Gallagher v. St. Patrick's Church

• Decision Date: 19 June 1895
• Citation: 63 N.W. 864,45 Neb. 535
• Parties: GALLAGHER ET AL. v. ST. PATRICK'S CHURCH.
• Court: Nebraska Supreme Court

45 Neb. 535

63 N.W. 864

GALLAGHER ET AL.

v.ST. PATRICK'S CHURCH.

Supreme Court of Nebraska.

June 19, 1895.

Syllabus by the Court.

Meals & McVea, contractors, entered into a writing with St. Patrick's Church, in and by which they agreed to furnish the labor and material and construct for said church a certain building. The contract provided: (a) That the building should be completed by the 31st of December, 1890; (b) that, if the building should not be completed by that time, the contractors should forfeit to the church the sum of $10 for each day that the building remained unfinished thereafter; (c) that, if the contractors should neglect or refuse to comply “with any of the articles of this agreement,” the church might take possession of the premises, after giving three days' notice in writing, complete the building, and charge the costs thereof to the contractors; (d) that the architect should make estimates on the last days of August, September, October, and November, of the value of the material and labor furnished by the contractors; and the church at said dates should pay to the contractors three-fourths of the amount of such estimates; (e) that the church should protect by insurance to cover its interest in the property when payments had been made to the contractors. To secure the performance of their agreements the contractors executed a bond to the church signed by themselves as principals and a number of other parties as sureties. The building was not completed by the 31st of December, 1890, and the contractors were proceeding with its construction on the 18th of February, 1891, when it was totally destroyed by fire. Prior to the 31st of December, 1890, the church had paid to the contractors for labor and material the sum of $12,440; prior to the day of the destruction of the building the church had paid to the contractors $14,489.59. The church took out insurance on the property in the sum of $10,000, and no more. The church sued the contractors and the sureties on their bond to recover the money paid to the contractors under the contract. Held: (1) That the failure of the church to keep the building insured to the exent of its interest therein was a complete defense for the sureties on the bond of the contractors; (2) the object of the provision in the contract requiring the church to insure its interest in the property was to lessen the risks taken by the sureties; (3) that the sureties were under no obligation to make inquiries from time to time to ascertain if the church had complied with its contract to insure its interest in the property; (4) that the sureties had a right to suppose that the church would comply with its contract in that respect, and that if the building should be destroyed before its acceptance by the church, and they were called upon to and did make good the loss, they would be entitled by subrogation or otherwise to the benefit of the insurance effected on the property by the church; (5) that the question as to whether the destruction of the building was the result of the negligence of the contractors was an immaterial issue; (6) that the church could not excuse its failure to comply with its part of the contract on the ground that its performance would have been of no value to the sureties, because the loss of the building through the negligence of their principals would defeat a recovery of the insurance, if it had been effected; (7) that its duty was to insure the property and, when the loss sued for occurred and was paid by the sureties, to transfer to them the insurance contracts, and leave the sureties and the insurance companies to litigate the question of the latter's liability; (8) that the fact that the church was unable to procure responsible insurance companies to write insurance on the building to the extent of its interest therein did not relieve it from the performance of its agreement to insure the property to the extent of its interest; (9) that it is evident from the contract that it was within the contemplation of the parties thereto at the time it was made that the building might not be completed at the very day fixed by the terms of the contract; and that, if it was not, the church had the option to permit the contractors to finish the work, and to recover from them whatever damages the church might sutsain by reason of the building not being completed in time; or the church might, at its option, exclude the contractors from any further connection with the work, and complete it itself; (10) that the church, by permitting the contractors without protest or objection to continue the work after the date when the building was to be completed, recognized the contract as in full force, and as long as it was in force the church was under obligation to perform its part of it; (11) that by such act it waived, as it had a right to do, the completion of the building on the day named in the contract, and reserved the right to recover damages from the contractors for the delay.

Error to district court, Holt county; Bartow, Judge.

Action by St. Patrick's Church against Ed. F. Gallagher and others on a contractor's bond. Judgment for plaintiff, and defendants bring error. Reversed.R. R. Dickson, B. G. Burbank, Kennedy & Learned, and Blair & Goss, for plaintiffs in error.

E. Wakeley, Thos. Carlon, and M. F. Harrington, for defendant in error.

RAGAN, C.

St. Patrick's Church is a religious corporation organized under the laws of the state, and situate at O'Neill, Neb. Meals & McVea, in August, 1890, were contractors and builders, and will hereinafter be referred to as the contractors. In the said month of August said contractors entered into a written agreement with said church, in and by the terms of which they agreed to furnish all the material and erect an academy or school building for said church at said city of O'Neill, according to certain plans and specifications. The contract price for this building was $16,160.94. The contract contained the following provisions: (a) The architect was required to make estimates on the last days of August, September, October, and November, of the value of the material furnished and labor performed by the contractors towards the erection of the building, and thereupon the church was to pay to the contractors at said date three-fourths of the amount of such estimates. (b) The building was to be completed by the 31st of December, 1890, at which time the church was to pay to the contractors the balance of the contract price. (c) That if the contractors “shall neglect and refuse to carry on the work at any time for two days, in the manner required by the architect, or shall neglect or refuse to comply with any of the articles of this agreement,” then the church “is hereby empowered to enter upon and take possession of the premises, with the materials and apparatus thereon, after giving three days' notice in writing,” and complete said building, charging the costs thereof to the contractors. (d) That, if the contractors should fail to complete the building by the time agreed, they should forfeit and pay to the church the sum of ten dollars a day for every day that the building remained unfinished. (e) That “the owner--the church--shall protect by insurance to cover its interest when payments have been made to contractor.”

To secure their performance of this contract, the contractors gave a bond to the church signed by themselves and a number of other persons hereinafter denominated the “sureties.” Immediately after the execution of this contract, the contractors began the erection of the building, and continued working upon the same until the 18th of February,...