Southern Surety Co. v. United States Cast Iron Pipe & F. Co.

• Decision Date: 18 May 1926
• Docket Number: No. 7153.,7153.
• Citation: 13 F.2d 833
• Parties: SOUTHERN SURETY CO. v. UNITED STATES CAST IRON PIPE & FOUNDRY CO.
• Court: U.S. Court of Appeals — Eighth Circuit

13 F.2d 833 (1926)

SOUTHERN SURETY CO. v. UNITED STATES CAST IRON PIPE & FOUNDRY CO.

No. 7153.

Circuit Court of Appeals, Eighth Circuit.

May 18, 1926.

David A. Murphy, of Kansas City, Mo. (John T. Harding and R. C. Tucker, both of Kansas City, Mo., on the brief), for appellant.

Charles M. Miller, of Kansas City, Mo. (Roger S. Miller, of Kansas City, Mo., on the brief), for appellee.

Before SANBORN and LEWIS, Circuit Judges, and PHILLIPS, District Judge.

PHILLIPS, District Judge.

This is a suit in equity to procure reformation of a surety bond and to recover upon the bond as reformed.

The facts are these:

On June 27, 1923, one F. M. Beeson, trading under the name of Beeson Machinery Company, entered into a contract with the city of King City, Mo., whereby he agreed to furnish all material, labor, and tools for the construction of a waterworks system in such city in accordance with certain plans and specifications. The material portions of the contract, which was in the form of an accepted proposal, read as follows:

"We, the undersigned, respectfully submit our proposal for the furnishing of all material, labor, tools, and miscellaneous items of every description necessary for the proper construction and completion of the herein specified waterworks system, as given on the plans and in the specifications. * * *

"It is hereby agreed that the accompanying 5 per cent. certified check shall be returned to the bidder at the letting, if bid is not accepted, and if bid is accepted upon submission of a satisfactory surety bond in an amount equivalent to 100 per cent., covering the construction of the work and the payment of all bills in connection with same. * * *"

The specifications referred to in the contract contained the following provisions:

"A surety company bond, assuring the faithful performance of the contract will be required in a sum equal to 100 per cent. of the contract price. This bond shall be filed with the municipality until the work has been entirely completed and three months' satisfactory operation has been secured, after which the bond shall be returned to the contractor. The bond shall include a provision for the protection of mechanics, laborers, and persons furnishing material for the construction of public improvements."

On June 27, 1923, J. J. Higgins, a representative of the Southern Surety Company, secured from Beeson an application for a surety bond to be given in connection with the above contract. Higgins asked Beeson if the city had any special form of bond. Beeson replied: "No; use your own form." Beeson advised Higgins that the exact amount of the contract had not then been determined, and that the bond should be made for the sum of $50,000. Higgins prepared the bond, and it was duly executed by Beeson and the surety company. Thereupon, Beeson and Higgins went to the city hall, at King City, to deliver the bond. The provisions of the bond material to this inquiry read as follows:

"Whereas, said principal has entered into a certain written contract with the obligee, providing for the furnishing of all labor and material necessary for the installation and completion of waterworks improvements in accordance with plans and specifications prepared by E. T. Archer & Co., engineers, which contract together with plans and specifications are made to form a part of this bond the same as though copied at length herein:

"Now, therefore, the condition of the foregoing obligation is such that, if the said principal shall well and truly indemnify and save harmless the said obligee from any pecuniary loss resulting from the breach of any of the terms, covenants, and conditions of the said contract on the part of the said principal to be performed, then this obligation shall be void; otherwise, to remain in full force and effect in law."

Rufus H. Limpp, called as a witness for the plaintiff, testified: That he was mayor of King City when the contract with Beeson was entered into; that the bond was executed by Beeson for the Beeson Machinery Company, and by Higgins for the surety company, and that Higgins delivered the bond to the clerk of King City at a meeting of the board of aldermen of the city. Limpp further testified that he asked Mr. Archer, the engineer for the city, "Is this the kind of a bond called for in the contract?" and that Archer replied, "It is the usual form of bond." He testified further, "Higgins stated that it was the kind of bond required in the contract, and, to absolutely satisfy us that it was, he would write in the bond that it complied with all the terms of the contract," and that Higgins wrote into the bond the provision italicized in the above quotation from the bond. On cross-examination he testified: "I don't know whether I saw him write that provision in, but I remember the agreement very distinctly. I wouldn't say that Mr. Higgins said a word to me."

