Moya v. Fidelity and Casualty Company of New York , 75 N.M. 462 ( 1965 )

MOISE, Justice.

Plaintiff-appellant here presents an issue of whether defendant-appellee, as surety on a “plugging bond,” owed a duty to plains, tiff, its principal, to attempt to locate him and notify him that his gas w.ell was about to be plugged, and whether defendant actually had the well plugged before it was required to do so. By cross appeal the defendant complains of the trial court’s refusal to grant it judgment on a counterclaim for amounts expended by it in meeting its obligation on the bond.

Plaintiff owned a gas well which went into production in 1953. Defendant had written a “plugging bond” which the trial court found ran to the New Mexico Oil Conservation Commission, guaranteeing plaintiff’s compliance with the laws of the state concerning plugging of wells.

On October 4, 1961, the Oil Conservation Commission held a hearing at which plaintiff was present, wherein he was required to show catase why the well in question should not be plugged and abandoned. As a result of the hearing, an order was entered directing that the well be reworked by January 15, 1962 or be plugged and abandoned by that date and, further, that if it was going to be reworked, operations to rework should commence not later than November 15, 1961. On November 17, 1961, the commission notified defendant that plaintiff had not contacted it concerning any reworking. A copy of this notice was sent by the commission to plaintiff at his last known address. Thereafter, defendant made several inquiries to determine if plaintiff was doing any reworking or plugging and, finding that he was not, made arrangements and had the well plugged on December 28, 1961. The court found that the weather was bad during much of December, 1961 and January, 1962, but on December 28, 1961 was such that the contractor employed by defendant could and did accomplish the work, which was done in accordance with rules of the commission and to its own satisfaction.

Plaintiff complains that because defendant was his agent, there was a confidential or fiduciary relationship existing between them, and that defendant breached this duty by failing to notify plaintiff that it was about to plug the well which would have given plaintiff the opportunity to do the plugging himself. Plaintiff also alleges that proper notice would have allowed him time to salvage material in the well, or to rework it as plaintiff claims he intended to do.

Defendant says that the relationship is not a principal-agent one, but rather one of principal and surety. We do not consider that it is necessary for us to enter into any lengthy discussion of the legal principles distinguishing these relationships, nor do we need to discuss the differences in duties attendant upon each. The facts as found by the court which are not questioned by plaintiff on this appeal provide ample support for the conclusion reached by the court that defendant acted in strict compliance with its obligation and the commission’s orders. As to plaintiff’s contention that he intended to rework the well, it is sufficient to point out that, under the commission order, when he failed to commence such operation by November 15, his right to do so ended. There is no evidence that he had commenced any operation by that date.

As we understand plaintiff’s position, he argues that since plaintiff had until January 15, 1962 to plug the well, defendant acted wrongfully and breached its fiduciary relationship in doing the work before that date, or at least in not contacting plaintiff to determine his intentions. We do not agree. Certainly appellee could not be required to wait until the morning of January 15, the date on which the plugging was ordered completed by the commission. We know of no requirement that prevents the surety proceeding to fulfill its obligation when the principal has defaulted. Neither was notice to him a requisite. See Counelis v. Counelis, 315 Mass. 694, 54 N.E.2d 177; compare Royal Indemnity Company v. Bottone, 66 N.M. 155, 343 P.2d 1042; Huffman v. National Surety Co., 244 Ky. 714, 51 S.W. 2d 950. So long as defendant was proceeding in good faith to perform its obligation to the state when there was no evidence of any activity hy plaintiff to do so, there can be no legal basis for complaint. November 15 having passed, the weather being bad and a real question being present whether the work could be accomplished by January 15 if not done when it was, we agree with the trial court that plaintiff failed to show any right to damages, and his complaint was properly dismissed.

We must now dispose of the cross appeal. It is defendant-cross appellant’s position that the court erred in applying a rule of “mitigation” and, further, that having performed its obligation on the bond, it is entitled to recover “all loss, damage or expense” incurred by it, as provided in the indemnity agreement which was a part of the bond application signed by plaintiff-cross appellee.

