137 Iowa 490 | Iowa | 1908
On June 20, 1900, the American Bridge Company entered into written contracts with Yan Burén county to erect two steel bridges known in the record as the “ Selma Bridge ” and the “ Kilburn Bridge.” The agreed price of the Selma Bridge was $11,950 and of the Kilburn Bridge was $14,950, the former to be completed on November 19, 1900, and the latter on December 1, 1900. In other respects the two contracts are substantially identical in their terms and conditions, to which, so far as material to the present controversy, more specific mention will be hereinafter made. To secure the faithful performance of these contracts, . the bridge company executed and delivered to the
I. The bonds in suit attach certain conditions to the liability of the surety company, among which are the following : “ First. That, in the event of any default on the part of the principal in the performance of any of the terms or conditions of said contract, written notice thereof, with a verified statement of the facts showing such default and the date thereof, shall, within ten days after such default, be mailed to said surety at its office in the city of Chicago, No. 704 Marquette Building. Second. That no suit, action, or proceeding shall be brought or maintained against the principal or surety upon or by reason of any such default, after the expiration of four months after such default, nor,
It is the claim of appellant that plaintiff failed to give notice of the contractor’s default within the time thus fixed, and therefore this action cannot be maintained. It is also claimed that, so far as the plaintiff’s demand has reference to the construction of the Selma Bridge, the action was not begun within four months after the alleged default, and is therefore barred by the contract limitation. That the surety in a bond may prescribe reasonable conditions for notice of the principal’s default, and for the release and discharge of such bond upon failure to comply therewith, may be admitted for the purposes of this ease; but the question what shall be deemed due ■ notice within the true meaning and intent of the contract is another consideration, which requires more particular examination of the proved or conceded facts. The trial court has found that the Selma Bridge was not completed until some time in January, 1901, when a majority of the hoard of supervisors, acting individually, only, undertook to accept it, and caused the county auditor to issue warrants to the bridge company for the remainder of the agreed price of that structure, but such acts were done by the supervisors without any knowledge or notice of the fraud which had been practiced by the contractor.- The other bridge was not completed or tendered to the county until after March 1, 1901. Prior to that date, and immediately prior to February 14, 1901, the wrongful substitution of the lighter and less valuable materials in the construction of the bridges was discovered by the county, and thereupon and within less than ten days it caused written notice of the fact to be given to the surety company. Unless the action of the supervisors above mentioned with respect to the Selma Bridge is to be construed as an acceptance, neither structure has ever been formally accepted, though both have ever since been in use as part of the public highway.
The contention of the appellant that the aforesaid writ
It is further argued, if we understand counsel, that the default, if any of the contractor, occurred when the inferior materials were delivered on the ground or placed in the bridges, and that, to hold the surety liable, notice thereof should have been given within ten days thereafter.
It has also often been held that, where circumstances render a condition affecting the remedy impossible of performance, it will not be allowed to defeat recovery on a meritorious claim. Such was our holding in Eggleston v. Insurance Co., 65 Iowa, 316, where the production of invoices and bills of goods destroyed was made a condition of the defendant’s liability upon its policy, and, upon a showing made that insured could not produce them, we said: “We think she was not required to do an impossible thing, and, if it can be shown that without any default or fraud on her part compliance is rendered impossible, she may recover without performing the condition.” A like condi
What shall be considered a performance so as- to entitle a party to insist upon payment of a loss within the terms of the policy depends upon the true construction of the contract of the parties. A strict interpretation of the language employed would not unfrequently prevent a recovery against the company, as no exceptions are made to the requirements to furnish the inventory, and to produce the books and vouchers. The inventory required is one strictly accurate, not approximating to accuracy, and made according to the best knowledge the party may have. Such a statement, though made out with all care and honesty and really affording the insurers all the information they could reasonably desire, would not be an inventory of the property within the literal meaning of the condition. So the nonproduction of books and vouchers destroyed by the very fire against which the party had sought indemnity would effectually defeat his claim under.the policy. Such an interpretation would be unreasonable, and cannot be supposed to have been in the minds of the contracting parties at the time the insurance was effected. The construction of these conditions should be reasonable and as near the apparent intent of the parties as may be consistent with the terms employed, taking into consideration the motive that led to their insertion in the contract, and the object intended to be effected by them.
