Lackland v. Renshaw

• Decision Date: 17 February 1914
• Citation: 165 S.W. 314,256 Mo. 133
• Parties: LACKLAND et al. v. RENSHAW et al.
• Court: Missouri Supreme Court

165 S.W. 314

256 Mo. 133

LACKLAND et al. v. RENSHAW et al.

Supreme Court of Missouri, Division No. 2.

February 17, 1914.

Rehearing Denied March 24, 1914.

1. PRINCIPAL AND SURETY (§ 59) — LIABILITY OF SURETY — CONTRACTS — CONSTRUCTION.

The rule that a surety is a favorite of the law, and that a claim against him must be strictly construed in his favor, does not apply to a bond executed for a consideration by a corporation organized to make such bonds for a profit, and its contracts must be construed most strictly in favor of the obligee.

2. PRINCIPAL AND SURETY (§ 100) — DISCHARGE OF SURETY — CHANGE OF OBLIGATION SECURED.

The surety for a consideration in a bond conditioned on performance of a building contract, providing that should any alteration be required in the work described, a reasonable valuation thereof, added or omitted, should be made by the architect, and the contract price be increased or diminished, was not released from liability merely because the architect did not make an estimate in advance of the cost of changes, and order the changes in writing, but the contractor and the owner and superintendent for the architect made a list of changes after completion and agreed on allowances therefor which was approved by the architect.

3. PRINCIPAL AND SURETY (§ 100) — DISCHARGE OF SURETY — ACTS CONSTITUTING.

The surety for a consideration, in a bond conditioned on the performance by the contractor of a building contract, stipulating for payment

in installments and final payment, on the architect certifying that all the work for which payment was to become due has been done to his satisfaction, was not discharged from liability merely because the owner made partial payments, pursuant to orders of the architect ordering payments to the contractor on account of the contract, and all the moneys paid were applied to the payment of work done and materials furnished for the building.

4. PRINCIPAL AND SURETY (§ 100) — DISCHARGE OF SURETY — ACTS CONSTITUTING.

Where advances to a building contractor, made before maturity, were actually used to pay for labor and materials in the building, the contractor's surety, undertaking for a compensation to insure performance of the contract, was not released thereby.

5. PRINCIPAL AND SURETY (§ 123) — DISCHARGE OF SURETY — ACTS CONSTITUTING.

The surety for a consideration in a bond conditioned on the performance of a building contract, stipulating for the completion of the work on a designated date, was not discharged from liability for the contractor's failure to pay for labor and materials merely because the owner did not notify the surety of the contractor's failure to complete the building in contract time, though the bond stipulated for notice of defaults, where the owner did not seek damages from the surety for delay.

6. PRINCIPAL AND SURETY (§ 123) — DISCHARGE OF SURETY — ACTS CONSTITUTING.

The surety for a consideration in a bond to secure the performance of a building contract, stipulating that the contractor should refund to the owner all moneys paid by the owner in discharge of liens on the premises necessary because of the default of the contractor to pay claims for labor and materials, was liable for claims paid by the owner in excess of the contract price on the contractor's failure to pay claims for labor and materials, where it received timely notice of the claims and an itemized statement thereof, and then refused to act, though it did not receive notice of the claims as each was incurred by the contractor.

7. JUDGMENT (§ 257) — FINDINGS — JUDGMENT.

A referee's findings, approved by the trial court, is, under Rev. St. 1909, art. 2013, a special verdict, and judgment must be entered in accordance therewith.

Appeal from St. Louis Circuit Court; Jas. E. Withrow, Judge.

Action by Rufus J. Lackland and others, trustees under the will of Henry Shaw, deceased, against Edwin Renshaw and others. From a judgment for defendants, plaintiffs appeal. Reversed and remanded, with directions.

Judson & Green, of St. Louis, for appellants. J. D. Johnson and Loomis C. Johnson, both of St. Louis, for respondent American Surety Co. of New York.

BLAIR, C.

