Case Name: UNITED STATES FIDELITY & GUARANTY CO. v. MEANS & FULTON IRON WORKS et al.
Court: Texas Courts of Civil Appeals
Jurisdiction: Texas
Decision Date: 1910-11-19
Citations: 132 S.W. 536
Docket Number: 
Parties: UNITED STATES FIDELITY & GUARANTY CO. v. MEANS & FULTON IRON WORKS et al.
Judges: 
Reporter: South Western Reporter
Volume: 132
Pages: 536–539

Head Matter:
UNITED STATES FIDELITY & GUARANTY CO. v. MEANS & FULTON IRON WORKS et al.
(Court of Civil Appeals of Texas.
Nov. 19, 1910.
Rehearing Denied Dec. 10, 1910.)
1. PRINCIPAL AND SUKETY (§ 42 ) — LIABILITY or Surety — Fraud op Obligee.
Where a building contractor’s bond for performance of the contract was executed several months after the time for the completion of the-work, the surety was put on notice that for some reason the contract had not been complied with, so that, if he desired information, he must make inquiry, in the absence of which the silence of the obligee was not fraud precluding a recovery.
[Ed. Note. — For other cases, see Principal and Surety, Cent. Dig. §§ 86-90; Dec. Dig. § 42. ],
2. Principal and Surety (§ 123 ) — Liability oe Surety.
Where a contractor, who took from a subcontractor a bond conditioned on the faithful performance of the contract and stipulating that no liability should attach to the surety unless in case of default the contractor should promptly on knowledge deliver to the surety notice thereof, relied on the assurance of the subcontractor that it would properly remedy a defect in the work, and supposed that the defect had.been remedied until the contractor discovered the contrary after the collapse of the work, it was not incumbent on the contractor to notify the surety of the defect.
[Ed. Note. — For other cases, see Principal and Surety, Cent. Dig. §§ 30A-811; Dec. Dig. §■ 123. ]
3. Principal and Surety (§ 129 ) «— Discharge oe Surety —Extension oe Contract with Obligee.
A surety on a building contractor’s bond for performance of the contract, executed after the time fixed in the contract for the completion of the work, is put on notice of the granting of an extension of time for the completion, of the-work, and he cannot escape liability on the ground that prior to the execution of the bond an extension had been granted.
[Ed. Note. — For other cases, see Principal and Surety, Cent. Dig. §§ 366-372; Dec. Dig. & 129. ]
4. Principal and Surety (§ 122 ) — Liability oe Surety — Notice by Obligee.
Where the obligee of a contractor’s bond did not extend the time for the completion of the work, but permitted the work to continue after the time fixed for completion, the surety on the contractor’s bond was not thereby discharged from liability, since the acquiescence of the obligee in the continuance of the work by the contractor did not result in injury to the surety.
[Ed. Note. — For other cases, see Principal and Surety, Cent. Dig. ■§§ 302, 303; Dec. Dig. § 122. ]
5. Pt.eadiNg (§ 246 ) — Petition—Amendment —Allowance.
Where the original petition seeking a recovery on a bond erroneously stated the date of the bond, an amended petition curing the error and making the bond a part thereof was properly allowed in the absence of any showing of surprise.
[Ed. Note. — For other cases, see Pleading, Cent. Dig. §§ 676-6S8; Dec. Dig. § 246, ]
6. Pleading (§ 248 ) — Petition—Amendment —Allowance.
An amended -petition correcting dates in the original petition does not state a new cause of action.
[Ed. Note. — For other cases, see Pleading, Cent. Dig. §§ 68G-709; Dec. Dig. § 248. ]
Error from District Court, Dallas County; E. B. Muse, Judge.
Action by the Gainesville Plumbing Company, a partnership composed of M. P. Kelly and another, against the Means & Fulton Iron Works and the United States Fidelity & Guaranty Company. There was a judgment for plaintiff against the guaranty company, rendered after the dismissal of the action against the iron works, and the guaranty company brings error.
Affirmed.
Etheridge & McCormick and A. J. Cldpton, for plaintiff in error. Chilton & Chilton and W. H. Clark, for defendants in error.
For other cases see same topic and section NUMBER in Dec. Dig. & Am. Dig. Key No. Series & Rep’r Indexes
writ of error denied by Supreme Court.
For other cases see same topic and section NUMBER in Dee. Dig. & Am. Dig. Key No. Series & Rep’r Indexes

Opinion:
RAINEY, C. J.
