National Surety Co. v. Long

• Decision Date: 23 November 1903
• Docket Number: 1,883.
• Citation: 125 F. 887
• Parties: NATIONAL SURETY CO. v. LONG.
• Court: U.S. Court of Appeals — Eighth Circuit

125 F. 887

NATIONAL SURETY CO. v. LONG.

No. 1,883.

United States Court of Appeals, Eighth Circuit.

November 23, 1903

Syllabus by the Court.

The care or negligence with which an obligor, who failed, sought to perform his contract, is no defense to an action for its breach. The only test of the right to recover is the existence of the breach of the covenant upon which the action is based.

Under an agreement that a contractor shall complete a building by the 1st day of September, 1901, and that in case of a failure to finish it by September 15, 1901, he shall pay damages at the rate of $5 for each day after that date until the building is finished, the time for the completion of the structure is September 1, 1901.

'Immediately' means before the happening of other events-- forthwith. A covenant to notify a surety of the default of his principal immediately is not performed by mailing a notice 11 days after the known default.

The immateriality of a warranty or of a condition precedent made by the agreement of the parties, and the unnocuousness of a failure to perform it, do not nullify or mitigate the fatal effect of such a failure prescribed by their agreement.

A surety is discharged if a condition known to the obligee upon which the surety agreed to be bound, is not complied with.

He who commits the first substantial breach of a contract cannot maintain an action against the other contracting party for a subsequent failure on his part to perform it.

Robert A. Holland (J. E. McKeighan and M. F. Watts, on the brief) for plaintiff in error.

E. A McCulloch (S. H. Mann, on the brief), for defendant in error.

In Error to the Circuit Court of the United States for the Eastern District of Arkansas.

On May 23, 1901, Thomas Lee Humphreys made a written contract with E. A. Long, the plaintiff below, to construct and complete a brick building for him by September 1, 1901, for the sum of $6,600. On May 28, 1901, Humphreys, as principal, and the National Surety Company, a corporation, the defendant below as surety, executed and delivered to Long a bond whereby they covenanted that Humphreys should perform his contract, and save the obligee and the property from liens and loss, on the condition that the liability of the surety should be limited by, and be subject to, the conditions precedent written into the bond. The principal failed to complete and abandoned the building on September 9, 1901, and on the same day he left for parts unknown. The plaintiff notified the surety company of this fact on September 12, 1901, and demanded that it should finish the building, and pay the damages which he had sustained by the default of the contractor. The surety company declined to do this. Thereupon the plaintiff finished the building at a cost of $3,037.44 more than the contract price. He then sued the surety company for its alleged breach of the condition of the bond, and recovered a verdict and judgment against it in the court below for $3,126. The writ of error in this case has been sued out to reverse this judgment.

Before SANBORN, and VAN DEVANTER, Circuit Judges, and HOOK, District Judge.

SANBORN Circuit Judge, after stating the case as above, .

One of the defenses of the surety company, and the only one that it will be necessary to notice in this court, was that the plaintiff below failed to comply with the third and fourth paragraphs of the bond, which by its terms constituted conditions precedent to the liability of the defendant. In so far as these paragraphs are material in this case, they read in this way:

'If, at any time, the above-named principal shall, in any manner, fail, neglect or refuse to keep, do or perform, any matter or thing at the time and in the manner in said contract set forth and specified to be by said principal kept, done or performed, the obligee shall immediately so notify the company in writing, by registered letter, prepaid, addressed to the company, at its principal offices in the City of New York.'

'If, at any time, it appears that the above-named principal has abandoned the work, or will not be able, or does not intend, to carry out or perform the contract, the obligee shall immediately so notify the company in writing, by registered letter, prepaid, addressed to the Company, as its principal offices in the City of New York, and the company shall have the right at its option, to assume such contract and to sublet or complete the same, and, if it so elect, all moneys due, or to become due thereafter, under said contract, including percentages agreed to be withheld until completion, shall, as the same shall become due and payable under the terms of said contract, be paid to the company, regardless of any assignment or transfer thereof by the principal.'

