National Surety Company v. Long

• Citation: 96 S.W. 745,79 Ark. 523
• Parties: NATIONAL SURETY COMPANY v. LONG
• Decision Date: 02 July 1906
• Court: Arkansas Supreme Court

96 S.W. 745

79 Ark. 523

NATIONAL SURETY COMPANY v. LONG

Supreme Court of Arkansas

July 2, 1906

Appeal from St. Francis Circuit Court; Hance N. Hutton, Judge reversed.

STATEMENT BY THE COURT.

The complaint of Long alleges that on May 23, 1901, he made a written contract with one Humphreys, by which the latter agreed to furnish the material and erect a brick building and to complete the same on or before September 1, 1901 "for which Long was to pay him $ 6,600, and it further alleged that the National Surety Company had, by its bond (dated May 28, 1901) guarantied the faithful performance of Humphreys' contract. As a breach, it is alleged that although Long paid Humphreys $ 4,908.58, the latter never did complete the house, but that on September 9, 1901," he abandoned it, and left the country, and that plaintiff had to expend more than $ 4,671,41 to complete the building.

The plaintiff joined as defendants with the National Surety Company, T. L. Humphreys, American Bonding & Trust Co., J. S Whiting and S. M. Whiting.

The National Surety Company for its separate answer denied all liability on the bond, and set up that, under the contract between Long and Humphreys, the latter agreed to complete the building by September 1, 1901, and that plaintiff did not notify this defendant of Humphreys' failure to complete the building by September 1, 1901, until September 12, 1901, and that Long had paid to Humphreys more than three-fourths of the work done and materials furnished and incorporated into the building.

The written contract contained the following stipulations: "The said party of the second part agrees to complete said building by the 1st day of September, 1901, and the said party of the second party further agrees that, in case he fails to complete said building by the 15th day of September, 1901, he shall pay to the said party of the first part as liquidated damages the sum of $ 5 for each and every day or part of a day that said building remains uncompleted after said time; that sum being the actual loss accruing to the party of the first part by said delay."

The contract was attached to the bond, and was expressly made a part of it.

The bond contains the following stipulations: "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 office 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 at 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 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 so specified, shall relieve the company from all liability under this bond."

The evidence shows that the building was not more than three-fourths completed on September 12, 1901, and that less than this had been done on September 1, 1901. That on September 12, 1901, Long notified this defendant that Humphreys had abandoned the work, and that the building, which was to have been completed by September 1, 1901, had not been completed.

The written contract between the parties contained the following:

"The said party of the first part agrees to pay to the party of the second part for said work the sum of six thousand, six hundred dollars ($ 6,600), the contract price, to be paid in installments according to written estimates to be made by the architect or the superintendent as the work progresses, payments to be made not oftener than as allowed in the bond, and said installments are to be seventy-five per cent. of the value of the work done and materials furnished and incorporated in the building, the remaining twenty-five per cent. of said contract price to be paid by the party of the first part to the party of the second part in ten days after the building is completed and accepted."

The evidence shows there was no architect or superintendent employed, but that Long acted as such on his own behalf. Long testified in his own behalf that he paid Humphreys $ 4,908; that that was a little less than three-fourths of the amount of the contract price, that the work and labor done the last time he paid Humphreys was $ 3,200, and that this did not embrace the material on the ground; that the material on the ground amounted to $ 1,600 or $ 1,700; and then said that the work and material when Humphreys left amounted to $ 6,600, and that he had to pay for about $ 1,700 worth of lumber above what he had paid Humphreys for material which Humphreys had bought. All the other evidence shows that a less amount of work has been done when Humphreys left and abandoned the building. There was also evidence to show that the building could have been completed at the time Humphreys abandoned it for $ 2,885.

Reversed and remanded.

