Lucas County v. Roberts

Servers, J. 1. surety: release of: laches of principal. A recovery is sought against .the sureties on the bond, which is conditioned as follows: “Now if said Roberts shall proceed and complete said contract accordance with the terms thereof, and to thesatisfaction of the board of supervisors of said Lucas county, Iowa, without loss or damage to said Lucas, county, then this bond to be void.” The contract required Roberts to “build or repair the north and south fronts of the court-house in accordance with the. [161] specifications, * * * to the satisfaction and acceptance of the board of supervisors, * * ” and the county agreed to pay the contract price on completion of the work. It seems to be conceded by counsel that a mechanic’s lien may be lawfully established against a public building, and for the purposes of this ease this will be assumed. It is quite clear that the failure of Roberts to pay for the materials used in making the improvement constitutes the basis on which the recovery is sought. It may admit of doubt whether such .failure is within the terms of the bond, but conceding such to be the case we have for determination the question whether the plaintiff has so acted as to release the sureties. The contract only required the plaintiff to pay for the work when it was completed. This the sureties knew, and accordingly signed the bond. . Waiving the question whether the payment made in advance had the effect to release-the sureties, we find that at the time final payment was made the plaintiff paid Roberts more than was sufficient to discharge all claims which were subsequently paid by the plaintiff to the holders of the liens. Conceding such liens could be lawfully established, the plaintiff was bound to so know, and the time within which they must be filed, and as it was possessed of sufficient funds to protect itself and the sureties it was bound to hold and so apply them. The sureties had the right to expect, and good faith required, the plaintiff to hold the funds until the debts contracted by Roberts, which could be established as liens, were paid, or the time for filing the same had expired. Failing to take this course, but having negligently or carelessly paid the money to Roberts, the defendant should not be called upon to reimburse the plaintiff because of such negligence. This case comes within the well established principle which requires a creditor who has an obligation signed by a principal and surety, and who has also a collateral security from the principal to appropriate the avails of the security to the payment of the debt, and if he surrenders the security without [162] the knowledge of the surety the latter is discharged either wholly or to the extent of the security surrendered. N. H. Savings Bank v. Colcord, 15 N. H., 119; Baker v. Briggs, 8 Pick., 122; Chambers v. Cochran et al., 18 Iowa, 159. Reversed.