surety had been benefited by the property not having been sold on foreclosure, as that would have cost the surety "that much more in costs and attorneys' fees constituting damages [allowed the owners] * * * under the Decision and Judgment * * *."
Plaintiff has joined in the owners' argument. Plaintiff contends that it has a right of action on the bond as a third party beneficiary. The argument goes further, and presents the position that materialmen and suppliers of labor can recover against the surety on such a bond as third party beneficiaries irrespective of any act or omission of the obligees, the owners, the contention being that defenses of the surety good against the owners, are not good against the materialmen and suppliers of labor
At this point it is necessary to review the provisions of the several statutes providing for attorneys' fees. This is the subject of amended specifications 4(l) and 5(g) We are of the opinion that a $500 fee could not be allowed the plaintiff in an action on the bond, as distinguished from an action for foreclosure of the lien.
If the action were on the bond, R.L.H. 1965, § 219-14, would be applicable. Allied Amusements v. Glover, 40 Haw. 92. Section 219-14 provides that "in all actions of assumpsit there shall be taxed as attorneys' fees, in addition to the attorneys' fees otherwise taxable by law," a fee according to a schedule there set out, amounting in this case to about $32 if computed on the amount of the present judgment.
If the action were on the bond and this section applied, what attorney's fees would be "otherwise taxable by law"? R.L.H. 1955, § 219-16.5, as amended (Supp. 1965), would not apply as the bond contained no provision for an attorney's fee, other than the provision for holding the owners harmless from damages,
This provision must be read with the other provisions of the section of which it is a part; it has to do with suits provided for by that section. Despite the breadth of the section in respect of parties and procedure, suits under it are limited to (a) foreclosure of liens provided for by the mechanic's lien statute, and (b) claims based on contracts, express or implied, between parties. The point designated (b) is derived from the next to the last sentence of section 193-45. This contains a limiting proviso that a writ of execution (as distinguished from an equitable decree of foreclosure) "shall only issue where the claim upon which the motion therefor is based is upon a contract, express or implied, between such parties," the parties referred to being the party moving for issuance of the writ and the party against whose property it is sought to direct the writ.
No third party beneficiary claims are provided for by section 193-45. This is clear from the words "between such parties." It is evident that the legislature thereby intended to continue the policy expressed in the section as it read prior to the revision made by S.L. 1949, c. 241, which enacted the present provisions. Before this revision the section, then R.L.H. 1945, § 8773, being the original enactment as amended by S.L. 1933, c. 143, provided that attachment of property other than that subject to the lien
Under the present Hawaii Rules of Civil Procedure, a claim upon the bond, if allowable, of course can be joined with a claim for foreclosure of a mechanic's lien, but a claim upon the bond as a third party beneficiary will not serve as the foundation for an attorney's fee in any amount larger than that provided for by R.L.H. 1955, § 219-14, supra, R.L.H. 1955, § 219-16.5 being inapplicable.
It is manifest that there is an error in the judgment, which has awarded an attorney's fee under section 193-45 when that section was not put into effect by the judgment.
The record calls for the result above reached. Upon study of the record, it becomes evident that plaintiff's intention in its complaint was to stand on its lien and to
The surety's argument against the allowance of the attorney's fee falls when its contention that the judgment should have provided for foreclosure of the lien is sustained. The argument rested on the form of the judgment, i.e., that it was a personal judgment against the surety. Upon remand the judgment will no longer so provide. However, the surety further contends that the amount of the fee was "unreasonable and excessive." In fixing the amount the court did not confine its attention to the services in connection with the foreclosure of the lien. Therefore the amount of the fee requires redetermination.
Upon remand of the case it will be the duty of the court, at the appropriate time, to provide for foreclosure of the lien with interest thereon and an attorney's fee confined to the services in foreclosing the lien.
