Citizens' Trust & Surety Co. v. Howell

Opinion by Rice, P. J., This was an action upon a bond given to the Citizens’ Trust and Surety Company by Lewis G. Howell, Jr., as principal, and the National Surety Company, as surety, conditioned for the performance by Howell of a certain contract entered into by him, and for the reimbursement of the Citizens’ Surety Company for all loss or damage which it might sustain by reason of the failure or default of Howell. The bond provided, as conditions precedent to the right to recover thereunder, that certain things should be done by the obligee. These were specified in five paragraphs which are quoted in the opinion filed by the learned judge of the court below, and need not be repeated here. The sixth paragraph reads as follows : “ The failure, neglect or refusal of the obligee to keep, strictly observe, and fully perform, each and every, all and singular, the matters and things hereinbefore stipulated and agreed to be done, kept or performed by the obligee, at the times and in the manner specified, shall relieve the company” (meaning the National Surety Company), “ from all liability under this bond.” Performance by the obligee of its obligations and nonperformance by Howell are thus alleged in the statement of claim: “And the plaintiff avers that it in every respect complied with the conditions mentioned in said bond and Howell agreement. The said Howell neglected and refused to complete said work as he had agreed, of which neglect and refusal the said defendants received notice according to the terms of said Howell agreement and of the said bond, and the said National Surety Company thereafter, although requested by said plaintiff so to do,” (and as the National Company had reserved the right at its option to do), “ also neglected and refused to complete the same, whereupon the said bond [263] became in default and the said plaintiff, at the request of the said National Surety Company, caused the said work upon the houses to be properly finished, and paid the bills therefor through the use plaintiff.” The National Company demurred, basing its two principal causes of demurrer upon the fact alleged in the statement that the Citizens’ Company assigned the bond to the Union Surety and Guaranty Company, the use plaintiff, on April 11, 1899. It is argued, that it is fairly to be implied from the fact that the bond does not run to the assigns of the obligee and from the nature of the conditions to be performed, that the National Company reposed a personal confidence in the Citizens’ Company, and became surety relying upon its knowledge of, and confidence in, that company, and, therefore, the latter could not, without the assent of the National Company, transfer the right and duty of performance to another. This was the view taken by the learned judge below, and if not as to all, at least as to some of the conditions, the correctness of this view may be conceded. But the court went further and held, that by assigning the bond the Citizens’ Company put it out of its power to perform its obligations, and thereby discharged the National Company. This, it seems to us, gives to the assignment an effect not warranted, in view of the fact admitted by the demurrer, namely, that the Citizens’ Company fully complied with all the conditions mentioned in the bond, and that after Howell’s default and the refusal by the National Company to exercise its option to complete the work, the Citizens’ Company caused it to be completed. The terms of the assignment are not expressly averred in the statement of claim, nor is it neeessarjr that they should be in an action brought by and in the name of the original obligee as legal plaintiff, where full performance by him of conditions precedent to be performed by him is alleged. See Blanchard v. Commonwealth, 6 Watts, 309, Montgomery v. Cook, 6 Watts, 238, and Hamilton v. Brown, 18 Pa. 87. It is well settled that a contract may be assigned so as to vest in the assignee the equitable right to the proceeds, although the money may not have been due, or his part of the contract performed by the assignor, at the time of the assignment. “ It is often done by builders and other contractors to enable them to procure the materials necessary to fulfill their contracts. This was the [264] case in Sett v. Morris, 4 Simons, 607, in which the assignment was-held good : ” Philadelphia v. Lockhardt, 73 Pa. 211. See also, East Lewisburg Lumber and Mfg. Co.., 91 Pa. 96. Such an assignment “ is valid in equity as an agreement, and takes effect as an assignment when-the ‘demands intended -to be. assigned-are-subsequently brought into existence:” Ruple v. Bindley, 91 Pa. 296. So far as -at present appears, this was the entire. effect of the assignment, and we will not volunteer discussion of questions which might have arisen if the ease had gone to trial and a different state of facts had been shown. We■ fully recognize -the principle,, that, as the surety can only be charged when the ease is brought within -the very term of his contract, the obligee cannot be permitted, without the assent of-the surety, to enter into any arrangement which -has the effect of varying the terms of the contract and extending or enlarging the liability.of the- surety, or which deprives 'him of the- benefit he contemplated from the character, c-reditand substance of-the person, whether natural or artificial,-with-whom he contracted. But we do not think it is to be assumed that the effect of the- assignment alleged in the plaintiff’s statement was to permit the obligee to drop out and to substitute another obligee in its stead. The averment as to the assignment is to be read in-the light of the averments as to performance by the original obligee. So construed, it is not to be implied on demurrer that the assignment deprived the Citizens’ Company of the right and ability to-perform the conditions of the bond, even though it be conceded, which is- by no means clear, that it was made before breach. -Nor-is it to be'implied, that as between the Citizens’ Company, the original obligee, and the Union Surety.-and Guaranty Company, the use plaintiff, the former was relieved of the duty to perform. So far as we-are at present informed there'was no alteration or variation of the terms of the. contract and-no extension or enlargement of the liability .of the surety. We conclude, therefore, that it was error to hold that the surety was discharged. If the parties-to a contract provide that any dispute which may.arise between them, in reference to the subject-matter of the contract, shall'be determined by a person therein named, whose decision shall be final, the parties cannot seek redress elsewhere until the person so chosen has been discharged by [265] having made an- award, or otherwise. But in order to oust the jurisdiction of the court, it must clearly appear that the subject-matter of the controversy was within the prospective submission. The right of trial by jury is not to be taken away by implication: Lauman v. Young, 31 Pa. 306. As the case is now presented the sole subject of controversy is the effect of the assignment of the bond. So far as now appears there was never any dispute or disagreement as to any other matter. We are of opinion that the submission of that question to the president of the Citizens’ Company, the referee named in the Howell and Zane agreement, was not contemplated by the parties to the present suit. Moreover, the demurrer admits the fact, alleged in the statement, that before suit brought the National Company “ declined to recognize any liability whatever and to abide by the terms of said agreement and bond.” This was a waiver of the reference clause, which became effective to discharge the referee when suit was brought by the other party. The judgment is reversed, the demurrer is overruled and the record is remitted to the court below with directions to enter judgment for the plaintiff unless other sufficient cause be shown why such judgment should not be entered.