United States v. Tillotson, 1 Paine 305

United States v. Tillotson

1 Paine 305 | U.S. Circuit Court for New York | 1823

THOMPSON, Circuit Justice.

The rules and principles of law by which the rights of the parties in this case are to be determined, seem not so much to have been drawn in question upon the argument, as the correct application of those principles to the contracts and circumstances embraced in the case. The defendants are prosecuted as the sureties of Samuel Hawkins, upon a bond duly executed by them, bearing date the second day of November, in the year one thousand eight hundred and nineteen, conditioned for the faithful performance by Hawkins of a contract entered into by him with the proper department of the government for building a fortification at Mobile Point, in the state of Alabama.

It is contended on the part of the defendants, that they are exonerated from all responsibility as sureties, by reason of a subsequent contract entered into with Hawkins, varying essentially as is alleged, the stipulations in the contract, for the performance of which the defendants became sureties. Other grounds were raised and urged on the argument, upon which the sureties claim to have been exonerated from all responsibility, but the one principally relied upon, is the second contract I have referred to. This contract was entered into without the knowledge or consent of the sureties, and nothing was aft-erwards done'by them, in any manner to ratify or confirm the same. The general principles of law applicable to this class of cases, are too well settled and understood, to require authorities or illustration in their support. Sureties cannot be made responsible beyond the scope of their engagement. Any agreement between the creditor and principal, which varies essentially the terms of the contract, without the consent of the sureties, will exonerate them from their responsibility. Any new debt incurred, or the demand enlarged, or any act done to the injury and prejudice of the surety will discharge him from all liability. These are undeniable and controlling rules, and universally admitted, both in courts of law and equity. And the only inquiry before us, is as to their application to the case under consideration.

The bond executed by the defendants, and upon which this suit is brought, contains several recitals stating substantially, that Benjamin W. Hopkins, on the 13th of May, 1818, entered into a contract with Joseph G. Swift, chief engineer of the United States, to construct, or cause to be constructed, a fort, at such place in the vicinity of Mobile Point in the state of Alabama, as the United States by any engineer might direct, and refers to that contract for more particular information respecting it. That Hopkins has since died, and that his administrator had duly assigned and transferred to Samuel Hawkins, the said contract, with all its conditions, stipulations, and advantages, thereunto in any wise ap*186pertaining. And it is admitted in this case, that Hawkins was acknowledged by the authorized agents of the United States to be the lawful assignee of the contract, and that he entered upon the performance and execution thereof, under the superintendence and direction of the agents of the United States. And on the 7th day of June, 1820, the second contract was entered into between Col. James Gadsden, then acting as the agent for fortifications at Mobile Point, and Samuel Hawkins, the legal effect and operation of which as is contended, is to discharge the sureties from all responsibility. Such are the general outlines of the case; and I now proceed to notice more particularly the points that have been drawn into discussion.

The first inquiry which seems naturally to present itself is, the effect of the new contract upon the one for the performance of which the defendants became sureties. It is objected however on the part of the plaintiffs in the first place, that this second contract is not binding on the United States, not having been made or ratified by the proper authority. No reference was made on the argument, to any act of congress pointing out and regulating the mode and manner, in which contracts of this description are to be made; nor am I aware of any law designating any particular mode in which it is to be done. The contract upon its face purports to have been made by competent authority. It expressly declares, that the agreement was entered into and concluded on the part of the United States by Capt. James Gadsden of the engineer corps, in pursuance of instructions from the secretary of war. In addition to which the case expressly states, that it appeared in evidence, that after the execution of the bond, and whilst the said Samuel Hawkins was proceeding in the execution of the contract assigned to him, Col. James Gadsden, then acting as the agent for the fortifications at Mobile Point, and thereto duly authorized by the war department, entered into the contract, &c. Here we find it distinctly admitted, that the agent who acted in behalf of the United States was duly authorized to make the contract. And it is worthy of remark, that the ease was made up by the parties without any trial, upon facts and documents agreed on and admitted by the parties, so that no mistake or misapprehension could have occurred, either with respect to the purport of the evidence or its competency to establish the fact; and if any thing farther could be necessary to show that this contract was binding on the United States, the case furnishes sufficient evidence that it was ratified by the proper department. For by Schedule B, it appears that after the 7th of June, 1820, the date of the second contract, money was advanced to Hawkins, and credit given to him for work performed according to the stipulations in the second agreement.

