150 F. 17 | 8th Cir. | 1906
after stating the case as above, delivered the opinion of the court.
A surety who guaranties by his bond the performance by his principal of the latter’s contract with the obligee is bound for the fulfillment of no new or modified agreement, and any material alteration of the bonded contract without his consent releases him from liability for its fulfillment. The wrongful surrender by the obligee in the bond of security for the performances of the guarantied obligation, without the knowledge of the surety, discharges him from liabilty therefor entirely or pro tanto, according to the value of the security thus surrendered. Brown v. First National Bank, 66 C. C. A. 293, 298, 132 Fed. 450, 455; Brown v. First National Bank, 112 Fed. 901, 904, 50 C. C. A.
By the terms of the lease, whose performance by the lessees was warranted by the bond in suit, the obligee in the latter granted to the tenants, the principals in the bond, the option to purchase the leased' premises for $120,000 at any time during the lifetime of the lease. The surety in the bond had the right to acquire and to exercise this option by discharging the obligations of the lessees to the investment company, the lessor, and by invoking the principle of subrogation. The surrender of leased premises by the tenants during the term of the lease and the acceptance of the property by the landlord, without a notice that the latter takes it and will hold and use it during the remainder of the term for the use and benefit of the tenants exclusively, closes the term of the lease, and destroys all rights conditioned upon its subsequent continuance. Prout v. Roby, 15 Wall. 471, 476, 21 L. Ed. 58; Watson v. Merrill, 136 Fed. 359, 362, 69 C. C. A. 185, 188, 69 L. R. A. 719. The term specified in the lease was to expire on September 12, 1905, and the lessees and their surety, if they fulfilled their covenants, had the right to purchase the property for $120,000 on or before that date. The surrender of the hotel by the tenants and its acceptance by the landlord on December 27, 1904, closed the term of the lease on that day, and deprived the lessees and the surety of the right to make that purchase thereafter.
The first and the chief complaint of counsel for the surety is that the court below refused to hold that this surrender, which was made and accepted without notice to the surety, discharged it from all liability under its bond. They argue with commanding ability and great force, and ingenuity that this surrender modified the terms of the lease and deprived the surety of the security of the right to purchase between December 27, 1904, and September 13, 1905, and that either effect was sufficient to release it. In support of this position they cite authorities which sustain the general rules of law which have already been stated, and Stern v. Sawyer (Vt.) 61 Atl. 36, where, without notice to the surety of the tenant, the landlord accepted a release of part of the leased premises which he sold for $2,250 and the lessee waived the performance of the lessor’s covenant to repair, Holme v. Brunskill, Daw Rep. 3 Q. B. D. 495, in which, without notice to the surety, the principal released a part of the demised premises to the lessor in consideration of a reduction of the rent ten pounds annually, Brandt on Suretyship & Guaranty, § 429, where a case is cited in which a yard, shed, and frame dwelling house were rented for $375 per month, and, without notice to the surety for the lessee, the latter surrendered the dwelling house to the landlord in consideration of a reduction of the rent for the remainder of the premises to $300 per month (Penn v. Collins, 5 Rob. [La.] 213), and Warren v. Lyons, 152 Mass. 310, 25 N. E. 721, 9 L. R. A. 353, in which there was a lease for a specified term for a rental of $108.30 per month, and a covenant by the lessee to pay the same rent as long as he held the premises after the expiration of the term, and before the term lapsed the
And here is the answer, also, to the contention that this surrender deprived the sureties of the option to purchase after December 27, 1904. The right to exercise this option was by the express provisions of the contract limited-by the condition that the lessees should fulfill their covenants. It was granted during the lifetime of the lease only. The lifetime of the lease was conditioned, as we have seen, by the right of the lessor to end it whenever the lessees were in default in the per
