Roberts v. Security Trust & Savings Bank

This is a companion appeal to that already considered by the court in Roberts v. Spires et al., 195 Cal.

Mrs. Spires appealed from that portion of the judgment which required her to pay the lien claimants in full before deducting the whole amount'of her judgment for damages from the amount due the contractor. That judgment was affirmed. {Roberts v. Spires, supra.)

The United States Fidelity & Guaranty Company, as surety on the contractor’s bonds, appealed from the judgment upon the ground that the court erred (1) in awarding to the owner, and against it, any damages caused by the delay of the contractor in completing the building, and (2) in decreeing that the laborers and materialmen have direct judgments against the surety for the respective amounts of their claims, notwithstanding such claims were found to be a lien upon the owner’s property, when there remained in the hands of the owner more than enough of the contract price due to the contractor to pay and discharge all of such liens. The surety company, by an amendment to its answer to the cross-complaint of the owner, Mrs. Spires, who sought to recover damages caused by the delay of the contractor in completing the building, took the position that it had been released from all liability to the owner for the reason that during the progress of the work material provisions of the contract were disregarded and set at naught in that extra labor and materials were ordered and furnished by the contractor without the knowledge or consent of the surety company, and that no extension of time to be granted to

At the trial Roberts and appellant each sought to introduce evidence of the delay in the completion of the building, resulting from and necessitated by the performance of extra and additional work, beyond the time originally required by the contract. The owner objected, and the court sustained the objection. The contractor is not here on appeal, and we need consider the ruling of the court only in its effect on the cause of the surety. As to it, the objection to the introduction of the evidence was twofold: First, that the contractor and the owner had waived certain of the contract requirements, and, second, that the condition of the undertaking given by the surety company constituted an assent in advance to a departure from the terms of the building agreement, for the reason that the bond, by its terms, guaranteed the provisions of the contract, “or any modification thereof. ’ ’ Both views were adopted by the trial court. It construed the contract together with the bond, and held that the surety for the contractor must be deemed to have assented to a provision in the contract that, should the owner at any time during the progress of the work request any alterations, deviations, additions, or omissions from the contract, she should be at liberty to make such change or changes without in any way affecting or making void its terms. As a result of the court’s view, the judgment against the appellant surety company followed.

The trial court found that, during the progress of the work, labor and material, in addition to that required by the contract, plans and specifications, were ordered by the owner and furnished by the contractor, a large portion of which

[2] No principle of law is perhaps better settled than that the liability of a surety is not to be extended by implication beyond the express terms of his contract. (Civ. Code, sec. 2836.) It is also the law that when the undertaking is to assure the performance of an existing contract, if any change is made in its requirements in matters of substance without the consent of the surety, his liability is extinquished. (United States v. Freel, 186 U. S. 309 , 316 [ 46 L. Ed. 1177 , 22 Sup. Ct. Rep. 875 , see, also, Rose’s U. S. Notes].) The rule applies to building contracts, as to ordinary transactions, and in Wolf v. Aetna Indemnity Co., 163 Cal. 597 , 605 [ 126 Pac. 470 , 473], this court said: “It may be conceded that material changes in the plans and specifications not expressly authorized by the contract, or material changes authorized by the contract, made by the parties without following the particular method prescribed therefor by the contract, made without the knowledge or consent of the surety, would operate to discharge the surety on the bond of the contractor.” (See, also, Tally v. Parsons, 131 Cal. 516 [ 63 Pac. 833 ].) The authority most strongly relied on by the appellant is the decision of this court in First Congregational Church of Christ v. Lowrey, 175 Cal. 124 [ 165 Pac. 440 ]. The contract, between the owner and the contractor in that case made provision for alterations, deviations, additions, or omissions in the work to be done, and provided that the reasonable value should be added to or deducted from the contract price, “provided, however, that the character and