I shall therefore assume it as undeniably established, that this second contract was duly and legally made, and is binding on the United States, and the next inquiry will be, whether any and what alterations are thereby made in the original agreement Although it was urged on the argument by the plaintiffs’ counsel, that there was no material difference between the old and the new agreement, it appears to me impossible to read the two, without at once discovering the most essential difference. The only points of difference, that I deem it necessary to notice here, are first, the substitution of tapia for brick in the formation of the revetment walls, and the reduction of the price from eleven to ten dollars per cubic yard, and secondly, the new stipulation as to the price for excavation.

It was contended on the part of the plaintiffs, that under the original contract with Hopkins it was left in the discretion of the engineer to direct of what materials the wails of the fort were to be made. If the contract could by possibility admit of such construction, the mind would be irresistibly led to the conclusion, that such an incautious and unguarded stipulation must have crept into the-contract by inattention or mistake. It is inconceivable that any man would knowingly place himself so entirely at the will and pleasure of another, in a contract of such magnitude, and expose himself to the hazard of being required to build the walls of this fort of marble instead of brick, at the price of eleven dollars per cubic yard. But the contract admits of no such construction; and it is inconceivable to me, how the learned counsel could have been led into such a palpable misconception of the contract. I can account for it in no other way, than that he must have been misled by the recital in the bond. It is true that in reciting the contract with Hopkins, it is stated that he was to construct the fort of such materials, and in such manner, as should be prescribed by the engineer, as by the contract, (reference being thereunto had,) may more fully appear. On reference to the contract, this appears clearly to be a misre-cital. The contract only provides that the materials should be of such quality as the engineer should direct, but the contract throughout manifestly shows that the walls were to be built of brick. It expressly provides that the contractor was to receive eleven dollars for every cubic yard of brick masonry. And that such was the understanding of all parties is manifest, both from the special provisions, and general scope of the second contract. In reciting the contract with Hopkins it is expressly stated, that the fortification was principally, as to the revetment walls, to be built of brick, and that Col. Gadsden had received authority to substitute for the building, erecting, and constructing the revetment walls of the fortification, in the place of brick, a certain composition called tapia, being a species of artificial stone formed by a proper union in equal proportions, of sharp sand, fresh lime, and oyster shells, with water sufficient to produce ad*187hesion. This tapia to be substituted for brick, in such portions of the walls as should be designated by the superintending engineer. And Hawkins stipulates to receive ten dollars for every cubic yard which should be built of tapia, instead of eleven dollars for every cubic yard agreed to be paid for mason or brick work, as mentioned in the agreement between Swift and Hopkins. Can there then be the least possible doubt, that by the first contract the principal walls of the fort were to be built of brick, and that by the second contract, tapia was to be substituted in the place of brick, and that the price per cubic yard was to be reduced from eleven to ten dollars? If this is not a material alteration of the contract for the performance of which the sureties became bound, it is difficult to say what would be deemed a material alteration. But whether this alteration was for the benefit or to the prejudice of Hawkins, cannot enter into the question. This was a matter upon which the sureties had a right to judge for themselves; and it was not in the power of the plaintiffs to transfer the surety-ship from one contract to another, without the consent of the sureties. The first contract became functus officio, so far as it was altered by the second. The latter, with the adopted part of the old contract, became the one to which the plaintiffs must look for pérformance of the stipulations between the parties. Both contracts could not be in force at the same time, so far as they are incompatible with each other; and to say that the latter was not in force and binding, would be denying to the parties the right of modifying and altering their own engagements.

But admitting the first contract in part to remain in full force, as to Hawkins, the second was an essential alteration or modification of it, and cannot be binding on the sureties in this new shape. Such a rule would be placing it in the power- of the principal to draw his sureties into responsibilities they never assumed, contrary to the established doctrine of the law in relation to principals anti sureties. If Col. Gadsden, as appears by the contract itself, and as the case expressly admits, was duly authorized to make the second contract, no subsequent ratification by the war department was necessary. And the case furnishes no evidence of any such usage or practice, nor has any law been referred to requiring this to be done. The letter therefore written by the secretary of war to the sureties, to declare their assent or dissent to the contract, even if it had been received, could have had no effect upon the contract; it was at this time complete and binding on both parties. The sureties were not bound to give any answer. They had a right to remain silent, and avail themselves of the legal effect of the second contract upon their responsibility. And besides, it appears from the schedule already referred to, that at the very date of this letter, (July 10th,) the work at the fortification was going on under the new contract, for credit is given according to the modification by the second contract, which shows the understanding of the parties, that the contract was complete without the ratification of the secretary of war.

