Athletic Tea Co. v. McCormack

Humphreys, J. This is a suit upon a contract and bond by appellant against O. C. Langford, as principal, and R. -F. Marsh, and appellee, sureties, for the faithful performance of the contract. The contract sued upon was an employment contract, whereby O. C. Langford was employed by appellant as its sales representative in Little Rock. O. C. Langford was obligated in the contract to pay appellant all sums collected by him for it in the prosecution of the business. The bond was an obligation in the sum of $500 executed by Langford, as principal, and Marsh, and appellee, sureties, to appellant, conditioned for the faithful performance of the contract. The contract contained a provision to the effect that Langford should make weekly reports to appellant showing total sales, cash collected, amount outstanding, and stock on hand and in transit. The action against the several defendants was submitted on different days. On June 23, 1922, appellant obtained judgment against O. C. Langford for $606.54, from which there was no appeal. On June 16, 1922, it obtained judgment by default against E. F. Marsh for $500, the face of the bond, from which no appeal has been prosecuted. On the same day the cause between appellant and appellee was tried, which, at the conclusion of appellant’s testimony, resulted in an instructed verdict in behalf of appellee. The judgment was rendered in accordance with the verdict exempting appellee from liability on the bond, and dismissing* the complaint of appellant, from which is this appeal. For the purposes of the appeal it is agreed between the parties “that the principal to the contract, O. C. Langford, furnished weekly reports during the time of his employment up to and including December 20, 1920, but that none of the reports, after the report for the week of ¡September 13, 1920, show ‘stock on hand and in transit, ’ and that plaintiff failed to notify defendant McCormack of this omission.” The court held that the provision in the contract for a weekly report embracing total sales, cash collected, amount outstanding, and stock on hand and in transit, was an essential part of the contract, for the benefit of the sureties in the bond as well as appellant, and that the acceptance by appellant of weekly reports from O. C. Langford which omitted “stock on hand and in transit” amounted to a material change in the terms .of the contract without the consent of appellee, thereby discharging him as the surety on the bond. Appellant’s contention for reversal is that the provision of the contract referred to was for the sole benefit of appellant, and that a waiver of same on its part in no way affected the sureties. We cannot agree with learned counsel for appellant in this contention. Had the- weekly reports been made in conformity to the contract, it would have reflected, at the end of each week, the exact state of the account between Langford and appellant. Sucli an account would have served as a check upon Langford and a means for discovering any deficit that might exist in its very inception. A bondsmaii would naturally rely upon such restrictions in a contract, for they tend to protect him from loss. It cannot be said of a clause in a contract which serves as a protection to a surety that it was for the sole benefit of an obligee in the bond conditioned for the faithful performance of the contract. The weekly reports omitted matter which was necessary in order to ascertain the exact condition of the account between Langford and appellant. Without showing the amount of goods on hand and in transit, it was impossible to determine at the end of any week whether the deficit or shortage existed in fact. In determining the effect upon a surety of a waiver -of a stipulation in a contract similar to the stipulation in question by an employer, this court, in the case of Singer Mfg. Co. v. Boyette, 74 Ark. 600, said: “The stipulation for weekly settlements in this case was an essential part of the' contract. The enforcement of it would have made a record of the business transactions of Mrs. Boyette, and lessened litigation as to the same, and would have held her in surveillance, and checked the misappropriation by her of moneys in her hands belonging to the company, and would probably have led to the discovery of any misappropriation of money before it could have assumed considerable proportions. This, doubtless, was the object of the stipulation, and its enforcement would a.t least have afforded some protection to the sureties on the bond. Plaintiff having, without their consent, acquiesced in the violation and breach thereof, thereby released and discharged them from all liability on the bond. ’ ’ Appellant’s second and last contention for reversal is that the waiver was not pleaded as a defense. It is true appellee did not interpose the waiver as a defense, in his written answer, but, without objection on the part of appellant, evidence was introduced, and the case tried, upon the theory that appellee had been released as surety because appellant waived the weekly reports required by the contract. No error appearing, the judgment is affirmed.