McIver Construction Co. v. Hurwitz

Thomas, J., delivered the opinion of the Court. This suit was brought by Aaron Hurwitz, the appellee, against the Mdver Construction Company, a corporation (hereinafter referred to1 as the contractor) and the Maryland ⁴⁵³ Casualty Company, a corporation (hereinafter referred to as the surety), the appellants. The declaration charges that on or before “the 30th of Sep>ternber, 1919, the plaintiff agreed to loan to The Clifford Improvement Company, a corporation, the sum of” $2,400 “for six months a.t six per cent, on a second mortgage of certain property” in Baltimore City, “known as Ho. 2514 Horth Charles Street, which was at that time subject to a first mortgage to The Druid Hill Perpetual Building Association of Baltimore City, a corporation, for five thousand and seventy dollars, on condition that the Clifford Improvement Company would repair and improve said property to the extent of seven thousand nine hundred and seven dollars and twenty-two cents and would give the plaintiff satisfactory security that such repairs and improvements would be made; that thereupon, as such security, The Clifford Improvement Company offered and the plaintiff accepted the bond of the d& fendants, dated the 30th day of September, 1919.” The bond is set out in the declaration, hut the only parts to which we need refer are as follows: “Know all men by these presents, That we, Mdver Construction Company, of Baltimore, Maryland (hereinafter called the Principal), as Principal and the Maryland Casualty Company, a corporation organized under the laws of Maryland and having its principal place of business in the City of Baltimore, Maryland, (hereinafter called the surety), as Surety, are held and firmly bound unto The Clifford Improvement Company and Aaron Ilurwitz, as their respective interest may appear, of Baltimore, Maryland, (hereinafter called the Obligee), in the sum of seven thousand nine hundred seven and 22/100 dollars ($7,907.22) for the payment whereof said Principal and Surety bind themselves, their legal representatives, successors and assigns, jointly and severally, firmly by these presents. “Whereas, the Principal has entered into a written contract, dated * * *, .191 , with the Obligee, for ⁴⁵⁴ additions and alterations to a three-story brick building located at 2514 North Charles Street, Baltimore, Maryland, in accordance with the plans and specifications prepared by Benjamin Prank, architect, a copy of which is hereto annexed, and which contract is made a part hereof, as fully as if recited at length herein: “Now, therefore, the conditions of this obligation is such, that if the Principal shall indemnify the Obligee against any loss or damage directly arising by reason of the failure of the Principal to faithfully perform said contract then this obligation shall be void; otherwise to remain in full force and effect; “Provided, however, that this bond is executed upon the following express conditions, the performance of each of which shall be a condition precedent to any right of recovery hereon; anything in the contract to the contrary notwithstanding: “Pirst — That in the event of any default on the part of the principal, a written statement of the particular facts showing such default and the date thereof shall be delivered to the Surety by registered mail, at its office in the City of Baltimore, Maryland, promptly and in any event within ten (10) days after the Obligee or his representative, or the architect, if any, shall learn of such default; that the Surety shall have the right within thirty (30) days after the receipt of such statement to proceed, or procure others to proceed, with the performance of such contract; shall also be subrogated to all of the rights of the Principal; and any and all moneys or property that may at the time of such default be due, or that thereafter may become due, to the Principal under said contract shall be credited upon any claim which the Obligee may then or thereafter have against the Surety. “Pourth — That the Obligee shall faithfully perform all the terms, covenants and conditions of such contract on the part of the 'Obligee to be performed.” ⁴⁵⁵ The declaration further charges that said bond was delivered to the plaintiff, who, accordingly, made said loan to the Clifford Improvement Company (hereinafter referred to as the owner) upon the terms mentioned, that the plaintiff faithfully performed all the terms, covenants and conditions of said bond on his part to be performed, but that the defendants failed to perform all the terms, covenants and conditions of said bond on their part to be performed in that the contractor failed to make any additions or alterations to said property, and the surety has failed and refused to indemnify the plaintiff against the loss or damage directly arising by reason of the failure of the contractor to make such additions and alterations; that the said loss or damage to the plaintiff is the sum of $1,028.60, and was “ascertained and made certain” in the case of said Building Association v. Clifford Improvement Company and C. Stanley Sterling in Circuit Court No. 2, in which said first mortgage was foreclosed by the sale of said property, and out of the proceeds of sale the plaintiff was allowed in the auditor’s account, which was finally ratified on the 25th of September, 1920, the sum of $1,441.00, and that the plaintiff demanded of the defendants said sum, of $1,028.60, hut they refused to pay the same. Each of the defendants filed the- pleas of “never was indebted” and “did not promise” .as alleged, and the trial of the case before the court without a, jury resulted in a judgment in favor of the plaintiff for $1,188.66, from, which the defendants have brought this appeal.

