Young v. American Bonding Co. of Baltimore

• Decision Date: 24 May 1910
• Docket Number: 75,74
• Citation: Young v. American Bonding Co. of Baltimore, 228 Pa. 373, 77 A. 623 (Pa. 1910)
• Parties: Young, Appellant, v. American Bonding Company of Baltimore
• Court: Pennsylvania Supreme Court

77 A. 623

228 Pa. 373

Young, Appellant, v. American Bonding Company of Baltimore

Nos. 74, 75

Supreme Court of Pennsylvania

May 24, 1910

Argued March 28, 1910

Appeals, Nos. 74 and 75, Jan. T., 1910, by John L. Young Kennedy Crossan and Jane Fortescue, in No. 74, and by Norman Kellogg in No. 75, from judgment of C.P. No. 4, Phila. Co Dec. T., 1906, No. 2,594, on verdict against defendant, Norman Kellogg, and for American Bonding Company non obstante veredicto, in case of John L. Young, Kennedy Crossan and James Fortescue v. Norman Kellogg, George H. Thomas, David M. Andrew, Charles H. Basshor and the American Bonding Company of Baltimore. Affirmed.

Assumpsit upon a bond of suretyship. Before WILLSON, P.J.

The facts are stated in the opinion of the Supreme Court.

Verdict for plaintiffs for $27,500. Subsequently judgment was entered on the verdict against defendant, Norman Kellogg, and in favor of the defendant, the American Bonding Company, non obstante veredicto.

Error assigned by plaintiffs was in entering judgment for the bonding company non obstante veredicto.

Error assigned by Norman Kellogg was in dismissing his motion for judgment in favor of himself non obstante veredicto.

The assignments of error in this appeal are overruled. The judgment is affirmed.

Ellis Ames Ballard, with him Boyd Lee Spahr, for appellants, John L. Young et al. -- The bond was not given for the faithful performance of the agreement of February 26, 1906, but only for the accomplishment of a single act, namely, the completion of a building of a certain cost within a certain time: Shelton v. American Surety Co., 131 Fed. Repr. 210; New Haven v. National Steam Economizer Co., 79 Conn. 482 (65 A. Repr. 959); Baglin v. Title Guaranty & Surety Co., 166 Fed. Repr. 356; Guaranty Co. v. Brick Co., 191 U.S. 416 (24 S.Ct. Repr. 142); Atlantic Trust, etc., Co. v. Laurinburg, 163 Fed. Repr. 690; Alexandria Water Co. v. National Surety Co., 225 Pa. 1.

There was no departure from the terms of the contract of February 26: Alexandria Water Co. v. National Surety Co., 225 Pa. 1; Warner v. Connecticut Mut. Life Ins. Co., 109 U.S. 357 (3 S.Ct. Repr. 221); Cross v. Allen, 141 U.S. 528 (12 S.Ct. Repr. 67).

Even if there was a variance it was with the surety's knowledge and assent: Roach v. Summers, 87 U.S. 165.

Francis B. Bracken, for appellee, American Bonding Company. -- The American Bodning Company was discharged from liability as surety on the bond by reason of a material alteration or departure from the contract of February 26, 1906, under which, according to the condition of the bond, the building was to be erected by the principal therein, Norman Kellogg: Zeigler v. Hallahan, 131 Fed. Repr. 205; Shelton v. American Surety Co. of New York, 131 Fed. Repr. 210; Bensinger v. Wren, 100 Pa. 500; Bauschard Co. v. Fidelity & Casualty Co., 21 Pa.Super. 370; Nesbitt v. Turner, 155 Pa. 429; Alexandria Water Co. v. National Surety Co., 225 Pa. 1; Holme v. Brunskill, L.R. 3 Q.B. Div. 495; Miller v. Stewart, 22 U.S. 680; Cross v. Allen, 141 U.S. 528 (12 S.Ct. 67); New Haven v. National Steam Economizer Co., 79 Conn. 482 (65 A. Repr. 959).

Leo Belmont, for appellant, Norman Kellogg.

Before FELL, C.J., POTTER, ELKIN, STEWART and MOSCHZISKER, JJ.