As to the first point, it is plaintiff-cross appellee’s position that since all the evidence necessary to a determination of the issue of mitigation was received in evidence without objection, the fact that no such issue was pleaded is immaterial, and the pleadings will be considered amended to conform to the proof. Cited in plaintiff-cross appellee’s brief are Luvaul v. Holmes, 63 N.M. 193, 315 P.2d 837; Berkstresser v. Voight, 63 N.M. 470, 321 P.2d 1115; and many cases from other jurisdictions. However, these cases all differ because in each of them all parties were obviously aware of the particular issues or defenses to which the evidence was applicable, while here, the evidence was admissible in the main case and there was no suggestion that the testimony respecting mitigation was introduced in connection with the cross complaint.

Mitigation of damages, as a defense to. defendant-cross appellant’s counterclaim-does not appear in plaintiff-cross appellee’s, requested findings and conclusions. Nor does defendant-cross appellant make any mention of any theory of mitigation of damages. The trial court’s findings, for the first time, incorporate this theory in the case. 3 Moore, Federal Practice, par. 15.-13(2) at 991-92, states:

“The purpose of an amendment to conform to proof is to bring the pleadings in line with the actual issues upon which the case was tried; therefore an amendment after judgment is not permissible which brings in some entirely extrinsic issue or changes the theory on which the case was actually tried, even though there is evidence in the record — introduced as relevant to some other issue — which would support the amendment. This principle is sound, since it cannot be fairly said that there is any implied consent to try an issue where the parties do not squarely recognize it as an issue in the trial.”

See Underwriters Salvage Co. of New York v. Davis & Shaw Furniture Co., 198 F.2d 450 (CA 10, 1952); and Freitag v. The Strand of Atlantic City, 205 F.2d 778 (CA 3, 1953).

In Otness v. United States, 23 F.R.D. 279 (D.C. Alaska, 1959), the court said:

“There is no authorization within the above rule [Rule 15(b) ] to allow an amendment to the pleadings to conform to proof merely because evidence presented which is competent and relevant to the issue created by the pleadings may incidentally tend to prove another fact not in issue. [Citing authority] * * * Where proof is taken only under the claim of the complaint, there is no proper case for amendment even though the proof may prove another issue. The plaintiff gave no indication of, or intention to claim, additional grounds for relief during the course of the trial.”

Defendant-cross appellant’s further claims are also correct. The contract of indemnity promised to reimburse for expenditures made under the bond unless made fraudulently. There being no question that the payments were made (the court so found), by what right are defendant-cross appellants denied the right specifically contracted for? We do not think they had any duty to mitigate — and the proof here does not support any conclusion that they should have. Illinois Surety Co. v. Maguire, 157 Wis. 49, 145 N.W. 768, supports defendant-cross appellant’s position. Also compare American Surety Co. of New York v. Inmon (CA 5, 1951) 187 F.2d 784; U. S. F. & G. Co. v. Jones (CA 5, 1937) 87 F.2d 346; U. S. F. & G. Co. v. Baker, 136 Ark. 227, 206 S.W. 314; Fidelity and Casualty Co. of N. Y. v. Harrison (Tex.Civ.App. 1925) 274 S.W. 1002; National Surety Co. v. Casner (Mo. 1923) 253 S.W. 1057. Another case is Carroll v. National Surety Co. (1928) 58 App.D.C. 3, 24 F.2d 268.

While the court found that the amount paid for the plugging was excessive and that no competitive bids were taken for the work, and further that salvageable material was left in the well, he further found that the “well was properly plugged and abandoned as required by law and by the bond, and that defendant [cross appellant] proceeded in a proper manner and at a proper time to carry out its obligation.” This being true and mitigation of damages not being an issue in the counterclaim, there is no support for the court’s conclusion that defendant-cross appellant was not entitled to recover the amounts expended by it in complying with its obligations.

It follows that the judgment in favor of defendant-appellee is affirmed, and the judgment on the counterclaim in favor of plaintiff-cross appellee is reversed.

It is so ordered.

CARMODY, C. J., and NOBLE, J., concur. COMPTON and CHAVEZ, JJ., concurring in part and dissenting in part.