Union State Bank v. American Sur. Co.

• Decision Date: 03 February 1930
• Docket Number: 27709
• Parties: Union State Bank, Trustee, and R. Thews et al. v. American Surety Company, Appellant
• Court: Missouri Supreme Court

23 S.W.2d 1038

324 Mo. 438

Union State Bank, Trustee, and R. Thews et al. v. American Surety Company, Appellant

No. 27709

Supreme Court of Missouri

February 3, 1930

Appeal from Jackson Circuit Court; Hon. Willard P. Hall Judge.

Affirmed.

Langworthy Spencer & Terrell for appellant.

(1) The bond sued on was not shown to have been written on the contract executed by the parties. Evans v. Graden, 125 Mo. 72; Utterson v. Elmore, 154 Mo.App. 646; Kane v. Thuener, 62 Mo.App. 70; Bowman v. Steam Heating Co., 80 Mo.App. 635; McMullen v. United States, 167 F. 462; Beers v. Wolf, 116 Mo.App 186; Justice v. Surety Co., 209 F. 105; Moore v. Title Guaranty & Trust Co., 151 Mo.App. 256; Baglin v. Linderman, 41 App. D. C. 530; 32 Cyc. 177, 162, 163, 180; Inman v. Nolan, 288 S.W. 1007; Heim Brewing Co. v. Hazen, 55 Mo.App. 277; Leavel v. Porter, 52 Mo.App. 632; Harris v. Taylor, 150 Mo.App. 291; Singer Mfg. Co. v. Hibbs, 21 Mo.App. 574; Swasey v. Doyle, 88 Mo.App. 536; Matthews v. Hill, 287 S.W. 791; State v. McGonigle, 101 Mo. 353. (2) On December 16, 1920, plaintiff bank and the Elevator Company, entered into a new agreement modifying the terms of the written contract by reason of which defendant herein was released on its bond. Cases supra. (3) The bond never became operative as plaintiff bank never fulfilled its obligation thereunder to the Elevator Company, 5 Page on Contracts, 5159, sec. 2926; Coughran v. Bigelow, 164 U.S. 301; Rice v. Fidelity & Deposit Co., 103 F. 427; Denny v. Kile, 16 Mo. 450; Monks v. Miller, 13 Mo.App. 363; Craycraft v. Walker & Co., 26 Mo.App. 469. (4) Defendant did not waive the failure of performance by the plaintiff bank of its contract with the Elevator Company. Rice v. Fidelity & Deposit Co., 103 F. 427; Fidelity & Deposit Co. v. United States, 137 F. 866; Coughran v. Bigelow, 164 U.S. 301.

Trusty & Pugh for respondents.

(1) Defendant's demurrer was properly overruled. M. K. & T. Railroad Co. v. Am. Surety Co. (Mo.), 236 S.W. 657; Barton v. Title Guaranty etc. Co., 192 Mo.App. 561, 183 S.W. 694; State etc. v. Potter, 63 Mo. 212; St. Louis etc. v. Bonding Co., 197 Mo.App. 430, 196 S.W. 1148; 9 C. J. 84, 85; Guilford v. Harrison, 23 App. D. C. 23; City of Kennett v. Const. Co. (Mo.), 202 S.W. 558; 21 R. C. L. 999, sec. 47. (2) The Surety Company issued the bond for a profit and is not a favorite of the law. M. K. & T. Rd. v. Am. Surety Co. (Mo.), 236 S.W. 657; Barton v. Title Guaranty Co., 183 S.W. 694; Dorr v. Bankers Trust Co., 218 S.W. 398.

OPINION

Lindsay, C.

