Springfield Lighting Co. v. Hobart

• Decision Date: 02 June 1902
• Citation: 68 S.W. 942,98 Mo. App. 227
• Court: Missouri Court of Appeals
• Parties: SPRINGFIELD LIGHTING CO. v. HOBART.<SMALL><SUP>1</SUP></SMALL>

68 S.W. 942

98 Mo. App. 227

SPRINGFIELD LIGHTING CO. v. HOBART.¹

Court of Appeals at Kansas City, Missouri.

June 2, 1902.

SURETY — LIABILITY — DISCHARGE.

Where a surety executed a bond, conditioned that his principal would faithfully fulfill a certain contract whereby it agreed to furnish power for an electric light company to operate its apparatus, and afterwards the electric light company was consolidated with another company, and a new corporation formed, the surety continued liable to the new corporation for the performance of the contract.

Appeal from circuit court, Polk county; Argus Cox, Judge.

Action on a surety bond by the Springfield Lighting Company against B. F. Hobart. Judgment for plaintiff, and defendant appeals. Affirmed.

Adiel Sherwood, for appellant. James R. Vaughan, for respondent.

SMITH, P. J.

It appears from the allegations of the plaintiff's petition that the Springfield Electric Lighting Company, the Springfield Gaslight Company, and the Metropolitan Electric Railway Company were each corporations created and organized under the provisions of article 8, c. 42, Rev. St. 1889, and that the first two of them were, on the 30th of June, 1893, under the authority conferred by section 2786 of said article, consolidated and united under the name of the Springfield Lighting Company, the plaintiff. It further appears that, some time prior to the said consolidation, the said Metropolitan Electric Railway Company entered into a written contract with the said Springfield Electric Light Company whereby the former agreed and bound itself to furnish and supply the latter power to operate its lighting apparatus, as therein specified, for a period of 10 years. It still further appears that at the time of entering into said contract the said Metropolitan Electric Street Railway Company and Hobart, the defendant, entered into a certain bond, by which they bound themselves to pay the said Springfield Electric Light Company the sum of $3,000, conditioned that if said Metropolitan Electric Railway Company should do and perform, on its part, all the conditions required of it by the terms of said contract, fully and completely, then said bond was to be void; otherwise, to remain in full force. It is also further disclosed by the allegations of the petition that at the time the said contract was entered into the Springfield Electric Lighting Company was engaged in furnishing light, both to the city and to individuals therein, and that after the creation of the consolidated company the plaintiff, "holding and enjoying all the rights, privileges, power, franchises, and property belonging to each of the incorporations out of which it was formed," continued to furnish light to the said city and individuals therein, as the said Springfield Electric Light Company had done, and that the said Metropolitan Electric Railway Company supplied it with power, and otherwise complied with the requirements of said contract, as it had done before the consolidation, until a certain named date, when it refused further compliance, etc. The defendant interposed a demurrer to the petition, on the ground that it shows upon its face that the alleged bond, upon which defendant was security, was given to the Springfield Electric Lighting Company as obligee, while the plaintiff in this case is a separate and different legal entity. The court overruled the demurrer, and, the defendant having elected to stand thereon, and declining to plead further, judgment was given for the plaintiff.

