178 Iowa 644 | Iowa | 1916
“paid by the owner to the contractor, in current funds, and only upon certificates of the architect, as follows: 85% of all work completed and all materials on the ground to be computed in value on or about the first of each month, and payment made for same upon proper certificate of the architect. The final payment shall be made within 30 days after the completion of the work included in this contract, and all payments shall be due when certificates for the same are issued. If at any time there shall be evidence of any lien or
For the purpose of protecting the owners against any liens or claims for which the premises might be liable, and to secure the refund which the contractor was required to make to the owners under the foregoing provisions of the contract, the contractor, Faus, on February 26, 1913, gave to the owners a bond of $4,000, in which he is named as the principal, which recites as follows:
“Whereas, said principal has entered into a certain written eontraht with the obligee for the substantial erection and completion of all concrete and reinforced concrete work in connection with a building to be erected by the said owner on Mulberry Street, Waterloo, Iowa, ih strict accordance with the plans, specifications and contract as prepared by Mortimer B. Cleveland, architect, for the sum of $12,000;
“Now, therefore,- the condition of the foregoing obligation is such that, if the said principal shall well and truly indemnify and save harmless the said obligee from any pecuniary loss resulting from the breach of any of the terms, covenants and conditions of the said contract on the part of the said principal to be performed, then this obligation shall be void,; otherwise to remain in full force and effect in law. ’ ’
The contract also provides that the owner may take charge of the work in case the contractor fails to perform as set out in the contract, and provides the manner of doing so, and that the owner shall provide labor and material for extras, so as hot to delay the contractor. The contractor
After the court had sustained defendant’s motion to direct a verdict in its favor, a stipulation was entered into between the parties to this effect: That, if the case is reversed in the Supreme Court, such judgment may be there entered against the Southern Surety Company in a like amount as that which may be finally recovered by plaintiffs against the defendant Faus in the action now proceeding between plain
The issues, as appellant states them, and the errors assigned, relate: First, to the question whether the default entered against the appellee Southern Surety Company was properly set aside, and the appellee permitted to answer; second, to the question whether the contract with the appellee was breached by the appellant, and the surety company thereby released; and, third, to * the question whether the appellee surety company had waived certain of the alleged breaches of the indemnity contract relied upon by appellee as excusing it from the performance of its contract of indemnity.
1. When defendant’s demurrer to the petition was submitted, a written stipulation was entered into, to the effect that, if either party did not' wish to stand on the ruling should be made on the demurrer, ten days should be allowed to the defendant to answer or plead, and to the plaintiff to amend. The statute substantially provides that, for unavoidable casualty or misfortune preventing a party from prosecuting or defending, the district court may vacate the final judgment rendered. The ruling on the demurrer was April 24, 1914, and the ten days allowed under .the stipulation expired May 4th. An answer in general denial was filed May 6th, and later, on May 11th, the application and showing to set aside the default were filed, and another answer tendered. As we understand it, the defendant at that time did not have a local attorney, and it is made to appear that defendant’s counsel was engaged in the trial of a ease in New York City. Without setting out the entire showing, it appears that the clerk for defendant’s counsel, upon receiving word
Many of the cases cited by appellee in regard to how the rights of sureties are determined, arose whe.re the sureties were accommodation or uncompensated sureties; and counsel for appellee seek to apply the rules as to such parties to a case where the surety is paid a consideration for signing the bond. A clause in Bartlett & Kling v. Illinois Surety Co., 142 Iowa 538, at page 552, states, in substance, that it
3. Plaintiff contends that, so far as the alleged breaches by plaintiff of the terms of the building contract were made grounds of the motion to direct a verdict, sustaining the motion was error, because the appellee was not, under the express terms of its contract, a surety for the performance of the building contract made by Faus and appellants, but was surety to the indemnifying contract made by the contractor Faus; and second, that, if appellee’s contract is to be held as one of surety for the performance of the building contract, sustaining the motion, so far as on the grounds above referred to, was error, because: There was no proof that the amounts paid by appellants exceeded in value “85 per cent of all work completed and all materials' on the ground, ’ ’ at the time the payments complained of were made; that no prejudice to appellee is shown to have resulted therefrom; that the final payment was not made until after the contractor had abandoned the contract; and that no prejudice, resulted from the failure to secure the architect’s certificates before payments were made; and it does not appear that the’payments were made for less than the value of the labor and the materials at the time of their making.
Appellants also contend that, so far as the alleged breaches by it of the conditions of the indemnity contract itself were made grounds of the motion to direct, sustaining
On the other hand, appellee contends that, because of plaintiff’s notice of forfeiture to the defendant surety company, and its demand on defendant that it furnish sufficient money to complete the building in accordance with the contract, or that the company complete the same under the conditions of the bond, and because a condition of the bond provides that, in case of default on the part of the contractor, the surety shall have the right, if it so desire, to assume and complete the contract, therefore the understanding of the parties was that defendant was surety upon the building contract, and that the defendant company was not surety only to the indemnifying contract made by the contractor.
“If’ the said principal shall well and truly indemnify and save harmless the said obligee from any pecuniary loss, ’ etc.
