Rule v. Anderson

• Decision Date: 04 December 1911
• Citation: 142 S.W. 358,160 Mo. App. 347
• Parties: RULE et al. v. ANDERSON et al.
• Court: Missouri Court of Appeals

142 S.W. 358

160 Mo. App. 347

RULE et al. v. ANDERSON et al.

Kansas City Court of Appeals, Missouri.

December 4, 1911.

Rehearing Denied January 9, 1912.

1. PRINCIPAL AND SURETY (§ 100) — DISCHARGE OF SURETY—GROUNDS.

A building contract provided for the making of changes in the plans and a method by which the contractor would be entitled to compensation for extra work in consequence thereof. A bond guaranteeing performance by the contractor stipulated that the obligee should notify the surety immediately on the making of any changes in the plans. The contract was made a part of the bond. Changes consisting in substitution of one kind of material for another, and in omitting work, and in additional work, were made; but the surety was not notified thereof. The cost of the extra work in consequence of the changes amounted to $16.25, and the reduction of the contract price in consequence of changes amounted to $49. The surety was engaged in the business of suretyship for hire. Held that, since the changes did not materially affect the risk, the surety was not discharged from liability because of the failure of the obligee to give notice thereof.

2. PRINCIPAL AND SURETY (§ 100) — DISCHARGE OF SURETY.

The rule that where changes in a building contract, made without the consent of the surety of the contractor, affect the identity of the contract, the surety is discharged, though the changes do not increase the risk of the surety, does not apply where the surety is engaged in the business of suretyship for hire, and in such a case mere immaterial variations or unsubstantial deviations, which do not prejudice the right of the surety, do not discharge it.

3. PRINCIPAL AND SURETY (§ 59)—INDEMNITY INSURANCE — CONTRACTS — CONSTRUCTION.

The contracts of surety companies, conditioned on the performance by others of contracts, are contracts of indemnity, and, since they are prepared by the companies, the stipulations therein must be strictly construed, and no unreasonable right of forfeiture must be allowed.

4. APPEAL AND ERROR (§ 169)—QUESTIONS REVIEWABLE—QUESTIONS NOT RAISED IN TRIAL COURT.

A point not raised in the trial court will not be considered on appeal.

5. PRINCIPAL AND SURETY (§ 20) — CONTRACTS—VALIDITY.

The rule that a bond by a contractor to secure the performance of the contract, which recites that it is executed by the contractor as principal and by another as surety, is void as to the surety if not signed by the principal, does not apply to a contract of indemnity created by a surety company engaged in the business of suretyship for hire, and, where a surety company signs a bond to secure performance of a building contract and collects and retains the premium charged for the bond, it cannot repudiate liability on the ground that the bond was not signed by the contractor.

6. PRINCIPAL AND SURETY (§ 129)—BREACH —WAIVER BY SURETY.

Where the manager of a surety company, executing a bond conditioned on the performance by a contractor of a building contract, knew of the failure of the contractor to complete the building within the time fixed in the contract and acquiesced in the course pursued by the owner in permitting the contractor to continue work, the company waived a forfeiture of the bond based on the failure of the owner to give written notice of the breach of the contract.

Appeal from Circuit Court, Jackson County; John G. Park, Judge.

Action by Alice H. Rule and another against R. H. Anderson and another. From a judgment for defendants, plaintiffs appeal. Reversed and remanded.

Boyle & Howell, for appellants. Botsford, Deatherage & Creason, for respondents.

JOHNSON, J.

This suit is on a builder's bond executed by defendant, a surety company, as a surety for hire. A jury was waived by agreement, and, after hearing the evidence, the court made and filed findings of fact and conclusions of law on which it rendered judgment for the defendants. Plaintiffs appealed.

The facts of the case thus may be stated: Plaintiffs are husband and wife, and in August, 1904, acting for himself and as the agent of his wife, the husband entered into a contract with defendant Anderson, by the terms of which Anderson, who is a contractor, agreed to do the carpenter work and provide the materials therefor for an apartment building to be erected on lots in Kansas City owned by Mrs. Rule. The work was to be done according to plans and specifications in the office of the architect employed by plaintiffs, and the contractor was to be paid $4,102.25 for the work at stated times and on the architect's certificates. November 20, 1904, was fixed as the date for the completion of the work.