There is another reason why this surrender faiied to discharge the surety. Its principals had failed to perform covenants of- the lease whose fulfillment it had warranted. It had received notice.of this fact four months before the surrender, and it had not discharged the broken obligations of the principals. The investment company had fulfilled all the terms of the contract which it had undertaken to perform. The principals in the bond and the surety had broken their covenants and the obligee had not, and the surety was aware of these facts. Now, although a surety is a favorite of the law and his liability may not be enlarged by construction nor extended without his consent by modifications of the guarantied contract, yet he, and not the obligee, covenants to pay and must respond for the damages caused by the defaults of his principals for which he promises indemnity. The contract of suretyship is not that the obligee will see that the principal pays his debt or fulfills his contract, but that the surety will see that the principal pavs or performs. Nelson v. First National Bank, 16 C. C. A. 425, 435, 69 Fed. 798, 807; Williams v. Lyman, 31 C. C. A. 511, 514, 88 Fed. 237, 241. The obligee does not represent to the surety that the principal will keep his covenants, but the* surety holds his principal out to the obligee, and represents and promises to him that the principal will perform his agreements. The surrender was the natural and lawful effect of the failure of the principals in this bond to keep the covenants which the surety warranted that they would fulfill and of the failure of the surety after notice to perform them for the principals. Even where one of two innocent parties must suffer from the wrongful act or default of a third, that one must bear the loss who intentionally or negligently enables the third party to cause it. The surety in the case in hand by the execution of its bond to the plaintiff gave a credit to the principals thereto and enabled them to hold the possession of this hotel for nearly two years and to incur the liabilities upon which this action is based, and to the amount of its bond it ought to bear the burden of the loss its action has occasioned, even if it had been innocent of default or wrong. A fortiori is it liable when it was itself in default for more than four months before the surrender occurred. “Where one of two innocent parties must lose, and one of them is in fault, the law throws the burden of the loss upon him.” Magee v. Manhattan Life Ins. Co., 92 U. S. 93, 98, 23 L. Ed. 699; Hearne v. Nichols, 1 Salk. 289. The result is that the surrender
The lessees made agreements with a contractor, a corporation, for the heating plant and the plumbing specified in the lease. The contractor completed the improvements by September 22, 1903, but the lessees did not pay it for them, and on January 3, 1905, it recovered a judgment against them for $8,795.93, and á decree against them and the lessor to the effect that it held a lien upon the leased premises for $5,175 and interest from the date of the decree. The lessor paid the latter amount to the contractor on January 20, 1905, in order to discharge its property from the lien, and the court below held that it was entitled to recover this amount from the surety on the bond. Counsel for the defendant contend that this was an erroneous ruling, and insist that the surety is not liable for this amount (1) because there was no express agreement in the lease that the lessees would pay for the heating plant and the plumbing which they agreed to furnish as part of their rent; (2) because the lease contained their express promise to give a bond with a surety conditioned to pay for the material and labor used in these improvements, and this. stipulation excludes any implication of any other'contract to pay for them (Hawkins v. U. S., 96 U. S. 689, 698, 24 L. Ed. 607); and (3) because the contract of the surety must be strictly construed, and may not be enlarged by construction or implication (U. S. v. National Surety Co., 92 Fed. 549, 550, 34 C. C. A. 526, 527).
The legal effect of the contract between the plaintiff, on the -one hand, and the lessees and their surety, on .the other, that the latter will pay for the labor done and the material furnished in making the improvements, is the same as the legal effect of a contract between them that the latter will indemnify the former against liens for such labor and materia!, or that they will pay for them, to the end that no liens shall be placed upon the property. The only damages which the plaintiff could recover under the first contract are those which it might sustain by the fastening of liens upon its property, and'no one who performed work or furnished material could recover of the surety under either becaus.e he would be a stranger to each and would have no interest therein. As the distinction between contracts with owners of property to pay for work done and materials furnished to improve,,it and contracts to protect them against liens upon it is not material in the case in hand, it will not be further noticed in the discussion which is to follow.