It is said, however, that it is reasonable to infer that the contract was made subject to the ratification of the secretary of war, because such was the provision in the contract with Hopkins. Even admitting this reservation in Hopkins’s contract, it does not warrant the conclusion drawn from it, but rather affords a contrary inference that a special reservation in the contract for such ratification was necessary. Besides, the instructions to General Swift might have been very different from those to Gol. Gadsden. What the former were, does not appear. But the case shows expressly that the latter was duly authorized by the war department to enter into the contract, and upon the face of which it is stated, that he acted in pursuance of his instructions. The reservation however, in the contract with Hopkins, is not as it seems to have been understood by the counsel; it only reserves to the secretary of war his approval of the sureties given for the faithful execution of the agreement.

The second point of difference between the two contracts which I am to notice, is that which relates to the price for excavation. In the contract with Hopkins, the stipulation on the part of the United States, is to pay for every cubic yard of earth excavated and removed, as aforesaid, eighty-three cents and eight-tenths of a cent. To what part of the contract the aforesaid refers, is not easily perceived. There is no provision respecting the excavation and removal of earth, except what is implied under the terms “ditches” and “embankments,” in that part of the contract which declares that the fort shall be constructed of such walls, ditches, embankments, buildings, parts, and dimensions, as the engineer may from time to time prescribe. And that it was understood to apply to this part of the works, will appear from the certificate of John Bliss the superintendent, being one of the documents referred to in the case. He certifies, that 7,043 cubic yards of earth had been excavated from the ditches of the fortifications at Mobile Point by B. W. Hopkins, for the quarter ending 30th June, 1S19. Upon which, an account is made out as follows: “7,043 cubic yards of earth at eighty-three cents and eight tenths of a cent, agreeably to contract, five thousand nine hundred and two dollars and three cents,” which was duly paid. In the last contract we find the following clause relating to this subject: “The party of the second part (Hawkins.) hereby agrees, that the following shall be the construction of that part of the contract entered into by Joseph G. Swift and Benjamin W. Hopkins,- which re*188lates to the excavation, viz.: The eighty-three and eight-tenths cents, allowed for each cubic yard of earth excavated and removed, applies to each cubic yard composing the remblais in its finished state, embracing the several stages of excavation, removing, putting up, ramming, sodding, dressing off, and every thing necessary to complete the remblais; and that the monthly receipts for labour performed in reference to this part of the contract, will be by relays, or for each cubic yard of earth excavated and removed, in proportion to the value the same may bear to its finished state.” Although this purports to be a construction of the first contract, no one can read the two provisions without at once perceiving a manifest difference, and that the labour to be performed by Hawkins is increased, and the monthly payments therefore reduced.

Without noticing in detail, the particulars in which the contracts disagree in this respect, X shall only mention one about, which there can be no difference of opinion, viz.: the sodding of the remblais. No possible construction of the first contract could impose this upon the contractor.. It is therefore an increased burden put upon him, and one too of no inconsiderable importance as to expense, which, if the sureties were bound to see done, would be increasing their responsibility beyond their engagements, and enlarging the demand against them without their consent.

But it is said that the defendants are not called upon to perform specifically the contract for the performance of which they become sureties, or for the payment of damages for the non-performance; but to reimburse the advances made to Hopkins and Hawkins, beyond the amount they were entitled to receive for work done and materials found. And for this it is alleged, there is an express stipulation in the bond' upon which this suit is founded. A little attention to the provisions in the bond, and in the contract with Hopkins, will show that this claim cannot be enforced against the sureties. By the bond the defendants among other things, became bound that Hawkins should well and faithfully account to the war department of the United States, for all such sums of money theretofore advanced by the United States, under and in virtue of the late-mentioned contract, and also for all such further advances as might thereafter be made to facilitate the execution of the contract. If the United States have made any advances not required, or warranted by the contract with Hopkins, they have been made on their own responsibility, and for which the defendants cannot be held accountable. They only stipulate that Hawkins shall account for all advances under and by virtue of the contract. The case furnishes no evidence that the sureties were apprized of what advances had I been made to Hopkins, or that they had any knowledge of the state of the accounts between him and the United States. The sureties were bound only to look to the contract, to learn the extent of their responsibility. And they are entitled to all the guards and checks it contains to shield them from risk and hazard. This was doubtless taken into their calculation when they became sureties, and the United States were bound not to transcend these limits, and thereby expose the sureties to risks they never meant to assume.

