Title Guaranty & Surety Co. v. Schmidt

• Decision Date: 28 March 1914
• Docket Number: 3799.
• Citation: 213 F. 199
• Parties: TITLE GUARANTY & SURETY CO. v. SCHMIDT et al.
• Court: U.S. Court of Appeals — Eighth Circuit

213 F. 199

TITLE GUARANTY & SURETY CO. v. SCHMIDT et al.

No. 3799.

United States Court of Appeals, Eighth Circuit.

March 28, 1914

Alfred G. Ellick, of Omaha, Neb. (H. C. Brome and Clinton Brome both of Omaha, Neb., and George S. Wright, of Council Bluffs Iowa, on the brief), for plaintiff in error.

Emmet Tinley, of Council Bluffs, Iowa (W. E. Mitchell, of Avoca Iowa, and A. L. Preston and H. L. Robertson, both of Council Bluffs, Iowa, on the brief), for defendants in error.

Before SANBORN and CARLAND, Circuit Judges, and RINER, District Judge.

RINER District Judge.

This was an action brought by the plaintiff in error in the District Court of the United States for the Southern District of Iowa, Western Division, against the defendants in error, to recover upon an indemnity bond. The record discloses the following state of facts:

Marxen & Rokahr, a copartnership, were general contractors having their principal place of business at Avoca, Iowa; that on the 16th of May, 1905, they entered into a contract with Seward county, Neb., to furnish all material and construct a courthouse building for that county. By the terms of their contract the contractors were required to furnish a bond in the sum of $30,000, conditioned, among other things, for the payment of all material used in the construction of the courthouse building. Pursuant to this requirement of the contract, on the 19th of May, 1905, an application was made to the local agent of the plaintiff in error at Omaha, Neb., to furnish a bond. This application was accepted on condition that Marxen & Rokahr deliver to the plaintiff in error an indemnifying bond in the sum of $10,000, with at least two satisfactory sureties, conditioned to save the plaintiff in error and its successors and assigns harmless against all suits, actions, debts, damages, and loss whatsoever by reason of its contract of suretyship upon its bond given to Seward county to secure the performance by Marxen & Rokahr of their contract for the construction of the courthouse. Marxen, for and on behalf of his firm, agreed to procure an indemnifying bond, and returned to his home at Avoca, Iowa, for that purpose. Pursuant to the agreement between Marxen and the local agent of plaintiff in error at Omaha, the local agent executed and delivered a bond in the sum of $30,000 from the plaintiff in error to Seward county, which was filed in the office of the county clerk of that county. Marxen, having procured the signatures of the defendants in error to the indemnity bond, delivered it to the local agent of the plaintiff in error at Omaha.

During the progress of the work of constructing the courthouse the contractors purchased material from the Des Moines Bridge & Iron Works of the value of $17,609.30, of which they paid the sum of $6,610.80, leaving a balance of $10,998.50 due and unpaid upon the purchase price of the material.

On the 7th of January, 1908, the Des Moines Bridge & Iron Works Company brought an action in the District Court of Seward County, Neb., against the contractors and the plaintiff in error upon the bond given to the county to recover this balance due upon the purchase price of the material furnished by it to the contractors and used in the construction of the courthouse. A trial was had, resulting in a judgment in favor of the Des Moines Bridge & Iron Works Company for $12,134.15, with interest and costs. The contractors being at that time insolvent and unable to pay or appeal from the judgment, the plaintiff in error appealed the case to the Supreme Court of the state of Nebraska, where the judgment was affirmed and the plaintiff in error was compelled to pay the amount of the judgment, with interest and costs, in the sum of $13,886.10. The defendants in error were notified of these proceedings, and also that they would be held liable on their indemnity bond for any loss that the plaintiff in error might sustain, and pursuant to this notice employed counsel to assist in the defense of the suit brought by the Des Moines Bridge & Iron Works Company.

On the 15th of March, 1911, this action was brought by plaintiff in error to recover upon the indemnity bond.

The defendants in error in their answer set up two defenses: First. That the indemnity bond was executed and delivered without consideration. This defense, however, was abandoned at the trial. The second defense alleged that Marxen at the time he procured the defendants in error to execute the indemnity bond represented to each of them that Marxen and Rokahr would sign the bond, and that he would procure 10 responsible sureties; that he would leave the bond with the cashier of the Avoca State Bank and would not deliver it as an executed agreement until it had been signed by 10 persons and his firm. It is further alleged that the plaintiff in error and Dodson, its local agent at Omaha, had notice of the conditions upon which the signatures of the defendants in error were obtained.

At the trial the defendants in error offered evidence tending to show that Marxen obtained their signatures to the indemnity bond upon the representation that his firm would sign the bond and that he would procure 10 responsible persons to sign before it was delivered; but there is no evidence in the record tending to show that the plaintiff in error or its local agent, who received the bond from Marxen, had any notice or knowledge that the defendants in error had executed the bond upon any condition whatever. The indemnity bond, a copy of which is set out in the record, the original having been presented to the court for inspection at the oral argument, upon its face was a perfect instrument, having no blanks or room for additional names, either in the body of the bond or in the spaces provided for signatures, and the local agent of the plaintiff in error testified that he received the bond in its present condition from Marxen on the 27th of May, 1905, pursuant to their agreement that such bond should be furnished. At the close of all of the evidence the plaintiff in error moved for a directed verdict in its favor, which motion was overruled, and the court on its own motion directed a verdict in favor of the defendants in error.

The bond in suit being apparently perfect and complete upon its face, if the sureties have any defense it must be because the writing does not fully express their contract. They say that it does not express the contract they intended to make, but no conditions are attached to the bond. If they wanted to attach conditions to their obligation they should have stated them in writing, or at least given notice of them in some form to the obligee, the other party to the contract. In other words, the obligation, as expressed in writing must, we think, remain in full force in the absence of conditions known to the party for whose benefit the promise was made.

The case of Dair v. United States, 16 Wall. 1, 21 L.Ed. 491, was an action to recover on a distiller's bond. At the request of Jonathan Dair, one of the principals, James Dair and William Davidson signed the bond as sureties on condition that it was not to be delivered to the plaintiff until it should be signed by Joseph Cloud as cosurety. With this understanding the bond was placed in the hands of the principal, Jonathan Dair, who subsequently, and without procuring the signature of Joseph Cloud as cosurety, delivered the bond to the plaintiff. The bond was in all respects regular upon its face and the plaintiff had no notice of the condition. Upon these facts the Circuit Court entered a judgment in favor of the United States, which was affirmed by the Supreme Court, and in the course of its opinion the court said:

'It must be conceded that courts of justice, if in their power to do so, should not allow a party who, by act or admission, has induced another with whom he was contracting to pursue a line of conduct injurious to his interests to deny the act or retract the admission in case of apprehended loss.'

This principle has been applied in a number of cases: Empire State Surety Co. v. Carroll Co., 194 F. 593, 114 C.C.A 435; Moses v. United States, 166 U.S. 571, 17 Sup.Ct. 682, 41 L.Ed. 1119; Joyce v. Auten, 179 U.S. 591, 21 Sup.Ct. 227, 45 L.Ed. 332; Smith v. Kirkland, 81 Ala. 345, 1 So. 276; Williams v. Morris, 99 Ark. 319, 138 S.W. 464; Tidhall v. Halley, 48 Cal. 610; Byers v. Gilmore, 10 Colo.App. 79, 50 P. 370; Mathis v. Morgan, 72 Ga....