The contract contained this stipulation:

'The said party of the second part agrees to complete said building by the first day of September, 1901, and the said party of the second part further agrees that in case he fails to complete said building by the fifteenth day of September, 1901, shall pay to the said party of the first part, as liquidated damages, the sum of five dollars for each and ever day or part of a day that said building remains incompleted after the said time, and that sum being the actual loss occurring to the said party of the first part by said delay.'

The uncontradicted evidence was that on September 1, 1901, the plaintiff knew that the contractor, Humphreys, would not be able to, and that he had already failed to, perform his contract in the time and manner specified therein. He knew that the building then lacked roof, doors, windows, plastering, and floors. Nevertheless he never notified the surety company of any of these facts until September 12, 1901, three days after Humphreys had abandoned his contract and absconded.

In one of the paragraphs of the bond, which precedes the conditions that have been quoted, this stipulation is found:

'This bond is executed by the company as surety on condition that its liability shall be limited by, and subject to, the conditions and provisions hereinafter contained, which shall be conditions precedent to the right of the obligee to recover hereunder, anything in said contract to the contrary notwithstanding.'

Moreover, the eleventh paragraph of the bond reads:

'The failure, neglect or refusal of the obligee to keep, strictly observe, and fully perform, any matter or thing in this bond or in said contract stipulated and agreed to be done, kept or performed by the obligee, at the time and in the manner specified, shall relieve the company from all liability under this bond.'

In this state of the case, the circuit court refused to instruct the jury to return a verdict for the defendant, and charged them that the time fixed by the contract for the completion of the building was September 15, 1901; that, if the plaintiff gave the notice of the inability or failure of the contractor to perform his contract to the surety company in such time as a man of ordinary prudence would have given it under similar circumstances, they might return a verdict in his favor, but that, if he was guilty of negligence in this matter, their verdict should be for the defendant. The surety company excepted to these rulings, and it has assigned them as error.

The care or negligence with which an obligor, who fails, seeks to perform his contract, is no defense to an action for damages for his failure. The only test of the right to recover in such an action is the existence of the breach of the covenant. It is no answer to an action for a failure to pay a promissory note that the maker, although he paid no part of it, exercised all the care to pay it that a person of ordinary prudence in similar circumstances would have used. It is no defense to an action for the breach of a contract that, although the obligor failed to perform it, yet he exercised ordinary care to do so. The very purpose of a promise or of a covenant is to relieve the obligee of all inquiry relative to the care or negligence with which the obligor acts in its fulfillment, and to impose upon the latter the absolute obligation to perform it. Nothing less than full performance satisfies the undertaking. The obligation of a promise or of a covenant to pay a debt or to do an act is not to use ordinary care to comply with the terms of the agreement, but it is to perform it; and, in an action for its breach, it is not material what care the obligor used, or what negligence he was guilty of, in his endeavor to fulfill it. The only question is, did he perform his contract? Guarantee Co. v. Mechanics', etc., Co., 183 U.S. 402, 421, 422, 22 Sup.Ct. 124, 46 L.Ed. 253. The covenant of the plaintiff in the case under consideration was to immediately notify the surety company of any failure or inability of the contractor to construct and complete the building at the time and in the manner specified in the contract, and the question was not whether or not, although he failed to give the notice, he had exercised ordinary care to do so, but whether or not he had actually given the notice immediately upon the appearance of the known inability and failure of the contractor to perform his agreement. The circuit court fell into an error when it instructed the jury that the care or negligence of the plaintiff conditioned his right to recover here.

By the stipulation in the contract between Humphreys and the plaintiff which has been set forth above, the contractor agreed 'to complete said building by the first day of September, 1901,' and that if he failed to complete it by September 15, 1901, he would pay to the plaintiff damages to the amount of $5 for every day from that time until the building was finished. The former date was...