Case Name: SHELTON v. AMERICAN SURETY CO. OF NEW YORK
Court: United States Court of Appeals for the Third Circuit
Jurisdiction: United States
Decision Date: 1904-06-13
Citations: 131 F. 210
Docket Number: No. 32
Parties: SHELTON v. AMERICAN SURETY CO. OF NEW YORK.
Judges: 
Reporter: Federal Reporter
Volume: 131
Pages: 210–214

Head Matter:
SHELTON v. AMERICAN SURETY CO. OF NEW YORK.
(Circuit Court of Appeals, Third Circuit.
June 13, 1904.)
No. 32.
1. Building Contract — Sureties—Departure—Discharge.
Where a building contract provides that no payments shall become due until in each case the contractors shall have delivered to the owner .a satisfactory release of liens against the premises, and the owner makes payments without requiring vouchers or releases, such payments constitute a substantial departure from the contract, to the prejudice of the contractor’s surety, and discharge it from liability for a loss resulting therefrom. >
¶ 1. See Principal and Surety, vol. 40, Cent. Dig. § 284.
Acheson, Circuit Judge, dissenting, in view of the special conditions of the surety bond and the facts.
In Error to the Circuit Court of the United States for the Eastern District of Pennsylvania.
For opinion below, see 127 Fed. 736.
C. Berkeley Taylor, for plaintiff in error.
H. Gordon McCouch, for defendant in error.
Before ACHESON, DALEAS, and GRAY, Circuit Judges.

Opinion:
DAEEAS, Circuit Judge.
But little, if anything, need be added to the opinion of the court below. 127 Fed. 736. It sufficiently states the material facts and correctly applies the law.
This court has this day decided, in the case of Zeigler v. Hallahan, 131 Fed. 205, that any material alteration of the principal contract, to which an undertaking of suretyship is attached, discharges the surety; and the question which this case presents is whether the same consequence results where the contract, though not avowedly altered, is materially departed from, by the principal parties to it, without the surety's knowledge, and to his prejudice. We think it does. He is entitled to rely upon its provisions as definitive of the extent of his responsibility, and the law which protects him against any express agreement to materially change them would be of dubious efficacy if the principal parties were permitted to enhance his liability by simply disregarding them. Therefore "any dealings with the principal by the creditor which amount to a departure from the contract by which the surety is bound, and which by possibility might materially vary or enlarge the latter's liabilities without his consent, generally operate to discharge the surety. There must be an assent of the surety to the creditor's dealing with the principal debtor otherwise than in the manner pointed out by the contract." Brandt on Suretyship & Guaranty (2d Ed.) § 397, and cases there cited. "In such cases he contracts in reliance upon the exact terms of his principal's undertaking, and has a right to suppose that no change will be made without his consent; and the courts have gone so far as to hold that any change will exonerate him, though it really rebound to his benefit." Guaranty Co. v. Pressed Brick Co., 191 U. S. 416-425, 24 Sup. Ct. 142, 48 L. Ed. 242. We need not pursue the argument. To do so would be but to repeat what already has been well said by the learned judge of the circuit court; and, in our opinion, this case is one which especially called for enforcement of the rule he applied to it. The contract by which the defendant in error was bound provided "that no payments shall become due until in each case the contractors shall have delivered to the owner a satisfactory release of liens against the premises," and yet it is for a loss which resulted from the owner making payments without requiring the production of a release of liens that the plaintiff below sought to hold the contractors' surety liable.
The judgment is affirmed.