Aetna Indemnity, Co. v. John Waters

The appeal in this case was taken from a judgment in favor of the appellee in a suit on a bond given by the appellant as surety for the Clarion Concrete Construction Company.

That company, in September, 1906, made a contract with John Waters, a well-known builder in Baltimore City, to furnish the material and do the work for the reinforced concrete construction required in the erection of a dormitory at the penitentiary, which he had undertaken to build for the State of Maryland. The bond sued on was given by the appellant to secure the performance of that contract.

In July, 1907, Waters instituted the present suit in the Superior Court of Baltimore City on the bond for an alleged failure of the concrete company to fully perform its contract with him. The case having been tried before the Court without a jury, resulted in a judgment for the plaintiff for $1,655.67, from which the appeal was taken.

The pleadings in the case are voluminous and intricate, covering more than twenty pages of the record, and nineteen issues were joined during their progress; but, as the case was finally tried on its merits, we can dispose of it here by a consideration of the questions raised by the bills of exception without reviewing the pleadings. The record contains twenty-three bills of exceptions, of which the last relates to the Court's action on the prayers and instructions to the jury, and all of the others refer to rulings on evidence. At the close of the case the plaintiff ordered two prayers and the defendant offered twenty-two. They will be set out in the report of the case by the Reporter. The Court refused the plaintiff's first prayer and granted his second one, and refused all of the defendant's prayers in the form in which they were offered, but granted the third, eleventh and twentieth after modifying them. The Court also gave two instructions on the law at its own instance. An examination of the exceptions makes it apparent that the questions raised by them may be conveniently disposed of in classes or groups, in the order adopted on the appellant's brief in presenting the several propositions upon which it relied to defeat the action in the Court below and on which it now insists as grounds of reversal. Those defenses relate:

(1) To the construction of the contract secured by the bond sued on.

(2) Failure of plaintiff to notify defendant of acts of the contractor likely to result in loss.

(3) Effect of alleged alterations in contract without defendant's consent.

(4) To various other questions raised by the 1st, 5th, 12th, 13th and 15th bills of exceptions and the plaintiff's 2nd prayer.

The appellant's main contention on the construction of the contract is that it did not require the Concrete Company to erect the ceiling on the upper story of the building. As against this view the appellee insists that the expression "roof slabs" found in the contract was intended to include the ceiling under the roof and fastened to it. He further insists that, upon a fair interpretation of the entire contract, and the architect's drawings and specifications therein referred to, it is plain that the reinforced concrete work contracted for by the Concrete Company was intended to include the ceiling in question.

The first article of the contract is as follows:

"Article 1. The contractor shall and will provide all the materials and perform all the work for the reinforced concrete construction; i.e., columns, beams, floor and roof slabs, skylight sides, concrete foundations, concrete under floors, top finish, asphalt under cells, cement floor finish at stair corridor, safety treads on stairs, all in the New Female Dormitory of the Maryland Penitentiary, as shown on the drawings and described in the specifications prepared by Charles M. Anderson, architect, which drawings and specifications are identified by the signature of the parties hereto, and become hereby a part of this contract."

The architect's specifications referred to in Article 1 provide, under the head of Reinforced Concrete, that: "The floors, beams and columns supporting same, ceilings, roofs and stairways and interior partitions throughout, as shown on plans, to be of reinforced concrete." They also require that the work should be of "monolithic construction."

It is further provided in the contract that the work is to be done under the direction of said architect, and that his decision as to the meaning of the drawings and specifications shall be final; also that no alterations shall be made except upon his written order, the amount to be paid by the owner or allowed by the contractor by virtue of such alteration to be stated in such order. There is also a provision that if the contractor should not at any time furnish a sufficiency of skilled workmen or materials of proper quality, or should fail to diligently prosecute the work or to perform any of the stipulations of the contract, then, upon the certification by the architect of such neglect or failure, the owner may, after three days' written notice to the contractor, provide any such labor or materials and deduct the cost thereof from any money then due or thereafter to become due, and may also, with the approval of the architect, terminate the employment of the contractor and take possession of the premises, with the material, tools and appliances thereon, and finish the work at the expense of the contractor. If, in such event, the expense of the completion as audited and certified by the architect shall exceed the unpaid balance of the contract price, the contractor shall pay the difference to the owner, and such certificate of the arcihtect shall be conclusive upon the parties.