Our present view is that the decision in First Congregational Church of Christ v. Lowrey, supra, is correct as a general statement of an abstract proposition of law, but that it cannot be properly held to be decisive of the present controversy. The decision fails to take into consideration other well-established principles of law that have a material bearing on the liability of sureties undertaking to guarantee the performance of contracts for the erection of buildings, wherein provision is made for modifications or for changes as the work progresses, and entirely fails to note the distinction between material changes in the contract or in the work to

Our Civil Code (see. 2837) provides that, in interpreting the terms of a contract of suretyship, the same rules are to be observed as in the case of other contracts. In Sather Banking Co. v. Briggs Co., 138 Cal. 724 , this court said (p. 730 [ 72 Pac. 352 , 354]): “While it is true that a surety cannot be held beyond the express terms of his contract, yet in interpreting the terms of a contract of suretyship, the same rules are to be observed as in the case of other contracts. Such construction does not mean that words are to be distorted out of their natural meaning, or that, by implication, something can be read into the contract that it will not reasonably bear; but it means that the contract shall be fairly construed with a view to effect the object for which it was given and to accomplish the purpose for which it was designed. The old rule of strictissimi juris applies only to the extent that no implication shall be indulged in to impose a burden not clearly inferable from the language of the contract, but does not apply so as to hold that the contract shall not be reasonably interpreted as other contracts are. ” [3] A bond may incorporate, by reference expressly made thereto, other contracts, in which case the bond and the contract should be read together and construed fairly and reasonably as a whole according to the intention of the parties. (Callan v. Empire State Surety Co., 20 Cal. App. 483 , 486 [ 129 Pac. 978 , 979] ; Smith v. Molleson, supra.) Therefore, in interpreting the language of the undertaking for the purpose of gathering its scope, or the measure of the liability of the sureties, we must do so by treating or viewing the contract and the undertaking as constituting an indivisible contract. In other words, we must, in order to ascertain the nature and extent of.the liability to which the sureties have bound themselves, examine

[4] The trial court here found that it was not true the additional work was ordered or performed without the knowledge or consent of the appellant, but that it had notice and knowledge of the changes and alterations by reason of the provisions in the contract and undertaking, which amounted “to advance consent of said surety to the said changes and alterations.” This finding is based on the provision of the contract (supra) that should the owner at any time during the progress of the work require any altera-. tion, deviation, addition to, or omission from the contract, plans, or specifications, she should have the right and power to make such change or changes, and the same should in no way injuriously affect or make void the contract. The court also found that the provision in the contract requiring the value of extra labor and material and the extension of time, if any, to be granted, to be reduced to writing before the work was done or materials furnished, was waived by the owner, the contractor and the architect. Provisions in building contracts similar in language and in effect have been frequently construed by the courts. The rule seems to be thoroughly well established that where alterations and changes are made pursuant to such agreement they are binding upon the surety unless they are so extensive and material as to amount to a departure from the original contract rather than a permissible modification of its details. (Equitable Surety Co. v. McMillan, 234 U. S. 448 , 457 [ 58 L. Ed. 1394 , 34 Sup. Ct. Rep. 803 , see, also, Rose’s U. S. Notes].) [5] It appears to be equally well established that where a building contract is referred to in the bond, and one of its provisions is that the contractor shall well and faithfully keep its covenants and agreements and turn over the building free and clear of liens accruing by reason of the work described in the contract or any modification thereof, the surety must be held to have agreed that

[7] There is no express requirement in the contract here under consideration that the surety for the contractor should be consulted, or its express consent obtained for the making of any alterations or modifications or changes in the plans or specifications or in the contract for the building. It agreed in advance to the making of such changes, with the proviso inserted that the cost thereof, and any delay occasioned the contractor thereby, should be fixed and determined before any extra work was done. The first question that presents itself, then, in this case is, Did the failure of the owner and the contractor to agree upon these matters, as required by the contract, of itself work a release of the surety on the contractor’s bond? We are of opinion that it did not. (Callan v. Empire State Surety Co., supra.) The appellant stood as guarantor for the faithful performance of the building contract, or any modification thereof. It consented in advance to the making of alterations, deviations, additions, or omissions during the construction, with the understanding that the same should in no way injuriously affect or make void the contract. We are not now dealing with an alteration of the contract for the performance of which the appellant became surety. About the most that can be said is that we are considering a departure from or