A surety is never liable beyond the strict terms of his contract. His obligation may not be extended by construction or by implication. On^ the other hand, it may not be reduced or destroyed thereby. His agreement, like other contracts, must have a rational .construction, an interpretation which, while it carefully restricts his liability to that which he agreed to undertake, does not fail to hold him to that liability which, by the plain terms of his agreement, he promised to assume. Written language has the same significance, and its meaning must be ascertained by the same rules of law when it is found in the contract
This bond recites the fact that the lease has been made, and that the lessees “in lieu of a fixed rental for the said property are to do and perform certain things in the way of putting the said hotel in first class repair, adding steam heating and electric light plant thereto, and make certain payment of taxes and insurance, to which said lease reference is hereby made for the purpose of ascertaining in detail the exact obligations assumed by the said lessees thereunder”; and it is conditioned that the lessees shall “well and truly perform the obligations by them assumed under the said lease to the true intent and meaning thereof.” The legal effect of these terms of the bond is to embody the entire lease therein to the same extent as if it had been literally written into it and to bind the surety not by implication, but, by the express terms of the bond, to indemnify the lessor against all loss it sustains by the failure of the lessees to perform any of the obligations which they assumed under the true intent and meaning of the lease. This conclusion is not inconsistent with the excerpt cited by counsel from Stearns on Law of Suretyship (section 143), that, “if the main contract is broader in its scope than the limits fixed in the bond, a reference to the contract will only incorporate so much of the same as is within the limits of the terms of the bond,” because Ac main contract is not broader in its scope than the limits fixed by this bond which by its plain terms guaranties the performance of every obligation assumed by the lessees by means of the lease. The question then becomes: Was it the true intent and meaning of the lease that the lessees should pay to their lessor their rent for the hotel by putting new plumbing and a new heating plant therein at their own expense or at the expense of the lessor? Was it that they should pay the rent they agreed to give to their lessor or that the latter should pay this rent to itself? The question seems to admit of but one answer. But counsel for the surety present ingenious arguments and persuasive authorities in support of their contention that the effect of the contract was that the lessor must pay for these improvements. Electric Appliance Co. v. U. S. Fidelity & G. Co. (Wis.) 85 N. W. 648, 53 L. R. A. 609; Dunlap v. Eden (Ind. App.) 44 N. E. 560; City v. Wolf (Ill.) 45 N. E. 218; Boas v. Maloney (Cal.) 70 Pac. 1004; Gato v. Warrington (Fla.) 19 South. 883. The crucial question in the first three cases was whether or not a laborer or materialman could recover upon a bond given to the owner of the property conditioned for the faithful performance by the contractor of his agreement to furnish the necessary labor and material for the improvement, and it was answered in the negative, as it -would be if such a plaintiff bought an action of this character upon the bond in suit upon the ground that the bond was not given for the benefit of the laborer or materialman, and that he had no interest in it. This question is not presented in the case at bar, and these authorities do not rule this case. In the last two cases the Supreme Courts of
Counsel call attention to the stipulations in the lease to the effect that the lessees would give a bond with a satisfactory surety for the performance of their obligations, and that they should pay for the work and material employed in the improvements they agreed to furnish, and to the fact that the bond in suit is conditioned for the performance of all the obligations of the lessees only, and does not contain the additional condition that they shall pay for the work and material. They invoke the rules that an express agreement relative to-a subject-matter excludes any implied contract concerning it, and that every contract is presumed to contain the entire agreement of the parties, and from these premises they argue that no agreement by the lessees to pay for the work and labor other than the bond may be deduced from the lease, and that, inasmuch as the condition that the lessees shall pay for the work and labor is not found in the bond, the surety is not bound to indemnify against the failure of the lessees to-make such payments. But the stipulation for the bond is a mere contract for additional security for the performance of obligations assumed by the lessees by the other terms of the contract. One who makes a written contract to pay money or to perform any act does not revoke his agreement or renounce his obligations thereunder by inserting in the contract a further agreement to give security for its performance. Moreover, the omission from the bond of the condition that the lessees should pay for the work and material is of no importance, because by the express terms inserted in the bond the surety guarantied the performance of every obligation which the lessees assumed under the lease. If one of their obligations thereunder was to pay for the work
The court should so far as possible put itself in the place of the parties when their minds met upon the terms of the agreement, and then from a consideration of the writing itself, of its purpose and of the circumstances which conditioned its making, endeavor to ascertain what they intended to agree to do, upon what sense and meaning of the terms thev used their minds actually met. Accumulator Co. v. Dubuque St. Ry. Co., 12 C. C. A. 37, 41, 42, 64 Fed. 70, 74; Salt Lake City v. Smith, 104 Fed. 457, 462, 43 C. C. A. 637, 643; Fitzgerald v. First National Bank, 52 C. C. A. 276, 284, 114 Fed. 474, 482.
