American Surety Co. of New York v. Broadway Improvement & Investment Co.

• Decision Date: 16 October 1928
• Docket Number: 1369
• Parties: AMERICAN SURETY CO. OF NEW YORK v. BROADWAY IMPROVEMENT & INVESTMENT CO. [*]
• Court: Wyoming Supreme Court

271 P. 19

39 Wyo. 195

AMERICAN SURETY CO. OF NEW YORK v. BROADWAY IMPROVEMENT & INVESTMENT CO. ^[*]

No. 1369

Supreme Court of Wyoming

October 16, 1928

Rehearing Denied February 5, 1929, Reported at: 39 Wyo. 195 at 214.

ERROR to District Court, Natrona County; CYRUS O. BROWN, Judge.

Action by Broadway Improvement & Investment Company against American Surety Company of New York. There was judgment for plaintiff and defendant brings error. The material facts are stated in the opinion.

Affirmed.

Hagens & Murane, for plaintiff in error.

The judgment and findings against the Surety Company are not sustained by evidence. The Improvement Company while obliged to pay $ 23,000.00 for the contract work had paid out only $ 18,031.63. Plaintiff failed to prove any damages whatsoever plaintiff below failed to give defendant below notice of the contractor's default by registered mail; this failure was admitted by plaintiff and not waived by defendant. Lewis v. Commercial Casualty Ins. Co., 28 A. L. R. 1287; 29 Cyc. 1118. The bond stipulated a limitation of time within which action might be brought upon it, to-wit: April 15 1924. The action here was commenced November 18, 1924; there was no waiver of this provision; a stipulation in the contract of suretyship limiting time for action which is less than the statutory period of limitations will be withheld; Building v. Seville, (Va.) 43 S.E. 361; Stone v. Construction Co., 123 F. 746; Novelty Co. v. Heinzerling, 81 P. 742; Henry v. Aetna Indemnity Co., 79 P. 42; 32 Cyc. 230; Appell v. Cooper, 80 N.E. 52 (Ohio); Dean v. Company, 172 S.W. 762; McKay v. McCarthy, 123 N.W. 755. The defense of limitations is never waived except by a distinct agreement. Hardware Co. v. Co., 154 P. 801; Ry. Co. v. Grain Co., 203 S.W. 680; Freeman v. Conover, (N. J.) 112 A. 324; Hopperton v. Ry. Co., 34 S.W. 895; Trail v. Firth, 198 P. 1033. Changes made in the building without the surety's knowledge or consent, and a supplemental agreement changing the terms of the contract bonded, without surety's consent, and the release of retained percentages by the owner are all prejudicial, and released surety from its obligations under the bond. Mfg. Co. v. Collins, (Wisconsin) 120 N.W. 225; Masonry Co. v. Surety Co., (Washington) 112 P. 517; 32 Cyc. 216; Johnson v. Jones, (Okla.) 135 P. 12; Skelton v. Surety Co., 127 F. 736; O'Neill v. Co., 191 F. 570; Justice v. Surety Co., 218 F. 802. Where contract provides for retention of percentage and contractor pays full amount, the sureties are released; Wehrung v. Denham, 71 P. 133; Bell v. Trimby, 38 S.W. 100; City Council v. Ormand, 28 S.E. 147; Cowdery v. Hahn, 81 N.W. 882; Morgan v. Salmon, (N. M.) 135 P. 553. The creditor by releasing the securities to that extent relieves the surety; Surety Co. v. Linden, 137 N.W. 496; Museum v. Bonding Co., (Miss.) 97 N.E. 633; Troll v. Dougherty, (Mo.) 171 S.W. 655. A paid surety is bound only by the stipulations of his contract. Surety Co. v. Long, (Ark.) 96 S.W. 745; Lyons v. Mitchell, 134 P. 213. The surety is entitled to remain in the position in which he was at the time the contract was made. Justice v. Surety Co., supra; Harris v. Taylor, (Mo.) 129 S.W. 995. Material alterations made in the work released the surety, 21 R. C. L. 1011. Woodruff v. Schultz, (Mich.) 118 N.W. 579. Counsel for plaintiff took the stand and conducted an examination by asking and answering their own questions. This rendered it difficult to distinguish between the testimony of the witness and what was mere argument of counsel.

Frank England and Henry E. Perkins, for defendant in error.

