Equitable Surety Co. v. McMillan
234 U.S. 448 (1914)

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U.S. Supreme Court

Equitable Surety Co. v. McMillan, 234 U.S. 448 (1914)

Equitable Surety Co. v. McMillan

No. 861

Argued April 15, 1914

Decided June 8, 1914

234 U.S. 448

Syllabus

The obligation given by the surety under the District of Columbia Materialmen's Act of 1899 which is modeled after the General Materialmen's Act of 1894, has a dual aspect, being given not only to secure the government the faithful performance of all the obligations assumed towards it by the contractor, but also to protect third persons from whom the contractor may obtain materials and labor, these two agreements being as distinct as though contained in separate instruments, the surety cannot claim exemption from liability to persons supplying materials merely on account of changes made by the government and the contractor without its knowledge and which do not alter the general character of the work. United States v. National Surety Co., 92 F. 549, approved.

Under the rule of strictissimi juris, the agreement altering the contract must be participated in by the obligee or creditor as well as the principal in order to discharge the surety; in the case of a bond under the Materialmen's Acts of 1894 or 1899, there is no single obligee or creditor to consent thereto, and the rule of strictissimi juris does not

Page 234 U. S. 449

apply where the alterations agreed upon do not change the general nature of the work.

In this case, the alterations of the term of a contract for building a school house in the District of Columbia altering its location but without affecting its general character, without the knowledge or consent of the surety, did not have the effect of releasing the surety from the obligation of the bond given under the District of Columbia Materialmen's Act of February 28, 1899.

Quaere, and not involved in this case, what would be the result of a change not contemplated in the original contract as between the District of Columbia and so great as to amount to abandonment of the contract?

The Court of Appeals of the District of Columbia certifies that the record in the above-entitled cause, now pending in said court upon appeal from the Supreme Court of the District of Columbia, discloses the following:

The declaration of the United States to the use of W. McMillan & Son, filed February 11, 1913, against the Equitable Surety Company, alleges:

That Allen T. Howison, as principal, and the Equitable Surety Company, as surety, on July 24, 1911, executed a bond to the United States in the penal sum of $110,350 conditioned for the faithful performance by Howison of a certain contract made by him with the Commissioners of the District of Columbia on that date. A copy of the bond, made an exhibit, shows that the contract was for the erection of a school building fronting on Eleventh Street, N.W. between Harvard and Girard Streets, in the City of Washington. The conditions of the bond are that if Howison shall perform to the satisfaction of the Commissioners the work to be done by him in accordance with the stipulations of the contract, and shall save harmless and indemnify the District of Columbia from any and all claims, delays, suits, charges, damages, judgments, etc., on account of any accidents to persons or property after the commencement of the work and prior to completion and acceptance, and pay the same, and

"will promptly make payments to all persons supplying him

Page 234 U. S. 450

with labor and material in the prosecution of the work provided for in said contract,"

etc., the obligation shall be void; otherwise to remain in force.

That thereafter, W. McMillan & Son, at the request of the Butt-Chapple Stone Company, agreed to furnish to said contractor certain stone materials to be used in the prosecution of the work provided for in the contract by the contractor, and did furnish to said contractor materials of the kind and quality specified in his contract to the value of $4,452.84, of which material the contractor used on the building a quantity of the value of $3,952.84, for which he has failed to make payment. And that defendant, though requested so to do, has refused to pay the same. The affidavit of the plaintiff in support of the declaration follows the requirements of Rule 73.

After the general issue, defendant filed a special plea denying liability on said bond because, after the execution and delivery of the same, and without the knowledge or consent of defendant, the Commissioners of the District of Columbia and the said Howison, its principal, altered the contract the performance of which was guaranteed by said bond. That said alteration consisted in the entire changing of the building from one fronting on Eleventh Street to one fronting on Harvard Street, which alteration involved the contractor in considerable expense not contemplated in the original contract, and prejudicial to defendant. That said relocation of the building necessitated a material change in grading the ground. That, prior to the change of location, the contractor had graded the ground as required in the contract, and expended therein the sum of $2,393.90. And that, by reason of the change, said sum was a total loss to the contractor, and the further excavation made necessary by the change of location was done at a cost of $1,300.90.

The affidavit of defense alleged the said change in the contract without its knowledge or consent, and that the

Page 234 U. S. 451

same necessitated a material change in the grading of the land, which had been previously performed by the contractor at a considerable expenditure not contemplated in the original contract, and prejudicial to the defendant.

On motion under the 73d Rule of the Supreme Court of the District of Columbia, the court entered judgment for the plaintiff for the amount of the demand, and defendant has appealed therefrom.

By stipulation, two other cases involving the same question here presented are to abide the result of this case.

The act of Congress in compliance with the requirements of which the aforesaid bond was executed (30 Stat. 906, c. 218), reads as follows:

"An Act Relative to the Payment of Claims for Material and Labor Furnished for District of Columbia Buildings."

"Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That hereafter any person or persons entering into a formal contract with the District of Columbia for the construction of any public building, or the prosecution and completion of any public work, or for repairs upon any public building or public work, shall be required, before commencing such work, to execute the usual penal bond, with good and sufficient sureties, with the additional obligations that such contractor or contractors shall promptly make payments to all persons supplying him or them labor and materials in the prosecution of the work provided for in such contract, and any person or persons making application therefor and furnishing affidavit to the department under the direction of which said work is being or has been prosecuted that labor or materials for the prosecution of such work has been supplied by him or them, and payment for which has not been made, shall be furnished with a certified copy of said contract and bond, upon which said person or persons supplying such labor and materials shall have a right of action, and shall be authorized to

Page 234 U. S. 452

bring suit in the name of the District of Columbia or the United States, for his or their use and benefit, against said contractor and sureties, and to prosecute the same to final judgment and execution: Provided, That such action and its prosecution shall not involve the District of Columbia or the United States in any expense: Provided, That in such case the court in which such action is brought is authorized to require proper security for costs in case judgment is for the defendant."

"Approved, February 28, 1899."

The Court of Appeals further certifies that the following question of law arises upon the record, that its decision is necessary to the proper disposition of the cause, and, to the end that a correct result may be reached, desires the instruction of the Supreme Court of the United States upon that question, to-wit:

Did the alteration of the terms of the contract by the District of Columbia and the contractor, without the knowledge or consent of the surety, have the effect to release the surety from the obligation of the bond?

Page 234 U. S. 454

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