That intention must be deduced, not from specific provisions or fragmentary parts of the instrument, but from the entire agreement, because the intent is not evidenced by any part or stipulation of it, nor by the instrument without any part or provision, but by every part and term so construed, if possible, as to be consistent with every other part and with the entire agreement. Jacobs v. Spalding, 71 Wis. 177, 188, 36 N. W. 608; Boardman v. Reed, 6 Pet. 328, 8 L. Ed. 415; Canal Co. v. Hill, 15 Wall. 94, 21 L. Ed. 64; O’Brien v. Miller, 168 U. S. 287, 297, 18 Sup. Ct. 140, 42 L. Ed. 469; Pressed Steel Car Co. v. Eastern Ry. Co., 57 C. C. A. 635, 637, 121 Fed. 609, 611; Uinta Tunnel, etc., Co. v. Ajax Gold Min. Co., 141 Fed. 563, 73 C. C. A. 35; U. S. Fidelity & G. Co. v. Board of Com’rs (C. C. A.) 145 Fed. 144, 148.
Where the language of an agreement is contradictory, obscure, or ambiguous, or where its meaning is doubtful, so that the contract is fairly susceptible of two constructions, one of which makes it fair, customary, and such as prudent men would naturally execute, while the other makes it inequitable, unusual, or such as reasonable men would
The intention of the parties when manifest, or when ascertained from the written agreement in accordance with the basic rules of interpretation, must control and be enforced without regard to inapt expressions and technical rules of interpretation, unless that intention is directly contrary to the plain sense of the binding words of the agreement. Prentice v. Duluth, etc., Forwarding Co., 7 C. C. A. 293, 298, 58 Fed. 437, 443; Westervelt v. Mohrenstecher, 22 C. C. A. 93, 95, 76 Fed. 118, 121; Tillitt v. Mann, 104 Fed. 421, 424, 43 C. C. A. 617, 619; Salt Lake City v. Smith, 43 C. C. A. 637, 643, 644, 104 Fed. 457, 462; Uinta Tunnel, etc., Co. v. Ajax Gold Min. Co., 141 Fed. 563, 567, 73 C. C. A. 35; U. S. Fidelity & G. Co. v. Board of Com’rs (C. C. A.) 145 Fed. 144, 148; Witt v. Railway Co., 38 Minn. 122, 127, 35 N. W. 862; Driscoll v. Green, 59 N. H. 101; Johnson v. Simpson, 36 N. H. 91; Walsh v. Hill, 38 Cal. 481, 486, 487.
When this lease was made, the lessees were seeking the use and occupation of the hotel owned by the investment company, and the latter was trying to obtain compensation for that use. The purpose of the lease was to record the extent to which each of these parties attained the object it sought. The investment company clearly agreed to grant the use and occupation, and the lessees plainly covenanted to put a heating plant and plumbing in the hotel in part payment for their use of these premises. These parties necessarily intended to provide' by these stipulations that either the investment company or the lessees should pay for the labor and material necessary to make these improvements. The inference: that they intended or agreed to defraud laborers or materialmen out of the value of their work or property is inadmissible. It is a settled rule of law that a lessee may not make repairs at the expense of the lessor unless there is a special agreement between them that he may do so (Sheets v. Selden, 7 Wall. 416, 423, 19 L. Ed. 166; Mumford v. Brown, 6 Cow. [N. Y.] 475, 16 Am. Dec. 440), and there was no such agreement here.
