Enterprise Hotel Co. v. Book, 85 P. 333

Enterprise Hotel Co. v. Book

85 P. 333

Or.

1906

Check Treatment

Mr. Chief Justice Bean

delivered the opinion.

There are numerous assignments of error, but they may all be grouped under three or four heads.

1. It is contended that the court erred in admitting in evidence the contract between the plaintiff and Book, and in refusing to direct a verdict for the defendants on account of a failure of proof. The contract in question and the bond heretofore set out are on one sheet of paper and were made up from printed forms. In the contract proper the contracting parties are referred to as the party of the first part and the party of the second part, and the names have been so transposed that, if the agreement is read literally and without reference to its context, it would appear as if Book owned the building and plaintiff was the contractor therefor. When the entire contract and bond are read together, it is apparent that the confusion grows out of a clerical error and the contract is in effect as alleged in the complaint. But, however that may be, the question is immaterial here *62because the answer of tbe defendants sets up affirmatively the making of the contract, its terms and conditions, and pleads breaches • thereof as a defense to this action, so that upon the pleadings there is no issue on that matter.

2. The contract provides that certain payments should be made to Book as the work progressed, and that $1,000 should be paid to him on the certificate of the architect that the building had been completed according to the contract and had been accepted by the plaintiff. The building was not completed until July 1, 1903, and about that time the plaintiff paid $1,000 to Book. The defendant sureties contend that they were released by reason thereof, because such payment was made without adjusting the claim for damages growing out of the delay in the completion of the building, and because there was at the time a mechanic’s lien on the same for a small amount. The argument is that the reserve payments stipulated in the contract were for the benefit of the sureties as well as that of the owner, and that the payment in question operated to impair this reserve to the injury and prejudice of the defendants.

It is a settled rule of law that where a security reserved in a building contract for the benefit of the sureties on the builder’s bond is lessened, impaired, or destroyed by a premature payment to the, contractors, the sureties will be released and discharged to the extent at least of the amount so paid: Cochran v. Baker, 34 Or. 555 (52 Pac. 520, 56 Pac. 641); Hand Mfg. Co. v. Marks, 36 Or. 523 (52 Pac. 512, 53 Pac. 1072, 59 Pac. 549); Wehrung v. Denham, 42 Or. 386 (71 Pac. 133). But this doctrine can have no application where such payment is made with the knowledge and by the consent of the sureties: 27 Am. & Eng. Enc. Law (2 ed.), 495; Brown Iron Co. v. Templeman, 30 Tex. Civ. App. 50 (69 S. W. 249); Smith v. Molleson, 148 N. Y. 241 (42 N. E. 669). Now, in this case, the bond contains a provision that payments made at times or in a manner other than as stipulated in the contract shall in no wise affect the validity of the obligation or operate to release the sureties from liability thereon. It is plain that under this provision the sureties cannot complain because all payments were *63not made at the time or in the manner stipulated in the contract, as they had waived that defense in advance.

3. The contract provides that if the plaintiff should at any time during the progress of the work request in writing any additions or alterations to the building, the same should be made and should in no way affect or make void the agreement, but the value thereof should be added to or deducted from the contract price, and the bond provides that “any departure from the plans, drawings and specifications, or if any additions to or alterations of, or any omissions be made in said building, the same shall in no way affect or make void this undertaking,” and that “it is the intention of the parties to this undertaking to provide that any changes or alterations in the construction of said building * * shall not in any wise release the sureties hereto from their obligations on this bond.” It is claimed that because certain changes and alterations were made in the building as the work progressed, such as increasing the height of the basement walls, the thickness of the exterior walls, the putting in of dormer windows and some work in connection therewith, a change in the painting specifications and the doubling of the first and second-story floors, were made without having been first requested in writing by the plaintiff, the sureties are discharged and released from liability.

It is an elementary rule of law that a surety can insist by his contract that he will not be bound except upon his own terms, and therefore, any alterations or additions in a building contract that materially change, vary, or increase the risk assumed by the sureties will release them from liability unless made by their consent, and there are authorities holding that where the contract provides that before the alterations or additions are made the value thereof shall be agreed upon in writing by the owner and the contractor that alterations or changes made by verbal agreement release the sureties: Killoren v. Meehan, 55 Mo. App. 427; United States v. Freel, 186 U. S. 309 (22 Sup. Ct. 875, 46 L. Ed. 1177). But there is no provision in the contract under consideration that the value of the alterations or additions should be agreed upon by the owner and contractor in advance. The *64stipulation is that the same shall he added to or deducted from the amount of the contract price by a fair and reasonable valuation, and that if any dispute should arise concerning the value of any work or changes, the same should be determined by arbitration, and hence the authorities referred to are not in point here, and the liabilities of sureties are not affected by alterations and changes if consented to by them: McLennan v. Wellington, 48 Kan. 756 (30 Pac. 183); Hayden v. Cook, 34 Neb. 670 (52 N. W. 165); De Mattos v. Jordan, 15 Wash. 378 (46 Pac. 402) ; Kretschmar v. Bruss, 108 Wis. 396 (84 N. W. 429); Hedrick v. Robbins, 30 Ind. App. 595 (66 N. E. 704). The provision in the contract that if plaintiff should at any time during the progress of the work request in writing any alterations or additions the same should be made, was for the benefit of the contractor, and could be waived by him. If he saw proper to make any changes or alterations in the work when requested, without first requiring such request to be placed in writing, it would, it seems to us, constitute no defense for the sureties, nor release them from their obligations.

4. Again, it is contended that the value of any alterations or additions became a part of the contract price, and the amount thereof should have been retained by the plaintiff until the final payment. It is provided that the contract price shall be paid to Book in installments as the' work progressed, and it is insisted that because the extra work was paid for from time to time as it-was performed, that such payments were premature and operated to discharge the sureties, but, as we have already seen, the bond itself expressly provides that payments made at any other time or in any other manner than as stipulated, should in no wise affect the obligation of the sureties. It necessarily follows, therefore, that even if the defendants are correct in their interpretation of the contract, and that the payments for extra work should not have been made at the time the work was performed, nor until final payment on the building, the premature payment thereof did not release the sureties, or relieve them from liability.

This, we think, covers substantially all the questions raised on this appeal, and there being no error in the record, the judgment is affirmed. Affirmed.