After citing the long-established rule requiring such restrictive clauses to be liberally construed in favor of the person contracting for indemnity, the court further adds: “ If this has been found necessary in former times in order to give effect to the contract of insurance as a real, and not illusory, contract of indemnity, it is still more necessary now, when, with the multiplication of companies holding themselves out as insurance companies and bidding for -risks, legal ingenuity and practical experience and skill have been exerted to the utmost to devise terms and conditions by which the nominal underwriters may guard against a legal liability in ease of loss of the property insured bv the perils
Conditions requiring “ immediate notice ” upon the occurrence of loss or default have been held satisfied by notice given within two days to two months; the time varying with the circumstances of the particular cases. Building & L. Ass’n v. Fidelity Co., 118 Iowa, 735; Harnden v. Insurance Co., 164 Mass. 382 (41 N. E. 658, 49 Am. St. Rep. 467) ; Insurance Co. v. Scammon, 100 Ill. 644; Wooddy v. Insurance Co., 31 Grat. (Va.) 362 (31 Am. Rep. 732) ; Insurance Co. v. Gould, 80 Ill. 388; Kentzler v. Ass’n, 88 Wis. 596 (60 N. W. 1002, 43 Am. St. Rep. 934). In Peele v. Provident Fund, 147 Ind. 543 (44 N. E. 661, 46 N. E. 990), the contract of indemnity was against accidental injury, and made subject to the condition that written notice of the injury with' statement of the particulars of the accident should be given to the insurer, and that “ failure to give such notice within ten days from the date of either injury or death shall invalidate any and all claim under this certificate.” The insured person was drowned, and, while the fact of such death was known to his wife immediately after its occurrence, yet she did not know its accidental "character until more than ten days had elapsed; but, when she ascertained the truth, she acted promptly, and notice then given was held to satisfy the condition. In reaching this conclusion, the court lays- considerable stress upon the provision, similar to the one in the case at bar, which requires the notice to be accompanied by a showing of.the particulars or circumstances of the alleged default, or loss for which indemnity is claimed, and, after saying that, in the interpretation of such conditions, courts are dis
In the last-cited case payment of a life policy was conditioned upon the presentation of notice of claim and proof of death within ninety days after the decease of the insured. Knowledge of his death was not obtained by the party entitled to the insurance for nearly a year after its occurrence when she at once gave notice. In overruling
Now, in the ease at bar, we have already noticed that the alleged default in the performance of the contract was of a secret and fraudulent character. The court found — and, the evidence not being preserved, we must presume the finding correct — that the bridge company for which appellant became surety, having procured the contract, fraudulently prepared new specifications for the manufacture of the materials to be used, which, while preserving the general features of the agreed plan as to form and appearance, systematically scaled down the amount and weight of the several parts composing the bridges, so that, when completed, said structures and substructures contained less steel than' was contracted for to the amount of one hundred and thirty-three thousand, nine hundred and ninety-two pounds, valued at $4,845.24. It is thus established that- the contract was violated at the very outset, and that the fraud of the contractor marked each successive step from the manufacture of the material to the completion of the work. The concealment of the imposition from the county was accomplished, as we shall hereinafter see, by a corrupt combination or conspiracy between the contractor and the agent or engineer, who was supposed to be acting in the county’s behalf. There is nothing in the contract which casts upon the county the duty to discover this fraud until the bridges were completed and tendered for its acceptance and reasonable time given to ascertain the facts. Indeed, if the county was to 'carry such risk, there was no occasion for any bond any more than a property owner could have occasion for insurance
As the Kilburn Bridge was not yet completed when the fraud was discovered and notice promptly given to the surety, there is no room for doubt that such notice was timely. The Selma Bridge had been completed, and a few days had intervened before, the truth as to its defective condition was ascertained by the county and the surety apprised thereof.