This controversy arises upon a surety bond given to secure plaintiffs against loss by reason of any failure of the defendant contractors to perform their contract to erect a building in St. Louis. The trial court gave judgment for the defendant surety company. The questions presented relate solely to the efficacy of certain facts to release the surety from its obligation. Respondent company is in the business of acting as surety, charging a premium therefor. It had received compensation for becoming surety on the bond in suit.

The defenses and findings upon which the surety was released below will be examined in order. They must be viewed in the light of some applicable general principles.

By the general law of suretyship, evolved at a time when sureties were all of the class whose obligations were entered into from motives of friendship and without pecuniary considerations moving to them, any change in the contract releases the surety, unless made with his consent.

"But the rule of strictissimi juris is a stringent one, and is liable at times to work a practical injustice. It is one which ought not to be extended to contracts not within the reason of the rule, particularly when the bond is underwritten by a corporation which has undertaken for a profit to insure the obligee against a failure of performance on the part of the principal obligor." Hill v. American Surety Co., 200 U. S. loc. cit. 202, 26 Sup. Ct. 170, 50 L. Ed. 437.

"The doctrine that a surety is a favorite of the law, and that a claim against him is strictissimi juris, does not apply when the bond or undertaking is executed upon a consideration by a corporation organized to make such bonds or undertakings for profit. While such corporations may call themselves `surety companies,' their business is in all essential particulars that of insurance. Their contracts are usually in terms prescribed by themselves, and should be construed most strictly in favor of the obligee.'" 32 Cyc. 306.

So far the decisions are in practical accord, though there is a wide divergence of opinion as to the effect and application of those principles.

In this case one ground upon which the surety was held released was that changes had been made in the plans without the surety's consent.

The contract provided: "Should any alteration be required in the work shown or described by the drawings or specifications, a fair and reasonable valuation of the work added or omitted shall be made by the architects, and the sum herein agreed to be paid for the work according to the original specification shall be increased or diminished as the case may be. In case such valuation is not agreed to, the contracts shall proceed with the alteration upon the written order of the architects, and the valuation of the work added or omitted shall be referred to three arbitrators" selected in a prescribed manner. The referee's finding on this phase of the case is that alterations in the work were made from time to time but that the architects did not pass upon these changes and determine, before each was made, the sum to be added or deducted on account of it; that the changes were not made upon the written order of the architects, nor was arbitration asked by the contractors. He finds that in July, after the building was nearing completion, the contractors and the representative of plaintiffs, and local superintendent for the architects, went over the building and made a list of changes; having made the list, the parties agreed upon the sums to be added and subtracted. The list of changes and agreed allowances were put in writing and signed by the parties and approved and signed by the architects. The net result was the enhancement of the contract price by $391 and the payment of that additional sum to the contractors. The referee concludes his finding on this branch of the case thus: "So far as the allowances made in this exhibit to the defendants Renshaw, for changes and alterations, are concerned, the referee believes and finds they were fair and reasonable, and not in excess of their true value; but, as already suggested, they were not agreed upon in the manner provided for in the contract." On his view the departures from the contract made were: (1) The failure of the architects to fix the increase or decrease of the contract price before the change was made; (2) that the changes were not made upon the written order of the architect; and (3) that arbitration was not requested by the contractors. By the quoted clause of the contract, the parties had the right to alter the plans, and a fair and reasonable increase or decrease in the contract price was to follow any such alteration. The architects were to determine what increase or decrease was fair and reasonable in each case. That was the extent of the surety's interest. That was done in this case. The contract does not specifically provide that the architects shall make their estimate in advance of the doing of the work under the changed specifications. Such a construction of the first sentence of this paragraph of the contract is merely an inference from the following sentence, the real function of which, however, is to provide a method whereby the contractors can be compelled to proceed in case of a disagreement. In view of the principles above announced, it appears the learned referee applied too strict a rule on this branch of the case. The surety lost nothing, its risk of loss was in no way increased and, in fact, in the end it received the exact protection to which the contract entitled it.

In Chapman v. Eneberg, 95 Mo. App. 127, 68 S. W. 974, there was an express provision in the contract to the effect that "no work of any description is to be considered as extra work unless the same shall have been understood and agreed...