Plaintiff in error agreed to purchase a body of materials on the building site at the time contract was made, and the Surety Company consented. Adding all payments, whether by cash or materials it was shown that defendant in error had expended $ 3,936.00 over and above its contract obligation for which it was intended it should be reimbursed under the judgment; plaintiff in error was promptly notified that its principal was not carrying out the contract. A surety company cannot place a limitation upon its bond for bringing action, indulge in negotiations for settlement of a breach, and then urge in defense that the time limit in the bond has expired. David v. Oakland, 39 P. 443; Vorhees v. Society, 51 N.W. 1110; Insurance Co. v. Hora, 59 N.W. 752; Thompson v. Company, 59 N.W. 287. The alleged changes and releases of retained percentages resulted in a benefit instead of detriment to plaintiff in error. The trial court made findings on the evidence as to whether these changes were prejudicial and they should not be disturbed; Ketchum v. Davis, 3 Wyo. 164; Hester v. Smith, 5 Wyo. 291.

TIDBALL, District Judge. BLUME, Ch. J., and KIMBALL, J., concur.

OPINION

TIDBALL, District Judge.

The parties will be referred to as in the trial court.

The plaintiff and defendant Martin Robinson made an agreement on October 25th, 1923, by the terms of which Robinson was to provide all the material and perform all the work for the construction of a one-story brick storeroom and showroom in Casper, Wyoming, for the price of $ 23,000.00. The contract provided that the building should be erected according to designated plans and specifications prepared by Rainwater and Epling, architects, which were made a part of the contract. The contract provided further:

"It is understood and agreed by and between the parties hereto that the said party of the first part (Robinson) shall buy all lumber, steel, brick and other material now on said premises which was bought to be used in connection with this contract for use in the erection of said building."

The contract further provided that the party of the second part (Broadway Improvement and Investment Company) should pay upon estimates of the architects as the work progressed eighty-five percent of such estimates and withhold payment of fifteen percent until thirty days after the building was completed and until the production of proper evidence to show that all labor and material claims had been paid so that no liens could be filed on the building. It was further agreed that all disputes between the parties should be settled by the architects named in the contract and that "their decision shall be considered final." The building was to be completed and ready for occupancy "not later than January 1st, 1924." There was a further stipulation in the contract for a surety bond in the sum of $ 5,000 payable to the Improvement Company indemnifying it "in full against all loss and damage which said party of the second part may sustain under this contract by reason of liens or other damage which may accrue and that said party of the second part may be required to pay."

The bond was duly executed by the builder with the defendant surety company as surety, in the sum of $ 5,000 on November 9th, 1923. The bond recites that,

"Whereas, the principal has entered into a written contract dated___191_, with the obligee for the erection of a brick building on Lot 13 in Block 100, a copy of which is hereto annexed, Now, therefore, the condition of this obligation is such, that if the principal shall indemnify the obligee against any loss or damage directly arising by reason of the failure of the principal to faithfully perform said contract, then this obligation shall be void."

The bond further provided that in the event of any default on the part of the principal, a written statement of the particular facts showing such default and the date thereof should be delivered to the surety by registered mail at its office in Denver, Colorado, promptly, and, in any event, within ten days after the obligee or his representative or the architect should learn of such default; that the surety should have the right within thirty days after the receipt of such statement to proceed with the performance of the contract. Another condition of the bond was that no claim, suit or action by reason of any default should be brought against the principal or surety after April 15th, 1924, nor should recovery be had for damages accruing after that date. The bond further provided that no change should be made in such plans and specifications which would increase the amount to be paid the principal more than ten percentum of the penalty of the bond without the written consent of the surety. The building contract above referred to was attached to and became a part of the bond.

In October, 1923, and after the execution of the building contract but before the bond was executed, another agreement was entered into between Robinson, the builder, and the Broadway Improvement and Investment Company, which contract was never accepted by the surety company and concerning the execution of which it had no notice at the time its bond was executed. This contract recited the execution of the former building contract and then provided that "it is the intention and purpose of this agreement that such terms and character of payment be particularly specified and agreed upon between the parties hereto," and then it is provided that "a credit in the sum of Four Thousand Four Hundred ($ 4,400.00) Dollars shall be allowed and given by the party of the first part to the party of the second part" upon the contract price of $ 23,000, "upon account of certain lumber and brick which are at this date upon the site where said building is to be erected." It then provided that $ 15,000 cash should be paid upon estimates as provided in the building contract and the balance of the total building price in the sum of $ 3,600 was covered by a promissory note in that amount running from R. N. Van Sant to the Broadway Improvement and Investment Company and endorsed without recourse to Robinson.

The suit is brought...