Dorr v. Bankers' Surety Co.

• Decision Date: 03 February 1920
• Docket Number: No. 15801.,15801.
• Citation: 218 S.W. 398
• Parties: DORR et ux. v. BANKERS' SURETY CO.
• Court: Missouri Court of Appeals

218 S.W. 398

DORR et ux. v. BANKERS' SURETY CO.

No. 15801.

St. Louis Court of Appeals. Missouri.

February 3, 1920.

Appeal from St. Louis Circuit Court; John W. Calhoun, Judge.

"Not to be officially published."

Suit by Lorenz E. Dorr and wife against the Bankers' Surety Company. From judgment sustaining motion to set aside nonsuit, defendant appeals. Affirmed and remanded.

Plaintiffs, being husband and wife, sue upon a building contractor's faithful performance bond which was executed by the defendant, Bankers' Surety Company, a corporation, authorized to do a surety business in the state of Missouri.

The suit was originally instituted against both the contractor and the surety company, but during the progress of the trial the cause was dismissed as to the contractor. Upon submission of plaintiffs' case, the trial court announced its intention to give a peremptory instruction in favor of the defendant, whereupon the plaintiff requested leave to take an involuntary nonsuit with leave to move the court to set the same aside, which request the court granted. Afterwards the plaintiffs filed a motion to set aside the nonsuit, which motion was sustained. From this order or judgment sustaining the motion to set aside the nonsuit the defendant has perfected an appeal to this court, contending that the court below erred in sustaining the motion and that the plaintiffs' proof failed to make a case for the consideration of the jury.

Plaintiffs, being the owners of a lot of ground in the city of St. Louis, entered into a contract with W. A. Schumacher for the erection of a three-story apartment building according to certain plans and specifications, and by which contract the said Schumacher undertook to erect and complete said building according to the terms of the contract and specifications and to furnish at his expense all labor and materials to be used in said building. Under the terms of the contract, Schumacher was to be paid the sum of $16,616 in installments during the progress of the work, the final payment of $3,616 to be made when the work was completed and within 10 days after the completion of said work included in the contract.

The defendant, Bankers' Surety Company, on April 22, 1909, for a compensation, executed the bond in suit, conditioned upon the faithful compliance of Schumacher of all the terms, covenants, and conditions of said contract, which bond was subject to the following provisions:

"Provided, that said surety shall be notified in writing of any act on the part of said principal, which shall involve a loss for which the said surety is responsible hereunder, immediately after the occurrence of such act shall have come to the knowledge of the duly authorized representative or representatives of the obligee herein, who shall have the supervision of the completion of said contract, and a registered letter mailed to the surety, at its principal office in Cleveland, Ohio, shall be deemed sufficient notice, within the meaning of this bond.

"Provided, further, that the obligee shall retain until the full performance of said contract, and until after limitation against liens shall have run, the percentage provided to be retained in said contract in the event of default by the principal in the terms of said contract, this instrument shall operate from the date hereof as an assignment unto said surety, for its protection, indemnification or reimbursement of all moneys earned or due, or to become due to the principal, which shall not, prior to such default, have been paid unto said principal on account of said contract," etc.

The provision of the contract and bond over which the controversy arises is that provision of the contract which provides that the final payment when the building was completed was to be $3,616, and that this final payment "shall be made within ten days after the completion of the work included in the contract," and the bond provision regarding payment "that the obligee shall retain until the full performance of said contract, and until after limitation against liens shall have run, the percentage provided to be retained in said contract."

As the work progressed, the plaintiffs made payments to the contractor substantially in accordance with the provisions of the contract. Two days after the building was completed, the contractor, Schumacher, applied to the plaintiffs for the final payment. At that time the plaintiffs, having been advised by Schumacher that all claims of materialmen against the building had been paid, made a partial payment of $2,000 to Schumacher on account of the final payment. Within a' few days thereafter, Schumacher applied to the plaintiffs for the balance due, but in the meantime the plaintiffs had discovered that there were bills in favor of materialmen against the building which were overdue and which had not been paid by Schumacher, and they thereupon declined to pay Schumacher the balance remaining unpaid under the contract.

Thereafter lien claims were established against the property on account of the contractor's failure to pay the materialmen aggregating the sum of $2,838.25, and the plaintiffs in addition paid two other claims aggregating $383.60 for materials furnished to the building, which the plaintiffs contend were lienable claims, but the liens were not perfected in view of plaintiffs' promise to pay the claims.

No written notice as provided by the bond was given the defendant by plaintiffs of the default of the contractor in failing to pay these materialmen. Defendant on this appeal contends:

(1) That it was released by reason of plaintiffs' failure to give notice of the contractor's default as required by the bond.

(2) That it was the duty of the plaintiffs to retain the final payment under the contract for at least 10 days after the completion of the building, and that such failure released the defendant, and, if such failure did not in fact totally discharge the surety, it at least entitled the surety to a credit pro tanto to the extent of the overpayments, which was more than sufficient to cover the amount claimed by the plaintiffs.

(3) That inasmuch as the contract provided that the plaintiffs, who were the owners, should act as architects, and inasmuch as the evidence showed that they failed to do so, this was such an alteration of the contract as to release the surety.

Jeffries & Corum, of St. Louis, for appellant.

Finnegan & Finnegan, of St. Louis, for respondents.

BIGGS, C. (after stating the facts as above).

As to notice, we think the point has been correctly ruled against defendant by the Kansas City Court of Appeals in the case of Hurley v. Fidelity & Deposit Co., 95 Mo. App. 88, 68 S. W. 958. The provision in the bond in the Hurley Case was exactly the same provision as is contained in the present case in regard to the question of the necessity of notice of default, and it was held by the court...