In 1903 the Gainesville Plumbing Company, a partnership composed of M. P. Kelly and AY. H. Riley, had a contract with the state of Texas to build and construct the electrical plant, light and heating apparatus, and water tank for the Epileptic Asylum at Abilene, Tex. On May 2, 1903, said plumbing company entered into a subcontract with the Means & Fulton Iron Works of Birmingham, Ala., whereby said iron works agreed to construct the necessary tank and tower for the waterworks, which was to be completed on or about September 30, 1903. At this time, the work not having been completed, time for its completion was extended for 60 days. Time for completion was again extended until January, 1904, but the work was not finally completed until in March, 1904, when, in attempting to fill said tank with water, 17 feet of water having been placed therein, said tower and tank collapsed and fell, wrecking both tower and tank. On or about January 1, 1904, said work not being completed, and the plumbing company being dissatisfied with the delay, said company demanded of the iron works security for the faithful performance of the work, and on January 13, 1904, the iron works executed to the plumbing company a bond with the United States Fidelity & Guaranty Company as surety in the sum of $2,-000 that the work should be constructed according to the terms of the contract entered into May 2, 1903. This action was brought by the defendant in error against the iron works to recover $7,000 for the collapse of the tower and against the guaranty company for $2,000, the amount of its bond. The iron works becoming insolvent, the action was dismissed as to it. The guaranty company answered by general and special demurrers, general denial,' and specially a novation of the contract. A verdict was instructed for the plumbing company against the guaranty company, which prosecutes this writ of error.
The plaintiff in error assigns error to the instruction of the court directing a verdict, and the following proposition is presented: "The court affirmatively misdirected the jury as to the law arising on the undisputed facts, in that the Gainesville Plumbing Company, in permitting the plaintiff in error to become surety upon the bond of the Means & Fulton Iron AVorks for the faithful performance of its contract, was bound to exercise the utmost good faith, and the concealment by it, or its failure to disclose material facts which tended to enhance the risk incurred by the plaintiff in error in becoming a surety upon the bond, and which had occurred and were known to defendant in error prior to the execution of the bond, was a fraud upon the plaintiff in error, and operated to absolutely discharge it from liability."
The only testimony in the record is that of M. P. Kelly, one of the members of the plumbing company, and his evidence is in effect: That he had a contract with the state of Texas that he sublet to the iron works the construction of the water tank. That the iron works sent out some workmen and material. They worked with the material about three months. They put up some sections of the tank, but they did not fit. They then took them down and made them fit on the ground, and then put them up again. "At that time I found out that the foreman sent out from Birmingham to superintend the job was incompetent, and so informed the iron works. The iron works then sent another man, one Ritchie, who worked' about two months, trying to build the tank, and he wholly fai]ed. I got tired of the other man, as he drank too much. The time had expired, the state was crowding me for possession of the building, and I asked the iron works to relieve me of Ritchie. Up to that time I had not asked the iron works for a bond to protect me, but told them of the incompetent men they had sent out and the style of structure they were trying to put together was not satisfactory, that their time had expired, and I would not let them go any further without bond, which they executed. In my experience of 20 years as a contractor this is the only bond I ever required. I was to build the foundation for the water tower, which I did. The iron works did not erect the tower on this foundation. They removed the capstones so as to fit some bolts, and put them back again. They put in foot plates 30 inches, when the foot plates called for by the specifications were 36 inches, or 3 feet square. They built the foundation back without joining the capstones with cement or concrete. This was done at the start, and I discovered it in October, 1003. It was done without my knowledge or consent. They assured me they would make them all secure and steadfast, but, when the collapse came, we found they replaced them loose without concrete or cement joining, and thereafter permitted them to remain in that condition. You could not see them any way, after they took them up and put them back loose, because the ground was filled up all around them, and those caps just showed up on top of the ground, and there was no possible chance to see without you had gone there and dug the dirt away so you could get in under them. I never notified the guaranty company of any of the facts above stated, either before or after the bond was executed."
The bond in suit, after providing for liability in case of breach thereof, contained the further provision as follows: "First. That no liability shall attach to the surety hereunder unless, in the event of any default on the part of the principal in the performance of any of the terms, covenants, or conditions of the said contract, the obligee shall promptly upon knowledge thereof, and in any event not later than thirty days after the occurrence of such default, deliver to the surety at its office in the city of Baltimore written notice thereof, with a statement of the principal facts showing such default, and the dates thereof; nor unless the said obligee shall deliver written notice to the surety at its office aforesaid before making to the principal the final payment provided for under the contract herein referred to. Second. That, in case of such default on the part of the principal, the surety shall have the right, if it so desire, to assume and complete, or procure the completion of, said contract, and, in case of such default, the surety shall be subrogated and entitled to all the rights and properties of the principal, arising out of the said contract and otherwise, including all securities and indemnities theretofore received by the obligee, and all deferred payments, retained percentages and credits due to the principal at the time of such default, or to become due thereafter by the terms and dates of the contract."
