Noonan v. Independence Indem. Co.

• Decision Date: 28 July 1931
• Parties: Elizabeth E. Noonan v. Independence Indemnity Company, Appellant
• Court: Missouri Supreme Court

41 S.W.2d 162

328 Mo. 706

Elizabeth E. Noonan v. Independence Indemnity Company, Appellant

Supreme Court of Missouri

July 28, 1931

Appeal from Circuit Court of City of St. Louis; Hon. Frank Landwehr, Judge.

Affirmed.

Polk Williams & Campbell for appellant.

(1) The interpretation of the contract between the respondent and the building contractor is vital. It does not appear who prepared that contract, and it was completed when brought to the surety. The appellant contends that this contract contained two vital provisions: First, the supervision of the work by an architect or superintendent; and, second, payments only upon certificate as to satisfactory doing of the work. (2) Violation of the provisions of the contract with respect to the making of payments destroyed the security of the appellant as surety and effectuated its release. Fidelity & Deposit Co. v. Agnew, 152 F. 955; Evans v Graden, 125 Mo. 77; Harris v. Taylor, 150 Mo.App. 291; Martin v. Whites, 128 Mo.App. 117; Prairie State Bank v. United States, 164 U.S. 233; First National Bank of Montgomery v. Fidelity & Deposit Co., 13 L. R. A. (N. S.) 418; Colvert v. London Dock Co., 2 Keen. 638; Long v. Am. Surety Co., 23 N.D. 492; Kunz v. Boll, 141 Wis. 69; 9 C. J. 861. (3) It is impossible to interpret the building contract otherwise than as providing for a superintendent who should be known as the architect. (4) It is equally impossible to interpret this contract otherwise than as providing that the notes secured by deed of trust should form a part of the total consideration of twenty-eight thousand one hundred ($ 28,100) dollars, which was fixed by the contract for the erection of the building; and the contract provided that no part of this total consideration could be paid over to the contractor except upon certificates by the architect representing work and materials that had actually entered into the building in a satisfactory manner. The payment of eight thousand, seven hundred and fifty dollars, without observing such provisions and before any work had been done took away, in great part, the security upon which the appellant, as surety, was entitled to rely. (5) The court erred in giving the first instruction for the plaintiff, because it submitted, by such instruction, to the jury, a finding that the respondent had substantially performed all her duties and obligations under the contract and the bond. Under the undisputed testimony this was a question of law for the court, and the court should have declared the law, as requested by appellant's instruction numbered 3. (6) The measure of damages, submitted by the instruction numbered 2 given for respondent, was erroneous, Page on Contracts (2 Ed.) 5658, sec. 3215; Simons v. Wittmann, 113 Mo.App. 357; Kennett v. Construction Co., 273 Mo. 290; Drainage District v. Surety Co., 252 Mo. 564.

Leahy, Saunders & Walther and Harold F. Hecker for respondent.

