Alexander Lumber Co. v. Aetna Accident & Liab. Co., 13223.
| Decision Date | 15 February 1921 |
| Docket Number | No. 13223.,13223. |
| Parties | ALEXANDER LUMBER CO. v. AETNA ACCIDENT & LIABILITY CO. |
| Court | Illinois Supreme Court |
OPINION TEXT STARTS HERE
Error to Appellate Court, Third District, on Appeal from Circuit Court, Champaign County; Franklin H. Boggs, Judge.
Suit by the Alexander Lumber Company against the AEtna Accident & Liability Company to recover on a contractor's bond. The liability company thereafter filed a bill to enjoin prosecution of the suit, and the lumber company filed a cross-bill. A decree of the circuit court for the lumber company was on appeal affirmed by the Appellate Court, 215 Ill. App. 555, and the liability company brings error.
Reversed and remanded, with directions.
Green & Palmer, of Urbana, and L. L. Dent, of Chicago (Henry I. Green and Oris Barth, both of Urbana, of counsel), for plaintiff in error.
Dobbins & Dobbins, of Champaign, for defendant in error.
Defendant in error, the Alexander Lumber Company, a corporation, brought suit upon the bond of the plaintiff in error given by it to the board of trustees of the University of Illinois to secure the faithful performance of the contract of Freeman & Brooks, contractors, for the erection of a building at the University of Illinois to be known as the chemistry building. The amount claimed by the Alexander Lumber Company to be due and unpaid for materials furnished under the contract is $15,790.13. Plaintiff in error filed numerous pleas to the suit, which were demurred to and the demurrers sustained. Thereupon plaintiff in error filed its bill to enjoin the prosecution of the suit, alleging, among others, the matters set up in its various pleas demurred to. The bond upon which suit was brought provided for the faithful performance of the contract by Freeman & Brooks, and contained, among other provisions, the following:
‘It being hereby understood and agreed by the parties hereto that this bond and agreement is entered into not only for the protection of the said board of trustees of the University of Illinois, but also for the protection of the said subcontractor, materialman, mechanic, workman, laborer or other person so furnishing material or labor, who shall have the right to enforce the obligation of this agreement and bond against the said principal and surety in the same manner and to as full an extent as though they were parties to this bond and agreement, it being understood and agreed, however, that this protection shall not extend to any party or parties to whom the said principal is not directly indebted by reason of the furnishing of labor or material in or about the erection or construction of said building, then this obligation to be void, otherwise to remain in full force and effect.’
Six different grounds for equitable relief are averred in the bill, but, under the view we take concerning the case, it will not be necessary to consider them all.
The first contention of plaintiff in error is that, by reason of the relation of the parties existing under this particular bond, plaintiff in error had a special equity in the funds paid under the construction contract, and that payments to the defendant in error derived from said contract should in equity be credited to the account for materials furnished and used in the building, and that, if that be done, the Alexander Lumber Company, having received from said funds more than the amount of its bill for materials furnished for said building, is fully paid and the bond discharged as to it. To this contention the defendant in error replied that it was under no obligation to apply payments made to the account for which plaintiff in error was surety, and that as the contractors were indebted to it for other large sums of money on other contracts, and that since the defendant in error did not know the source of the funds paid to it by the contractors and received no directions for the applicationof payments, the payments so made were applied to antecedent indebtedness. Defendant in error admits that it made no application of payments to the account for materials furnished for the chemistry building. It admits that it received, during the time of the construction of the said building, the sum of $26,000 from the contractors, but avers that it had no knowledge of the source of such funds. It filed its cross-bill setting forth practically the same facts and circumstances contained in an answer to the original bill filed herein, and prayed that the sum found to be due it be paid to the trustees of the University of Illinois for the use of the defendant in error. The chancellor entered a decree awarding the relief prayed in the cross-bill and dismissed the original bill of the plaintiff in error for want of equity, and in the decree awarded the lumber company the sum of $17,560.35 and interest thereon from the 18th day of April, 1916. An appeal was taken from this decree to the Appellate Court, where the decree was affirmed.
Plaintiff in error contends that, by reason of the particular contract entered into, it had a special equity in the fund derived from the contract of Freeman & Brooks with the state of Illinois, and that, defendant in error having been a beneficiary under the contract, there was such privity existing between plaintiff in error and the defendant in error as to give plaintiff in error the right to have the payments of money derived from the construction contract in question applied to the account for materials furnished by defendant in error for such building, and that this, therefore, is not a general surety contract in which the general rules of suretyship and application of payments apply. It is admitted that the general rule as to the application of payments is that the debtor may specify the account to which he desires application made, and if he does not do so the application which is made by the creditor is binding not only upon the debtor, but upon his surety; but plaintiff in error contends that the general rule does not apply.
An examination of the bond in this case discloses that it was conditioned upon the faithful performance by Freeman & Brooks of a certain contract and the payment of materialmen furnishing material on that contract. The bond, as we have seen, provided that it was made not only for the protection of the board of trustees of the University of Illinois, but also for the protection of materialmen or other persons furnishing material or labor, who were given the right to enforce the obligation of the bond against the principal and surety in the same manner and to as full an extent as though they were parties to the bond. There follows in the bond, after this provision, language which must be taken as a limitation upon the contract of suretyship:
‘It being understood and agreed, however, that this protection shall not extend to any party or parties to whom the said principal is not directly indebted by reason of the furnishing of labor or material in or about the erection or construction of said building.’
This bond is twofold in its effect. It is first a general bond as to the trustees of the University of Illinois, saving them harmless from claims of any character arising from the construction of the chemistry building, but it is a special bond as to the materialmen. They are given protection under it as to payment for materials furnished on this contract only. It was plainly the intention of the parties that this bond was not to cover the open account of Freeman & Brooks generally, but to apply only to materials furnished to the building in question. The provisions of the bond just referred to form the only basis of the defendant in error's right to sue. Without these provisions it could not sue upon the bond. City of Sterling v. Wolf, 163 Ill. 467, 45 N. E. 218. Its right to sue is therefore limited to the language of said provisions. The obligation of a surety is to be strictly construed. Searles v. City of Flora, 225 Ill. 167, 80 N. E. 98. The lumber company was not required to accept this bond if it did not desire to do so, but, having accepted it, it is bound by its terms and conditions. By bringing suit upon this bond it must be held to have accepted it. Having been made a beneficiary under the bond, with right to sue thereon, there is privity of contract existing between it and plaintiff in error. This bond was given to secure the doing of certain things, to wit, the fulfillment of the contract by the firm of Freeman & Brooks. In this regard the bond in question became a part of the contract for the erection of the building and affected by it.
Defendant in error contends that there is no reason for applying a different rule regarding application of payments in this case from that applied under a general suretyship contract. There appear to have been no c...
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