Bor the purposes of this case, it may be conceded to be the general rule that, if the obligee in a bond to secure the performance of a building contract fails to retain the reserve which by the terms of the contract he is to withhold until the work is completed, or until certain conditions are complied with, or if he pays the contractor installments of the agreed compensation before they are earned or become due, the surety will be discharged. But is such rule applicable in the case before us ? The bridge company undertook to construct the bridges of materials of a definite kind, character, and quality, and was entitled to receive seventy-five per cent, of the cost of such materials as the same were from time to time delivered upon the ground in readiness to be used in the work of construction. To insure the faithful performance of this as- well as all other stipulations of the agreement by said company, the appellant became surety upon its bond. The company did not faithfully perform its contract but substituted lighter and inferior materials, and by false vouchers showing apparent compliance on its part induced the officers of the county to issue to it warrants in excess of seventy-five per cent, of the real cost of the materials, but not in excess of what was due on the showing made by such vouchers. If we were to hold that this operates to discharge a bond given to secure the performance
Tbe contract for tbe performance of which appellant became surety was not merely to construct certain bridges, according to certain plans. By tbe express terms and necessary implication of tbe writing, tbe company undertook to present true and correct bills of tbe cost of materials furnished from time to time as a basis for payments to be made. If, in violation of that contract obligation, it presented claims or vouchers which concealed tbe fraudulent substitution of tbe inferior materials, and thereby obtained payment in excess of tbe sum really due, we see no reason why an action will not lie upon tbe bond against both principal and surety to make good the injury thus inflicted. Tbe decisions in Commissioners v. Branhan (C. C.) 57 Fed. 179, and College v. Meagher, 11 Ky. Law 112 (11 S. W. 608), are not, as we read them, inconsistent with this conclusion. In tbe former tbe payments were to be due upon estimates to be made by tbe plaintiff itself or by its own engineer; and tbe court held, in effect, that its negligence in failing to perform this requirement on its part, and in making payments upon a false statement to tbe' commissioners that tbe money bad been earned, released tbe surety. Tbe latter case holds tbe same rule, saying that, under tbe terms of tbe contract, it was tbe duty of tbe owner not to pay until tbe work was inspected and approved by a man of its own selection. As applied to tbe facts involved in those eases, we are not disposed to quarrel with tbe results there reached. Goodwin v. Ohio, 18 Ohio, 6, is álso cited as authority for tbe proposition that a ' settlement between a county treasurer and board of supervisors will release tbe
This conclusion is strengthened and emphasized when we take the next step, and consider the further proposition that the county employed Booth as an engineer to inspect the bridge materials and to protect the interests of his principal therein, and that he approved the bills on which the payments were made, from which circumstances it is argued that the county is estopped, as against surety at least, to recover for the alleged default of the contractor in this respect. The trial court found, and we must take it as established, that Booth, while professing to represent and serve the county, entered into a conspiracy with the bridge company,- acting by its president, one Wetherell, to defraud the county by permitting said company to construct the bridges of inferior materials, ánd to conceal the fraud from the county; and that, in pursuance of such corrupt combination, Booth did certify to the correctness of the false vouchers presented by the contractor, knowing them to be false, and thereby induced and procured the payments to be made thereon. It would be a travesty on justice for us to hold that the surety for the performance of a contract is released from his obligation because his principal corrupted the agent
There is another and very proper ground upon which the claim of appellant to be discharged because of the payments to the contractor may well be overruled. Even if we take the construction of the bond for which counsel insist, the payments, even if excessive as compared with the actual cost of the substituted materials, were made upon the engineer’s estimate, and were therefore in strict accord with the contract. If those estimates were fraudulently exaggerated in the interest of the bridge company, it is not in position to refuse to be bound thereby, nor can its surety take advantage of it. Finney v. Condon, 86 Ill., 78.
We are not perpared to admit the correctness of the position advanced by counsel, to the effect that, under the terms of the contract, it was the duty of the county to know the progress of the work and the kind and character of the bridges that were being erected, and, on peril of discharging the surety, discover each default of the contractor as it occurred during the progress of the work, and give notice thereof to the- surety within ten days from the act complained of. This subject has already been sufficiently treated in a previous paragraph of this opinion, and it is unnecessary to further extend its discussion.
Other questions argued by counsel, so far as they are within the record before us, are fairly governed by the conclusions already announced.
No reversible error has been shown, and the judgment of the district court is affirmed.