George A. Hormel & Co. v. American Bonding Co., of Baltimore
| Decision Date | 28 October 1910 |
| Docket Number | 16,611 - (10) |
| Citation | 128 N.W. 12,112 Minn. 288 |
| Parties | GEORGE A. HORMEL & COMPANY v. AMERICAN BONDING COMPANY OF BALTIMORE |
| Court | Minnesota Supreme Court |
Action in the district court for St. Louis county against American Bonding Company of Baltimore and J. W. Hilliard to recover $6,500 on a bond given to secure the performance of a building contract. The facts are stated in the opinion. The complaint alleged, among other things, full performance by plaintiff of all the terms and conditions of the bond; that defendant as surety was notified in writing and by telegraph of every breach in the contract by Hilliard and of every failure by him to pay claims for labor and material immediately after the occurrence of any such breach or failure of payment came to the knowledge of plaintiff or its authorized agent, and that all such notifications were given to the surety promptly and in the manner provided by the conditions of the bond. It also alleged that Hilliard was duly adjudged a bankrupt. The substance of the answer is given in the opinion.
The case was tried before Dibell, J., who, at the close of the testimony, denied defendants' motion to direct a verdict in favor of defendants. The jury returned a verdict in favor of plaintiff for $1,847.96. The defendant company moved that the verdict be set aside and judgment entered in favor of defendants notwithstanding the verdict. The motion was denied. From the judgment entered pursuant to the verdict defendant company appealed. Reversed and remanded with direction to enter judgment in favor of defendant notwithstanding the verdict.
Guaranty insurance of building contract -- notice of default.
The appellant executed a guaranty insurance bond to indemnify the respondent against loss from the failure of the principal in the bond to perform on his part the conditions of a building contract to which he and the respondent were parties. The contract reserved the right of the respondent to make changes in the work and order extras in writing, and provided that fifteen per cent. of the contract price should be retained until the work was completed, which was to be done within a time limited. The bond provided that the appellant should be notified of any breach of the contract, or of any act on the part of the principal which might involve loss to the appellant, immediately after the knowledge thereof should come to the respondent. This is an action on the bond to recover the amount paid by the respondent to discharge liens upon the building arising from the failure of the principal to pay for labor and materials. Held:
1. While the bond in form resembles a contract of suretyship, it is in effect a contract of insurance, to which the rules of construction peculiar to contracts of suretyship proper do not apply, but to which the rules governing ordinary contracts of insurance are applicable.
2. If a guaranty insurance bond is fairly open to two constructions, one of which will uphold and the other defeat the claim of the insured, that should be adopted which is most favorable to the insured; but the plain intention of the parties cannot be nullified by construction.
3. Where a building contract, the performance of which is secured by a guaranty insurance bond, reserves the right to make changes in the work and order extras in writing without limit, the mere fact that such changes are made and extras ordered verbally, which are audited and allowed by the architect, does not release the bond.
4. The provision of the bond for notice to be given the insurer of any default on the part of the principal which may result in loss immediately after the insured has notice thereof requires that it be given only within a reasonable time in view of all the circumstances. This is ordinarily a question of fact; but if the facts are undisputed, and only one reasonable conclusion can be drawn therefrom, it is the duty of the trial judge to instruct the jury accordingly.
5. It conclusively appears from the undisputed facts in this case, which are stated in the opinion, that notice of the default of the principal was not given to the appellant within a reasonable time, and that thereby the bond was released.
Fitzhugh Burns and Washburn, Bailey & Mitchell, for appellant.
Catherwood & Nicholsen and H. B. Fryberger, for respondent.
On October 28, 1908, the plaintiff, hereinafter referred to as the owner, entered into a written contract with J. W. Hilliard, hereinafter referred to as the contractor, whereby he was to erect at Duluth a cold storage warehouse for the owner in accordance with the plans and specifications therefor which were a part of the contract. The contract price was $19,500, in consideration of which the contractor undertook to furnish all materials and perform all the labor for the erection of the warehouse, protect it from liens, and complete it by March 1, 1909. The other provisions of the contract, which are here material, are these:
The appellant, hereinafter referred to as the surety company, gave the required bond, which contained the provisions, with others following: "The owner shall keep, do and perform each and every, all and singular, the matters and things set forth and specified in said contract to be by the owner kept, done and performed, exclusively at the times and in the manner as in said contract specified, provided that said surety shall be notified in writing of any breach of said contract by said principal, or of any act on the part of the said principal, or his agent or employees, which may involve a loss for which the said surety may be liable hereunder, immediately after the occurrence of such act shall have come to the knowledge of said owner."
The contractor did not protect the warehouse from liens, and the owner was compelled to and did pay $7,615.65 in discharge of valid liens thereon, and thereupon brought this action in the district court of the county of St. Louis against the surety company on its bond to recover the amount so paid. The surety company answered to the effect that the bond was released, for the reasons that changes in the work were made and extras ordered orally, and not on the written order of the owner or architect; that payments were made to the contractor in a manner not authorized by the contract; and, further, that immediate notice was not given to the surety company by the owner of the alleged failure of the contractor to complete the contract within the time limited and to pay his bills for materials and labor.
At the close of the evidence the surety company requested a directed verdict in its favor for the alleged reason, in effect, that upon the evidence the owner was not entitled to recover. The motion was denied, the ruling excepted to, and the issues tendered by the answer submitted to the jury, with instructions, none of which was excepted to at any time. Verdict for the owner in the sum of $1,725.19. No motion for a new trial was made, but a motion was made for judgment in favor of the surety company notwithstanding the verdict, which was denied, and judgment entered upon the verdict, from which this appeal was taken.
The sole question for our decision is whether, upon the record as it stood at the close of the evidence, the surety company was, as a matter of law, entitled to a verdict in its favor. The answer to the question depends upon whether there was any evidence, taking the most favorable view of it for the owner, reasonably tending to show that it was entitled to a verdict in any amount. If there was not, then a verdict should have been directed as requested. If there was, then the requested instruction was rightly refused.
The answer cannot be controlled in any respect by the instructions of the court to the jury in submitting to them the issues made by the pleadings; for the charge of the court as to either the law or facts, although not excepted to, is not the law of the case, as appellant claims. If the refusal to direct a verdict as requested was wrong, because there was no evidence to support any different verdict, the error could not be corrected by any charge which did not in...
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