We must then look to the contract to ascertain what advances were authorized; and the only stipulations we there find upon this subject are, that the United States will pay, or cause to be paid, to Benjamin W. Hopkins, the amount of value of every cargo of materials, which the engineer aforesaid may pronounce to be delivered of proper quality, at or near the said Mobile Point, for the construction of the fort as aforesaid—the said value and amount to be considered in part payment of the work aforesaid: provided always, that the said Benjamin W. Hopkins shall and do deliver to the said engineer, the invoice of the materials so. delivered as aforesaid. And that the United States shall pay, or cause to be paid, to the said Benjamin W. Hopkins, the sum of twelve thousand five hundred dollars, if demanded at the close of every month after the' work shall have been commenced: provided always, that the said work so done at the close of every month as aforesaid, shall amount to twelve thousand five hundred dollars, exclusive of the materials used in the construction of the. said work. ■ The sureties have a right, and doubtless did take into their calculation, that these checks would be strictly adhered to; and if so, the risk they incurred was comparatively trifling. No advances were to be made for materials until they were deposited at the place where the fortification was to be built, and duly approved by the superintending engineer. All the sureties had therefore to see to, with respect to the materials, was their faithful application to the contemplated works. This was a mere guaranty of the integrity and good faith of the contractor, and no advances on account of labour were to be made until the work was done. So that no risk whatever was here incurred.

The amount claimed in this suit is one hundred and seven thousand two hundred and twenty dollars thirty-four cents, of which sum ninety thousand nine hundred and seven dollars twenty-nine cents, is the balance standing against Hopkins. No detailed statement of the account with him accompanies the case. The items therefore of which it is composed, and the grounds upon which this balance is struck, does not appear. Enough however is shown by the documents, to make it evident, that a great proportion of this balance is made up of advances, not required by the contract with Hopkins; being neither for ma*189terials delivered, nor work done upon the fortifications. Most of the expenses incurred, and for the payment of which the advances were made, related to preparations for commencing the works, as will be seen by reference to the documents accompanying the case; and if I am correct in the construction I have given to the engagement of the sureties, they are not responsible for these advances. The case does not furnish materials to enable me to say to what extent the advances were made, under and by virtue of the contract. And the advances on account, and drafts for materials and labour properly falling within the contract, are so blended with others, that it is impossible to separate them. -Thus the first draft of the 15th of November, 1818, for three thousand dollars, purports to be for materials and passage-expenses of men. &c. That of the first of December, in the same year for ten thousand dollars, is for materials and expenditures on account of fortifications, &c. So also it appears from a certificate of Col. Gadsden upon some of Hopkins’s accounts, and which was intended for and received as an authority for an advance of upwards of thirty thousand dollars. The items consisted of invoices of provisions, clothing, lumber, transportation of men, construction of accom-odations for them, expenses of brick-yards and pay of men employed at them; expense of excavators, their provisions and transportation, and quarters for their accomodation. Advances to a considerable amount appear likewise to have been made for brick at the kilns, and before delivery as provided by the contract. And to hold the sureties responsible for all these advances, would certainly be extending their liability far beyond the scope of their engagement. The plaintiffs are bound to make out distinctly the extent of the defendants’ liability.

But it is said the defendants are responsible for all advances made to Hawkins without limitation or qualification: that their undertaking for him in that respect is different from that which relates to advances to Hopkins. For the purpose of examining the soundness of this distinction, we must recur again to the bond, and look at the whole clause, which embraces both objects. It reads thus: He (Hawkins) “shall well and faithfully account to the war department for all sums of money heretofore advanced by the United States under and in virtue of the late mentioned contract,” (thus far relates to advances to Hopkins,) “and also for all such further advances as may hereafter be made to facilitate the execution of the contract.” A fair construction of the latter clause, does not make it broader or more extensive than the former. The recitals in the bond showed, that the contract had been assigned to Hawkins, and the object of the arrangement was to put Hawkins in the place of Hopkins under the contract. And he is to account for such further advances as may be made to him. Such advances, necessarily imply like advances to those before made to Hopkins, and of course under the same limitations and restrictions. It was urged on the argument, that there were no limits, but the discretion of the war department, to such advances if they would facilitate the execution of the contract. But this is not a natural or fair construction of the clause. No new object or inducement was presented to justify the conclusion, that more liberal advances were to be made to Hawkins, than Hopkins by his contract was to have made to him. Both were to facilitate the execution of the contract, by furnishing the contractors with funds to pay for the materials as delivered, and to enable them to pay off the workmen monthly. The sureties cannot therefore be made responsible for advances to Hawkins, except for materials' delivered at the place, and for work actually done. It is not understood by the contract, that the materials were to be delivered to the agents of the United States so as to become their property, and remain at their risk. The property still continued in the contractor, and the sureties were responsible for its faithful application to the building the fortification according to the contract. Whatever work therefore has been done according to-the contract, the plaintiffs have had the benefit of it, and there is no complaint that the materials delivered have been misapplied. Upon this view of the case then, there is no foundation for any claim upon the sureties.