Even if judgment of foreclosure is entered on remand without delay, the question of plaintiff's right on the bond directly against the surety as a third party beneficiary for any deficiency that may arise shall be reserved for disposition when and if a deficiency is ascertained. As we hold in Part II of this opinion, the surety is or may be liable on the bond to the owners. It is a question of striking a balance between the parties. The amount of the surety's liability must be redetermined because of the manner in which the case was tried. The surety's liability to the owners includes indemnification against plaintiff's claim and others like it,
In the interest of sound judicial administration we
Plaintiff is not entitled to have this question of direct liability of the surety to it determined now. The principal reason for doing so would be to cut through the surety's defenses, assuming but not deciding that those defenses would not be good against plaintiff as plaintiff contends. But plaintiff did not adequately present this contention in the court below. Plaintiff did not move under H.R.C.P., Rule 12(f), to strike as insufficient against it the surety's fifth defense, which was that the surety had been released from its obligation on the bond by acts of the owners who, it was alleged, "altered and breached the building contract," and "made payments contrary to the assignment and power of attorney executed [to the surety] * * *." Under H.R.C.P., Rule 12(h), absence of such a motion did not preclude plaintiff from asserting the insufficiency of the defense at the trial. However, in the pre-trial order the court while listing the fifth defense as one of the "basic questions" raised by the surety, did not set out any contention on plaintiff's part that the defense was not good against it. The contention had been asserted in an earlier memorandum in the form of a quotation submitted in support of the general contention that there was a right to sue on the bond, and should have been pointed up in the pre-trial order if plaintiff intended to insist upon it. At the trial, the evidence as to the owners' acts came in without any objection on the part of plaintiff that this was irrelevant as to it. We think that such contention lay in the background and did not come to the fore. Finally, in a memorandum submitted after trial plaintiff did contend
Upon this review of the record we conclude that the present case is not one in which an appellate court is called upon to advance into a point on which the court below has not ruled. Even if such a point tends to support the judgment, the appellate court should not rule on it unless "it is made clear beyond doubt that this could not prejudice the rights of the plaintiff in error." Peck v. Heurich, 167 U.S. 624, 629. Cf., Waterhouse v. Capital Investment Co., 44 Haw. 235, 240, 353 P.2d 1007, 1012. Tied in with the surety's liability in the present case are its rights of subrogation,
Liability of Surety to the Owners.
Before taking up the surety's defenses we further consider the form of the judgment appealed from. It awarded the owners judgment against the surety in the sum of $21,935.17, which was in addition to the amount of plaintiff's recovery and did not include the surety's potential liability on liens filed against the owners in seven other suits, totaling a further amount of over $14,000 according to the court's findings.
"Defects and Deletions" in the performance of the contract ($5136), and "additional defects ($1000) ______________________________________ $ 6,136.00 "Advancements" _______________________________________ 7,314.47 "Penalty" for delay in completion ($1725.00), and "interest" ($1711.50)
13__________ 3,436.50 "Attorney's fees" ____________________________________ 5,000.00 Costs of court _______________________________________ 48.20 __________ $21,935.17 Less: Amount of last payment ($10,287.30) and amount fixed for extras ($1000) __________________ 11,287.30 __________ $10,647.87
The surety contends, as set out in its amended specification of error No. 5(a), that the court erred in considering
No cross-claim was asserted by the owners against the surety until they filed their amended answer on October 11, 1963. The cross-claim set out the filing of plaintiff's lien; that this might entail payment by the owners of plaintiff's claim, costs and attorney's fees; that it had been necessary for the owners to incur attorney's fees and other costs and expenses in defense of the action; and that "there may be damages in addition to those herein above mentioned arising on account of the failure of Defendants EDWARD M. KIRK and SHUMAN LUMBER & SUPPLY Co., Inc. to fulfill and discharge their obligations under the above-mentioned Bond * * *," the terms of which had been set out in a previous paragraph. However, the prayer for relief was for damages "on account of the claims made by Plaintiff herein," and that an order be made requiring the surety "to hold them [the owners] harmless from all other liens, suits, actions or damages on account of said claims * * *." There were no allegations that any defects or deletions in construction had occurred, or that the contractor was liable for delays.
