Nodaway Drainage Dist. No. 1 v. Illinois Surety Co.

• Decision Date: 24 November 1913
• Citation: 252 Mo. 543,160 S.W. 999
• Parties: NODAWAY DRAINAGE DIST. NO. 1 v. ILLINOIS SURETY CO.
• Court: Missouri Supreme Court

160 S.W. 999

252 Mo. 543

NODAWAY DRAINAGE DIST. NO. 1 v. ILLINOIS SURETY CO.

Supreme Court of Missouri.

November 24, 1913.

DRAINAGE CONTRACT — LIABILITY OF SURETY.

In an action on the bond of a drainage contractor, which was a foreign corporation, and which abandoned the work, that was completed with alterations by the drainage district, held that the district was entitled to recover.

Lamm, C. J., and Woodson and Walker, JJ., dissenting.

In Banc. Appeal from Circuit Court, Holt County; William C. Ellison, Judge.

Action by the Nodaway Drainage District No. 1, a corporation, against the Illinois Surety Company, a corporation. From a judgment for plaintiff, defendant appeals. Affirmed.

The following is the statement and opinion of BOND, J., in division:

Statement.

The petition states that the plaintiff is a corporation of this state organized for drainage purposes, with jurisdiction of a contiguous body of swamp and overflowed lands in the counties of Holt, Nodaway, and Andrew, and is engaged in constructing works and improvements in its district; that "the John Gilligan Company" is a Nebraska corporation engaged in contracting for building and constructing bridges, drainage dyking systems, and other public improvements; that the Illinois Surety Company is a corporation of that state, engaged in furnishing suretyship for contractors and others; that plaintiff, after adopting a general drainage system and plan of improvement for its district, contracted for work, in accordance therein, with one John Gilligan. The particulars of the work to be performed by him and the respective covenants and stipulations of the parties to said contract are fully set out and described.

The petition further alleges that the consideration to be paid by the plaintiff for the work described in said contract was $40,000, which was apportioned, to wit, $36,850 for construction of ditches, $3,150 for construction of bridges; that payments were to be made to the contractor upon estimates of his work reported to plaintiff by its chief engineer or his assistant; that rights of way should be obtained without cost to the contractor, and delays caused by litigation over rights of way were not to be counted against him; that the contractor should give bond in the sum of $10,000 to secure his covenants; that the work should begin September 1, 1906, and be completed in one year, barring inevitable accidents and two exceptions, the work on "Floyd cut-off" and "Blood Hill cut-off," for which six months' additional time was allowed.

The petition further states that the defendant, the Illinois Surety Company, entered into a bond guaranteeing the faithful performance of the contract made by said John Gilligan with the plaintiff; that the contractor, John Gilligan, thereafter incorporated himself and others as the "John Gilligan Company," and took charge of the work until after the time for its completion had expired.

The petition then alleges breaches of the bond: In that, in the particular respects set forth in the petition, the contractor did not faithfully keep and perform the conditions and terms of his contract. That the Illinois Surety Company was duly notified of the defaults and omissions of the contractor. That thereafter the following modifying contract was entered into, and the following indorsement placed thereon, by the defendant, the Illinois Surety Company:

"Change of Contract. Whereas the contractor John Gilligan and his assignee the John Gilligan Company have defaulted or failed to complete the work under the contract with the Nodaway Drainage District No. One within the time specified in said contract, and has thereby made the bond of the Illinois Surety Company liable to the said drainage district, and whereas the John Gilligan Company is desirous of having an extension of the time for the completion of the said work contracted for, until January 15, 1908; and, whereas, said drainage district and the said the John Gilligan Company are both desirous of modifying and changing that part of the said contract work from station `O' to station 46 plus 41 feet, being a distance of 4,641 feet, * * * and that the said the John Gilligan Company shall be allowed an extension of the time for the completion of the work of construction of said plan of drainage so contracted for and herein modified until the 15th day of January, 1908; provided, however, the said Illinois Surety Company will by written indorsement hereon agree that their said bond company will consent to such change of ditch and work and such extension of time as aforesaid, and will bind itself to stand as surety for the completion of said original contract and work and as so modified and extended as above stated.

