Hamill v. Maryland Casualty Co.

Gunnell Construction Company (Gunnell) (defendant), in need of capital, reached an investment agreement with Don Hamill (defendant). Hamill agreed to advance 10% of any construction contracts that Gunnell entered into in exchange for 10% of any net profits that Gunnell made on the contracts. Under this agreement, Gunnell entered into a contract to build an addition onto a school. Gunnell applied to the Maryland Casualty Co. (Maryland) (plaintiff) for a performance bond. Maryland stated that Gunnell had insufficient working capital to issue the bond, at which point Gunnell showed Maryland its contract with Hamill. With this contract backing Gunnell’s financial stability, Maryland issued the performance bond. During the school project, Gunnell encountered financial problems and could not pay all of its bills. Hamill nonetheless demanded repayment under their agreement and Gunnell paid. Maryland then paid Gunnell’s outstanding bills to discharge Maryland’s obligations on the performance bond. Maryland then brought suit against Hamill and Gunnell, seeking repayment of the performance bond. The United States District Court for the District of New Mexico ruled in favor of Maryland against Hamill, finding that Maryland was a third party beneficiary to the Hamill-Gunnell contract and that Hamill breached the contract by demanding repayment of his investment before the project’s bills were paid in full. Hamill appealed.