This is a suit upon a bond given by the Associated Mill & Elevator Company, hereafter called the Elevator Company, as principal, and the American Surety Company as surety, to Union State Bank of Beverly, Kansas, as trustee, for the benefit of the individuals joined as plaintiffs, respondents here. The bond was given to secure the performance by the Elevator Company of the terms of a written contract entered into by the Elevator Company, and the Union State Bank as trustee, on behalf of the named individuals, for the building of a grain elevator at Beverly, Kansas. The Elevator Company is not a corporation, but is a common-law trust. It was engaged in the business of building elevators. Under the plan it pursued, the sum required for the construction of an elevator was procured through subscriptions made by individuals residing in the locality of the proposed elevator, who, for payment of their subscriptions, received from the Elevator Company certificates of stock in the trust estate. In the case at bar, representatives of the Elevator Company prior to November 15, 1920, had solicited and procured subscriptions, from the individuals herein joined as plaintiffs, and one other, in the total amount of $ 6,900. The payments upon these subscriptions were made to the Union State Bank, to the end that the bank might contract on behalf of the subscribers. Although only the sum of $ 6,900 had then been subscribed, the plan was that the sum of $ 8,000 should be raised, to be paid to the Elevator Company for the construction of the elevator, which, according to the plan, was to be completed ready for crops maturing by July 1, 1921. By way of preface, it may be said that the contract here in question was entered into before the amount of $ 8,000 was subscribed, when only $ 6,900 had been subscribed, and the bond sued on was delivered at the time the contract was signed by the bank and the Elevator Company. It may further be said at this time that the full sum of $ 8,000 was never paid to the Elevator Company. That company, before this suit was brought, had become insolvent, and its affairs were in the hands of a receiver. No work on the construction of the elevator was ever done. This suit is for the recovery of money paid to the Elevator Company by the bank, which the bank received as trustee for the subscribers, and for which the Elevator Company had issued certificates of stock. A subscription, and payment, of $ 300 was canceled by an arrangement between the subscriber and the Elevator Company. The suit is for the recovery of the sum of $ 6,600, and accrued interest. The plaintiff had judgment for the total sum, principal and interest, of $ 8,218.10, and defendant appealed.

The trial was had without a jury, and most of the evidence was taken under the first amended petition of the plaintiff and the amended answer of defendant. After an interval of several months, further evidence was taken, and plaintiff filed a second amended petition, and defendant filed a second amended answer. These pleadings are long, but in view of the questions presented on appeal they need not be set forth extensively, and they will be referred to as occasion requires in the discussion of the questions raised.

The defendant makes nineteen assignments of error, but all the contentions made under his "points and authorities," and in the discussion in the brief, are directed to the claim that the court should have sustained defendant's demurrer to the evidence. This claim that the demurrer to the evidence should have been sustained is put upon the several grounds: (1) That the bond sued on was not shown to have been written on the contract executed by the Elevator Company and the Bank; (2) that on December 16, 1920, the bank and the Elevator Company entered into a new agreement modifying the terms of the written contract, by reason of which, the Surety Company was released on its bond; (3) that the bond never became operative, because, the bank, as acting for the subscribers, never fulfilled its obligation to the Elevator Company under the terms of the contract and bond, that is, never paid the sum specified, $ 8,000; that the Surety Company did not waive the failure of performance by the bank of its contract with the Elevator Company.

The primary step is to determine whether the Surety Company insured the performance by the Elevator Company of the contract pleaded in the petition, and if so, next, to determine whether it is liable under the terms of that contract and the conditions of the bond, in view of the facts shown in evidence.

The testimony for plaintiff shows that in November, 1920, the Elevator Company, by its vice-president, Mr. McQueen, presented to the bank the proposed contract in writing already signed for the Elevator Company by its president; but no bond was tendered by the Elevator Company at that time. The proposed contract as thus written and presented, contained the following provision:

"Of the amount subscribed sixty per cent shall be placed on deposit in the Union State Bank of Beverly, Kansas, in the name of the second party and shall only be used in the payment of obligations incurred in obtaining a site, payment for bills for material, insurance, plans and specifications, and like obligations incurred in the construction of such elevator and the equipment thereof until ready for use. The second party shall approve the bills payable from such fund before they are paid, and second party's checks upon such fund shall only be paid by the said bank upon the approval of such bills by the second party. The remaining forty per cent of funds derived from such subscription shall be delivered to the second party."

This provision was objected to by Mr. Schroeder, cashier of the bank, and by the attorney for the subscribers, on the ground that no bond was required before the money was paid over, and it was insisted that the provision quoted should be changed, or stricken out, and another provision substituted therefor requiring a bond to be given before the money should be paid to the Elevator Company. As we understand the testimony, the form of the provision so to be substituted, was prepared by the attorney for the subscribers. About the 16th day of December, 1920, the vice-president of the Elevator Company returned, bringing the proposed contract and the bond sued on, the contract being the same instrument before tendered, except that the clause objected to and quoted above had been stricken out by drawing lines in ink over the words in that clause, and the substituted clause appeared therein in typewriting. As thus drawn, the contract was signed for the subscribers by the bank through its cashier, and the bond was accepted as written, except that by consent obtained at that time from the Surety Company, the bond was so changed as to provide for a completion of the elevator for crops "maturing in the season" of 1921 instead of "maturity after July 1, 1921." The contract as declared upon in the petition as the one entered into between the Elevator Company and the bank, and for the performance of which the bond was given, omitting signatures, is now set forth, the clause therein appearing substituted for the clause eliminated, being shown in italics:

"Agree...