Before the filing of the amended answer which asserted the cross-claim, a pre-trial conference had been held. On the basis of this conference a pre-trial order was prepared and signed on October 22, 1963, stating under the heading "Nature of the Case" that "The nature of the case is for the purpose of foreclosing Mechanic's Lien No. 61 [plaintiff's lien], a notice of which has been given to the owners." On November 6, 1963, over objection of the surety, the owners obtained a modification of this order, and it thereafter was filed. The modification substituted the following for the original statement under the heading "Nature of the Case":
It will be noted that, even as modified, the pre-trial order was confined to plaintiff's claim. It did not set out any claim on the part of the owners against the surety. Likewise, the surety's claim against the owners for the last payment was not set out in the pre-trial order or pleaded as a defense or counterclaim at any stage of the case.
However, it is conceded by the surety that the damages suffered by the owners in regard to the plaintiff's claim were within the scope of the issues brought to trial.
The principal point for review is the surety's contention that it was and is entitled to be discharged altogether. This contention cannot be sustained. In this connection, three points merit consideration. A fourth point to be taken up is the matter of fees of the owners' attorney, and a fifth point is the matter of the proceedings to ensue upon remand of the case.
1. The surety contends that there can be no recovery by reason of the proviso of the bond reading as follows:
Amended specification of error No. 5(f) asserts that the trial court erred in finding and concluding "that the improvement called for in the contract had not been completed."
It is to be noted that the findings were that "the contract is not completed," and "the Contract was not performed according to the plans and specifications." The sixty day clause is tied to the completion of "the contract," to which the court directed its attention, not the completion of "the improvement," on which the specification of error was based. As stated in Pacific Hardware Co. v. Lincoln, 12 Haw. 358, 361:
The surety nevertheless contends that "the date on which said contract is completed" refers to the time when there has been "substantial completion of the improvement under the contract," such as to permit the contractor to recover on the contract.
R.L.H. 1955, section 193-42 of the mechanic's lien law, provides that publication of notice of completion "shall not be construed as an admission * * * that the improvement has been satisfactorily completed." And at the time when the owners commenced occupancy of the residence, they informed the surety that they did so because they had to vacate their old home, which had been sold, and
Under the court's findings in this case the contract work was not satisfactorily completed. The court found defects and deletions requiring $5136 to remedy them, and other defects and deletions impractical to remedy but depreciating the value of the house to the extent of $1000. While, under our holding that the issues brought to trial did not encompass the owners' claims for damages, these figures are not binding on the parties when it comes to striking a balance as to amounts owing,
In this situation even if the contract was substantially performed the contractor — in this case the surety as assignee of the contractor — had no right to recover the balance of the contract price, but only the price less a sum sufficient to compensate for defects. Mackey v. Eva, 80 Idaho 260, 328 P.2d 66, 69. Apart from the question of crediting the owners with the sums advanced by them (see infra), the amount to be deducted on account of defects
As above noted, the language of the bond calls for determination of "the date on which said contract is completed," which is not the same as the date of completion of the work. In Edgewood Knoll Apartments v. Braswell, 239 N.C. 560, 80 S.E.2d 653, 663, the court ruled that in the case of a bilateral contract, the contract "is not completed until fully performed by both parties." We are not prepared to go that far. We hold only that substantial performance by a contractor, when there are defects to be remedied and the amount to be paid remains undetermined because of the defects,
The surety argues that "it is common knowledge that no building is ever completed according to all the details of any plans or specifications." The argument is, in effect, that the limitation period specified in the bond will be nullified if "the date on which said contract is completed" is not given the meaning for which the surety contends. We do not agree. Our interpretation of the sixty-day clause does not nullify it. Suppose an owner accepts a building and makes the last payment, so that the contract definitely is completed. The sixty-day clause, if deemed reasonable,
We do not deem it material to consider in this connection the legislative policy as to when the time for filing mechanic's liens starts to run.
