United States Fidelity Guaranty Company v. United States

• Citation: 24 S.Ct. 142,191 U.S. 416,48 L.Ed. 242
• Decision Date: 07 December 1903
• Docket Number: No. 39,39
• Parties: UNITED STATES FIDELITY & GUARANTY COMPANY, Plff. in Err. , v. UNITED STATES, for the use, etc
• Court: United States Supreme Court

191 U.S. 416

24 S.Ct. 142

48 L.Ed. 242

UNITED STATES FIDELITY & GUARANTY COMPANY, Plff. in Err.,

v UNITED STATES, for the use, etc.

No. 39.

Argued October 30, 1903.

Decided December 7, 1903.

This was an action originally begun in the circuit court for the district of Colorado by the United States, for the use and benefit of the Golden Pressed & Fire Brick Company (hereinafter called the brick company) against John A. McIntyre and the United States Fidelity & Guaranty Company (hereinafter termed the guaranty company), upon a bond executed April 11, 1898, in pursuance of an act of Congress of August 13, 1894 (28 Stat. at L. 278, chap. 280, U. S. Comp. Stat. 1901, p. 2523), to secure the performance of a contract theretofore entered into by McIntyre with the Secretary of the Treasury to furnish all the labor and materials, and do all the work required for the foundation and superstructure of a mint in the city of Denver.

The questions certified are founded upon the following facts: McIntyre, having agreed to erect the building, executed a bond to the United States, with the guaranty company as surety, conditioned not only upon the faithful performance of his work to erect the building according to his contract, and to any changes or additions made thereto, but to 'promptly make payment to all persons supplying him labor or material in the prosecution of the work contemplated by said contract.' During the progress of the work the brick company furnished the contractor brick for the construction of the building to the amount of $6,517.55, which had been reduced by payments to $2,711.65, for which the action was brought.

The defendant denied its liability upon the ground that on October 1, 1898, the brick company, without the knowledge or consent of the guaranty company, granted to McIntyre an extension of the time of payment of the balance then due on account of the purchase price of such brick; and accepted two promissory notes, one for thirty days after date (October 1), and another sixty days after September 15, 1898, the first one of which was paid. There was no allegation that, by reason of the extension of the time of payment of the sum so due on October 1, the guaranty company had sustained any loss or injury, but it was insisted that it was nevertheless thereby released and discharged from any further liability upon such bond.

The circuit court held that the extension did not operate to discharge the guaranty company from its liability, and the circuit court of appeals, to which the case was carried, certified to this court the following questions of law arising from these facts:

'First. Did the action of the brick company on October 1, 1898, in taking two promissory notes, one for the sum of $1,275 and the other for the sum of $2,508.10, for the amount of the brick company's account, then due and payable, one of said notes running for thirty days and the other for sixty days, and each bearing 10 per cent interest per annum from date, operate to discharge the United States Fidelity & Guaranty Company from its liability, assumed under the provisions of the aforesaid bond, to pay to the Golden Pressed & Fire Brick Company the amount of said indebtedness?

'Second. Did the extension of the time of payment of the balance due from said McIntyre, on October 1, 1898, by the taking of two notes in the manner and form aforesaid, operate to discharge the United States Fidelity & Guaranty Company of its liability to pay the amount of said indebtedness to the brick company, irrespective of the question whether said guaranty company did or did not sustain an actual loss or damage on account of such extension?'

Messrs. Andrew W. Gillette and James H. Brown for plaintiff in error.

[Argument of Counsel from pages 418-420 intentionally omitted] Mr. T. J. O'Donnell for defendant in error.

Statement by Mr. Justice Brown:

[Argument of Counsel from pages 420-422 intentionally omitted] Mr. Justice Brown delivered the opinion of the court:

This bond was given in pursuance of the act of 1894 (28 Stat. at L. 278, chap. 280, U. S. Comp. Stat. 1901, p. 2523), 'for the protection of persons furnishing materials and labor for the construction of public works.' The act requires, in substance, that persons contracting with the United States for the construction of any public building, etc., shall be required, before commencing such work, to execute the usual penal bond, 'with the additional obligations that such contractor or contractors shall promptly make payments to all persons supplying him or them labor and materials in the prosecution of the work provided for in such contract,' with a right on the part of the materialman to bring suit in the name of the United States for his use and benefit against the contractor and his sureties. The bond in this case contained two entirely distinct and separate obligations: First, that McIntyre should fulfill all the conditions and covenants of his contract, whatever changes in or additions to such contract might thereafter be made; and, second, promptly make payment to all persons supplying him labor and materials in the prosecution of the work. Of course, these covenants are to be read together, and the latter interpreted in the light of the former.

The question involved is whether the ordinary rule that exonerates the guarantor in case the time fixed for the performance of the contract by the principal be extended applies to a bond of this kind, executed by a guaranty company not only for a faithful performance of the original contract, but for the payment of the debts of the principal obligor to third parties. It is conceded that, by the general law of suretyship, any change whatever in the contract for the performance of which the guarantor is liable, made without his consent, such, for instance, as an extension of time for payment, if made upon sufficient consideration, discharges the guarantor from liability. Miller v. Stewart, 9 Wheat. 681, 6 L. ed. 190; Smith v....