The bond of the appellant, on which the suit was brought, is conditioned on the faithful performance of the contract. It also provides that the surety shall be notified in writing of any act on the part of the principal or its agents or employees, which may involve a loss, immediately after its occurrence, and must be similarly notified of, and its written consent secured to, any change or alteration made in the original plans or specifications by the obligee.

The contract and bond having been executed, the Concrete Company began the execution of the work contracted for and had completed the greater portion of it by February 4th, 1907, when it took the position, in a letter to the appellee, that it was not compelled under its contract to construct the ceiling over the upper floor of the building. The appellee stoutly insisting that the contract did call for the construction of that ceiling, the two parties expressed a willingness to have the dispute between them settled by arbitration but as only one of them selected an arbitrator and neither of them took further steps in that direction no settlement by that means occurred.

On March 28th, 1907, the appellee formally notified the Concrete Company to proceed with the work under the contract which it failed to do. It was on the same day put into the hands of Horace S. Whitman as receiver, on a suit of one of its creditors, by a decree of Circuit Court No. 2 of Baltimore City. On April 2d 1907, the appellee notified the appellant that the Concrete Company was not proceeding with its work and that it denied its obligation to construct the ceiling. In response to this notice the receiver, Mr. Whitman, who was also counsel for the appellant, offered to complete the work without the ceiling for which he refused to accept any responsibility. The appellee thereupon, having first notified Mr. Whitman of his purpose, proceeded to have the work completed himself through the agency of other subcontractors. After the work had been finished the architect certified that the cost of its completion by the appellee was $7,995.67, which exceeded the balance of the money not paid to the Concrete Company under its contract by $1,655.67, for which amount the judgment was obtained.

Mention will be made hereafter of certain acts of the Concrete Company likely to result in loss; of which the appellant insists that it did not receive prompt notice, and also of an alleged alteration of the contract without the appellant's consent, which it contends discharged the bond.

We will now consider whether, under a proper construction of the contract, the Concrete Company was bound to construct the disputed ceiling. We agree with the appellant that the provision in the contract that the architect's decision as to the true construction and meaning of the drawings and specifications shall be final, does not take from the Court and confer upon the architect the power to construe the contract itself. The law is clear that the common right of resort to the Courts for the determination of the rights of parties or the settlement of disputes between them will not be taken away by inference or implication or anything short of a distinct agreement to waive it. No such agreement is found in the contract before us which in terms limits the architect's authority to determining the meaning and construction of the drawings and specifications prepared by him but does not submit to his decision the contract rights of the parties. Smith Sons v.Jewell, 104 Md. 279 et seq.; Isaac v. Dawson, 70 N.Y. App. Div. 232, affirmed in 174 N.Y. 537; Baltimore v. SchaubBros., 96 Md. 554; Lauman v. Young, 31 Pa. St. 306;Gubbins v. Lautenschlager, 74 F.R. 167.

The question before us is not one of the construction of the drawings and specifications under which the contract is to be performed, although the ascertainment of their true meaning may afford some assistance in its solution. It is a question of the construction of the contract itself to determine whether, under its provisions, the Concrete Company was under any obligation at all to construct the disputed ceiling.

It is familiar law that the construction of written documents is ordinarily one of law for the Court, and if their terms are not technical, ambiguous or obscure parol evidence cannot be resorted to to aid in the construction. Roberts v. Bonaparte,73 Md. 199; Woods v. Williams, 16 Md. 251; Cecil Bank v.Farmers' Bank, 22 Md. 155; Needy v. Middlekauff,102 Md. 183. But where technical terms are used in a written contract parol testimony may be introduced to explain their meaning which will then become a question for the jury to whom "the Court will give conditional instructions as to the effect of the contract according as they may find the meaning of such terms to be."Roberts v. Bonaparte, supra; Leftwitch v. Royal Ins. Co.,91 Md. 612; Badart v. Foulon, 80 Md. 589. In the last mentioned case this Court in its opinion quoted with approval, from the opinion of Baron Parke in Share v. Wilson, 9 Clark Finnelly, 355, the following statement. "In the first place there is no doubt that not only where the language of the instrument is such as the Court does not understand, it is competent to receive evidence of the proper meaning of that language as when it was written in a foreign tongue; but it is also competent where technical words or peculiar terms, or indeed any expressions are used which at the time the instrument was written had acquired an appropriate meaning, either generally or by local usage or amongst particular classes."