2. A total discharge is claimed by reason of alterations or changes made in the building contract. This is amended specification of error No. 5(e).
The parties contemplated changes in the contract. The contract of May 9, 1962, referred to in the bond, provided that all payments due under the contract were to be made through Shuman Lumber & Supply Co., "subject to such additions thereto and/or deductions therefrom as may be mutually agreed upon in writing during the progress of the work." The signatory parties were the owners and the contractor; so Shuman's agreement in writing was not required at this point for changes in the contract. However, as noted by the court below, the accompanying bond signed by the surety provided that it would not cover "any additions or extras to said contract unless such additions or extras are approved in writing by the Surety."
By letter of May 24, 1962, in response to a request for a first payment of $15,396.06, being 35 percent of $43,998.75, the contract price set out in the contract, the owners informed the surety that they had agreed with the contractor to supply the following: appliances; grading, filling and landscaping; fence; hot-house; drapes; carpeting; and fireplace accessories. The amount to be deducted for each was set out, the total deduction being $9,697.75. The letter concluded by stating, in effect, that the contract price was reduced to $34,291 and the first
The schedule of allowances was made a part of the contract through incorporation therein of the specifications, to which this schedule was appended. The amounts allocable to such items therefore cannot be disputed. Other changes made either were of the type within the contemplation of the parties or represented defaults on the part of the contractor. The case is governed by Hustace v. Davis, 23 Haw. 606, in which the court said:
The court further said as to the necessity of written authorization where required by the terms of the contract itself, as distinguished from the bond:
See also 17 Am.Jur.2d., Contractors' Bonds, § 27 at 211.
Of course, the owners are not in a position to assert non-liability for the extras by reason of the absence of a writing, upon a proper claim for the extras being asserted by the surety under the terms of the assignment,
We note further that, were the owners to arrange to receive the benefit of work not called for by the contract, plans and specifications, and then deny liability therefor, that might introduce an element of prejudice and pro tanto discharge of the surety. But this is a matter of detail which does not concern us now. The record is inadequate for us to indicate at this time what should and what should not be treated as items for which the owners are liable upon remand of the case.
3. It further is contended that the surety is entitled to a total discharge by reason of payments made by the owners to the contractor or others in a manner deviating from the terms of the contract. This is amended specification of error No. 5(f).
As seen, the contract itself provided that the owners would make their payments to Shuman. Moreover, at the time of execution of the bond an instrument called "assignment and power of attorney"
Since this assignment merely covered the moneys due under the contract, which contained a schedule of allowances of which the owners availed themselves as above set forth, we find no error in the court's conclusion that the surety was entitled to only $34,291 under the assignment, plus extras. The payments made to Shuman, the surety, as agreed, totaled $22,763.70. The remaining amount, $11,527.30, was paid to others or not paid at all. According to the court's findings
Date Amount Person Receiving Payment May 25, 1962 $1240.00 Contractor
26June 23, 1962 245.00 Charles Ishii 27July 20, 1962 1100.00 Contractor August 17, 1962 1400.00 Contractor September 4, 1962 1069.00 Contractor September 14, 1962 1150.00 Contractor November 13, 1962 190.00 Hilo Iron Works December 1, 1962 200.00 Wallace Izumi December 5, 1962 1089.00 S. McCabe Paving Co. December 5, 1962 200.00 M. Iyo December 6, 1962 35.98 M. Iyo December 24, 1962 143.97 Wallace Izumi December 30, 1962 180.09 M. Iyo February 5, 1963 311.43 Hawaii Hardware ________ $8554.47
After applying the $1240 payment of May 25, 1962 on the first payment due under the contract — as did the owners according to their letter to the surety dated May 24, 1962 but evidently mailed a little later — the court allowed the balance of $7314.47 as "advancements" for which the surety was "indebted" to the owners, the court further stating that the judgment would reflect the fact that the last payment of $10,287.30 had not been made. As above set out, the judgment failed to reflect this fact.
