161 A. 632 | Pa. Super. Ct. | 1932
Argued April 21, 1932. In this action on an additional bond, given by a contractor, as principal, and the defendant, as surety, to protect laborers and materialmen, the main question is whether the bond was intended to cover materials furnished by the use-plaintiff prior to the date on which it was executed. The court below decided the questions of law raised by the defendant's statutory demurrer in its favor on the ground that the bond was intended to operate prospectively only; from the judgment thus entered for defendant the use-plaintiff has appealed.
The facts as set forth in the statement of claim are: The Township of Mount Lebanon, the legal plaintiff, entered into a contract on October 8, 1928, with the Southern Construction and Supply Corporation for the grading, paving and curbing of a road in that township. Defendant, as surety, executed the usual performance bond. The use-plaintiff, a cement company, sold the contractor, between October 14 and October 17, 1929, cement which entered into the construction. Under the use-plaintiff's credit terms, the contractor was entitled to a period of thirty days within which to make payment. The contractor never paid for the cement, but subsequently went into bankruptcy, and the use-plaintiff has received only a three per cent dividend from the bankrupt estate.
On November 12, 1929, the contractor, as principal, and defendant, as surety, entered into an additional bond in the amount of $35,488, naming the Township of Mount Lebanon as obligee and conditioned that the contractor, "shall and will promptly pay, or cause to *212 be paid, to any person or persons, co-partnership or co-partnerships, corporation or corporations all sums of money which may be due for labor performed or materials supplied and furnished in and about the performance of the work covered by the said contract."
The construction work was accepted by the township on December 30, 1929. In form, this bond is similar to the one considered by us in City of Pittsburgh to the use of The Bessemer Cement Corporation v. Commercial Casualty Insurance Co.,
We are not convinced that the court below was justified, under all the averments in the statement and the reasonable inferences arising therefrom, in finally disposing of this case upon the rebuttable presumption *213 that bonds are intended to secure losses sustained after, and not before, their execution.
In the first place, we think the lower court should not have ignored the averment as to the credit terms of the use-plaintiff. The statement of claim alleges that under these terms the contractor had thirty days in which to pay for the cement, which would make the obligation mature on November 17, 1929 — five days after the execution of the bond. If, in fact, these credit terms were a part of the contract between the use-plaintiff and the contractor, the latter was not in default until November 17, 1929. It would seem reasonable that the definitive point of responsibility should be the time when the obligation was due and payable, and not when the materials were furnished. Nor is it a valid objection, as urged by defendant, that the materials could not have been furnished in reliance upon the bond; they may have been furnished in reliance upon a promise of a bond to be executed in the future; but even if such were not the case, the matter is immaterial, as no consideration need move from the materialmen. The sole issue is whether a bond was in fact given under which materialmen have a right of action. Nor are we impressed by the case of U.S. Fidelity and Guaranty Co. v. Fultz,
Again, we are not convinced that the bond was intended to have only a prospective effect. In support of its decision the court cites Tarentum Realty Co. v. *214
McClure et al.,
This is undoubtedly the general rule of construction, but, as the presumption is rebuttable, a court should consider any facts which might tend to establish a contrary effect. The true intent of the bond is to be determined not only from its language, but from all the surrounding circumstances: Commonwealth to Use v. Fidelity Deposit Company of Maryland,
The court there held a surety company upon the additional bond of a trustee liable for a loss resulting from the misconduct of the trustee previous to the date of the bond. In reaching this determination it took into account not only the language of the bond itself, but the application made by the trustee for the bond and all the surrounding circumstances, including the character of the trust, its indefinite duration, the purpose for which the bond was given, and the investigation made by the surety company prior to its execution. We think these and similar matters should be investigated and considered in this case before it is finally disposed of.
It is to be noted that the bond is general in its terms, referring to the execution of the contract and requiring that the contractor pay all money which may be due for labor performed or materials supplied and *215
furnished in and about the performance of the work. Since it was required by statute, and since that statute specified only one additional bond, it would seem natural to infer that the parties furnishing the bond intended it to cover any and all obligations arising in the course of the job. It has several times been held that where a bond definitely fixes a period during which the principal is to do, or refrain from doing, something, it covers all defaults during that period, even though they may have occurred before the date on which the bond was actually executed. See, for example, McMullen et al. v. Winfield Building Loan Assn.,
Such a construction is particularly reasonable if it gives practical effect to the bond. It is a common sense rule of construction to interpret contracts so as to give them life and force. The bond here was executed November 12, 1929 — within two months of the *216 completion of the contract — although the contract had been in operation for more than a year. It is quite possible that if the facts are fully developed it will be found that most, if not all, of the materials necessary for the job had been furnished before the bond was given. If such should prove to be the case, the normal inference would be that the bond was intended to operate retrospectively, as it is not to be assumed that the parties intended to enter into a hollow obligation.
A similar example may be found in Hurlburt v. Kephart,
Another proper subject of inquiry would be the approximate cost of the labor and materials involved in the construction. The bond is in the sum of $35,488. If it be found that this amount is approximately the cost of such labor and materials, it might reasonably be inferred that the surety company intended to guarantee payment of the total cost and not merely such costs as might accrue after the execution of the bond. The same inference would follow if, as is often the *217 case, the bond was drawn in double the amount of the cost.
A somewhat analogous case is that of Commonwealth, to use, v. Allen,
These considerations are presented, not to control, or even indicate, what the final determination of the court below should be, but as furnishing suggestions for its guidance when all the circumstances of the case have been developed. We merely determine now that the court was not justified in limiting itself to the language of the bond and the presumption relied upon in support of its decision. As was said in Aldridge Co., for use, v. Eshleman,
The judgment, in favor of the defendant, is reversed and the record is remitted for further proceedings under the twentieth section of the Practice Act not inconsistent with this opinion.