An agreement that the lessees should pay for the improvements which they agreed to give as rent for the premises is fair, rational, and such an agreement as prudent men would naturally make, while a contract that the lessor should pay for them is unreasonable, unfair, absurd, one that reasonable men would not be likely to enter into.
The maxim, “Noscitur a sociis,” points in the same direction. The promise to put the steam heating plant and the new plumbing in the hotel is found in the covenants of the lessees among those things for which they promised to pay in lieu of a fixed rental, to wit, the taxes, the premiums on insurance, repainting, repapering, changing skylight, relaying tiling, recarpeting, furnishing an electric dynamo and an electric light plant, rewiring, constructing a stone curbing, repairing the
The stipulation in the lease for the bond to secure performance on the part of the lessees confirms this view. The argument of counsel that that portion of this stipulation which promises a bond conditioned that the lessees shall pay for the work and material demonstrates the fact that they did not otherwise undertake to pay therefor proves too much. The stipulation requires a bond to secure the performance of all the obligations of the lessees under the lease, and also their payment for the work and material. If the stipulation for a bond for the payment for the work and material proves that they had assumed no obligation by the lease to pay for them, then by the same mark the stipulation for the bond for the performance of all their obligations under the lease proves that they had never incurred any obligations thereunder. This provision of the bond is for security for the performance of the obligations assumed by the lessees by virtue of the other provisions of the lease, and it carries in itself persuasive evidence that by those other provisions the lessees had agreed to pay for this work and material because it promised the bond to secure this payment, “to the end that no liens shall be placed against the property by any creditor of the lessees.” If the lessor was to pay for this labor and material and the lessees were not, there would be no creditor of the lessees on account of them.
The situation and surrounding circumstances of the parties to this lease at the time of its execution, the purpose of the writing and of the parties who signed it, the entire body of the agreement and all its stipulations considered together, the fact that the promise to furnish the heating plant and the plumbing is found in the covenants of the lessees to do other things for which they were unquestionably to pay, the object of this promise, to wit, to compensate the lessor for the use of the premises in lieu of rent, the fact that this object may not be attained by an interpretation that the lessor itself was to pay for these improvements, that such an interpretation makes the contract irrational, improbable, unfair, absurd, while the construction that it expressed the promise of the lessees to pay for the improvements they agreed to furnish renders the agreement reasonable, equitable, probable, and such as prudent men would naturally make, and the fact that this meaning is consistent with every term of the lease — these considerations converge with compelling force to convince that the parties to this lease intended to agree, and did contract thereby, that the lessees
Since the result is that a proper construction of the lease and bond discloses an express agreement therein by the lessees and the surety to pay for the heating plant and the plumbing to the extent npcessary to discharge the property of the lessor of liens therefor, the arguments of counsel against the implication of such a stipulation become immaterial, and it is unnecessary to consider them farther. The question in this case is not a question of implication, but of construction, and the lessees and the surety were liable to pay for the discharge of the lien in controversy by the express terms of their contracts, legally interpreted.
The allowance of $107'.60 which the lessor paid to relieve the carpeting in the hotel, which the lessees had laid in pursuance of their covenant in the lease, from a mortgage for its purchase price, was right, for the same reasons that sustain the allowance of the item of $5,175 and interest, which has been considered.
The lease was terminated by the surrender on December 27, 1904.
The lien for the $5,175 had been fastened upon the property as early as December 1, 1903, but the contractor had claimed in his recorded statement several thousand dollars in excess of this sum which the court on January 1, 1905, decreed to him, and his suit to foreclose the lien was pending when the surrender occurred.