Under our holding above set out that the issues were not so framed as to call upon the court to strike a balance between the owners and the surety, the only point squarely at issue was whether or not the surety was entitled to a total discharge ipso facto. The surety was not so entitled. This court, in Hustace v. Davis, supra, 23 Haw. 606, 612, held that:
The court in Hustace did not distinguish between a compensated and an accommodation surety, although the record of the case shows that the surety, the appellee, endeavored to make the point that he was an accommodation
Many courts make a distinction between a compensated and an accommodation surety in respect of deviations from the contract in the matter of payments, applying the rule of pro tanto discharge to the extent of the prejudice suffered in the case of a compensated surety, as illustrated by Young Men's Christian Ass'n v. United States Fidelity & Guaranty Co., 90 Kan. 332, 133 Pac. 894, modified on rehearing, 92 Kan. 467, 140 Pac. 892; Corporation of President of Church of Jesus Christ of Latter Day Saints v. Hartford Acc. & Indemnity Co., 98 Utah. 297, 95 P.2d 736, 741; National Union Indemnity Co. v. Bass, 369 F.2d 75 (5th Cir., applying Mississippi law); United States v. Duby, 201 F.2d 300 (9th Cir., applying Washington law); Annot., 127 A.L.R. 10, 69. Under these cases the surety has a right of recoupment reducing the damages to the extent of the prejudice suffered.
Is the surety here involved a compensated surety? The surety argues that the owners failed to allege consideration for the execution of the bond by the surety and that the cross-claim was defective in this regard. This point is without merit, but the question of the surety's status — whether a compensated or an accommodation surety — requires consideration. In the Restatement a surety is not treated as a compensated surety merely because it receives some pecuniary advantage from the undertaking; only one in the business of executing surety contracts for a premium is treated as a compensated
We recognize that in some cases the prejudice suffered by a surety when advance payments are made may be larger than the amount of such payments, due for example to the removal of the contractor's incentive to finish the work in order that he may qualify for the last payment. However, on this record we are not concerned with any such matter. Cf., Globe Indemnity Co. v. Southern Pacific Co., 30 F.2d 580 (2d Cir.).
The court below found that owner A.M. Felix, by letter of September 17, 1962, notified the surety of the
The court at another point found that: "I am satisfied that Defendant Shuman at no time prior to September 17, 1962, did ask Defendant Felix not to make advances"; that the surety "has not sustained the burden of proving its defense of material alterations or payments contrary to the terms of the contract"; and that the surety "by its acts and conduct waived its right to claim release from the Bond." The owners were credited with all of the advancements made.
The court further found "that all of these advancements were utilized for construction of the house and that none were used for `extras'." It, of course, is true that aside from the questions involved in the special situation exemplified by the July and August payments considered below, the owners ordinarily would be entitled to credit for payments which satisfied claims for labor or materials
As held in Holzinger v. Goo, 36 Haw. 506, 510, citing Stearns, Suretyship,
The payments made by the owners to the contractor in July and August, 1962, which were for payroll, may have resulted in a duplication of payments, due to the surety also having made payments to the contractor for payroll. The court did not rule on this point, merely stating that the surety had not sustained its burden of
As to the August 17, 1962 payment it does not even appear that the money paid to the contractor actually reached the employees. But even if both payments went to satisfy just claims for labor, it appears that the surety paid out to the contractor on July 30, 1962 the sum of $1500 for the July 20, 1962 payroll, and on August 18, 1962 the sum of $1350 for payment "in full" of all labor to that date on the Felix job, thus presenting a question of duplication of payments as above noted. The findings of the court do not take into consideration many pertinent questions. For example, one of the owners, A.M. Felix, testified that the payrolls "were made up to Friday and paid on Saturday." While it is not clear whether this was true in July and August, 1962, it is noteworthy that each of the July 20, 1962 and August 17, 1962 payments by the owners was made on a Friday. On what dates, other than May 24, 1962 and September 17, 1962, was notice given to the surety of the various advances made? Was immediate notice given to the surety of the moneys advanced by the owners to the contractor and their purpose? At the time when the surety made its July 30, 1962 and August 18, 1962 payments, was it aware that payroll payments were being made by the owners without waiting for a reasonable period
As has been stated, an obligee on a bond has a duty of prudence in preserving security under his control. On the previous occasion of a payroll advance made by the owners in May, 1962, immediate notice of the payment was given to the surety. As to the advancements in question,
We therefore conclude that while the surety is not entitled to a discharge ipso facto, as distinguished from the striking of a balance between the parties, the court erred in its determination of the credits to which the owners are entitled. This is true not only because the court went beyond the issues that were before the court for trial, but also because the court's findings failed to take into account the assignment and the burden resting on the owners of showing that they were entitled to credit for the payments they made contrary to the terms of the assignment. The amount to be credited to the owners for these advancements will be an open question upon remand of the case.
