Court Opinion

ID: 6818792
Source: CourtListenerOpinion
Date Created: 2022-07-23 19:04:36.241856+00
Date Added: 2024-06-11T16:04:01.414128
License: Public Domain

Hudgins, J.,
dissenting.
Some eight months after the owner and contractor had executed the building contract, and after the contractor had done substantial work on the building, the owner applied to the Virginia Trust Company for a loan, offering as security a deed of trust on the building then in course of construction. The Virginia Trust Company agreed to make a loan of $30,000, provided the owner would execute a deed of trust on the lot and building, and the bond here in question.
These papers were duly executed and the money paid to the owner. The object that the parties had in mind in executing these papers was two-fold: (1) To guarantee the completion of the building; (2) and to create a first lien on the property.
This appears on the face of the bond, and the same intention is expressed in a letter written by the attorneys for the Virginia Trust Company at the time they requested the bond to be executed. This letter reads as follows:

Exhibit “A.”

“Post Office Box 263 Telephone 938
“Birchfield & Birchfield “Attorneys and Counsellors at Law “508-509 Mountain Trust Bank Bldg.
“Harris S. Birchfield Roanoke, Va.
“Howard P. Birchfield November 29, 1929.
“Mr. R. P. Plank,
“Blacksburg, Virginia.
“Dear Sir:
“Enclosed please find bond for you, R. C. Whitsett, Elizabeth' Temple Plank, Ruth C. Whitsett and Morris C. Miller *829to sign. Please have same signed by all parties and return to me promptly so that we may proceed to close the loan on your theatre.
“As I explained to you in our conversation last week, this bond is only for the purpose of guaranteeing to the Virginia Trust Company that their deed of trust will be a first and prior lien on the theatre, and above all things to guarantee to the Virginia Trust Company that the theatre will be completed so that the theatre will bring in revenue from rent as per schedule you sent them. In all cases where we make loans on uncompleted buildings and advance money before completion, we require bonds of this nature. You can readily see that the reason for this is that we do not want a loan on a building that has not been completed.
“This bond is meant to run just long enough to be sure the building is completed and that the deed of trust is a first and prior lien, at which time the bond is to be void as all provisions and purposes intended will have been complied with.
“Yours very truly,
“Howard P. Birchfield.”
Plaintiff furnished to the contractor a part of the materials used in the building before the bond was executed and a part thereafter, and in due course perfected a mechanic’s lien on the building. It later developed that the owner had paid the contractor in full, and according to the terms of his contract. Hence, the mechanic’s lien was of no value to plaintiff. It then ascertained for the first time that this bond was held by the Virginia Trust Company and soon after ascertaining this fact instituted, in its own name, this action, on the bond, for value of materials it had furnished on the credit of, and to, the contractor.
It is well settled that the liability of a surety is measured by his agreement and cannot be extended by construction. This is true whether a surety contract is construed strictly as to gratuitous sureties or less strictly as to sureties for hire. The language used is to be given a fair and reason*830able interpretation, viewed in the light of all the circumstances surrounding the transaction. The real intentions of the parties and the purpose sought to be accomplished is controlling in the interpretation of all contracts. Kirschbaum v. Blair, 98 Va. 35, 34 S. E. 895; 77 A. L. R. 42 et seg. See, also, National Surety Co. v. Com., 125 Va. 232, 99 S. E. 657; United States, for Use of Hill v. Surety Co., 200 U. S. 197, 26 S. Ct. 168, 50 L. Ed. 437; Bennett v. Draper, 139 N. Y. 266, 34 N. E. 791; Richardson v. County, 226 N. Y. 13, 122 N. E. 449; Sather Banking Co. v. Briggs Co., 138 Cal. 724, 72 Pac. 352; Builders’, etc., Co. v. Chicago, etc., Co., 167 Wis. 167,166 N. W. 320; Gumz v. Fidelity & G. Co., 209 Wis. 408, 245 N. W. 82.
The bond was not given in compliance with any statute requiring that it be furnished for the benefit of laborers and materialmen and hence, the decisions of the Aetna Casualty Co. v. Earle-Lansdell Co., 142 Va. 435, 129 S. E. 263, 130 S. E. 235, and Luck & Sons v. Boatwright, 157 Va. 490, 162 S. E. 53, are not applicable.
The Blacksburg Realty Corporation is the owner. Morris C. Miller was the contractor. Persons furnishing labor and material in the construction of this building had protection under the law, by way of notice and a mechanic’s lien.
The owner before the building was completed desired to borrow money offering the lot and building as security. The lender knew that unpaid laborers and persons who furnished material used in the building had a right to obtain a lien on the property which, if perfected, would constitute a prior lien to the deed of trust contemplated. It was to protect itself against such a contingency that the lender required the bond in question. The sureties were willing to obligate themselves to pay any mechanic’s lien which might be perfected on the property in order to preserve the lien, evidenced by the deed of trust, but they apparently did not intend to bind themselves further than this.
The language of the bond is plain and unambiguous, and expressly declares that Miller and the defendants, as sureties, “should enter into the written bond or obligation *831to the end that the Virginia Trust Company might be secured in placing a first mortgage lien on said premises.” When the language of the bond is considered, as it must be, in the light of all the circumstances under which it was executed and the relations in which the parties stood to each other, it is reasonably clear that neither of the parties to the bond gave any thought to the interest or welfare of those who might become interested as laborers or material-men further than to afford protection against liens which might impair the security created by the deed of trust.
“To say that an entire stranger to the contract, who knew nothing of it at the time of its formation, who did not share in the consideration, and whose interests were probably not thought of, is a real party in interest, is to confuse fancy and fact. * * * To give the bond the strained construction suggested by materialmen would be indicative of judicial paternalism.” Maryland Casualty Co. v. Johnson (D. C.), 15 F. (2nd) 253, 255.
It seems clear to me from the terms of the bond as a whole, from the surrounding circumstances at the time it was executed, and the relation of the parties to each other and to the subject matter, that the sole intention of the parties was to secure to the obligee a first mortgage on the property. It was contemplated this result should be accomplished in two ways: (1) By the completion of the building according to plans and specifications; (2) to keep it free and clear of any mechanics’ liens which might affect the security. This object and purpose has been fully attained and performed. The Virginia Trust Company could not and it is not undertaking to maintain any action on the bond. It is not, in the language of the trial judge, “remotely incidental to any of these purposes, that the sureties become liable to general open account creditors of the contractor.” Any judgment that such creditors might obtain against the owner or the general contractor would not impair the security of the deed of trust lien.
The Virginia Trust Company owed no legal or moral obligation, either fixed or contingent, to see that such credi*832tors were paid. The majority opinion entirely ignores the fundamental requirement of Code, section 5143, namely, that in order for a person, not a party to the contract, to maintain an action thereon, the covenant or promise must be made for the benefit in whole or in part of such person. To hold otherwise reads into the contract an intention which was not in the minds of either the obligee or obligors.
During the argument of the case some question was raised as to whether the stipulation of counsel and the evidence taken before the trial court was properly authenticated for the purpose of making it a part of the record. Even if this was not done, the result would be the same, as it does not affirmatively appear from the pleadings that the bond upon which the action is based was executed for the benefit of plaintiff.
I think, therefore, that the judgment of the trial court is plainly right, and should be affirmed.
Epes, J., concurs in this dissent.