Watters v. Fisher

• Citation: 139 A. 842,291 Pa. 311
• Decision Date: 28 November 1927
• Docket Number: 168
• Parties: Watters, Appellant, v. Fisher et al
• Court: United States State Supreme Court of Pennsylvania

139 A. 842

291 Pa. 311

Watters, Appellant, v. Fisher et al

No. 168

Supreme Court of Pennsylvania

November 28, 1927

Argued October 5, 1927

Appeal, No. 168, March T., 1927, by plaintiff, from judgment of C.P. Allegheny Co., Oct. T., 1920, No. 391, for defendant n.o.v., in case of S. S. Watters v. J. H. Fisher and C. L Carter doing business as Fisher-Carter Co. and London &amp Lancashire Indemnity Co. of America. Affirmed.

Assumpsit on bond. Before DREW, J.

The opinion of the Supreme Court states the facts.

Verdict for plaintiff on which judgment was entered for surety company n.o.v. Plaintiff appealed.

Error assigned was judgment n.o.v., quoting record.

The judgment is affirmed.

W. Clyde Grubbs, with him William B. Secrist, for appellant. -- The bond on which this suit is based is conditioned so as to indemnify the owner against loss or damage. It is not a bond to indemnify against a liability. No right of action arises on a bond of indemnity against loss nor can the indemnitee recover until he has suffered an actual loss. Actual loss was a prerequisite to an action by the owner: Faulkner v. McHenry, 235 Pa. 298.

The undertaking of defendants was to insure the satisfactory completion of the contract: Butz v. Ins. Co., 255 Pa. 53; Phila. v. Ray, 266 Pa. 345.

When this contract was extended beyond December 1, 1919, the provisions of the second condition precedent "That no claim, suit or action by reason of any default shall be brought against the principal or surety after the first day of December, 1919, nor shall recovery be had for damages accruing after that date," were rendered inconsistent with the other conditions precedent and became contrary to the main condition of the bond: Harrity v. Title & Trust Co., 280 Pa. 237; Baldwin v. Magen, 279 Pa. 302.

The recital in the bond of the contract and the knowledge of the surety at the time the bond was executed of the provisions of the contract was a waiver by estoppel on the part of the surety of the right to plead, as a defense, the second condition precedent: Stewart v. Accident Ins., 39 Pa.Super. 396.

Where, at the time of issuing an insurance policy, the company knows that one of the conditions thereof is inconsistent with the fact, and the insured has been guilty of no fraud, the company is estopped from setting up the breach of the said contract: Damms v. Ins. Co., 226 Pa. 358; Central Market St. Co. v. Ins. Co., 245 Pa. 272; Hoffman v. Ins. Co., 274 Pa. 292.

The acts of the surety after December 1, 1919, are consistent with the waiver, inconsistent with the forfeiture, and the surety is estopped from setting up as a defense the second condition precedent: Niagara Fire Ins. Co. v. Miller, 120 Pa. 517; Diehl v. Ins. Co., 58 Pa. 443; Buckley v. Garrett, 47 Pa. 204.

Charles H. Sachs, of Sachs & Caplan, for appellee. -- The condition contained in the bond, limiting the time for bringing suit thereon, is valid and enforceable according to its plain terms: Riddlesbarger v. Ins. Co., 74 U.S. 386; Northwestern Ins. Co. v. Oil & Candle Co., 31 Pa. 448; Farmers Mut. Fire Ins. Co. v. Barr, 94 Pa. 345; Waynesboro Mut. Fire Ins. Co. v. Conover, 98 Pa. 384; Wernick v. Underwriters Agency, 90 Pa.Super. 186.

Cause of action accrued to appellant immediately on breach of contract by contractor, regardless of difficulty of determining exact loss.

Before MOSCHZISKER, C.J., WALLING, SIMPSON, KEPHART, SADLER and SCHAFFER, JJ.

OPINION

MR. JUSTICE SADLER:

Watters, plaintiff, brought suit on a bond of the London & Lancashire Indemnity Company to ensure the performance of a building contract entered into by him with the Fisher-Carter Company, one of the defendants. The agreement, dated July 16, 1919, called for the erection and construction of a dwelling house within three months unless the period was extended for specified reasons by the architect in whose charge the work was placed. Provision was made for the completion of the work by the owner, if he so elected, in case the contractor failed to comply with its obligation. In this event further payments were to cease, the balance remaining to be devoted to the necessary outlays required for finishing the residence, and should a greater amount be used than the sum retained, the excess was to be paid to the owner. In January following, the contractor being in default, further construction was taken over by Watters, and the building finished by him some months later at a cost larger than the sum retained. To recover this amount, and money expended in satisfying mechanics' liens filed, the present action was instituted against the contractor and the indemnity company. No defense was interposed by the Fisher-Carter Company, but an affidavit was filed by the codefendant. A verdict for the plaintiff against both parties followed. Judgment n.o.v. was later entered for the surety, and plaintiff has appealed.

The only question with which we are now concerned is the liability of the surety company on the bond given. It was conditioned "that if the principal shall indemnify the obligee against any loss or damage directly arising by reason of the failure of the principal to faithfully perform said contract," it should be void, otherwise remain in full force and effect. If this general statement of the responsibility undertaken was without limitation a recovery could be had by the owner for the cost of completing the work. The liability is, however, modified, by the recitals which follow (31 C.J. 427), as to its extent, the duty of the owner to give notice within ten days of any default, and the condition "that no claim, suit or action by reason of any default shall be brought against the principal or surety after the first day of December, 1919, nor shall recovery be had for damages accruing after that date; [and] service of writ or process commencing any such suit or action shall be made on or before such date."

Nothing was done by the indemnity company, prior to the time for bringing suit, which induced the plaintiff to delay in doing so. On December 2d, the first notice was given to defendant of a default, when Watters wrote: "Please be advised that the writer holds bond of your company on behalf of Fisher & Carter Company for the erection of a dwelling on Heberton Avenue, city. This bond secures the writer until the first day of December. As residence is not completed, due to apparently unavoidable delays, I would like an expression from you whether or not your bond will be extended. While the house is under roof and it looks as if the contractor will carry the same forward to completion, which latter I would estimate at two (2) months, I would like to know just what standing this will give me on my bond." Later, the surety, though requested, declined to undertake the completion of the house, expressly stating that it reserved its rights under the terms of the bond, and in no way indicated willingness to waive the conditions limiting its liability as set forth in the obligation sued on, and this cannot be inferred from mere silence: Royal Ins. Co. v. Beatty, 119 Pa. 6. Nor is such purpose disclosed in the correspondence and the later conversations between the representatives of both parties.

It is urged the continued discussion concerning completion of the house, without a distinct declaration that no payment would be made because of failure to institute an action within the time stipulated, was such conduct as worked an estoppel to now set up the defense insisted on. It is true that, if negotiations for payment or satisfaction have taken place thus inducing a delay in bringing suit within the period fixed by the policy, a recovery may nevertheless be had, since the claimant, under such circumstances, was prejudiced by the act of defendant: Thompson v. Phoenix Ins. Co., 136 U.S. 287; Bonnert v. Ins. Co., 129 Pa. 558. It cannot be said here that the plaintiff was misled by anything done by the...