4. The surety, by amended specification of error No. 5(h), has attacked the trial court's allowance of a $5000 fee for the owners' attorney. This again is outside the issues properly brought to trial, except insofar as the fee was allowed for services in connection with plaintiff's claim. But since the point will arise on remand of the case we will consider it.
It appears that the $5000 fee was for all of the services of the owners' attorney, including not only services in defending the owners against plaintiff's lien but also services in seeking recovery on the bond. The fee for the latter was not within the coverage of the bond.
As to the former — the services in defending the owners against plaintiff's lien — the provisions of the bond calling upon the surety to deliver the work "free from
As to the latter — the services in seeking recovery on the bond — a different situation is presented. R.L.H. 1955, § 219-16.5, as amended by S.L. 1959, c. 218 (Supp. 1965), specifically provides in the third paragraph of the section that: "Any law to the contrary notwithstanding, no such attorney's fee shall be allowed to the plaintiff by any court: (a) if prior to or at the time the debt was incurred, the debtor did not sign an instrument in writing which provided for the payment of an attorney's fee; * * *." The word "such" refers back to the first paragraph of the section, which provides for an award of an attorney's fee where action is instituted on a written contract which "provides for an attorney's fee." The intent of the above clause (a) of the third paragraph is to add
The $5000 fee having been allowed as a lump sum, without distinguishing between the services of the owners' attorney in defending against plaintiff's claim and his services in seeking recovery on the bond, it will be necessary for the court below to determine what is a reasonable fee for the former. As to the latter, R.L.H. 1955, § 219-14, governs.
5. Upon remand of the case it will be the duty of the court below to set aside the judgment awarded the owners (as well as that awarded the plaintiff concerning which we have ruled in Part I). It further will be the duty of the court to make appropriate orders providing for such amended and further pleadings as the parties may desire to file, consistent with this opinion. It is manifest that
We have not adverted heretofore to the surety's motion to disqualify the trial judge, which is the subject of both amended and original specification No. 3. We agree with the ruling below that the motion was not timely. R.L.H. 1955, § 213-3(b) (Supp. 1965), under which the motion was made, requires filing of the disqualifying affidavit
It is argued here that until the filing of the cross-claim and until the court's ruling that it would entertain the same, made by denial of the surety's motion to dismiss the cross-claim, the surety had no occasion to seek the disqualification since it was based on the relationship between the trial judge and owner A.M. Felix as fellow judges; that the owners and the surety were on the same side until the court entertained the cross-claim; and that the surety could not have sooner moved to disqualify the trial judge for bias and prejudice in favor of said A.M. Felix. It is true that in order to disqualify a judge for bias or prejudice in favor of a party that party must be an "opposite party," under the terms of the statute. But after careful review of the record we cannot accept the contention that the surety was entitled to await a ruling on its motion to dismiss the cross-claim before making the suggestion of disqualification.
