Alabama Fidelity & Casualty Co. v. Alabama Fuel & Iron Co.

de GRAFFENRIED, J. R. G. Banks made a contract with the Alabama Fuel & Iron Company, whereby he undertook to handle coal for said fuel and iron company in the city of Montgomery. The contract between the parties was reduced to writing. A copy of it appears on pages, 3, 4, and 5, of the transcript, and the reporter will set it out. The performance of the contract by Banks with said Alabama Fuel & Iron Company was guaranteed by the Alabama Fidelity & Casualty Company. A copy of the contract of guaranty is set out on pages 5 and 6 of the transcript, and the reporter will also set out a copy of this contract. (1) 1. An examination of the contract made by Banks with the fuel and iron company will show that Banks agreed to* pay for all coal shipped to him by the fuel and iron company, at the invoice pricé, and an examination of the contract of guaranty will show that the fidelity and casualty company bound itself “to the faithful performance by Banks of all the provisions” of his said contract. By its contract the fidelity and casualty company became the surety of Banks, with its liability limited to |7,500. — Saint v. Wheeler, — 403 — & Wilson Mfg. Co., 95 Ala. 362, 10 South. 539, 36 Am. St. Rep. 210. A further examination of the contract will show that among the terms"of the contract which was made by the plaintiff with Banks was the' following: “He is to keep an accurate account showing the amount of coal sold, to whom sold, the price paid therefor, and the sum collected thereon; and is to render monthly statements on or before the 5th day of each month, showing the amount of such sales, and paying the party of the first part, on or before the 20th of each month, for all coal shipped to the party of the second part up to the first day of that same month, except in such cases as maybe covered by special agreement in writing between said parties.” The above-quoted excerpt from the contract made by Banks with the plaintiff — especially that part of it providing for monthly statements — was dictated by ordinary business prudence, and the contract with Banks, without, that provision, would have been materially different from the contract which was actually made. The provision requiring monthly statements was one which was calculated to give to the plaintiff reasonable supervision over the peculiar agency which was created by the contract, and as the defendant, in its contract of suretyship, incorporated the contract of Banks with .the plaintiff into the contract of suretyship, the provision as to monthly statements may have had its influence upon the defendant when it entered into the contract of suretyship. An agent who, under the terms of his contract with his principal, is required 'to make monthly statements of his acts and doings as agent, is much less likely to fall into habits of negligence or as to that matter, into acts of actual wrong against his principal, than is an agent who, under the terms — 404 — of his contract of agency, is left without restrictions as to making statements to his principal. The provision which we have quoted, taken in its entirety, was a material provision of the contract which the defendant in this case guaranteed that the agent would perform. —Fidelity Mutual Life Ass’n v. Dewey, 83 Minn. 389, 86 N. W. 423, 54 L. R. A. 945; Morrison v. Arons, 65 Minn. 321, 68 N. W. 33. (2) 2. This suit was brought by the plaintiff against the defendant, upon the bond, which the reporter has set out, for the recovery of $4,467.19, balance due by Banks to the plaintiff for coal shipped to him by the plaintiff under the contract which the plaintiff made with Banks and which the reporter has above set out. The defendant, among other pleas to' the complaint, filed the following: “(5) Defendant says that in and by the terms of said contract Banks was to keep an accurate account showing the amount of coal sold, to whom sold, the price paid therefor, and the sum collected thereon, and to render monthly statements on •or before the 5th of each month showing the amount of such sales, and to pay the plaintiff on or before the 20th of each month for the coal shipped to him up to the first day of that same month, and plaintiff avers that the defendant relieved said Banks of his obligation to comply with this term of said contract without the consent of this defendant.” We do not find any plea, which the trial judge allowed to remain with the jury, which presents the defense which the defendant, by the above plea, undertook to make to this action. In our opinion counsel for appellant, in his brief, has properly presented the ruling of the trial court in sustaining the demurrer of the plaintiff to the above plea to us for our consideration, and the discussion below is confined to the — 405 — points which were taken against the sufficiency of the plea by the grounds of demurrer which were filed to the plea. (3, 4) 3. There are three well-defined rules of law which are in perfect harmony with each other, and which, as applicable to contracts of suretyship, are plainly recognized by our decisions. In the case of Saint v. Wheeler & Wilson Mfg. Co., supra, this court, after careful consideration, declared two of these rules as follows: (1) Mere indulgence granted by the employer to the principal, or an agreement to give the principal further time to make good a default, if not supported by any new consideration which would make it binding as á contract, does not discharge the surety. (2) If the employer discovers the dishonesty of the principal during the service, and fails to give notice thereof to the surety and continues the principal in the service, the surety is discharged from subsequent liability for subsequent defaults. (5) In the case of First National Bank v. Fidelity & Deposit Co., 145 Ala. 335, 40 South. 