It is equally familiar law, recognized by the cases already cited, that in the construction of contracts Courts look to the language employed, the subject-matter and the surrounding circumstances of the parties who made them so as to carry out their true intent.

Applying these principles to the present case, we have first, in point of time, a contract between Mr. Waters and the State for the erection of a penitentiary dormitory according to the drawings and specifications of a designated architect. Those specifications are found to contain the distinct statement: "The floors and beams and columns supporting the same, ceilings, roofs and stairways, and interior partitions throughout to be of reinforced concrete." We next have the sub-contract, now under consideration, between Mr. Waters and the Concrete Company by which the latter undertakes to "provide all of the materials and perform all of the work for the reinforced concrete construction" in the dormitory as shown on the drawings and described on the specifications already mentioned. The items constituting the concrete construction contracted for are not enumerated in precisely the same language in the sub-contract as in the specifications. In the enumeration in the specifications the word "ceilings" is used as well as "floors" and "roofs," while in that contained in the contract we find no mention of ceilings nor any separate mention of roofs, but two expressions, "floor slabs," and "roof slabs," appear there, that are not found in the enumeration contained in the specifications.

If from that state of facts it is to be inferred that the Concrete Company was not bound to construct the ceiling on the fourth floor, it would equally follow that it was not bound to construct ceilings on the first, second or third floors, unless some of the expressions, descriptive of the work to be done, employed in the contract be held to include the ceilings on those three floors. In view of the violence of the assumption that the contract did not intend to provide for the construction of any ceilings at all, and also in view of the subject-matter of the contract and the surrounding circumstances, we think that the learned Judge below correctly permitted the appellee to introduce evidence to show that in concrete construction the expressions "floor slab" and "roof slab" are respectively used in a technical or peculiar sense to designate not merely the floor or roof, but also the ceiling below it, as the roof or floor is constructed at the same time as the ceiling under it, and they together form one integral portion of the entire building. We are convinced that those expressions were used in a technical or peculiar sense in the present case from the testimony of Mr. Waters, the builder; Mr. Anderson, the architect, and Mr. Barre, the manager of the Armored Concrete Company, all of whom, from the nature of their occupations, were familiar with architectural drawings and specifications.

The appellant did not deny that the expression "floor slab" in the contract was intended to describe the concrete structure which formed at once the floor to one story and the ceiling to the story below it, but he contended that the expression "roof slab" should not be held to describe both the roof and the ceiling below it, because the two, although rigidly connected with each other, were in fact separated by an air space of several feet, and could be separately constructed. That contention presented a question of the meaning of the technical expression "roof slab," as used in the contract, and was one for the jury or for the Court sitting as a jury.

The Court's first instruction which covered this branch of the case was as follows:

"The Court finds as matter of law that the words ``roof slabs' * * * as shown on the drawings and described in the specifications referred to compose a technical term."

"The Court further rules as a matter of law that if it, sitting as a jury, shall find from the evidence that said technical term, when used in a contract for the erection of a building where the specifications referred to require that the roof and ceiling should be constructed of reinforced concrete by "monolithic construction," the ceiling being attached to and dependent from the roof, means to persons skilled in the trade in which said technical term is used "the roof, together with the ceiling so attached and dependent," then by the true construction of the contract offered in evidence between the Clarion Concrete Company and the plaintiff, the said Clarion Concrete Company, was bound thereunder to erect the ceiling so attached to and dependent upon the roof as called for in the specifications referred to in said contract." We find no error in the granting of that instruction.

The contention of the appellant is that the contract in this case falls within the principle that where general words are followed by a special clause the latter will limit and restrain their operation, which is asserted in Needy v. Middlekauff,supra, and Mims v. Armstrong, 31 Md. 87. In the present case we not only have general words of description of the work covered by the contract, followed by a brief mention of its several items, but have also incorporated into the contract, by special reference thereto, a set of drawings and specifications which more fully show the purpose and particulars of the work. The intention of the parties to the contract must be gathered from a consideration of the contract and the drawings and specifications, taken together in the light of the purpose which their contents show they were intended to serve.

What we have said in reference to the Court's first instruction also disposes of questions raised by the defendant's 1st, 2d 3 rd, 4th and 5th prayers, and its 2d 3rd, 4th, 8th, 9th, 10th, 14th and 16th to 22nd exceptions to rulings on evidence.