"Witness our hands this 10th day of September, A. D. 1907. Nodaway Drainage District No. 1. J. W. Patterson, President. C. W. Lukens, Sec'y-Treas. The John Gilligan Co., by C. W. Reavis, President, by J. A. Crook, Sec.

"We hereby agree to the above change of contract, and to the extension of time for the completion of the same as modified, and bind ourselves to stand as surety under our bond for the said John Gilligan Company for the completion of said original contract as modified and changed.

"Witness our hands this 14th day of September, A. D. 1907. Illinois Surety Company, by F. P. Blount, President. Attest: H. W. Watkins, Secretary. [Seal.]"

The petition further states that "the John Gilligan Company" mentioned in the above contract did not well and truly perform the obligations imposed on it thereby, in the particulars fully set out in the petition; that before the lapse of the time therein specified the said John Gilligan Company wholly abandoned the further performance of its contract, and wrongfully failed and refused to comply with its terms, covenants, and stipulations, although often requested so to do by plaintiff; that the said John Gilligan Company then left the said work and improvements in a bad, worthless condition, and a total loss to the plaintiff.

The petition further stated that the plaintiff notified the defendant, the Illinois Surety Company, fully of the failures and omissions of the John Gilligan Company as to the performance of his contract with plaintiff, and that the Illinois Surety Company did nothing directly or indirectly towards securing the performance of said agreement.

The petition further states that the plaintiff was compelled to pay sums of money to other persons as the reasonable value of work done by them as to matters and things wherein the John Gilligan Company had failed to comply with its contract. (All set out in detail in the petition.)

The petition further states that by reason of the matters thereinbefore alleged the defendant, under its bond as surety, exhibited with the petition, had become indebted to plaintiff for an amount in excess of the penalty thereof. It prayed judgment for $10,000 specified in said bond and for an assessment of damages for that sum.

The answer of the defendant is summarized in appellant's brief to wit: "It admits that the plaintiff had paid out to John Gilligan and to John Gilligan Company the sum of $24,000 of the contract price of $40,000, although said improvements were not and are not one-half complete, and charges that all overpayments were made without the knowledge or consent of the defendant. It admits that the contractors were substituted, and the defendant extended its suretyship to the John Gilligan Company. It denies default upon the part of the Gilligan Company. It further charges that after the plaintiff undertook the work that it, the respondent, without the knowledge or consent of appellant, made new and additional contracts for the construction of the work which differed materially in terms and conditions from the contract upon which the appellant was bound, and that thereby the said surety company was released from liability. It further alleges that John Gilligan Company was a corporation organized under the laws of Nebraska, and it had never complied with the laws of Missouri so as to authorize it to do business in said state, and that the contract entered into between plaintiff and the said John Gilligan Company was illegal and void."

The last clause of the answer was, on motion, stricken out; defendant excepting, the reply took issue. The jury found for plaintiff for the penalty of the bond and assessed the damages in that amount. The defendant duly perfected its appeal to this court. The errors assigned and the evidence relevant to rulings thereon will be considered and stated hereafter.

Opinion.

I. The first error assigned by the appellant is the action by the trial court in striking out that portion of its answer which alleged as a defense that its principal, the Gilligan Company, had not been licensed to do business in this state, wherefore its contract with the plaintiff was void, and hence the bond entered into by defendant securing the performance of said contract was also void. That is quite a novel proposition independent of its moral aspect. Whether the Gilligan Company could have enforced its contract against plaintiff, or vice versa, is a matter between it and the plaintiff, as to which the present defendant is not interested. This action is for breach of the contract made by this defendant with the plaintiff by the terms and stipulations of the bond sued upon. This defendant was authorized to do business in this state by executing bonds to secure the performance of the obligations assumed by other persons or corporations, for which this defendant received a valuable consideration and probably indemnity. The contract between the plaintiff and defendant expressed in the bond sued upon was, in all respects, lawful and made between competent parties. Its legal effect was an unconditional undertaking on the part of the defendant that the Gilligan Company should faithfully perform the work and duties imposed upon it by an agreement between...