[8] The conclusion we have reached brings us to a consideration of the question whether or not the failure of the owner and the contractor to observe the formalities relating to extra work and materials resulted in such extensive and material alterations as to amount to a departure from the original building contract, rather than a permissible modification of its details. The building contract provides that no work should be considered as extra unless a separate estimate in writing therefor should be submitted by the contractor to the supervising architect, and his signature ob

[9] There is a further clause in the contract that “should the contractor be obstructed or delayed in the prosecution or completion of work by the act, neglect, delay or default of the owner, or the architect, . . . then the time herein fixed for the completion of the work shall be extended for a period equivalent to the time lost by reason of any or all of the causes aforesaid; but no. such allowance shall be made unless a claim therefor is presented in writing to the architect within 24 hours of the occurrence of such delay. The duration of such extension shall be certified to by the architect, and his decision shall be final.” In the absence of such a clause in the contract, the contractor could no doubt have claimed an extension for delays, if there were any, occasioned by the act of the owner in ordering extra work. (Ward v. Haren, 139 Mo. App. 8 [ 119 S. W. 446 , 447].) The requirements for extra work were acts of the owner. The failure of the contractor to invoke the benefit of the clause of the contract, in case any delay was occasioned by such act of the owner, operated to waive any right to subsequently claim an extension on account of his being required to do such extra work. (Hiller v. Daman, 183 Mo. App. 315 [ 166 S. W. 869 ]; Wagner Co. v. Cawker, 112 Wis. 532 [ 88 N. W.

[10] Another clause of the contract has a material bearing on the rights of the parties to this controversy. It is provided therein that, should any dispute or controversy arise respecting the true construction or meaning of any of the provisions of the contract, plans, or specifications, or as to what is extra work outside of the contract, or as to any payment to be made thereunder, or any matter or thing to be done or performed thereunder by either the owner or the contractor, or as to any omission, failure, or neglect on the part of either the owner or contractor, such controversy or dispute shall be determined and decided by the architect, and his determination or decision thereon shall be final and conclusive. On completion of the building, a controversy arose between the owner and the contractor respecting the extent and value of extras furnished at the request of the owner, and the claim of the contractor that, by reason of his having been compelled to do the extra work, he was entitled to an allowance of additional time, or an extension of the period within which he had contracted to complete the contract. All the matters were referred to the architect for the purpose of procuring a ruling and certificate from him as to the actual facts. The architect filed such a certificate, in which he certified the facts and his conclusions in detail and at length concerning the matters referred to him. The question of the effect of such a certificate, under the provisions of a contract like the one here, has been considered by this court in a number of cases. It is now well settled that, where the parties to a building contract, by its

In his certificate the architect certified all items of extra work and their reasonable value. Many items claimed by the contractor were found to be included in the original contract. No serious complaint is made here concerning the determination of the architect on those matters. [11] He further found, however, and certified that, beyond one extension of thirty days, which appears to have been given, the contractor was not delayed in the completion of the building by performance of any extras, or by any act, neglect, delay, or default of the owner or the architect, or any other contractor employed by the owner on the work, and also that he was not entitled to have his claim for an extension of time allowed by reason of any alterations, deviations from, additions to, or omissions in the contract. In view of the binding force of the architect’s unimpeached certificate, we conclude that it was not error for the trial court to exclude the evidence by which the appellant sought to show that the delay in the completion of the building resulted from, and was necessitated by the performance of extra and additional work.

[12] The second point made by appellant on this appeal is that the court should not have entered a decree giving the materialmen and laborers direct judgments against it for the full amounts of their claims, when there remained in the hands of the owner more than enough of the contract price due the contractor to fully pay and discharge the liens. So far as the relation of the lien claimants to the owner was concerned, there being a valid contract, they could only

The judgment is affirmed.

Lawlor, J., Richards, J., Seawell, J., Shenk, J., Lennon, J., and Myers, C. J., concurred.