The second defense relied on by the appellant is an alleged violation of one of the provisions of the bond sued on, consisting of a failure of the appellee to give it notice of acts of the Concrete Company likely to result in loss for which the surety would be responsible. Matters connected with this defense are presented by the 11th bill of exceptions and the defendant's 1st, 11th, 12th, 13th, 14th and 20th prayers, as well as by the Court's own instructions and its modification of the 11th and 20th prayers and the overruling of the defendant's special exceptions.

It is not disputed that the appellee gave immediate written notice to the appellant of the Concrete Company's refusal on Feby. 4th, 1907, to construct the disputed ceiling and of the appointment of the receiver for that company on March 28th, 1907, and also of the attachment laid in his hands to affect any money payable to the company under its contract. The other acts of the company likely to involve loss of which the appellant complains that it did not receive due notice, consist of delays in the progress of the work, improper workmanship and failure to comply with specifications and the cessation of the work on or about Jany. 11th, 1907. Although a surety is not liable beyond the strict terms of its contract, that contract, like all others, must receive a rational construction which will accomplish the real purpose which its authors had in view in making it. Its "language has the same significance and its meaning must be ascertained by the same rules of law when it is found in the contract of a surety as when it appears in other agreements."Am. Bonding Co. v. Pueblo Investing Co., 150 F.R. 17;National Surety Co. v. U.S., 63 C.C.A. 512; U.S. FidelityCo. v. Woodson Co., 145 F.R. 144.

It may safely be said to be a matter of common knowledge, certainly one which a company like the appellant, which makes a business of guaranteeing the performance of contracts of builders and others, ought to have known, that in the execution of every building contract of any magnitude or importance some delays, cessations of work and slight deviations from the plans and specifications are bound to occur. In a sense it is true that every such occurrence may result in loss to the surety, but it is irrational to suppose that the parties to the contract of suretyship contemplated a destruction of the contract and the consequent loss of the protection it was intended to afford upon the happening of any such occurrence of a slight and immaterial character. Without noticing in detail all of the acts disclosed by this record which might have resulted in loss to the surety, but did not do so, we may say that in our view they are not such as to call for or justify an application to them with strict severity of the provision of the bond relating to notice to the surety. That clause is in effect a forfeiture clause, and therefore belongs to a class of provisions of which the Courts are not disposed to make a rigid application to circumstances not of the essence of the transaction. Monahan v. Mut. Ins. Co., 103 Md. 158-9, and cases there cited.

The contention of appellant's counsel that the failure to promptly notify the surety of the cessation of work under the contract about Jany. 11th, 1907, deserves especial notice. Treating that as having been a final abandonment of the work by the company, he insists that the failure to promptly notify the surety of the fact prevented it from taking possession of the work, as it had a right to do under the terms of the bond, and receiving all subsequent payments under the contract, including the sum of $2,000 afterwards paid to the company or for its account. That contention involves a distinct issue of fact;i.e., whether the plaintiff had any reason to believe that the work was finally abandoned on Jany. 11th. There is evidence in the record tending to show that although Mr. Waters on or about that date stopped the employees of the company from doing somework, because of the manner in which it was being done, he allowed them the privilege of correcting their erroneous method; also that after that date the completion of the concrete work was delayed because the other portions of the work on the building were not sufficiently advanced to permit the resumption of the concrete construction, and that when the building was ready for the concrete construction of the roof Mr. Waters notified the company of that fact, and promptly informed appellant that he had done so, and that the receiver of the company replied that he was prepared to complete the contract by constructing the roof, but refused to construct the disputed ceiling, and that it was the controversy over the obligation to construct the ceiling and the state of the other work on the building rather than an abandonment of the contract by the company which delayed the completion of the work. A letter appears in the record written by the Concrete Company to Mr. Waters on Feby. 4th informing him that they were forced to suspend work on the building because the stone walls had not reached a sufficient height to enable them to proceed with the only concrete work which then remained to be done.

In the recent case of the United Surety Co. v. Summers,ante, page 95, we had occasion to pass upon a state of facts involving the same principle as that now under consideration. That was a suit on a bond for the faithful performance of a building contract, and the bond contained the identical provision found in the present one, requiring prompt notice to be given to the surety of any act on the part of the principal likely to result in loss to the surety. In that case the builder omitted to construct a stairway, called for by the contract, between two floors of the building, although he was paid for it, No notice was given to the surety of the omission or the payment, and it relied upon the failure to give the notice as one of its defenses to a suit on the bond. We there held that the surety was not released by the failure of the obligee to give it the notice to which it claimed that it was entitled.