W. S. McCain, for appellant.

1. A failure to have estimates made and to withhold the reserve releases the surety, even where it is not so provided in the bond. 49 Co. 131; 57 F. 179; 52 N.W. 1110; 91 Cal. 233; 67 N.W. 913; 2 Keen. 638; 105 Wis. 445; 54 P. 1122; 23 Mo. 251; 68 Conn. 495; 36 Minn. 439; 11 S.W. 608; 62 Mo.App. 69. But in this it was stipulated that appellee hold 25 per cent. in reserve for the benefit of the surety company. His failure to do so released the latter from its bond. 73 Ark. 473; 50 Ark. 229; 34 Ark. 80; 59 Ark. 47.

2. Under the stipulations in the bond, it was appellee's duty to notify appellant not later than September 1, 1901, of Humphreys' failure to comply with his contract. Notice mailed on September 12th, was not a compliance with the bond. 60 C. C. A. 623. On this point that decision is res judicata. 168 U.S. 48; 193 U.S. 553; 1 Crawford's Digest, § 163, and cases cited; 1 Freeman, Judg., § 249; 20 Ark. 85; Cooley's Const. Lim. 47. But even if the question be treated as res nova, this court cannot reach the conclusion that notice given on September 12 was "immediate" within the stipulation of the bond. 20 Ark. 583; 23 Ark. 205; 1 Pet. 583; 99 Wis. 447. See, also, 13 Conn. 28; 43 Ill. 155; 29 Pa.St. 198; 75 Mo.App. 349.

S. H. Mann and P. D. McCulloch, for appellee.

1. That the decision of the Circuit Court of Appeals is not res jedicata, is settled by the authorities. 210 Ill. 342; 108 Tenn. 670; 15 Ohio St. 464; 7 Wall. 82; 125 U.S. 555; 150 U.S. 349.

2. The contract did not require appellee to employ an architect or superintendent. The mere fact that payments were made without certificates of an architect was not such a departure from the terms of the contract as to relieve the surety, where the payments did not exceed the amount stipulated in the contract and bond. 148 N.Y. 241; 69 Ark. 126; 34 Ore. 555. In this case the appellant is not an accommodation, but a paid surety, and the contract--proposed by the company and embodying its language--must be liberally construed. United States v. American Surety Co., U. S. Sup. Court (advance sheets) citing 95 U.S. 673; 127 U.S. 661; 4 H. L. Cas. 484; 170 U.S. 130; 139 N.Y. 266; 27 Wash. 429; 57 S.C. 459; Stearns on Surety, 321.

3. On the question of "immediate" notice, the clause requiring notice of failure or refusal of the contractor to perform the contract, has no reference to the time of performance, where it does not appear that the surety was prejudiced by the delay in giving notice. Under the ninth clause of the bond the company was concerned in no delay not purposely and premeditatedly occasioned by the contractor. Ubi supra.

The question whether or not the notice given was "immediate" within the meaning of the bond, was one of fact for the jury to decide. 186 U.S. 342; 71 N.H. 362; 27 Wash. 429; 136 Ala. 379; 86 Ala. 559; 47 Conn. 553; 56 Vt. 374; 49 La.Ann. 636; 46 Ia. 631; 100 Ill. 644; 62 Neb. 673; 31 Gratt. (Va.), 362; 62 O. St. 529; 126 Pa.St. 317; 32 Wash. 132; 28 Ind.App. 437; 164 Mass. 382; 135 N.Y. 298; 98 Pa.St. 280; 27 Ore. 146; 88 Wis. 589; 140 N.Y. 25; 124 Mo. 204; 160 N.Y. 595; 100 N.Y. 417; 170 Mass. 173; 80 Ia. 56.

OPINION

CARMICHAEL, Special Judge, (after stating the facts).

A majority of the court are of the opinion that the undisputed evidence shows that Long did not notify the National Surety Company within the time in which he was required to do so by the contract and bond. The time for the completion of the building was September 1, 1901, and the evidence shows that the appellee knew, some time prior to that date, that the contractor would not complete the building by that date, and the bond specifically provided that, if at any time it appeared that the contractor would not be able to complete the building by that time, the appellee would immediately notify the surety company. We think, as a matter of law, the notification on September 12 did not meet the requirements of the contract and bond,...