Justice v. Empire State Surety Co.

• Decision Date: 25 November 1913
• Docket Number: 1,356.
• Citation: 209 F. 105
• Parties: JUSTICE v. EMPIRE STATE SURETY CO.
• Court: U.S. District Court — Eastern District of Pennsylvania

209 F. 105

JUSTICE v. EMPIRE STATE SURETY CO.

No. 1,356.

United States District Court, E.D. Pennsylvania.

November 25, 1913

Sydney Young and William W. Montgomery, Jr., both of Philadelphia Pa., for plaintiff.

Hepburn Carr & Krauss, of Philadelphia, Pa., for defendant.

THOMPSON District Judge.

The plaintiff brought suit against the defendant, a surety company, to recover the sum of $5,047.83 upon a bond entered into by the defendant, as surety, and Francis T. Maguire, as principal, with the plaintiff, conditioned that Maguire, as contractor, should fully perform his contract with the plaintiff for the erection of a house and barn. The contract provided that the total price for the work and material was to be $14,484 for the house and $3,750 for the barn. The contract provided for payments of certain sums to the contractor upon certificates of the architects at specified stages in the progress of work. Upon the house five payments aggregating $10,200, were to be made during the progress of the work, and upon the barn one payment of $1,500, the balance to be paid when the contract was completed. The bond was in the sum of $10,950, and provided, inter alia:

'Second. That the obligee shall retain not less than 10 per centum of all payments for work performed and materials furnished in the performance of said contract, until the complete performance by said principal of all the terms, covenants and conditions thereof, on said principal's part to be performed.'

It appeared at the trial that the plaintiff had made the payments provided for during the progress of the work and an additional payment of $2,000 to the contractor in excess of the amounts specified in the contract, all upon certificates of the architect, and had not deducted 10 per cent. from the amount of any payment. The plaintiff, therefore, had paid the contractor $13,700 before the contractor defaulted in his contract, which was $3,170 in excess of the payments due under the terms of the contract and bond. The plaintiff thereupon completed the work at a cost to him of $621.03, and paid $7,789.99 to clear the property of liens which had been filed by materialmen and subcontractors. He claimed for those amounts, together with the amounts of undetermined liens, $920.81, and counsel fees in contesting the liens, $250, making a total of $9,581.83, less the amount due the contractor at the time of default, $4,534, making his total claim $5,047.83. At the close of the plaintiff's evidence, counsel for the defendant moved for binding instructions upon the ground that the plaintiff had materially varied the terms of the contract by anticipating payments and by failure to deduct from each payment 10 per cent. provided for by the bond. The jury was accordingly directed to return a verdict for the defendant.

In the case of Prairie State Bank v. United States, 164 U.S. 227,17 Sup.Ct. 142, 41 L.Ed. 412, Mr. Justice White, in delivering the opinion of the court, said:

'That a stipulation in a building contract for the retention, until the completion of the work, of a certain portion of the consideration, is as much for the indemnity of him who may be guarantor of the performance of the work as for him for whom the work is to be performed, that it raises an equity in the surety in the fund to be created, and that a disregard of such stipulation by the voluntary act of the creditor operates to release the sureties, is amply sustained by authority.' The Circuit Court of Appeals in this circuit, in the case of Fidelity & Deposit Co. v. Agnew, 152 F. 955, 82 C.C.A. 103, following the rule in Prairie State Bank v. United States, said:

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