Askins, one of the aldermen, testified, that Limpp asked Archer "if it was a legal bond to cover the contract," and that Archer said "he thought it was," and that then Higgins wrote some further provisions into the bond. Askins identified such provisions, and then testified further as follows: "That was written in after the objection was made. The objection was about covering the materialmen."

Archer, the engineer, testified: "Limpp took the bond, and read it over to me, and asked me if it was all right. I told him that it was in the usual form, but that it didn't tie up sufficiently with the specifications. It didn't have any particular reference to the specifications, and I suggested that there be written in it a reference to the specifications, and I dictated approximately what was written in, and Mr. Higgins wrote it in. The specifications which I had in mind were the specifications covering the work — a clause which says they have to guarantee the work, and a clause that says they have to be responsible for the payment of the bills. * * * He Higgins said, `All right, we will write in there whatever you say;' and I dictated practically what was put in there, and he wrote it in at that time. He might have changed a word or two."

Mr. Higgins, the agent for the surety company, testified: "Nothing whatever was said to me about the question as to whether or not the bond complied with the contract. Up to the time I left King City, I had never seen a copy of the contract. On June 29, 1923, the engineer, Mr. Archer, sent me a copy of the contract. Up until the time I received that copy from Mr. Archer, I had never read it, never had it in my possession, and never heard it read by anybody else. * * * At the time the bond was executed, I did not know that there was any law in the state of Missouri requiring a contractor to give a bond for the protection of materialmen and laborers. I knew there was a specific form of bond in Kansas covering labor and material bills, a bond which was made to the state and filed with the district court, but I never heard of a bond covering labor and material bills being filed in Missouri."

Beeson undertook the performance of the contract. In January, 1924, he abandoned the work. The city notified the surety company of Beeson's default, and the surety company completed the contract.

The United States Cast Iron Pipe & Foundry Company (hereinafter called the United States Company) sold to Beeson certain pipes and castings for use in the construction of the waterworks plant, for which Beeson agreed to pay $22,609.81. Beeson paid only $6,719.89 of this amount. The United States Company brought this suit against Beeson, the surety company, and King City, to procure a reformation of the bond and to recover the balance due for the materials furnished to Beeson.

The trial court reformed the bond, by adding after the named obligee, the city of King City; Mo., the following: "And any person entitled to claim protection under this bond" — and by adding to the condition of the bond the following: "And said principal shall also well and truly make payment to persons and materialmen furnishing material used in the construction, installation and completion of the waterworks improvements in accordance with the written contract and plans and specifications above referred to," and gave judgment against the surety company and in favor of the United States Company for the balance due it for materials furnished Beeson. From such decree, the surety company has appealed.

The contentions of the surety company are, first, that the bond is not a statutory bond; second, that the bond is a common-law bond, made solely for the benefit of King City, and not for the benefit of the United States Company, and that the United States Company has no rights thereunder; third, that the United States Company is neither a party to the contract nor in privity with a party thereto, and cannot have reformation of the bond; fourth, that the evidence failed to show a mutual mistake, or a mistake on the part of the city and fraud on the part of the surety company; and, fifth, that if any mistake was shown it was a mistake of law, which affords no ground for reformation.

The United States Company contends, first, that the bond was a statutory bond, and that it was entitled to recover thereon without reformation; and, second, that if reformation was necessary it was entitled to have the bond reformed.

Section 1040, R. S. Mo. 1919, provides:

"It is hereby made the duty of all officials, boards, * * * of any * * * city, * * * in making contracts for public work, * * * to require every contractor for such work to execute a bond to the * * * city, * * * with good and sufficient sureties, and in an amount to be fixed by said officials, * * * and such bond, among other conditions, shall be conditioned for the payment of material used in such work and for all labor performed in such work, whether by subcontractor or otherwise."

A statutory bond is one that either literally or substantially meets the requirements of the...