Federal Union Surety Company v. McGuire

• Decision Date: 16 February 1914
• Citation: 163 S.W. 1171,111 Ark. 373
• Parties: FEDERAL UNION SURETY COMPANY v. MCGUIRE
• Court: Arkansas Supreme Court

163 S.W. 1171

111 Ark. 373

FEDERAL UNION SURETY COMPANY v. MCGUIRE

Supreme Court of Arkansas

February 16, 1914

Appeal from Phillips Circuit Court; Edwin Bevens, Special Judge affirmed.

Affirmed.

Moore Vineyard & Satterfield, for appellant.

1. It needs no citation of authorities to show that the court erred in permitting the witness McGuire to read to the jury a copy of a letter purporting to have been written to the appellant without requiring a proper foundation for the introduction of a copy instead of the original letter.

2. It was error to permit this witness to detail transactions and conversations between himself and a party claimed by him to have been the agent of appellant.

One who deals with a special agent is bound to ascertain the nature and extent of his authority, and must know before he deals with him that he is in fact what he represents himself to be. 81 Ark. 202; 74 Ark. 557; 62 Ark. 33. The authority of an agent can not be established by his own declarations. 92 Ark. 315; 84 Ark. 373.

3. There is no evidence showing that there was ever any disagreement or objection made to any of the work done or materials put in place by the contractor. After his death another contractor arbitrarily ordered certain parts of the work taken out and new work put in.

In the absence of fraud or such gross mistake as would necessarily imply bad faith, appellee had no right to take out work already done and have other work done in lieu thereof, at the expense of appellants. 48 Ark. 522; 83 Ark. 136.

4. The act of the appellee in paying out funds in excess of the amount authorized by the contract, was a material breach of the contract which should operate as a release of the sureties on the bond. 69 Ark. 126; 63 Ark. 473; 79 Ark. 523; 89 F. 925; 45 Ala. 535.

P. R. Andrews, for appellee.

1. The failure of the appellee to retain $ 532 for the last payment as specified in the contract was an immaterial departure from the contract and did not discharge the surety. 86 Ark. 217; 89 Ark. 480.

2. The contracts of surety companies are construed as contracts of insurance. They are not regarded as favorites of the law entitled to stand upon the strict terms of their obligations, but their contracts will be reasonably construed to give effect to the protective purposes of their execution. 73 F. 95; 133 S.W. 365; 80 Ark. 54; 32 Cyc. 306, and cases cited; 112 Minn. 288; 33 L. R. A. 513, and notes. When doubtful or ambiguous, the bond of such a company will be construed against the company. 170 U.S. 133; 183 U.S. 402.

MCCULLOCH, C. J. SMITH, J., dissenting.

OPINION

MCCULLOCH, C. J.

This in an action instituted by appellee against appellant, a surety company, to recover on a bond executed by the latter to stand surety for one James Loveland for the performance of his contract with appellee for the construction of a building in the city of Helena, Arkansas.

According to the terms of said contract, Loveland undertook to furnish material and build the house for appellee at the stipulated price of $ 4,132, to be paid as follows:

When the foundation is in and the framing is up,

excepting the rafters

$ 1,000

When the storm sheathing and roof is on

800

When brick work is finished and the outside is

finished, except paint

1,000

When the windows are in and plastering is on

800

When the contract is completed, the balance of

532

$ 4,132

The contract contained the following stipulation:

"In case there should be any disagreement between the two parties to this contract, each agrees to submit the same to arbitration, each to select a man, and if these fail to agree, they are to agree on a third man, and the decision of these three shall be final, should arbitration become necessary, it may be had at any time, before final settlement. The cost of arbitration, if any, to be paid by the parties deemed in fault."

The bond contained a stipulation to the effect that in case of default on the part of the principal, a written statement or notice thereof should be given by the obligee to the surety within ten days after such default, and that the surety should then have the right to complete the performance of the contract.

It also contained the following, among other stipulations:

"Fourth. That the obligee shall faithfully perform all the terms, covenants and conditions of such contract on the part of the obligee to be performed; and shall also retain that proportion, if any, which such contract specifies the obligee shall or may retain of the value of all work performed or materials furnished in the prosecution of such contract (not less, however, in any event, than 10 per centum of such value), until the complete performance by the principle of all the terms, covenants and conditions of said contract on the principal's part to be performed. * * *"

"Sixth. That the obligee shall retain 10 per cent (10%) of the value of the work done and material supplied in the execution of such contract, until the completion of the same by said principal, and until the expiration of the time within which liens or notices of liens may be filed, and until the legal cancellation and discharge of such liens, if any."

Loveland died before the building was completed, and due notice of the default was given to appellant in the manner specified. Appellant failed to respond to the notice and appellee proceeded to complete the building. He sued for the sum of $ 1,308.11 and recovered the sum of $ 1,176.01, with interest. The items of appellee's claims consisted of unpaid bills for material and labor incurred by Loveland, which constituted liens on the building, and of cost of completing the building after Loveland's death.

The principal contention of appellant is that appellee violated the terms of the bond with respect to payments made to Loveland.

Appellee testified that he paid to Loveland all of the contract except the sum of $ 444.35, which he said he retained in compliance, as he understood it, with the provisions of the bond requiring him to retain "ten per cent. (10%) of the value of the work done and material supplied in the execution of such contract."

Appellant insists that the fourth section of the bond required the obligee to retain...