Plaintiffs state their proposition at this point in this 'way: That “to indemnify” means “to secure against loss, to save harmless, to make good, to reimburse; ’ ’ and that there is no liability of the principal or surety on indemnity bond until there has been an actual expenditure by the obligee which has not been repaid, citing Cousins v. Paxton & Gallagher Co., 122 Iowa 465; Finley v. United, States Cas. Co., 113 Tenn. 592 (83 S. W. 2); Frye v. Bath Gas, etc., Co., 97 Me. 241 (54 Atl. 395); Burke v. London G. & A. Co., 93 N. Y. Supp. 652; Maloney v. Nelson, 144 N. Y. 182, 186 (39 N. E. 82); American E. L. Ins. Co. v. Fordyce, 62 Ark. 562 (36 S. W. 1051).
As to the distinction between indemnity and guaranty contracts, appellee states the rule, citing cases in support thereof, that, in an indemnity contract, a promise is made to protect the promisee against the consequences of some act which he has performed, or is about to perform; whereas, in the latter case, a promise is made to protect the promisee against some act which is to be performed by a third party. The Cousins case, supra, decided by this court, is in point. In American E. L. Ins. Co. v. Fordyce, supra, it was held .that the difference between a contract of indemnity and one to pay legal liabilities, is that, upon the former, an action cannot be brought and a recovery had until the liability is discharged; whereas, upon the latter, the cause of action is complete when the liability attaches. The distinction thus pointed out is the element which distinguishes the bond in suit, especially as to plaintiff’s claim for a refund of money paid by it, from bonds which are given to secure the performance of a building contract. The liability of the defendant surety company attached when Faus, as the principal in
Under the evidence, the bond was not breached so much because of the failure of Faus to ’ complete the contract as by his failure to make the refund, and the payments specified in a bond or’ contract for the repayment or refunding of whatever amount of money may be due from a contractor to an owner after the contract has been either closed up or abandoned. There is no cause of action until after the transactions between the owner and contractor are ended and the contractor has breached his contract to repay; and,- in such a case, breach of the provisions of the contract by the owner is not of so much consequence to the surety upon the indemnifying bond, except in so far as such a breach enlarges the indemnity otherwise to be paid, for which the surety upon such indemnifying bond may be liable. It would seem, then, that the alleged breaches of the building contract
“$12,000, subject to additions and deductions as herein-before provided, and that such' sum shall be paid by the owner to the contractor in current funds and only upon certificates of the architect as follows: 85 per cent of all work completed, and all materials on the ground to be computed in value on or about the first of each month, and payment made for the same upon proper certificates of the architect. ’ ’
It would seem that the cost of this building was not limited to $12,000, but might include more, if alterations which increased the cost to that extent were agreed to. The cost was to be $12,000, subject to additions, and was to be paid, 85 per cent of all work completed and all materials on the ground, whether the 85 per cent exceeded $12,000 or not. We think a proper construction of these words is that the 85 per cent applies to the “work completed and all materials on the ground,” and is not limited to the $12,000
“The contractor shall refund to the owner all moneys that the latter may bé compelled to pay in discharging any lien on said premises made obligatory in consequence of the contractor’s default.”
The material had been furnished and the work had been completed to such an extent that the total payments made at any time up to the time the contractor abandoned the work did not exceed 85 per cent thereof; and the owners doubtless believed that, in order to get their building, they had to keep on paying so long as that condition existed, and relied upon their contract for a refund, the payment of which refund they took a bond to secure. It may be remarked, in passing, that it seems clear that the contractor took the contract to build for less than he could afford to do.
Graves v. Merrill (Minn.), 70 N. W. 562, was a somewhat similar ease, in which it was held, substantially, that, although the amount paid by the owner was more than 85 per cent of the contract price, as there was neither finding nor evidence that such payments at any time exceeded 85 per cent “.of the total amount of materials and labor furnished there at the building,” there was no overpayment.
The record shows that the full cost of the material and
If the contractor had stopped the work when first begun, the oAvners could have proceeded to complete it, and require the contractor and his surety to pay the cost over the contract price, and in that ease the cost and loss would have
“The surety may not stand upon .the strict, letter of its undertaking and demand to be released therefrom for any and every variation in the terms or the performance of its principal's contract, with reference to which the surety’s agreement is made, but it may insist upon the compliance with requirements, clearly expressed, which are made the condition to liability.”
As to appellee’s claim that payments were made which were not made on certificates of an architect, we think the question is ruled by Getchell & M. Lbr. Co. v. Peterson, 124 Iowa 599; Getchell & M. Lbr. Co. v. National Surety Co., 124 Iowa 617.
Other questions are argued, but we think those discussed are decisive of the case, and it follows therefrom that the judgment must be reversed, and, under the stipulation, judgment will be entered in this court for the same amount rendered against the contractor Faus, which was $3,958.60, and interest will be computed at 6 per cent from December 14, 1914, the date of the judgment against Faus. Upon payment by appellee it will be subrogated as provided in stipulation.— Reversed.
Not officially reported, because nullified on rehearing, by equally divided court.