Bagwell v. American Surety Co.

GOODE, J. The appellant, the American Surety Company, is surety for William Logan on a bond given by said Logan to William B. Bagwell, for the faithful performance of a contract between Logan and Bagwell, wherein the former agreed to build a house for the — 711 — latter. This action was brought on the bond to recover damages for certain breaches of the building contract by Logan, which put Bagwell to an expense of nearly $600 above the contract price of the house. The breaches were the failure of Logan to pay for materials and labor, discharge some liens for labor and material, and complete the house in the time stipulated. In defense of the action appellant answered that Bagwell failed to perform his part of the. building contract, to-wit: that he unduly postponed the selection of certain articles called for in the architects’ specifications and which Bagwell had reserved the right to choose, thereby hindering the contractor’s work and preventing the expeditious completion of the house; that Bagwell did not pay Logan the installments of the contract price on the dates they were stipulated to be paid, thus hindering Logan’s work by leaving him without means to prosecute it; that the delay in payment grew out of an independent contract (to be stated later) entered into by Bagwell, Logan and J. E. Love,, from whom Bag-well borrowed the money to defray the cost of the house; that alterations were made by Bagwell as the house progressed, in contravention of the contract. Those alleged defaults are pleaded in discharge of the appellant as surety on Logan’s bond on the ground that they happened without its knowledge and enlarged the obligation for which appellant bound itself as Logan’s surety. This case was partly tried in the circuit court, but after some evidence had been introduced, was referred to Hon. Daniel Gr. Taylor, as referee, before whom the taking of evidence, after many adjournments to accommodate the parties, was finished. While the hearing was in progress before the referee, it was suspended at the request of the appellant in order that an amended answer might be filed in the cause by leave of the circuit court; and on the nineteenth day of December, 1902, application was made to the court for leave to file the answer. The respondent objected for the reason that — 712 — the case had been pending for years, had been partly tried before the circuit court, then referred, the hearing was in progress before the referee on issues that had long been made up, and the referee was so far advanced with the cause that he expected to close it on'December 23d, four days from the date of the motion for leave to amend. The court sustained the objection and refused permission to file an amended answer; to which ruling the defendant excepted and filed a term bill of exceptions. The amendment appellant desired to make was to insert in the answer a statement of the agreement alleged to have been made by Logan and Bagwell at the request of Love, in modification of the terms of payment to Logan provided in the original contract. The proffered amendment states that after the execution of the building contract and the bond in suit, Bagwell and Logan made a new and additional agreement in regard to payments without the knowledge and consent of the surety company, whereby Logan agreed to give plaintiff and his agent Love five days’ time to pay any installment after it fell due; that under the new agreement Love was not bound to make a payment unless the superintendents of the building drew an order on him and certified that Logan had paid for the materials and labor so used, and then was only bound to pay after five days; that those terms altered the contract for which appellant became surety. One term of the building agreement between Bag-well and Logan provided that no alterations should be made in the work shown and described in the drawings and specifications, except on the written order of the architects and that when so made, the value of the work added or omitted should'be computed by the architects and the amount added to or deducted from the contract price. The architects who drew the plans and specifications and superintended the construction of the building were Matthews & Clarke. There was a provision of — 713 — the contract that if the house was not completed by June 20,1896, Logan should pay Bagwell three dollars a day thereafter until it was completed, as liquidated damages. The referee found that Logan, instead of finishing the job, abandoned it after the walls were up and the roof on, but when considerable work remained undone; and that Bagwell and his architects finished it, as they had a right to do under the contract. He refused to allow the forfeiture of three dollars a day against Logan, because the delay was due, in a measure, to Bag-well’s own neglect in selecting certain materials; and Bagwell, moreover, took possession of the house with Logan’s permission, while it remained unfinished. In consideration of those circumstances the learned referee deemed it unjust to tax the surety on Logan’s bond with the penalty for delay in finishing the work. As Bag-well submitted to that ruling, it is not before us for review. The referee found that, on account of Logan’s failure to carry out the contract, Bagwell had to pay about $560 more than the contract price to get the house finished, for which sum, with interest, he advised the circuit court to render judgment, and this was done. We have no cause to notice the items included in that total. As to the release of the surety by Bagwell’s failure to promptly select material and the consequent delay of the work of construction, we think that circumstance could have had no effect on the surety company’s liability except the chance of burdening it with payment of the stipulated forfeiture; and as the judgment below relieved the company from the forfeiture, its contention on this point is devoid of merit. Slight negligence on Bagwell’s part in choosing tiling and other material was not a breach going to the entire consideration of the contract and so annulling it and the bond with it; but one that gave Logan' a claim for whatever loss he — 714 — sustained by the enforced delay and relieved bina from blanae for failure to finish in time, if the failure was due to respondent’s neglect. Under the facts shown, it affected the surety’s liablity only as to the stipulated forfeiture. Smith v. Crews, 2 Mo. App. 269; O’Neil v. Webb, 78 Mo. App. 1; Springfield Seed Co. v. Walt, 94 Mo. App. 76. It is earnestly contended that the surety was released by the side-agreement orally made between Logan and Bagwell, allowing five days grace for payment of each installment of the contract price. Those installments fell due as different stages were reached in the construction of the building; one was to be paid when the first-floor joists were in; another when the second-floor joists were in; another when the roof was on, .and so on. The verbal arrangement attempted to be pleaded by way of amendment to the answer, that Love, who furnished the money, should have five days ’ notice before