Allen v. Eneroth

O’Brien, J. Appellant, the Illinois Surety Company, became surety on a -contractor’s bond for defendant Eneroth, and demurred to the complaint exhibited by plaintiff, alleging a default by Eneroth and demanding judgment for the damages alleged to have been sustained. The contract was attached to the complaint, and contained a provision that not more than eighty per cent, of the amount earned under it should be paid until the final acceptance and completion of the building; also that no payments should be made until the contractor exhibited receipts in full to the. owner for labor done and materials furnished. The complaint contained no allegation as to the production of receipts, but alleged “that at various times during the construction of said building the said plaintiff has paid in cash to said Olaf Eneroth, and for said items of credit referred to in the last paragraph, the amount of fourteen thousand four hundred and sixty-one and Yioo dollars ($14,461.09),” which was considerably more than eighty per cent, of the contract price. The complaint further set out the names of persons who held or would file valid lien statements against the property, the aggregate amount of which claims would, [398] with the sums already paid by plaintiff, exceed the contract price by several thousand dollars. 1. It is claimed upon behalf of the surety that it appears from the complaint that plaintiff violated the contract by making excessive payments to the contractor, and that it is therefore released. This court has already held that a bonding or surety company regularly engaging in the business of furnishing bonds for compensation may not invoke the rule strictissimi juris to the same extent as may the surety who, without compensation and as a matter of. accommodation, signs a bond for another. We are not, however, prepared to say just when the distinction ceases, and as in so many other instances it is probable that no positive rule which will apply to every case can be given. That there should be a distinction is apparent, not only for the reasons given in Lakeside Land Co. v. Empire State Surety Co., 105 Minn. 213, 117 N. W. 431, but for the additional reason that the expense of the bond in one way or another is generally borne by the one for whose benefit it is executed. But it can be safely said that the rule should not be so far relaxed as to permit the obligee to enhance his damages or commit acts in violation of the contract which directly prejudice the surety. Where it appears that labor and materials are left unpaid, the damage has been enhanced, and the surety company on a contractor’s bond prejudiced, by the failure to hold in reserve the agreed amount to secure the payment of such claims. Whether the excess payments release the surety altogether, or should be credited pro tanto upon its full liability, is not here for decision. Erickson v. Brandt, 53 Minn. 10, 55 N. W. 62. The allegation that the payments were made “at various times during the construction of said building” does not conclusively show that more than eighty per cent, of the contract price was paid before its completion and acceptance. The complaint is silent as to the production of receipts, and under the well-established rule that on demurrer every possible construction most favorable to the pleading must be adopted, we hold this language does not negative the plaintiff’s right to recover. The time and manner of such payments, [399] as well as their effect upon the appellant’s liability, can be much better determined upon a full disclosure of all the facts. 2. The complaint sufficiently alleges a breach of the contract by the principal upon the bond. Even if entitled to only nominal damages, the demurrer could not be sustained; but, the breach having-been made before suit, the plaintiff may recover all damages sustained, if within the pleadings, up to the time of trial. 3. The character and validity of the liens are sufficiently alleged to support the evidence which the plaintiff will be required to present in order to recover upon the bond because of them. Brandrup v. Empire State Surety Co., supra, page 376, 127 N. W. 424. We do not consider the lien claimants necessary parties defendant. The order overruling the demurrer is therefore affirmed.