First Nat. Bank v. Fidelity & Deposit Co. of Maryland

• Decision Date: 30 January 1906
• Citation: 145 Ala. 335,40 So. 415
• Parties: FIRST NAT. BANK v. FIDELITY & DEPOSIT CO.
• Court: Alabama Supreme Court

40 So. 415

145 Ala. 335

FIRST NAT. BANK v. FIDELITY & DEPOSIT CO.

Supreme Court of Alabama

January 30, 1906

Rehearing Denied April 3, 1906.

Appeal from City Court of Montgomery; A. D. Sayre, Judge.

"To be officially reported."

Action by the First National Bank of Montgomery against the Fidelity & Deposit Company of Maryland. From a judgment for defendant plaintiff appeals. Affirmed.

This was an action by appellant against appellee upon a contract of suretyship entered into between appellant and appellee as the surety of John W. Hood & Co., who had a contract to erect a building for appellant. The bond or contract of suretyship was in words and figures as follows: "The State of Alabama, Montgomery County. Know all men by these presents That we, John W. Hood & Co., as principal, and Fidelity &amp Deposit Company of Maryland, as surety, are held and firmly bound unto First National Bank of Montgomery, in the sum of fifteen thousand dollars, for the payment of which we bind ourselves, heirs and executors, administrators and assigns. Sealed with our seals and dated this 7th day of March, A. D 1901. The condition of this obligation is such that, whereas, the above-bounden John W. Hood & Co. did on the 7th day of March, 1901, enter into a contract, as original or general contractor, with said First National Bank of Montgomery to build and complete a sixstory and attic fireproof building in the city of Montgomery, according to plans and specifications furnished and prepared therefor by Lockwood & Smith, architects, at and for the price of forty-four thousand dollars; and whereas, under article 1 of chapter 71 of the Code of Alabama of 1896, of force from February 17, 1898, certain liens are provided for mechanics and materialmen, and certain duties are required of owners and proprietors, in this: that if the owner or proprietor or his agent be notified in writing that certain specified material will be furnished to the contractors for use in the building or improvements on the land of the owner or proprietor at certain specified prices he shall be liable therefor, unless he objects thereto, and other provisions as to liens of mechanics and materialmen as to any unpaid balance that may be due by owner or proprietor to the original contractor, and for demanding of the original contractor the complete list of all materialmen, laborers, and employés who have furnished any material, or have done any labor or performing any service, or who may be under any contract or engagement to furnish any material or to do or to perform any service to such contractor for or on such building or improvement, with the terms and price thereof, and for retaining and paying such claims, for any unpaid balance remaining in the hands of the owner or proprietor, that any such sum may be retained and paid such mechanic, laborer, or materialman by the owner or proprietor if he wishes, and shall be a credit on this contract as if paid to the contractors; and whereas, said John W. Hood & Co., as said original contract calls for, have agreed to furnish all the material and labor required in the erection and completion of said building herein referred to and described, at and for the price hereinbefore recited and according to the plans and specifications herein above referred to, and to erect and complete said building according to said plans and specifications: Now, therefore, we, the undersigned, agree to secure and hold harmless the First National Bank of Montgomery against all contracts, claims, and demands of all materialmen, laborers, or employés who may furnish any material or thing or may do or perform any service, or who may be under a contract or agreement to furnish any material or thing or to do any labor or perform any services to said Hood & Co., as aforesaid contractors, for or on such building or improvement, and to exempt said First National Bank of Montgomery, owner and proprietor, from making any demands of the contractor for a complete list of all materialmen, laborers, and employés, from retaining in his hands any balance due, and to pay any claim of mechanics, laborers, and materialmen of which he may have notice, or from any demand or liability whatsoever to any other person than Hood & Co., the original contractors herein. We, the undersigned, promise and agree that the said Hood & Co. erect and complete said building according to said plans and specifications above mentioned, and, further, this bond shall cover and include any sum owing by said contractors as liquidated damages for a failure to complete contract in the specified time. But if the said Hood & Co. shall secure and hold harmless the said First National Bank of Montgomery as aforesaid, from all loss, liability, and damages as hereinbefore particularly mentioned and set forth, this agreement to be void; otherwise, to remain."