(1) Defendant is a surety engaged in writing surety bonds for hire. Its obligation, like a policy of insurance, is to be construed most strictly against it and all ambiguities in the bond are to be resolved in favor of the obligee. Missouri, Kansas & Tex. Ry. Co. v. Am. Surety Co., 291 Mo. 102; Fidelity & Deposit Co. of Maryland v. John Gill & Sons, 270 S.W. 705; Lackland v. Renshaw, 256 Mo. 133; Rule v. Anderson, 160 Mo.App. 358; Dorr v. Bankers Surety Co., 218 S.W. 400. (2) Unlike voluntary sureties, surety companies which engage in the business of writing bonds are not favorites of the law and the rule of strictissimi juris followed where voluntary sureties are concerned has no application in determining the liability of the defendant herein. State ex rel. Concrete & Steel Const. Co. v. Southern Surety Co., 221 Mo.App. 81; Fidelity & Deposit Co. v. John Gill & Sons, 270 S.W. 705. (3) The construction which the parties themselves place upon a contract or a policy of insurance may be shown as an aid to its interpretation. The fact that defendant's agent Orr C. Frazier was acquainted with the facts surrounding the construction of plaintiff's building and that he discussed with Caldewey the delivery by plaintiff of the deeds of trust and their disposition by Caldewey before the work began, and that defendant made no objection thereto and took no steps to have them returned to plaintiff or to obtain control of the disposition of the proceeds, indicate that it considered the delivery of these deeds of trust to Caldewey proper and in accordance with the terms of the contract. Hellrung v. Continental Ins. Co., 232 S.W. 241; Tetley v. McElmurry, 201 Mo. 382; Laclede Construction Co. v. T. J. Moss. Tie Co., 185 Mo. 73; Fuller Bros. v. Fidelity & Cas Co., 94 Mo.App. 496. (4) It cannot be said by a fair and reasonable interpretation of the bond and contract as entered into by the parties that plaintiff was obligated by the contract to employ a third person as an architect or supervisor to direct the construction of the building and to issue certificates as the work progressed. Plaintiff did not violate the terms of the contract and bond with defendant by not employing any third person as an architect or supervisor and defendant was not discharged from liability on its bond by reason of her failure to do so. First, by the terms of the contract, plaintiff was not bound to employ an architect; and, second, she had the privilege of employing an architect, if she so chose. The bond recognizes that the employment of an architect was optional. There being no positive obligation imposed upon plaintiff to employ a third person as an architect or supervisor, there was no breach by plaintiff of the bond, which required her "to perform the terms and covenants of the contract on the part of the obligee to be performed." (5) The contract and bond imposed no obligation upon the plaintiff to pay any part of the contract price for the building only upon the certificates of an architect. (6) By a fair and reasonable construction of the contract plaintiff was not bound to pay over and deliver the deeds of trust aggregating $ 8,750, upon the certificates of an architect or between the first and tenth of each month, as the work progressed. It was the intention of the parties, as written by the contract and as evidenced by the construction placed upon it by the representative of the surety company, that these deeds of trust should be paid over and delivered to the contractor in kind, and the balance of the price of the building, above the face of these deeds of trust, was to be paid out of a building loan, as the work of construction progressed. (7) Defendant surety company, through its agent, Frazier, had full knowledge of the payment and delivery of the deeds of trust to Caldewey. It made no objection to such payment and acquiesced therein and must be treated as having consented thereto. Therefore, even though it be said that the plaintiff paid and delivered the deeds of trust to Caldewey contrary to the terms of the contract, defendant was not discharged from liability on its bond. If a surety consents to overpayments or payments other than according to the contract, he is not discharged. 9 C. J. 863; State ex rel. Seibel v. Trimble, 299 Mo. 174. (8) Even though it be said that the plaintiff could not, by her contract, pay over and deliver the deeds of trust to Caldewey, except upon architect's certificates and monthly estimates, as the work progressed, yet under the evidence, defendant knew of their delivery at the time when they were delivered and before the work began, and acquiesced in such delivery, and defendant thereby waived that requirement of the contract, if such there was. Rule v. Anderson, 160 Mo.App. 360. It was not necessary for plaintiff to prove any such waiver of the manner or time of payment, for plaintiff could prove it under the plea of performance in her petition. Andrus v. Ins. Co., 168 Mo. 151. (9) The bond of defendant was more than a bond conditioned upon the performance of the contract by the principal; it was an indemnity contract wherein the company undertook to limit its liability by inserting express conditions and provisions which exempted it from liability. The company did not expressly provide that the failure by plaintiff to employ an architect, or that the failure by plaintiff to make payments in monthly installments only upon the certificate of an architect, should work a forfeiture of the policy, and under the application of the maxim expressio unius est exclusio alterius the failure of plaintiff to either so employ an architect or make payments did not discharge the surety. Dezell v. Fidelity & Casualty Co., 176 Mo. 280. (10) The measure of damages as submitted by instruction number 2 is proper and the elements of damage submitted thereby are the proper elements and represent the actual loss sustained by plaintiff. Drainage Dist. v. Ill. Surety Co., 252 Mo. 563; Simons v. Wittmann, 113 Mo.App. 357; 9 C. J. 812; In re Carrier, 21 F.2d 589; United States v. U. S. F. & G. Co., 59 L.Ed. 702; Kennett v. Katz Const. Co., 273 Mo. 290.

OPINION

Atwood, J.

This is a suit on a bond given to secure the performance of a building contract. The case was tried to a jury which returned a verdict in favor of plaintiff, Elizabeth E. Noonan, and against defendant, Independence Indemnity Company, upon which judgment for $ 13,787.64 was rendered, and from this judgment defendant has appealed.

The evidence showed that plaintiff was the owner of vacant ground in De Mun Park, a subdivision adjoining the city of St Louis, and desiring to erect a four-family apartment building thereon for which she had plans and specifications, she entered into said building contract with the J. W. Caldewey Construction Company, Inc., under date of September 20, 1923. Thereafter, under date of September...