Southern Real Estate & Financial Co. v. Bankers's. Co.

• Decision Date: 30 March 1916
• Docket Number: No. 17855.,17855.
• Citation: 184 S.W. 1030
• Court: Missouri Supreme Court
• Parties: SOUTHERN REAL ESTATE & FINANCIAL CO. v. BANKERS' SURETY CO.

184 S.W. 1030

SOUTHERN REAL ESTATE & FINANCIAL CO. v. BANKERS' SURETY CO.

No. 17855.

Supreme Court of Missouri, Division No. 1.

March 30, 1916.

Appeal from St. Louis Circuit Court; Rhodes E. Cave, Judge.

Suit by the Southern Real Estate & Financial Company against the Bankers' Surety Company. From a judgment for defendant, plaintiff appeals. Reversed and remanded.

Reynolds & Harlan and Thomas Bond, all of St. Louis, for appellant. Jeffries & Corum, of St. Louis, for respondent.

BROWN, C.

This suit was instituted to recover the sum of $9,670.56 against the defendant, an Ohio corporation authorized to transact a general surety business in Missouri upon its bond as surety for the E. H. Abadie Company, a Delaware corporation, as contractor for the erection of a steam heating, ventilating, and power plant for a hotel and theater building in St. Louis, for the contract price of $60,000 with the right in the owner to make additions and alterations up to the amount of $5,000, which was afterward changed, with the consent of the defendant, to $15,000, and extra work was actually done under this provision to the amount of $8,963.98, making the gross contract price $68,963.98. The contract contains the following provisions:

"It is hereby mutually agreed between the parties hereto that the sum to be paid by the owner to the contractor for said work and materials shall be sixty thousand dollars ($60,000.00), subject to additions and deductions as herein provided, and that such sum shall be paid by the owner to the contractor in current funds, and only upon certificates of the architect, as follows:

"On or before the 15th day of each month payments shall be made equal in amount to ninety (90) per cent. of the value of the work in place during the preceding month, according to the certificate of the architect."

The bond was in the usual form. The work proceeded under the contract, the plaintiff making payments from month to month to the aggregate amount of $65,056.52, and the contractor failed to complete the work as provided by the contract. The plaintiff, in pursuance of its provisions, entered upon and completed the work at an additional cost of $13,578.03, being $9,670.57 in excess of the contract price.

It may be seen from this statement that the payments made by the plaintiff before it took over the contract amounted to $2,988.94 over the entire contract price. The payments made by the plaintiff were upon orders of the architect, which are properly described by the trial judge in a memorandum at the time of entering judgment below as follows:

"`Please pay to the E. H. Abadie Company the sum of $6,000, being the second payment to apply on account for work done during the month of September, as per contract, and oblige.' Other certificates, in substance the same as above, were issued for $5,000, $7,000, and $3,000. Two other certificates are the same in substance, except that they add, `to apply on account of estimate for work' done during preceding month. Three request payment on account of labor and material furnished `as per contract and other extra work.' One requests the payment of $6,600, `being the balance due on statement filed for work done at Seventh and Market streets, during the month of October.' And three do not request the payment to E. H. Abadie & Co. at all, but request the payment to third parties for `material furnished the American Theater and Hotel Building, and charge to the account of the E. H. Abadie Company.' None of the purported certificates contain any statement of `the work in place during the preceding month' or any statement that the architect has in fact made any estimate of such work in place, unless it can be said that the two certificates containing the words, `to apply on account of estimate for work done,' etc., do so. And none of the certificates contain any statement that the payment requested is in fact 90 per cent. of any estimate of the work in place. On the other hand, some of the payments requested show on their face that they are not on account of `work in place,' but a far different thing, `materials furnished'; and the last three do not call for a payment to the E. H. Abadie Company, but for payment to third parties on account of `material furnished.' And as to these last three, it can only be fairly inferred that they were not payments of 90 per cent. even of such materials furnished, but were payments to such third parties in full of their bills against the Abadie Company for `materials furnished.'"