The defendant, by his appeal, has brought before us for review the action of the trial court in overruling his demurrer to the petition. In support of the ground of such demurrer, the defendant contends (1) that the defendant, as surety, bound himself to "indemnify the Springfield Electric Lighting Company for the failure of the Metropolitan Electric Railway Company to supply electric power to that company, but did not bind himself to indemnify the plaintiff, another and different legal entity; and (2) that by reason of the amalgamation of the Springfield Electric Lighting Company with the Springfield Gaslight Company, by which another company was formed, it was made impossible for the Metropolitan Electric Railway Company to furnish electric power to the Springfield Electric Lighting Company. If these contentions can be sustained, it is quite manifest that the demurrer should have been sustained, and whether or not they should be is to be determined by the construction placed upon the contract of suretyship. It appears that the rule prevailing in respect to ordinary contracts of suretyship is that the surety is the favorite of the laws and has the right to stand upon the strict terms of his obligation. Brandt, Sur. § 97; Bayless, Sureties, 144, 145, 260. He cannot be carried beyond his contract. The contract made by the parties must be judged of, and not another substituted in its stead. It cannot be varied without his consent, and a surety for a definite engagement shall not be extended to an indefinite one. Ludlow v. Simond, 2 Caines Cas. 1, 2 Am. Dec. 291. It was declared by the supreme court of the United States in Miller v. Stewart, 9 Wheat. 680, 6 L. Ed. 189, that "nothing can be clearer, both upon principle and authority, than the doctrine that the liability of a surety is not to be extended by implication beyond the terms of his contract. To the extent and in the manner and under the circumstances pointed out in his obligation, he is bound, and no further. It is not sufficient that he sustain no injury by a change in the contract, or that it even may be for his benefit. He has a right to stand upon the very terms of his contract; and if he does not assent to any variation of it, and that variation is made, it is fatal." In State v. Medary, 17 Ohio, 565, it is said that "the bond speaks for itself, and the law is that it shall so speak, and that the liability of the surety is limited to the exact letter of the bond. Sureties stand upon the words of the bond, and, if the words will not make them liable, nothing can. There is no construction, no equity, against sureties. If a bond cannot have effect according to its exact words, the law does not authorize the court to give it effect in some other way, in order that it may prevail." The two last above excerpts were quoted with approval in Nofsinger v. Hartnett, 84 Mo. 549. And the case from which the former (Miller v. Stewart) is quoted has been referred to approvingly in Lionberger v. Krieger, 88 Mo. 160, and in Blair v. Insurance Co., 10 Mo. 560, 47 Am. Dec. 129. The rule of strictissimi juris, as applicable to the interpretation of the contracts of sureties, was first announced in this state in the opinion of Judge Scott in Blair v. Insurance Co., supra, and all the subsequent cases (cited in defendant's brief) have uniformly and unvaryingly followed it, so that it (the rule) may be said to have become firmly established in the jurisprudence of this state. And while the contract of a surety is to be construed strictissimi juris, which means that it cannot be altered without his consent, and that he is only bound to the extent that he thereby agreed to be so bound, yet, aside from this, it must be construed like any other contract; id est, according to the intention of the parties. Beers v. Wolf, 116 Mo. 179, 22 S. W. 620; Harburg v. Kumpf, 151 Mo. 16, 52 S. W. 19.

2. Up to the time of the consolidation there was a complete performance of the contract on the part of the Metropolitan Electric Railway Company. The noncompliance or default complained of took place after such consolidation, so that the question arising, and decisive of the case, is whether or not the defendant, under his contract of suretyship, is bound to indemnify the consolidated corporation (the plaintiff) against any damage or loss sustained by it in consequence of the failure of the Metropolitan Electric Railway Company to furnish to it the electric power which it (the said Metropolitan Electric Railway Company) had agreed to furnish under its contract with the Springfield Electric Lighting Company. A corporation of the class to which the Springfield Electric Lighting Company belonged may, under the statute (section 971, Rev. St. 1899), change its name without in "any wise affecting its rights, privileges, or liabilities"; but we have no such case here. But, on the contrary, the plaintiff is a legal entity, created by the consolidation (under the statute section 2786, Rev. St. 1889; section 1334, Rev. St. 1899) of two corporations whose business was of the same general nature. The plaintiff was the issue of this union, and cannot be said to be either the one or the other of them, any more than a child can be said to be either its father or mother. And the section of the statute last cited declares that the result of such consolidation shall be to create "one consolidated corporation, holding and enjoying all the rights, privileges, power, franchises, and property belonging to each." The effect of the agreement of consolidation under the statute (section 1334) is, as we think, to transfer all the "rights, privileges, and...