The building contract and specifications are also set out in full. The part of said contract relating to the payments by the bank to the contractors is in following words: "Payments are to be made upon certificates of the architect and upon estimates made for material when delivered at and for said building, from which shall be reserved 25 per cent. of the cost of such material, and upon like certificates of the architect and their estimates made, upon the 1st of each month, payments are to be made for work erected into said building, less what has been previously paid for the same as materials, and from which shall be reserved out 10 per centum thereof. And the said 10 per cent. so reserved out of sum so paid for material and for work erected into said building is to be paid after the work shall have been completely finished, delivered, and accepted by the party of the first part, provided that a certificate shall be obtained by the party of the second part from the clerk of the office where liens are recorded, and signed by said clerk, testifying that at the time when the payment is due the building is free from all liens and claims chargeable to the party of the second part."

In reply to the complaint, the defendant set up that it was surety, and that in violation of its agreement the terms of payment set out in the contract of building upon the terms of which defendant agreed to become surety and did become surety for the builders were violated by the bank, in that it made the payment in utter disregard of said contract; wherefore the surety was released. The evidence tended to support the plea strongly.

Watts & Son and Horace Stringfellow, for appellant.

Steiner, Crum & Weil, for appellee.

SIMPSON J.

This was an action by appellant against appellee, based upon a bond which appellee executed March 7, 1901, as surety for John W. Hood & Co. to secure the faithful performance of a contract by which said Hood & Co. had agreed to furnish materials and erect a certain building in Montgomery, Ala.

The first point raised by the pleadings, and strenuously and ably argued in the briefs of both the appellant and appellee, is whether or not, in a case like this, where the building contract specifies that payment shall be made as the work progresses upon certificate of the architect, and estimates for material when delivered, reserving 10 per cent. to be paid only when the work is completed, and the owner undertakes to pay in a different way, as by advancing money to the contractor to be repaid as the estimates and certificates are made, and paying for lumber before it is delivered, without regard to the 10 per cent. deduction, the surety is released. The appellant relies upon the case of Fidelity & Deposit Co., of Maryland v. Robertson, 136 Ala. 379, 34 So. 933, and especially the remark of the court, on page 409 of 136 Ala., page 943 of 34 South., to the effect that the provision of the contract, authorizing "the temporary reservation from payments of 15 per cent. of estimated earnings, was solely for the benefit of the original contractor, and one which, in the absence of any prohibition in the bond, the original contractor might waive, without the consent of the surety." It is a maxim of the law that all parties, whether principal or surety, who reduce their contracts to writing, have a right to insist upon the terms of the contract as written, and it does not lie in the power of the courts to say that, although a party has contracted to do one thing, yet he has done something else, which is more beneficial to the other party, and is therefore entitled to the enforcement of the contract. When a party enters into a contract to do certain work and on certain terms, and procures a surety to guaranty the faithful performance of the work, the surety necessarily contracts with reference to the contract as made. The terms of the contract become a part of the terms of the bond. Otherwise the surety could never know what obligation he was assuming. The contracts are made at the same time. The surety's bond recites that, whereas the building contract has been made, etc. Then, in the absence of any explicit declaration to that effect, it is difficult to see how a court can undertake to say that certain provisions are made for the benefit of the principal alone, and can be waived or changed by him, without the consent of the surety. This is a matter, however, that has been so thoroughly discussed by the courts in England and in this country, and the trend of the best authorities is so evident, that it seems useless to go over the arguments of the courts.

The leading case in England is that of Calvert v. London Dock Co., 2 Keen, 638. And the Supreme Court of the United States in an able opinion by Justice White, in which he...