Morgan v. Salmon.

• Decision Date: 30 June 1913
• Parties: MORGAN ET AL.v.SALMON.
• Court: New Mexico Supreme Court

18 N.M. 72

135 P. 553

MORGAN ET AL.

v.SALMON.

Supreme Court of New Mexico.

June 30, 1913.Rehearing Denied Oct. 1, 1913.

Syllabus by the Court.

A surety on a bond for the faithful performance by the contractor of a building contract is absolutely discharged from liability when the obligee fails to retain not less than 15 per cent. of the value of all work performed and material furnished in the performance of said contract in accordance with the terms of said bond; said surety not having consented to such alteration.

Additional Syllabus by Editorial Staff.

Where the terms of a bond for the performance of a building contract conflict with the terms of the contract, the bond will control in determining the liability of the sureties.

Appeal from District Court, Santa Fé County; before Justice McFie.

Action by Nathan Salmon against A. L. Morgan and another. From a judgment for defendants, plaintiff appeals. Reversed and remanded.

The surety on the bond of a building contractor is discharged, where the obligee fails to retain not less than 15 per cent. of the value of all work performed and material furnished as required by the bond.

This is an action brought by the appellee, Nathan Salmon, against A. L. Morgan, as principal, and the American Surety Company, as surety, on a bond for the faithful performance of a building contract by the terms of which the said Morgan was to erect a building for said Salmon in the city of Santa Fé. The bond sued upon is conditioned as follows:

“Now, therefore, the condition of this obligation is such that, if said principal shall faithfully perform said contract on his part, according to the terms, covenants, and conditions thereof (except as hereinafter provided), then this obligation shall be void; otherwise, to remain in full force and effect: Provided, however, and upon the following further express conditions:

First. That in the event of any default on the part of the principal in the performance of any of the terms, covenants, or conditions of said contract, written notice thereof, with a verified statement of the particular facts showing such default, and the date thereof, shall, within fifteen (15) days after such default, be delivered to the surety at its office in the city of Santa Fé, N. M., and that in case of such default all moneys, which but for such default would be due, or would thereafter become due, to the principal, shall be held by the obligee and by him applied for the indemnification of the surety.

Second. That the liability of the surety hereunder is and shall be strictly construed as one of suretyship only; and that no suit, action, or proceeding upon or by reason of any such default shall be brought or instituted against the principal or surety after the 24th day of July, 1906, and that actual service of writ or process commencing such suit, action, or proceeding be made on or before such date.

Third. That the principal shall not, nor shall the surety, be liable for any damage resulting from an act of God, or from a mob, riot, civil commotion, or a public enemy, or from employés leaving the work being done in the performance of said contract, or so-called “strikes” or labor difficulties, or from fire, lightning, tornado, or cyclone, or from injury to person or adjacent property resulting from accident or negligence in the performance of such contract, and that the principal shall not, nor shall the surety, be liable for the reconstruction or repair of any work or materials damaged or destroyed by said causes, or any of them.

Fourth. That the obligee shall retain not less than fifteen (15%) per centum of the value of all 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, and that the obligee shall faithfully perform all the terms, covenants, and conditions of said contract on the part of said obligee to be performed.

Signed and sealed this 27th day of November, 1905. [Signed] A. L. Morgan. [[[Signed] American Surety Company of New York, by Robert C. Gortner, Resident Vice President. Attest: Hanna & Spencer, Resident Assistant Secretary.”

In the latter part of December, 1905, while the building was in process of erection, the contract was terminated by the obligee discharging the contractor because of alleged defects in the work so far done, and on January 5, 1906, he entered into a new contract with another contractor, under which the building was completed January 15, 1907. At the time Morgan was discharged, all work performed and materials furnished in the construction of said building was paid for in full by the obligee.

After the completion of the building the appellee brought suit for damages against the appellants on said bond, and, a jury having been waived, the cause was tried by the court, and judgment rendered against appellants, from which judgment this appeal is prosecuted; the following, among other errors, being assigned:

“2. The court erred in holding and finding that the obligee complied with the requirements of the bond in the matter of the reservation by him of fifteen per centum (15%) of the amount due in accordance with the terms of the bond and contract.”

Wilson, Bowman & Dunlavy, of Santa Fé, for appellant.

A. B. Renehan, of Santa Fé, for appellees.

LEIB, District Judge (after stating the facts as above).

A number of questions are raised by appellants in their assignment of errors, but the findings of fact of the lower court upon conflicting evidence are probably binding upon us as to all these.

[1] The court concluded that the surety was not released by the failure of the obligee to retain 15 per cent. of the value of the work performed and material furnished, as required by the bond. Nowhere has the appellee shown that he has complied with this...