The question arises: Is the evidence of such nature as to show that plaintiff in error acted in good faith, and that no fraud was perpetrated, in failing to notify the guaranty company of the act of the iron works in relation to the construction of the water tank and tower? We think the evidence fails to show any fraud on the part of the plumbing company in failing to disclose material facts that prevent a recovery against the guaranty company. Chief Justice Stayton in Ass'n v. Smith, 70 Tex. 168, 7 S. W. 793, thus announces the rule: "The fact that security is required of itself would seem to be sufficient notification to one proposing to become surety that the obligee is not willing to trust solely to the skill, diligence, and honesty of the person of whom the security is required, and it seems to us, that, to avoid a bond on the ground that the surety was not informed of the facts known to the obligee, it should be shown that there was a fraudulent concealment, or withholding of facts material for the surety to know. Whether a failure by an obligee to disclose facts known to him may be deemed fraudulent will depend largely upon the character of the fact concealed; and cases may arise in which it would be the duty of the obligee to disclose to a surety facts known to him, notwithstanding the surety may make no inquiry. If in the course of the employment of the obligee the person of whom security is asked has been guilty of acts showing moral delinquency and utter unfitness for trust, some of the cases hold, and it seems to us properly, that in such cases information should he given to the surety whether asked for or not (otherwise a fraud). If, however, the facts not disclosed be not of this character, but such as consist with honesty, and may only tend to show that the person is negligent, dilatory, or unskillful, it may not be thé duty of the person taking the bond unasked to give information to the surety of such known facts." There is no evidence tending to show that defendant in error knew who the iron works intended to give as security until the bond of the guaranty company was received by it. No misrepresentations were made by it, or the iron works, so far as the evidence shows. The bond was executed some four months after the expiration of the time for the completion of the contract, the performance of which it guaranteed, which was sufficient to put it on notice that up to that time for some reason the contract had not been complied with, and, if any information was desired, it should have made inquiry, and by not making inquiry the silence of the plumbing company was not culpable.
The testimony is not clear as to the plumbing company's knowledge of the defective foundation. Kelly stated, in effect, that he discovered that the iron works was remod-elling it in a defective manner, which was without his consent, and that the iron works assured him it would be fixed, and that he found out its condition after the collapse. We think it fair to presume from all the evidence that he relied on the assurance of the iron works that it would be properly fixed, and supposed it had been done until he discovered the contrary after the collapse of the tower. Under these circumstances, it was not incumbent upon the plumbing company to notify the guaranty company of this circumstance.
The plaintiff in error insists that there was a novation of the contract of which it was not informed by the extension of time for the completion of the work, as provided by the contract of May 2, 1903. Such change in this respect had been made before the 'bond of the guaranty company was executed. It is true that the plumbing company did not notify the guaranty company of this change, but there is evidence that'said guaranty company was ignorant of that fact, and we think the inference is fair that a bond being executed for the faithful completion of the work long after the time for its completion had expired the guaranty company was at least put on notice that an extension had been granted and is in no attitude to complain. The evidence does not show that any agreement as to extension of time was made after the bond was executed. It is true the work was not completed at the expiration of the last extension, to wit, January 20, 1904, but work continued until the succeeding March. This did not affect the liability on the bond. The acquiescence of the plumbing company in the continuation of the work by the iron works could not have resulted to the injury of said guaranty company.
The contention of plaintiff in error that the amended petition set-up a new cause of action which was barred by the statute of limitation is not well founded. The original petition was to recover on the bond aft-erwards made a part of the amended petition. The date' of the bond in the original petition was not correctly stated, and the amended petition was for the purpose of curing that error. There was no such dissimilarity in the two petitions as to cause surprise to or mislead the guaranty company, as it was not pretended that it had ever executed any other bond to the plumbing company, guaranteeing the performance of the iron works' contract. Our courts have frequently held that an amendment correcting dates stated in the original petition does not constitute a new cause of action. Turner v. Brown, 7 Tex. 489; Morehouse v. Railway Co. (Tex. App.) 17 S. W. 1086; Wiebusch v. Taylor, 64 Tex. 53; Bank v. Stephenson, 82 Tex. 435, 18 S. W. 583; Railway Co. v. Evans, 78 Tex. 369, 14 S. W. 798.
The judgment is affirmed.