OPINION

MR. JUSTICE STEWART:

We have here two appeals to consider. A recital of the facts is necessary to an understanding of the questions involved. The action was against principal and surety in a bond of $25,000 conditioned on the completion of certain buildings and improvements within a stipulated time. The plaintiffs being the owners of certain real estate at Atlantic City contracted by written article of agreement dated February 26, 1906, to sell and convey the same to Norman Kellogg, one of the appellants. The agreement provided that the consideration should be a purchase money mortgage for $500,000, to secure an issue of first mortgage gold bonds of like amount bearing interest at the rate of six per cent, payable semiannually with a sinking fund provision of $10,000 yearly, the whole issue of bonds to be redeemable at any understood period after three years, and to become due and payable at the expiration of ten years, the mortgage to be held by the Land Title & Trust Company of Philadelphia as trustee for the bondholders. It was further stipulated that of the bonds $400,000 were to be forthwith issued to the vendors, and the remaining $100,000 were to be held by the trustee, to be paid over upon the order of Kellogg upon the completion by him or his assigns of certain buildings and improvements which he had covenanted to make on the purchased premises, as part of the consideration, at an actual cost of not less than $350,000. Another provision in the contract was that in case the vendees should organize a corporation for the purpose of improving the property and conveyed the title to such corporation, the corporation should at the request of the grantor execute its bonds to the amount of $500,000 to be secured by the purchase money mortgage above provided for, thereby making them a first lien. Still another was that inasmuch as no cash consideration was being paid on the purchase, in order to indemnify the vendors against loss of rentals in case of failure of the vendee to make the improvements stipulated for within the required time, the latter should furnish a bond with security in the sum of $75,000 (afterwards reduced to $25,000) to protect against such contingency. The contract was to take effect and become binding on the parties only upon the execution and delivery of this bond. In compliance with this stipulation the bond here sued on was furnished and accepted March 9, 1906. It recites the fact of agreement of sale and purchase, the consideration, and the reason and purpose in requiring the bond, followed by this condition: "Now therefore the condition of this obligation is such that if the said principals shall well and faithfully construct and complete said improvements of the value of Three Hundred and Fifty Thousand Dollars ($350,000) upon said property, as provided in said agreement, on or before the 31st day of December, 1906, then this obligation to be null and void; otherwise it shall remain in full force and effect." The obligors were Kellogg and two others who signed as principals, and the American Bonding Company as surety. Kellogg and the bonding company were the only parties served, and the case proceeded against them. The facts as developed on the trial showed entire failure on the part of Kellogg to make the improvements stipulated for, although a corporation organized by him to accomplish this undertaking had expended in the attempt before its abandonment upwards of $60,000. A verdict was rendered for the plaintiffs, which upon a point reserved, affecting only the bonding company, was set aside as to the bonding company by the court, and judgment entered for the latter non obstante. This appeal is from the judgment so entered. Upon the admitted facts the learned trial judge held, that in the course of settlement between the plaintiffs and Kellogg, there had been such a departure from the terms of the original contract as relieved the surety. The variance was in connection with the purchase money mortgage. Upon the acceptance by plaintiffs of the bond in suit, March 13, 1906, the transaction between plaintiffs and Kellogg was completed, the former executing and delivering their deed of conveyance, and the latter a purchase money mortgage. This mortgage contained none of the special provisions set out in the contract. By its terms it was given to secure, not an issue of $500,000 of first mortgage bonds, with the incidents which according to the provisions of the contract were to attach to such bonds, but to secure one certain bond given by Kellogg in the sum of $500,000 payable to the plaintiffs' representative or his assigns on or before March 1, 1916, with interest payable semiannually. In neither bond nor mortgage is there any reference to the special provisions which were to govern, nor does either contain any reference to the rights of Kellogg. The learned trial judge held that this constituted a variance in substantial and material respects from what was required by the agreement, and operated to release the surety in the bond. The appeal raises several questions which we shall consider in the order they have been presented. First, it is contended that the bond in suit was not given for the faithful performance of the contract of February 26, 1906, but only for the completion of certain improvements at a certain cost within a certain time; and that therefore nothing in the contract is to be considered as affecting the obligors' liability. Emphasis is put on the fact that the contract does not accompany the bond, and that it is not by express terms made part of the bond. A sufficient answer to this would be that the bond by its terms recites the fact of the contract, and so much of the contract is introduced as is necessary to give a full understanding of what the respective parties had engaged to do thereunder. It expressly recites, among other things, that the consideration for the conveyance to Kellogg was "a portion of an issue of bonds as set forth in said agreement, to...