The taxes for the year 1904, $2,279.34, were levied in that year and thereupon became a lien upon the property, but they were “due and payable, one-half on or before the last day of February, and the remainder on or before the last day of July of the year” 1905. 3 Mills’ Ann. St. Rev. Supp. § 3802. The covenant of the lease was to pay these taxes “at the times the same shall become due and payable.” Counsel for the surety objects to the allowance of either of these items on the ground that the claims for them had not matured and become actionable when the lease was terminated.
The termination of a lease during its term by surrender, by re-entry, or by eviction, without more, discharges the lessee from liability for rents that have not accrued, but leaves him liable for all the rents which have accrued ’and become due, and for the performance of all covenants whose fulfillment is due. The liability of the lessees and of the surety for the $5,175 accrued, and the performance of the covenant to pay it and to discharge the lien, was due when that lien was fastened upon the property more than a year before the surrender occurred, and therefore they were not relieved from this liability by the subsequent termination of the lease. The liability of a tenant for rent
But a surrender, re-entry, or eviction between rent days, or at any time before the rent has fully accrued, releases the lessee from liability therefor, and defeats an action for its recovery. Smith v. Shepard, 15 Pick. (Mass.) 147, 25 Am. Dec. 432; Curtiss v. Miller, 17 Barb. (N. Y.) 477, 479; Home Life Ins. Co. v. Sherman, 46 N. Y. 370; Giles v. Comstock, 4 N. Y. 270, 275, 53 Am. Dec. 374; Reed v. Snowhill, 51 N. J. Law, 162, 16 Atl. 679; Hall v. Gould, 13 N. Y. 127.
In Smith v. Shepard, 15 Pick. (Mass.) 147, 150, 25 Am. Dec. 432, the rent was payable quarterly in advance, and eviction was made on the first day of the quarter. Chief Justice Shaw said:
“As to tlie quarter’s rent due by covenant in advance, the defendant had the whole day to make the payment in advance. But during the day the mortgagee entered and ousted him, and this was a good excuse.”
In Curtiss v. Miller, 17 Barb. (N. Y.) 477, 479, action was brought for the rent of a half year which ended April 10, 1846. The surrender occurred on April 2, 1846, only eight days before the expiration of the half year. The court said:
“It is well settled by numerous adjudged cases that, when the term is surrendered before the expiration of a period for which rent accrues, the rent for the whole of such period, not then due, is extinguished, and can neither be dis-trained for nor collected by action. Bain v. Clark, 10 John. (N. Y.) 424; Shepard v. Merrill, 2 John, Ch. (N. Y.) 280; Bac. Abr. tit. “Rent”; L. Clum’s Case, 10 Co. 128; Shep. Touch. 300, 301; Magaw v. Lambert, 3 Pa. 444; Greider’s Appeal, 5 Pa. 422; Hall v. Burgess, 5 Barn. & Cres. 332; Grimman v. Legge, 8 Barn. & Cres. 324.”
And it denied a recovery.
In Home Life Ins. Co. v. Sherman, 46 N. Y. 370, the rent was payable quarterly, and action was brought for the quarter’s rent from May 1, 1867, to August 1, 1867. There had been a surrender in June, 1867, and a recovery was denied.
The payment of the taxes of 1904 was in lieu of rent for that year. This rent was accruing, but the accrual was not complete when the surrender occurred on December 27, 1904, and none of this rent was due or payable before the last day of February, 1905. As the portion of the rent represented by the payment of these taxes had neither accrued nor become due when the surrender was made, the lessees and the surety were thereby released from liability for it, and the court below fell into an error when it overruled the objection to the evidence of these taxes and took them into consideration in estimating the amount which the lessor might recover of the surety.
For this error, the judgment below must be reversed, and the case must be remanded to the Circuit Court, with directions to grant a new trial, and it is so ordered.