31 A.2d 453 | Pa. Super. Ct. | 1943
Argued March 10, 1943. Plaintiff, maintaining that the bond executed by defendant as surety inured to its benefit, brought this action to recover for materials for which it was not paid by the principal, a building contractor. The court directed a verdict for plaintiff (the amount is not in dispute) and judgment was entered thereon. Defendant contends that plaintiff is not a third party beneficiary under the bond and that the court erred in refusing to enter judgment in its favor n.o.v. The precise questions raised in this appeal have not been before our appellate courts but in the application of settled principles, the judgment will be affirmed.
Sylvia O. Ferry on June 28, 1937, entered into a contract with Granite Construction Company for the construction of a dwelling house in Harrisburg at a cost of $17,000. Immediately before the execution of the contract the parties entered into a stipulation against the filing of mechanics or other liens. The stipulation was filed of record in the prothonotary's *219 office in Dauphin County on June 29, 1937, before any labor or materials were furnished. On the same day a bond in the sum of $16,000 was delivered to Sylvia O. Ferry as obligee executed by the Granite Construction Company as principal and the defendant as surety. The bond recites that the "contract is hereby referred to and made a part hereof as fully and to the same extent as ifcopied at length herein." The condition of the bond is: "That if the above bounden Principal shall well and truly keep, do and perform, each and every, all and singular, the matters and thingsin said contract set forth and specified to be by the said Principal kept, done and performed at the time and in the manner in said contract specified, and shall pay over, make good and reimburse to the above named Obligee, all loss and damage which said Obligee may sustain by reason of failure or default on the part of said Principal, then this Obligation shall be void; otherwise to be and remain in full force and effect." Under "General Conditions" the building contract provides: ". . . . . . the Contractor shall provide and pay for all materials, labor, tools, water, power and other items necessary to compete the work." (Italics added.)
Since the decision in Com. v. Great American Indemnity Co.,
This doctrine of liberal construction has special application in favor of donee beneficiaries under the declared public policy of the State that they who furnish labor and materials on public construction shall be paid. Act of June 23, 1931, P.L. 1181, 8 PS 146. However as to private structures the parties are free to make any kind of contract they choose, or none at all. And though, as Professor Corbin suggests, "social policy" approves the practice of protecting all laborers and materialmen, courts of their own motion may not write the provision into a private surety bond. The covenant in such bonds must be construed to mean what the parties intended as ascertained from the language used. Cf. Equitable Trust Co. v. Surety Co.,
It is appellant's contention that the `general conditions' of the contract were intended merely as a division of responsibility between the parties to it and that the bond by incorporating the contract afforded protection against loss to the obligee only. The difficulty with this position is that the bond, by including the *221 contract in its terms, insured performance by the contractor of "each and every, all and singular, the matters and things in said contract set forth" and the contract specifically provides that "the Contractor shall provide and pay for all materials". To "pay for" materials was as much an obligation of the contractor as to "provide" them.
A corporate surety in business for profit is not a `favorite of the law.' "While such corporations may call themselves surety companies, their business is in all essential particulars that of insurance. Their contracts are usually in the terms prescribed by themselves, and should be construed most strictly in favor of the obligee", (Phila. v. Fidelity Deposit Co.,
In Fleck-Atlantic Co. v. Insurance Co.,
Raising a second question, appellant contends that Mrs. Ferry prejudiced the surety by overpaying the contractor and therefore it as surety is relieved from liability to the plaintiff in any event. The contract required payments in specified amounts as the work progressed. The contractor abandoned the work before completion but plaintiff furnished the material before the default. There is testimony that the contractor at the time of the default had been paid more than $2,000 over and above the total amount then due under the terms of the contract. Since the verdict was directed against the defendant, it is entitled to the benefit of this evidence (note 12, 6 Stand. Pa. Prac., p. 74, § 89) and as between the obligee and the surety, undoubtedly the overpayment was prejudicial. There *223
is a conflict of authority however as to whether the prejudice affects the claims of donee beneficiaries. Under the better rule the surety is not released. The theory is that the liability created by the bond in favor of donee beneficiaries is independent of that assumed as to the obligee and cannot be affected by the subsequent acts of the obligee. "The donee beneficiary acquires a right at once upon the making of the contract and that right becomes immediately indefeasible": Loganv. Glass,
Judgment affirmed.