The third defense set up by the appellant is based upon an alleged alteration of the contract without its consent. The clause in the bond on that subject is: "The said surety must be notified in writing, and its written consent secured to, any change or alterations made in the original plans or specifications made by the obligee." The alleged alteration relied on in support of this defense was that, during the progress of the reinforced concrete work a screen partition in the dining room, called for in the specifications, was omitted under a verbal agreement, in consideration of which the Concrete Company agreed to allow Mr. Waters a credit of $30 on the contract price. It is difficult to see how the appellant as surety was injured by that transaction, and in view of the proportion which the sum of $30, which it involved, is to the whole contract price of $13,506, it might well be regarded as falling within the operation of the principle recognized by many authorities, that slight and immaterial changes in a contract which do not change its legal import will not release a surety. 27 A. and E. Encyc. 495-6; Anderson v. Ballinger, 4 L.R.A. 680; American BondingCo. v. Pueblo Investing Co., supra; 2 Cyc. 217-18; Leppert v. U.S. Fidelity Company et al., 101 Md. 75.

The learned Judge below, in rejecting this defense, relied especially upon the fact that the alleged change in the contract never was made in a valid or legally effectual manner, and consequently there was no alteration in the plans or specifications within the meaning of the bond. By the terms of the contract itself no such alteration could be made "except upon the written order of the architect," who was to fix the sum to be paid to or allowed by the contractor therefor, subject to the right of the parties to resort to arbitration if dissatisfied with his decision. The alleged alteration was not so made. The appellant in seeking to escape liability by a strict adhesion to the letter of its bond could not complain of the application by the Court of a similar strictness to the construction of the clause of the contract prescribing the method which must be adopted in order to make a valid change or alteration in its terms. We find no error in the action of the Court below upon the portions of the record applicable to that defense which are the 6th and 7th bills of exception and the defendant's 1st, 7th, 8th, 9th, 10th, 15th, 16th, 17th, 18th and 19th prayers and the Court's 2nd instruction.

The appellant also relied by way of defense on the fact that the drawings and specifications prepared by Mr. Anderson the architect and referred to in the contract were not signed by the contracting parties. We are unable to recognize any merit in that defense. The contract itself was signed by the parties and there is no question as to the identity of the drawings and specifications to which it refers. They were recognized and adopted by all parties to the transaction as controlling the performance of the work contracted for and their conduct in that respect amounted to a waiver of the formality of signing. Furthermore the drawings and specifications were relied on, as forming part of the contract, by the appellant in its main defense to the present action which was that they did not require the Concrete Company to construct the ceiling to the upper story to the dormitory. Under these circumstances it cannot now be heard to call in question their identity or complain of their admission in evidence. The features of this case to which we have adverted call with especial force for the application to it of the familiar doctrine that a surety is estopped to deny the facts recited in his obligation, which is well supported by the decisions in this State and elsewhere. 27 A. E. Encyc., 447, 466, 467; 16 Cyc., 702; State v. Horner, 34 Md. 573;Hamilton v. State, 32 Md. 352; Billingsley v. State,14 Md. 369.

Without referring in detail to the other questions relied on by the appellant as grounds for reversal, all of which are more or less technical in their nature, we deem it sufficient to say that the record discloses no reversible error in the disposition of those questions made by the learned Judge before whom the case was tried below.

In dealing with the construction of the bond in this case and of the contract the faithful performance of which it was intended to secure, we have kept in view the attitude assumed by us in several recent cases of a similar character especially the case of State use of Smith v. Turner, 101 Md. 584, where we said: "While the liability of the surety is not to be enlarged by mere implication, yet in the effort to ascertain what these duties are, a reasonable construction is to be given to the language of the statutes dealing with these duties, and the construction is not to be strained in order to effect a release of a surety, whose obligation is deliberately entered into, as a commercial transaction, and with the exclusive view to the pecuniary profit resulting from it."

As a result of the conclusions which we have reached from a careful examination of the issues presented by the Record we will affirm the judgment appealed from.

Judgment affirmed with costs.