There is no charge of fraud.

The case turned upon the effect of these architect's certificates. The trial court held that they did not constitute such authority for the payment of the sums named in them as was required by the contract, and that the payment upon them of more than ninety (90) per cent. of the value of the entire work done was such a violation of the rights of the surety as discharged it from the obligation of the bond, and gave the defendant judgment.

The petition did not state that the plaintiff had performed all the provisions of the building contract to be performed by it. The respondent says in its brief that on this account it failed to state a cause of action, and is for that reason not sufficient to support the judgment.

The appellant complains that after the evidence was all in and before judgment the defendant was permitted, against plaintiff's objection, to file an amended answer setting up the facts relied on for his discharge. To this the plaintiff excepted.

1. Although the respondent said in the oral argument that the vital and only question he desired to present pertained to the sufficiency of the papers in evidence relied upon as architect's certificates justifying the payment made to the contractor, it urges in its brief that the petition fails to state a cause of action because it does not state "either specifically or generally, that the plaintiff complied with all the conditions required to be performed on his part," contained in the building contract, to secure the performance of which the bond used on was given. This point was raised upon the trial by objection to the introduction of any evidence, and not otherwise. The petition does not state that the consideration named in the contract was "to be paid in installments on the 15th day of each month of ninety per cent. of the work in progress during the preceding month, according to the certificate of the architect, the final payment to be made thirty days after the completion of the work included in the contract," and that "all payments shall be due when certificates of the same are issued." It also states that prior to the abandonment of work by the contractor it paid him on the certificates of the architect the sum of $65,056.52. We think, the case having been contested by defendant upon the sole issue of the sufficiency of the certificates, it is now too late for the defendant to question the sufficiency of these allegations to cover the entire ground of the cause of action stated. The error, if there was an error, comes directly within the provisions of section 1850 of the Revised Statutes of 1909, which requires us, in every stage of the action, to "disregard any error or defect in the pleadings * * * which shall not affect the substantial rights of the adverse party," and that "no judgment shall be reversed or affected by reason of such error or defect"; and also within the terms of section 2119, which provides that no judgment shall be reversed "for the want of any allegation or averment on account of which omission a demurrer could have been maintained." The objection to the evidence was, at the trial, placed upon the ground that the petition should have stated that the payments were made upon the certificates of the architect in conformity to the terms of the contract. If the statement to which we have called attention was not a sufficient averment of that fact the point should have been raised and saved by demurrer as provided by the section last cited.

2. A similar question is made by the appellant upon the action of the court in permitting the defendant to file an amended answer after the evidence was all in. The only evidence given at the trial was on the part of the plaintiff, which presented for the first time the architect's certificates upon which payments were made to the contractor. Up to that time the defendant had stood on its general denial, but after the evidence was in showing the facts with reference to these payments and certificates, and before judgment, the court permitted it to amend by pleading specifically the overpayments which had been made, the want of certificates of the architect showing the existence of the facts justifying the payments, and asking the discharge of the defendant on that ground. We think the amendment was fully authorized by section 1848 of the Revised Statutes of 1909 and did not change the character of the claim or defense implied by the general denial and insisted upon at every stage of the trial.

3. If the architect's certificates introduced by the plaintiff substantially complied with the terms of the contract they were, in the absence of fraud or mistake, conclusive of the fact that such payments had become due, and were binding alike upon the principals and surety. Before construing them in this respect it is necessary to refer to the principles of law applicable to their construction as between the parties to this suit. It has been said from time immemorial that sureties are the favorites of the law, and that their contracts should be construed most strongly in their favor. This rule was sometimes justified upon the ground that their contract is a favor to the parties in the sense that it is founded upon a consideration moving not to themselves, but to the principals in the contract for which they become sponsors. Although, in many cases, this was a violent deduction from the facts, the rule remained that...