he had to pay an installment, and have, too, a certificate of the architects that material and labor bills had been paid, was an amendment of a vital character, offered several years after the issues were joined and in the midst of the referee’s hearing. But we are not called on to decide whether the circuit court abused its discretion in refusing to allow it. That question is of minor importance in view of the finding by the referee that no positive arrangement of that kind was made; that the matter was discussed in a general way by Love, Bagwell and Logan, but did not crystallize into a contract, and, moreover, that there was no consideration for such an agreement. The referee’s opinion on the subject we accept, as well as his finding of the facts: “The evidence on this subject simply tended to show an oral request for an accommodation in the times of payment different from those required by the building contract, made by Love, Bagwell’s agent, upon Logan and promised by Logan. This request and promise can hardly be termed an agreement, as the evidence pro — 715 — duced and offered shows it to have been made without any consideration whatever and without having been reduced to writing. It can not be contended that this understanding rises to the dignity of a contract, because it was subsequently lived up to, for such is not the fact. On the contrary the evidence shows that some of the payments were made in exact accordance with the original building contract, and that, in the only instances where there was a failure to make payments in accordance with the contract, such failure resulted from facts at wide variance with the agreement or understanding between Logan and Love.” The remaining inquiry is as to whether the alterations in the building while it was under construction, released the surety on the bond. The referee found that eight changes from the original plans and specifications for the house were made by order of Bagwell during construction, without the knowledge of the surety company and without written orders from the architects and computation of the cost by them. He found further that the entire cost of the changes did not exceed $200. If we are to look only to the building contract in deciding this point, the surety company must be held to have been discharged. As we have said, that contract provided that no alterations should be made except on a written order from the architects, and that when made, the value of the work added to or omitted, should be computed by the architects and added to or deducted from the contract price. This course was not pursued and if the bond contained no more than an obligation for faithful performance of the contract by Logan, the surety was released when the principal parties to the contract altered it without the knowledge or consent of the surety; and sc the referee found, citing Beers v. Wolf, 116 Mo. 179; Killoren v. Meehan, 55 Mo. App. 427; Eldridge v. Fehr, 59 Mo. App. 44. Those cases decide that if a building contract is materially altered without consulting the surety on the contractor’s bond!, the surety — 716 — is discharged, and hold further, that when the contract contains a provision for computation by the architects of the cost of the changes, this must be done before the changes can be lawfully made. These rules were applied for the surety’s benefit in Beers v. Wolf, though the cost of the deviations from the contract dealt with in that case exceeded but little the cost of the changes ordered by Bagwell. But the bond we have to construe is anomalous and appears to bear out the contention of the respondent and the finding of the referee and the court below, that the changes made by Bagwell had no effect on the surety’s obligation, as their cost fell below two hundred dollars. The parties to the contract, Bagwell and Logan, were both parties to the bond, with power to adopt what terms they pleased in deviation from those of the contract. The condition of the bond, in so far as it applies to the question under advisement, reads as follows: “The condition of the above obligation is such, that whereas, the said William Logan, has on the day of the date of these presents, executed and entered into a certain contract for the erection of a certain building in said contract described, which contract is hereto annexed. Now, if the said Wm. Logan shall well and truly perform and fulfill all and every the covenants, conditions, stipulations and agreements in said contract mentioned to be performed and fulfilled, and any alterations and additions to said contract, provided such alterations and additions, if any such be made, shall not exceed in extra costs the sum of two hundred dollars. “We, the said sureties, hereby expressly waiving all rights to be notified of, or by any further act to give our assent to, such alterations and additions and acknowledging ourselves to be bound unconditionally for the faithful performance of such alterations and additions within limit of such costs aforesaid. ’ ’ It will be noticed that the above clause provides for alterations from the original plans not to entail a — 717 — cost of more than $200. Bnt the appellant contends the true construction of the clause is that in any event alerations should be made in conformity to the regulations of the contract; that is, upon written orders from the architects and a computation of the cost; that when made in that manner they could not entail an additional expense of more than two hundred dollars. We would adopt this interpretation but for the language of the bond, whereby the surety company acknowledges itself to be bound unconditionally for the faithful performance of such alterations and additions within the specified limit. We are inclined to the view which prevailed below; that the true meaning of the bond was to permit alterations to the amount of two hundred dollars to be made in any mode the parties thought proper, regardless of the contract mode, without affecting the surety’s liability. The condition of the bond binds the company not only for the performance of all the covenants, conditions, stipulations and agreements in the contract to be performed by Logan, but contains a superadded clause which was wholly superfluous unless it was intended to increase or diminish the surety’s liability from what it would be if fixed by the terms of the contract. There can be no dispute that the intention of the bond was to do the one thing or the other; either enlarge or curtail the terms of the contract in respect to the right to alter the plans and specifications as the work progressed. Which was it? The words by which the surety company acknowledged itself “to be bound unconditionally for the faithful performance of such alterations and additions within the limits of such costs aforesaid,” appear to exclude the notion that the company was only bound on condition of the contract’s regulations being followed, and to dispense with those regulations as to changes not increasing the cost of the building above two hundred dollars. Judgment affirmed. Bland, P. J., concurs; Bey-burn, J., having been of counsel, not sitting.