The record shows that the cross-claim was filed on October 11, 1963. On October 19, 1963, the owners joined with the plaintiff in addressing interrogatories to the surety, to which the surety objected on October 30, 1963 on the ground that "under the pleadings it does not appear that said Albert M. Felix and Irene P. Felix are adverse parties to Defendant Shuman Lumber & Supply Co., Inc." On November 6, 1963, the surety appeared and argued a motion made by plaintiff and the owners to strike this objection, which motion was granted. Furthermore, on November 6, 1963 the surety noted its objection to the
Again, on November 8, 1963 the surety appeared and argued the motion to dismiss the cross-claim, which motion had been filed October 30, 1963. This motion likewise was denied. The disqualification motion, made November 21, 1963, came too late.
However, after the ruling against the disqualification motion the trial judge sua sponte raised and took under advisement the question "whether or not the best interest of justice for both parties would be subserved if I withdraw from this case." The judge announced on November 29, 1963 that in the interest of justice and fairness to all parties concerned it was his feeling that he should not disqualify himself on his own motion. We now direct our attention to his feature of the case. However the case may have appeared to the trial judge at the time, our concern now is with the proceedings that will ensue on remand of the case.
It is evident from the proceedings already had that owner A.M. Felix is a principal witness in the case and that questions of conflicting testimony have arisen and may again arise. The judge who heard the case and A.M. Felix are the only two circuit court judges in the County of Hawaii, which constitutes the third circuit. One would expect the two judges to be associated constantly or as
R.L.H. 1955, § 213-3(b), supra, provides that: "Any judge may disqualify himself by filing with the clerk of the court of which he is a judge a certificate that he deems himself unable for any reason to preside with absolute impartiality in the pending suit or action." As stated in In re Bouslog, supra, 41 Haw. 270, 283:
We have arrived at the conclusion that the circumstances of this case are such that we should direct the second judge of the third circuit to recuse himself as to all further proceedings in this case, and we do so direct.
Remanded with directions to set aside the judgment, and for further proceedings consistent with this opinion.
While so construing the cross-claim, the surety made other objections thereto. We find no merit in the surety's contention that the cross-claim had to be personally served upon the surety, or in its contention that the amended answer which asserted the cross-claim required the leave of court for filing thereof. If leave was necessary, the court's subsequent rulings conferred it.
"Let Judgment be Entered Accordingly."
During the trial which preceded the rendering of this decision it was understood, as shown by the below excerpt from the testimony of A.M. Felix, owner, that the owners' general damages were not at issue. The following is from the proceedings of December 30, 1963:
On July 17, 1964, the case came on for the taking of additional evidence. The transcript of this hearing was not filed with the record, though the surety had obtained an order that the court reporter "prepare and furnish a transcript of the proceedings * * *." The surety noted in its opening brief that the transcript of this further hearing had not been filed, but failed to take steps to complete the record until after argument on the merits, when a motion was made for permission to file the transcript of the further hearing. The court reserved its decision on this motion. It is granted at this time for the reason now stated.
Under H.R.C.P., Rule 16, a pre-trial order controls the subsequent course of the action, "unless modified at the trial to prevent manifest injustice." There was no modification of the pre-trial order subsequent to November 8, 1963 when it was filed. If the record remained in this state, the surety could stand on the pre-trial order. The owners' objection to the court being furnished the complete record at this time therefore is not valid.
The transcript of July 17, 1964, supports the surety's amended specification No. 5(a), showing the surety's objection that the matter at issue was "the extent of damages suffered by the particular claim which is the subject matter of this suit-claim of Honolulu Roofing Company versus Felixes and Shuman Lumber Company, defendants," and the allowance of a continuing objection along these lines.
We refer also to the $90 item which the court itself ordered stricken, but subsequently included in the amounts credited to the owners.
Under the terms of the assignment and bond the owners would not be entitled to credit for the payments against the surety if the payments were viewed as mere loans to the contractor, except as a different result might follow upon consideration of the uses and purposes to which the money was put. Cf., Museum of Fine Arts v. American Bonding Co., 211 Mass. 124, 97 N.E. 633. On the other hand, if these payments were viewed as money loaned to the surety then the burden again rested on the owners of showing that such sums were so borrowed.