The plaintiff testified that, ho was engaged in the wholesale drygoods business; that about a week or so before the 30th of September, 1919, or sometime in September, lie was approached by Mr. Morris Schuman, a real estate agent or broker, in regard to a loan of $2,400 on the1 property known as No. 2514 North Charles Street, which he said was to he remodeled at a cost of seven or1 eight thousand dollars; that Mr. Schuman brought him the specifications for the proposed improvements and stated that there was to be a first mortgage ⁴⁵⁶ on the property of “five thousand and some dollars” and that the owner would need and wanted to borrow $2,400 on a second mortgage; that he, the plaintiff, sent “a real estate man” to1 look at the property and to give him an estimate of its value, and that after getting a report from him he told Mr. Sohuman that he did not think the property, as it then stood, sufficient security for the second mortgage, but that if he could he assured that the proposed improvements would he made he would he willing to malee the loan; that Mr. S'chumaa said that the “construction company” was to do^ the Work and was to give a bond to the owner for the completion of the work; that he told Mr. Schuman that that would not he satisfactory because he did not know what might happen between “these parties,” and that he would require a bond to himself from some bonding company so that he could he certain that the improvements would he made, .aud that Mr. Sahúman said he would see if that could be done; that the next time he saw Mr. Sahúman was when he brought him the bond and a copy of the contract referred to therein and told him that everything had been “executed;” that he then gave Mr. Sohuman his check payable to the Clifford Improvement Company for $2,400, so that he could put the matter through without the witness being present, and that shortly after that Mr.. Sahúman brought him the mortgage, or the receipt for the mortgage; that about three weeks after he gave the check Mr. Lewis of the surety company called him ivp and told him that the contract referred to in the bond bad not been signed by the parties, and that therefore the bond was of “no! effect;” that he told Mr. Lewis that he had given his check “on the strength of the bond,” and that if he had called him up before he gave the cheek he would not have given it; that he did not know that the contract had not been signed, and did not see how his rights under the bond could be affected; that he received on his mortgage $1,436 of the $1,441 allowed by the auditor’s account in the proceedings for the foreclosure of the first mortgage on the property, and then notified the surety ⁴⁵⁷ company that his loss by reason of the failure of the contractor to make the improvements on said property and perform its contract was $1,028.28, and demanded payment of that amount. On cross-examination he testified that when Mr. Schuman brought him the bond and contract he told the plaintiff that it was only a copy of the contract; that he did not read the contract,, but did read the bond, and took it for granted that the bond would not have been issued unless the contract had been signed; that it was the first bond of the kind that he had ever read, and that he was not a lawyer; that he did read the specifications that Mr. Schuman brought him when he first, came to see him, about the loan, but that he did not read the contract which, was given to, him at the time he received the bond. Mr. Schuman testified that he was, a real estate agent or broker, and was employed by the Clifford Improvement Company to secure the loan of $2,400, and that he submitted the proposition to, the plaintiff as a broker for the Clifford Improvement Company; that, after the plaintiff had the property examined he told the witness what he would do, and that witness reported to Mr. Sterling, president of the owner, what the plaintiff was willing to do and that he wanted a bond; that he understood that the contractor was to give a bond for the completion of the improvements on the property, with the Maryland Casualty Company as surety, and told the plaintiff so,; that he went to, see the surety a,nd saw Mr. Lewis, the assistant manager of the bonding claim division of that company, and explained to him that the plaintiff was to lend the money on a second mortgage, and that he would not make the loan unless the bond “ran to, him,” and that Mr. Lewis, put the plaintiff’s name in the bond; that the transaction was to, be put through at Mr. P'arkhurst’s office, and as Mr. Sterling, president of the owner, and Mr. Melver, president of the contractor, were not there, he went to look for them and met them as they were coming out of the Fidelity Building; that Mr. Melver told ⁴⁵⁸ him that he was going away and when the witness ashed him if the papers had been signed, they presented to- him the contract sigped by the contractor, and Mr. Mclver told him “that everything had been arranged between them, that the papers were np stairs and he was in a hurry, * * * that everything had been agreed upon; the papers were all prepared and that I could go ahead and put the transaction througjh.” On cross-examination he testified that he knew “there was certain security to he given by the Clifford Improvement Company” before the contractor “was to go- ahead under’ the contract,” and understood that that was to- be a third mortgage on the property; that Mr. Mclver and Mr. Sterling told him that the matter had been arranged, and that he, the witness, knew “that they had agreed on the form of the security.” Mr. Lyon testified that he went with Mr. Schuman to the office of the surety and heard him explain to Mr. Lewis that the plaintiff would not loan the money unless he got a bond that the improvements would he made, and that it would he necessary that the bond “he written” in plaintiff’s “name directly,” and that Mr. Lewis said he would attend to it.

Mr. Sterling testified that Mr. Mclver gave him the bond and that he delivered it to- Mr. Schuman with a copy of the contract attached to it; that the contract was signed by the contractor, and that Mr. Mclver had agreed to- take a third mortgage of the property to cover the costs of the proposed improvements thereon; that on the day Mr. Schuman came to- see Mr. Mclver and himself, Mr. Mclver was going to- the Eastern Shore, and gave the witness the contract, which had been signed by the contractor, and told him to- come hack in a few days and sign the mortgage; and that when he went to see Mr. Mclver again Mr. Mclver wanted a deed instead of a