51 S.C. 121 | S.C. | 1897
Lead Opinion
The opinion of the Court was delivered by
This is a case involving the right of sureties. On the 19th day'- of March, 1892, G. C. Ormand and W. L. Goforth entered into a contract with the city of Greenville to perform certain work for said city, in digging trenches for sewerage, and on same day Ormand & Goforth, with appellants as sureties, entered into a bond for faithful performance. Among other things, it was stipulated in the contract that “payments for the work shall be made monthly upon the estimate of the city engineer. Ten per cent, of the amount due shall be retained until the satisfactory completion of this contract.” In the specifications made a part of the contract, it was provided that “the engineer, on the last day of each month, will estimate the amount of work completed, according to these specifications, and ninety per cent, of the amount due will be paid the contractor on or before the 5th day of the following month.” Before the completion of the work, Goforth died, and, on the 12th day of August, 1892, the surviving member of the firm, Ormand, entered into another agreement with the city of Greenville,
The sole question presented here is whether, under these circumstances, the sureties ought to be discharged. We think the sureties are discharged.
1. The disregard by the city of the provision for the reservation of ten per cent, of the amount due on the engineer’s estimate was a material variation of or departure from the contract. The surety 4s bound, and only bound, “to the extent and in the manner and under the circumstances pointed out in his obligation,” as stated by Mr. Justice Story, in Miller v. Stewart, 9 Wheat., 703. This principle is recognized by all the authorities. Nor is it essential that the alteration of the contract should be injurious to the surety. The surety is bound by the contract which he makes, not by some contract which he did not make, even though the latter may be’more favorable than the former. Jackson v. Patrick, 10 S. C., 197; Gardner v. Gardner, 23 S. C., 592. The contract made by the sureties expressly provided for the ten per cent, reserve. It is a mistake to suppose that this provision was inserted for the benefit of the city of Greenville alone, and that the city might waive it. It was designed to secure the satisfactory completion of the work according to the specifications of the contract, for which the sureties were liable, and was for their benefit as well as for the benefit of the city. The principals dealt with each other as if there was nothing whatever in the agreement in reference to the ten per cent, reserve, in effect striking that provision from the contract. This the principals could do so far as they were concerned, but not so far as the sureties are concerned. The good motive which actuated the city council in disregarding this provision, viz: to enable the contractor to continue the work, cannot help the city in this contention, since it failed to do what was essential to bind the sureties, procure their consent. It
It is quite easy to understand why the sureties in this case might not have signed the contract, except for the provision as to the ten per cent, reserve. If, by reason of the death or insolvency of the contractor, the work should stop, and it should become the duty of the sureties to carry on the work, or indemnify the city for damages, the ^reserve might protect the sureties against final loss. Such reserve, too, would be very potent in holding the contractor to his contract. In vol. 24, Enc. Law, p. 837, under the statement of the general principle that “any material alteration in the terms of the contract of a suretyship will release the surety if he has not consented to the change,” the following is stated in the note giving examples: “A surety on a building contract, where the principal is to be paid by in-stalments, is discharged if the principal is paid faster than the contract provides. Citing General Steam Nav. Co. v. Rolt, 6 C. B. (N. S.), 550; 95 E. C. L., 550; Calvert v. London Dock Co., 2 Keen, 638.” In DeColyar on Guar., &c., 390, these cases are referred to as good instances where a surety was discharged by a material variation of the terms between the creditor and the principal. In the first case, it is stated that “A contracted with B to build for A a ship for a given sum, to be paid by instalments as the work reached certain stages; and C became surety for the due performance of the contract on the part of B, the builder. A allowed B to anticipate the greater portion of the last two instalments. It was held that C (the surety) was discharged, as A, by allowing B to anticipate the instalments, had materially altered the terms of the contract with B, the principal.” In the other case, “a contractor undertook to
The necessity of a strict compliance with the mode of payments, specified in the contract, in order to bind a guarantor, is shown in Edmondston v. Drake & Mitchell, 5 Pet., 624, wherein it was held to be a material alteration of the contract of suretyship for the principals to change the mode of payment to bills on London, when the contract provided for payment in bills on New York. See, also, the following cases: Bacon v. Chesney, 1 Stark, 192; Warden v. Ryan, 37 Mo. App., 466; Simonson v. Grant, 36 Minn., 439; Marchman v. Robertson, 77 Ga., 40, cited in appellant’s brief. In the case of Mayhew v. Boyd, 5 Md., 102, 59 Am. Dec., 101, it was held a material variation of the contract so as to discharge the surety, for the creditor and principal to sell the property mortgaged to secure the debt, before the maturity of the debt, without the surety’s consent. In this last mentioned case the true rule is thus clearly stated: “Any dealings with the principal debtor by the creditor, which amounts to a departure from the contract, by which a surety is to be bound, and which by possibility might materially vary or enlarge the latter’s liability, without his assent, operates as a discharge of the surety.”
2. The right of the sureties to be discharged in this case may be considered from a somewhat different point of view. The payment by the city of Greenville to the contractor of the whole amount due under the engineer’s estimate, including the ten per cent, reserve, without deducting the amount due the city for tools and dynamite, which, under
It is argued that in this case the sureties are liable under the amended contract, and that the amended contract is entirely separate and independent from the contract containing the ten per cent, clause. But it is manifest, from what has been already said, that we think the amended contract is not distinct from and independent of the contract providing for the ten per cent, reserve.
The judgment of the Circuit Court is reversed as to the appellants, and the complaint as to them is dismissed.
Concurrence Opinion
The act of the plaintiff in paying to the contractors all the money due for the work without deducting the ten per cent., was violative of the express terms of the contract, not passive but positive in character, and injurious to the rights of the sureties; hence they were discharged. Lang v. Brevard, 3 Strob. Eq., 59.
I, therefore, concur in the opinion of Mr. Justice Jones.