Court Opinion

ID: 7164776
Source: CourtListenerOpinion
Date Created: 2022-07-24 16:19:51.608594+00
Date Added: 2024-06-11T16:15:30.184769
License: Public Domain

On the Merits.
(June 20, 1904.)
This is a suit against the International Construction Company, an ordinary partnership, and E. M. Costello and M. D. Burke, alleged to be members thereof, in damages for the default of said company in its contract to build a railroad for plaintiff; also against the National Surety Company, security on the bond of the construction company, for the faithful performance of the work.
Costello and Burke deny that they were partners in the construction company, or that they are in any way liable for its debts. And the lower court so found. But since then this court has held differently (see case of Cameron v. Railroad Co., 108 La. 83, 107, 32 South. 208), and that question need not now be gone into. In fact, in this court, these parties have not made an appearance, doubtless not deeming it worth while. There can be no doubt of their joint liability for the amount claimed — $36,500—with legal interest from the date of this judgment, nor of that of the partnership for the like amount.
Plaintiff cannot have judgment against Lawrence individually, as he was not cited.
The defense of the surety company is that it has been released from liability by reason of a change in the contract without its consent, and also by reason of the failure of the plaintiff to give notice of the commencement of work, as expressly stipulated in the surety-ship bond.
On the latter point the bond provided that the surety company should be immediately notified by the railway company of the commencement of work under the contract, and that this notice should be given by registered letter. The notice was not given, except by the mailing of a letter without registration, and the testimony is that the letter was not received.
The judge a quo held, correctly we think, that the surety company was entitled to a strict compliance with this requirement of notice, and was released hy plaintiff’s noncompliance therewith.
Also, on the other defense, the case is with the surety company.
The financial ability of the contractors to carry out the contract was a most important point. In fact, the collapse of the enterprise was due to lack of funds on their part, more than to lack of good will. Now, the contract contained a stipulation to the effect that certain bonds were to be deposited with a trust *413company to be disposed of for the raising of money, and, without the consent of the surety company, this arrangement was after-wards changed to another scheme, under one of the stipulations of which a part of the bonds originally agreed to be delivered to the trust company was to be withheld. It may well be that the latter scheme was a better one for the procuring of funds (though, as a matter of fact, it proved unsuccessful); nevertheless it was a change in the contract. It was to that extent an abandonment of the contract upon which the surety company stood security, and the substitution of a new contract. Among other effects that it had, it deprived the surety company to that extent of the benefit of that stipulation of the bond by which, in case of a breach of the contract, the surety company was to be subrogated to all the rights of the contractor under the original contract.
There was also an important change in the contract with reference to the work.
It is common learning that the contract cannot be changed without the consent of the surety. Miller v. Stewart, 9 Wheat. 680, 6 L. Ed. 189; Magee v. Manhattan Life Ins. Co., 92 U. S. 93, 23 L. Ed. 699; Prairie State Bank v. U. S., 164 U. S. 227, 237, 17 Sup. Ct. 142, 41 L. Ed. 412; Reese v. U. S., 9 Wall. 13, 19 L. Ed. 541; U. S. v. Freel (C. C.) 92 Fed. 299, 306; Id., 99 Fed. 237, 39 C. C. A. 491.
In McGuire v. Woolridge, 6 Rob. 50, this court said:
“It is a well-settled rule that the surety has the right to stand upon the very terms of his contract, even if he should be benefited by the change, and the creditor has no right to make such change.”
To the same effect, see Insurance Co. v. Randall, 42 La. Ann. 260-265, 7 South. 679.
The contention of plaintiff that because one of the numerous provisos of the suretyship contract contains a penalty clause, and the others do not, therefore the other provisos do not amount to conditions, is utterly untenable, and cannot be considered for a moment. The language of the contract is that, “this bond is subject to the following provisions,” and the provisos, seven in number, follow. All of them, as a matter of course, are conditions. Otherwise, what would be their function in the contract?
The judgment appealed from is affirmed in so far is it dismisses the suit of plaintiff as against the National Surety Company, with costs. In other respect it is set aside; and it is now ordered, adjudged, and decreed that the plaintiff have judgment against the International Construction Company for the sum of $36,500, with legal interest from this date, and against E. M. Costello and M. D. Burke, jointly, for the same debt and sum; costs in both courts to be paid by the International Construction Company and by E. M. Costello and M. D. Burke.