415, 8 Ann. Cas. 241, this court declared (3) that: “While, as between the original parties to the contract, either party may waive any of its provisions, yet, when a third party becomes interested in the -contract by binding himself to its faithful execution, the contract becomes a part of his obligation, and its provisions cannot be waived so as to affect his interest without his consent.” In that case this court took occasion to show that the two rules declared in Saint v. Wheeler & Wilson Mfg. Co., supra, were not in conflict with the rule last quoted, and in that case the court also quoted with approval the following language of the Supreme Court of the United States, in the case of Prairie State Bank v. United States, 164 U. S. 227, 17 Sup. Ct. 142, 41 L. — 406 — Ed. 412, viz.: “The rulings of this- court have been equally emphatic upon the agreement, with reference to which he entered into his contract , of suretyship, and to exact compliance with its stipulations.” To the same effect are the cases of Anderson v. Bellenger & Ralls, 87 Ala. 334, 6 South. 82, 4 L. R. A. 680, 13 Am. St. Rep. 46, and Manatee County State Bank v. Weatherly, 144 Ala. 655, 39 South. 988. While we are on this subject we desire to say that we are not unmindful of the salutary proposition that: “The contract of suretyship is not that the obligee will see that the principal performs its condition, but that the surety will see that he performs them.” — Williams v. Lyman, 88 Fed. 237, 31 C. C. A. 511. But the contract which the surety binds himself to see performed is the contract which he actually underwrites for his principal, and not some other contract which his principal and employer may see proper to make for themselves. — First Nat. Bank v. Fidelity & Dep. Co., supra; Anderson v. Bellenger & Ralls, supra; Manatee County State Bank v. Weatherly, supra; Prairie State Bank v. U. S, supra. In discussing the question presented by the demurrer to the above plea, we are not dealing with the question of the mere neglect of the employer to require his agent to comply with the terms of his contract, but we are dealing with the question as to whether the courts will force a surety to answer for the default of his principal when the employer has relieved the principal of a material requirement of the contract to the performance of which the surety bound himself. A careful examination of the cases of Aetna Ins. Co. v. Fowler, 108 Mich. 557, 66 N. W. 470; Home Insurance Co. v. Holway, 55 Iowa, 571, 8 N. W. 457, 39 Am. Rep. 179; Williams v. Lyman, 88 Fed. 237, 31 C. C. A. 511; — 407 — McMullen v. Winfield Bldg. Asso., 64 Kan. 298, 67 Pac. 892, 56 L. R. A. 924, 91 Am. St. Rep. 236; Fanning v. Murphy, 126 Wis. 538, 105 N. W. 1056, 4 L. R. A. (N. S.) 666, 110 Am. St. Rep. 946, 5 Ann. Cas. 435; Watertown Fire Ins. Co. v. Simmons, 131 Mass. 85, 41 Am. Rep. 196; Frelinghuysen v. Baldwin (D. C.) 16 Fed. 452; Pittsburgh, etc., Ry. v. Shaefer, 59 Pa. 350; and Chew v. Ellingwood, 86 Mo. 260, 56 Am. Rep. 429— cited by counsel for appellee in their brief, convinces us that the propositions announced in those cases are not applicable to the question which we now have under discussion. On the other hand, it seems to us that under the rules laid down by this court in First National Bank v. Fidelity & Deposit Company, supra, Anderson v. Bellenger & Ralls, supra, Manatee County State Bank v. Weatherly, supra, and by the Supreme Court of the United States in Prairie State Bank v. U. S., supra, the trial judge committed reversible error in sustaining the plaintiff’s demurrer to the above quoted plea. If, as the plea alleges, the plaintiff relieved Banks of that requirement of his contract relative to rendering monthly statements of his acts and doings as agent, then the plaintiff made a material alteration in the contract which the defendant guaranteed the performance of by Banks (Fidelity Mutual Life Ass’n v. Dewey, supra; Morrison v. Arons, supra), and the plaintiff thereby released the surety from the obligations which in its contract of suretyship it assumed (First Nat. Bank v. Fidelity & Dep. Co., supra; Anderson v. Bellenger & Ralls, supra; Manatee County State Bank v. Weatherly, supra). 4. While there is some divergence of opinion among courts of last resort with reference to some of the questions presented by this record, it seems to us that the rules which were laid down by this court in Saint v. — 408 — Wheeler & Wilson Mfg. Co., supra, Anderson v. Bellenger & Ralls, supra, and Manatee County State Bank v. Weatherly, supra, will furnish to the trial judge a sufficient guide for the next trial of this case if one is had. We deem it unnecessary, therefore, to discuss any one question presented by the record. Reversed and remanded. Anderson, C. Js,'and McClellan and Sayre, JJ.,