Among other provisions of the contract, which was in writing, were the following:

"Should the proprietor, at any time during the progress of the said works, require any alterations of, deviations from, additions to, or omissions in the said contract, specifications or plans, he shall have the right and power to make such change or changes, and the same shall in no way injuriously affect or make void the contract; but the difference for work omitted shall be deducted from the amount of the contract, by a fair and reasonable valuation; and for additional work required in alterations the amount based upon same prices at which contract is taken shall be agreed upon before commencing additions, as provided and hereinafter set forth in article No. 6; and such agreement shall state also the extension of time (if any) which is to be granted by reason thereof.

"No new work of any description done on the premises, or any work of any kind whatsoever shall be considered as extra unless a separate estimate in writing for the same, before its commencement, shall have been submitted by the contractor to the superintendent and the proprietor, and their signatures obtained thereto, and the contractor shall demand payment for such work immediately it is done. In case of day's work, statement of the same must be delivered to the proprietor at latest during the week following that in which the work may have been done, and only such day's work and extra work will be paid for, as such, as agreed on and authorized in writing."

Defendant the National Surety Company is a New York corporation engaged in the business of guaranteeing the fidelity of employés and contractors and authorized to transact business in this state. It maintains an office in Kansas City in charge of a district manager, and on October 4, 1904, at the request of Anderson, executed a bond at that office by the hand of the manager by which, in consideration of a premium paid by Anderson, it undertook to guarantee the performance of Anderson's contract with plaintiffs. The building contract was referred to and made a part of the bond.

Among the stipulations of the bond were the following:

"The obligee shall at all the times and in the manner specified in said contract, perform all the covenants, matters and things required to be by the obligee performed; and if the obligee default in the performance of any matter or thing in this instrument, or in said contract agreed or required to be performed by the obligee, the company shall thereupon be relieved from all liability hereunder.

"If said principal shall in any manner default in the performance of any matter or thing in said contract specified to be by said principal performed, or in the event of said principal abandoning the work provided by said contract to be done by said principal, the obligee shall immediately so notify the company, and thereafter the company shall have the right at its option to assume and sublet said contract and to proceed thereunder as if no default or abandonment had occurred; and if the company elect to assume said contract, all moneys agreed therein to be paid said principal and which at the time of the default be due the principal shall thereupon become payable to the company, and shall be paid to it, anything to the contrary in said contract notwithstanding. * * *

"If any changes or alterations by the principal and obligee be made in the terms of said contract or in the plans or specifications for the work mentioned in said contract, the obligee shall immediately so notify the company of such changes or alterations giving a description thereof and stating the amount of money involved by such changes or alterations. * * *

"None of the conditions or provisions contained in this instrument shall be deemed waived by the company unless the written consent to such waiver be duly executed by its president or vice president and its seal be thereto affixed and duly attested; nor shall this instrument or any rights thereunder be assignable unless with like consent duly executed and attested as aforesaid. * * *

"All notices and other evidence required by this instrument to be furnished by the obligee to the company shall be in writing and shall be forwarded by registered letter addressed to the company at its principal office in the city of New York."

The work was not completed until January, 1905, and plaintiff failed to give written notice of this default of Anderson until January 21, 1905. In answer to this notice, defendant's vice president in New York wrote plaintiffs as follows: "Referring to your communication of the 21st inst., concerning your contract with Mr. R. H. Anderson of Kansas City, the contract required the completion of the work on or before November 20, 1904. It appears from your letter that the work was not completed at that date, but in fact was being continued up to about the date of your letter. It is assumed that Mr. Anderson was given an extension of time within which to complete; a careful examination of our papers fails to disclose any assent on our part to any such extension—if one has been granted without our assent, all liability on our part to you ceased under the bond at the time such extension was granted. If no extension was...