It has been further urged in discharge of the sureties, that by the last contract, Hawkins relinquished all claim to an allowance to which he was entitled, in consequence of the United States neglecting to have an agent at Mobile Point in the fall of ISIS, to point out the site of the fortification, and to give the necessary instructions to Hopkins. The case states, that Hopkins in his lifetime did make a claim to a considerable-amount on this account. And the very fact, that a relinquishment of it by Hawkins was-inserted in the new contract, would seem an implied admission, that some importance-was attached to it. And if Hawkins has by any stipulation with the plaintiffs or their agent, relinquished any benefit to which he was entitled under the contract, it was an act to the prejudice of the sureties.

The case has thus far been considered under the supposition, that the original contract with Hopkins remained valid and binding, except so far as it was altered by the new contract with Hawkins; and this-may be true as between the parties themselves. But as it respects the sureties, very different considerations are presented. The-law is particularly watchful over the rights of sureties; and will not countenance any transactions between the parties that shall lessen the ability of the principal to comply with his contract, or that shall alter the rights of the parties, or enlarge the demand to the prejudice of the sureties. To permit parties to modify and alter their contracts' *190as they please, and to hold the sureties answerable for the performance of such parts as were not altered, would be transferring their responsibility without their consent from one contract to another. The contract by the modification and alteration becomes a new and a different contract,'and one for which the sureties never became responsible.

[This judgment was reversed'by the supreme court. 12 Wheat. (25 U. S.) 180.]

Under these views of the case, I am satisfied that the defendants are not answerable for the claim set up against them, and X might here dismiss the cause. But it may not be amiss briefly to notice some other points urged upon the argument in support of their defence, and which would certainly be entitled to great weight, were it necessary to draw them into examination and to decide upon them.

It was contended, that the death of Hawkins before the expiration of the time limited for the completion of the work, put an end to the contract and discharged the sureties. Without expressing any opinion upon this point, the facts- in the case present an alternative in exoneration of the sureties, that cannot easily be surmounted. If the contract survived, its performance devolved upon the personal representative of Hawkins, who, it appears, offered to go on and.execute it, but was refused permission so to do by the agent of the United States; saying he must have instructions from the war department for that purpose. The offer was forwarded to the department, and no answer given, which was equivalent to a refusal. Why this offer was refused is not readily perceived, as by the contract no advances were to be made for materials until delivered, or for work until performed, so that no great risk would have been thereby incurred. And by the recitals in the bond upon which this suit is founded, it would appear to have been the understanding of the parties, that upon the death of the contractor, the obligation, and duty of completing the contract, fell upon his personal representatives. The recital to which I allude is as follows: “Whereas the said Benjamin W. Hopkins has lately died intestate, without having completed the contract, by reason whereof the obligations of performing the said contract, on the part of the said Benjamin W. Hopkins, deceased, has devolved .upon the person or persons who may be authorized to administer the personal estate of the said intestate.” We find also the same admissiop in the second contract, made between Col. Gadsden and Hawkins. It recites the death of B. W. Hopkins, and the granting of administration to Roswell Hopkins, who as administrator, was legally authorized to assign the contract to Hawkins.

Again, it was urged that all obligations growing out of the contract are discharged, by congress withholding the appropriation necessary to complete the works. By the. original contract, the fortification was to be completed by the first of July, 1821. By the act of the 3d March, 1821, only thirty thousand dollars was appropriated to this object, and it is admitted, that no more could have been applied to it until a further appropriation was made; and the case states, that six hundred and ninety thousand dollars was necessary to complete the fortification. If this act had made it unlawful to proceed further with the works, it might well be urged that the contractor was discharged from all obligations and accountability growing out of the contract, the performance having become illegal by a legislative act. But as the necessary appropriation was only in part withheld, the operation of the law probably ought to be considered only a temporary suspension of the execution of the contract. And should no further appropriation be made, the contract- or, were he living, could not be called to account in any manner for a breach of contract.- The plaintiffs could not certainly be permitted to stop short when they pleased, and demand a reimoursement of the money advanced. Even admitting that Hawkins was accountable for all advances to Hopkins, there could be no violation of his engagement in this respect until the expiration of the term allowed for completing the contract; and if the plaintiffs by their own act, have either suspended or entirely defeated the performance, it does not lie with them to allege a breach on the other side.

I am accordingly of opinion that the defendants are entitled to judgment.