Hess & Skinner Engineering Co. v. Turney

Citation216 S.W. 621
Decision Date26 November 1919
Docket Number(No. 3306.)
PartiesHESS & SKINNER ENGINEERING CO. et al. v. TURNEY et al.
CourtSupreme Court of Texas

Suit by M. M. Turney and others against the Hess & Skinner Engineering Company and others. On appeal the Court of Civil Appeals (207 S. W. 171) reformed the judgment, and the Lion Bonding & Surety Company brings error. Judgment of the Court of Civil Appeals reformed, and as reformed affirmed.

A. B. Wilson, of Houston, for plaintiff in error.

N. A. Rector, of Austin, and H. W. Fielder and M. C. Jeffrey, both of Lockhart, and Paul D. Page, of Bastrop, for defendants in error.

GREENWOOD, J.

The writ of error was granted to the Lion Bonding & Surety Company, who executed as surety a bond, dated May 1, 1914, wherein the Hess & Skinner Engineering Company was principal, to the county judge and county commissioners of Bastrop county, in the sum of $45,000, conditioned to be void if the Hess & Skinner Engineering Company should faithfully perform a certain contract between it and the county judge and county commissioners of Bastrop county, for the construction of a bridge, and should promptly make payments to all persons supplying said company with labor and material in the prosecution of the work as provided for in the contract, and as provided by articles 6394f to 6394j, Vernon's Sayles' Texas Civil Statutes.

The surety company complains of a judgment against it in favor of the Vincennes Bridge Company for a balance of $6,407.09. It is not denied that the bridge company supplied the Hess & Skinner Engineering Company material, viz. steel, in the prosecution of the work covered by the contract, nor that the balance justly due therefor is $6,407.09. It is contended that the surety company was discharged from its obligation to pay for this material to the bridge company on two grounds: (1) That the bridge company shipped the steel without requiring one-half its cost to be paid in cash at point of shipment, when the contract between the bridge company and the engineering company entitled it to such cash payment; and (2) that the bridge company, when it held an assignment of the contract from the engineering company, to secure the purchase price of the steel, consented for $6,499.80 to be applied to claims of laborers and local merchants, and that this had the effect to reduce the surety's obligations to the bridge company in that amount.

We do not agree with the intimation in the opinion of the Court of Civil Appeals that the rules which determine the rights of uncompensated sureties have no application in determining the rights of corporation sureties, who enter into contracts of suretyship for profit. One who contracts as surety for another cannot be held bound save in so far as the law binds a surety. The views of this court on that subject are too clearly and emphatically stated in Lonergan v. San Antonio Trust Co., 101 Tex. 77, 104 S. W. 1061, 106 S. W. 876, 22 L. R. A. (N. S.) 364, 130 Am. St. Rep. 803, to require further statement.

The surety company invokes the elementary rules that material change in the terms of a contract, on which one is secondarily liable as surety, such as extension of time for performance, without the surety's consent, will discharge the surety from his obligation under the contract, and that the act of a creditor in releasing collateral securities so as to deprive a surety of the right to have same applied in satisfaction of the debt of the principal, guaranteed by the surety, will release the surety to the extent of the value of the securities.

There never was any change in the contract guaranteed by this surety company. Such contract was silent as to the terms on which the material for the construction of the bridge was to be purchased. The bond in effect authorized the contractor to make his own terms, and we see no good reason why it should be held that this did not include authority, while acting in good faith, to change such terms.

As said by the Supreme Court of the United States in Guaranty Co. v. Pressed Brick Co., 191 U. S. 425, 24 Sup. Ct. 144, 48 L. Ed. 242:

"The guarantor is ignorant of the parties with whom his principal may contract, the amount, the nature, and the value of the materials required, as well as the time when payment for them will become due. These particulars it would probably be impossible even for the principal to furnish, and it is to be assumed that the surety contracts with knowledge of this fact. Not knowing when or by whom these materials will be supplied, or when the bills for them will mature, it can make no difference to him whether they were originally purchased on a credit of 60 days or whether, after the materials are furnished, the time for payment is extended 60 days, and a note given for the amount maturing at that time."

The surety company was liable, on the bond, for the payment of the debts to the local merchants and laborers, being essentially claims for labor in the prosecution of the work of performing the engineering company's...

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