National Surety Co. v. Long

Carmichael, Special Judge, (after stating the facts.) A majority, of the court are of the opinion that the undisputed evidence shows that Long did not notify the National Surety Company within the time in which he was required to do so by the contract and bond. The time for the completion of the building was September 1, 1901, and the evidence shows that the appellee knew, sometime prior to that date, that the contractor would not complete the building by that date, and the bond specially provided that, if at any time it appeared that the contractor would not be able to> complete the building by that time, the appellee would immediately notify the surety company. We think, as a matter of law, the notification on September 12 did not meet the requirements of the contract and bond,, that the default of Long in not notifying the surety company within the time required was a substantial breach of the contract, and that he can not maintain an action against the other contracting party. As was said in this-case, when in the Federal court, in the 125 Fed. Reporter, page-892: “This bond contains mutual covenants of the parties; covenants by the surety company that Humphreys, the principal, should construct the building, and keep it free' from liens; covenants by the plaintiff that, if Humphreys was unable or failed to-perform the contract in the time 'and manner therein specified, he would immediately notify the surety, and that the latter might then take the contractor’s place. Thé plaintiff -failed to keep his' covenant before the surety company had in any way failed to-comply with those which it had made. On this account he cannot enforce the fulfillment of the covenant of the defendant. He who commits the first substantial breach of the contract cannot maintain an action against the other contracting party for a subsequent failure on his part to perform;” citing many authorities. National Surety Co. v. Long, 60 C. C. A. 623. Long agreed in his contract that he would pa}*- to Humphreys' in installments, according to written estimates to be made by an architect or superintendent as the work progressed, 75 per cent, of the value of the work done and materials furnished and incorporated in the building.” The evidence clearly shows that he-failed to keep this part of his contract. He states himself that at the time Humphreys left there was $1,600 to $1,700 worth of material on the ground, and that the work done, and materials furnished and incorporated into the building, together with the amount of lumber on the ground, amounted to only- $6,600, or the contract price. Giving him the benefit of the smallest amount, or $1,600 worth of material on the ground, and subtract this amount from the $6,600, the contract price, and the total amount on which he says he based the 75 per cent, which he paid to the contractor Humphreys would leave only $5,000 for work and material which had been incorporated into the building. 75 per cent, of $5,000 is only $3,750, showing that he had overpaid Humphreys the sum of $1,148 at that time, or, taking his other ■statement that there was $3,200 for work, labor and material in the building, not embracing the material on the ground which amounted to $1,670 the two aggregating, that is the work, labor and material not embracing the material on the ground and the $1,670 for the material on the ground, would only make a total of $4,870, which would include everything, work, labor and material incorporated into the building and the material on the ground, so that a payment of $4,908 was more than 100 per cent, of the work, labor and material incorporated into the building and material on the ground. This clearly shows that Long either wilfully, or from a misconception of the meaning of his contract, or out of generosity to Humphreys, paid much more than he was entitled to pay under his contract and bond. We think his conduct in this regard released the surety company, because it affected the liability of the surety, and the clause in reference to this was not intended solely for the protection of the owner. As was said by Judge Riddick in Lawhon v. Toors, 73 Ark., page 476: “Counsel for Lawhon contends with much earnestness that this provision of the contract in reference to the reservation of a portion of the contract price until after the performance of the contract was intended solely for the protection of the owner, and that the failure to retain it did not affect the liability of the surety. If this was a new question, it might be worthy of some consideration, but it is now well settled that, if a stipulation of that kind in a building contract be waived without the consent of the surety, it operates to discharge him from liability on his bond for the performance of the contract.” To quote the language of Lord Langsdale in Calvert v. Low-don Dock Company, 2 Keen (Eng. Chan.), 644, the payment of the money before the completion of the contract was calculated to make it easier for the contractor “to complete the work if he acted with prudence and good faith; but it also took ¿way that peculiar sort of pressure which by the contract was intended to be applied to him.” So we think in this case that the retention of 25 per cent, of the work done and material incorporated into the building would have been an effective incentive to compel the contractor to complete his work, while an overpayment was a temptation to abandon his work, to the injury of this surety. If there would have been any peculiar pressure upon the contractor in holding back part of the contract price, a fortiori it would have have increased the pressure to hold back part of the price o.f the work already done. The contractor had a present interest in the work already done and incorporated into the build'ing, when he would only have had a prospective interest in the part of the contract price retained. We have not overlooked the fact that the appellant in this case is not an accommodation surety, but is a paid surety, and we recognize the difference between them (Remington v. Fidelity & Dep. Co., 27 Wash. 429; Walker v. Holtzclaw, 57 S. C. 459) ; but we hold that a paid surety is only bound by the stipulations of his contract of suretyship. The evidence is not sufficient on this point to sustain the verdict. Where there is nothing to do but make additions of figures, and the verdict is contrary to the results so obtained, the verdict is not supported by the evidence. Reversed and remanded. Hill, C. J., and Riddick, J., dissent.