the work could not in truth be done without the payment of these bills.
The problem thus presented was taken to the surety, and it was agreed that the railroad might advance moneys to the Warehouse Company without affecting in any way the rights and obligations of the present plaintiff or defendant. The railroad thereupon made very substantial advances, taking the precaution to see that the money was applied to work which had been done on the job and by arranging for the issuing to the railroad of bonds secured by the mortgage which we have already mentioned. Had the funds advanced been sufficient to meet the requirements of the completion of the work, we probably would not have been troubled with this controversy. It, however, proved insufficient, and the railroad was appealed to for further help. At one time or the other, the terms upon which the advances were made were agreed to between the warehouse and the railroad by the former releasing the latter from all claims of a default under the contract and modifying the latter in certain respects, including the taxes and rents to be paid. This was done without the consent of the surety and without notice to it or its knowledge. The railroad had, however, in the meantime made a general complaint to the surety of the failure of the Warehouse Company to meet its contractual obligations. The final outcome was that the railroad declared a default, and, upon failure of the surety to complete the contract for its principal, completed it at its own cost and brought this action against the surety. It is to be noted that the action, although upon the contract executed by both the Warehouse Company and the surety, is against the surety alone. The obligation, however, is a joint and several one.
The Trial Situation.
The case was tried with the case of Pennsylvania R. Co. v. Fidelity & Deposit Co. of Maryland, 81 F.2d 526 ruled by the Circuit Court of Appeals as our guide. That case had ruled that the release executed by the Warehouse Company did not relieve the surety of its obligation except pro tanto the damage actually suffered by the surety thereby. The defendant was permitted to defend that the railroad had violated its contract by its refusal to remove its tracks from the land in question with the delay and the enhanced cost of construction thereby incurred. The verdict of the jury, however, must be accepted as a finding of no default by the railroad. The case thus becomes wholly one of damages. The plaintiff recovered for all its damages as claimed except the items excluded by the trial court. The excluded items were all of advances made by the plaintiff to the Warehouse Company to assist it in financing its part of the project and made before and to avoid default in its contract to complete the warehouse constructions. One item was the $1,500,000 paid for the issue of junior bonds which the railroad had agreed to take. This is an illustration of the ground upon which all were rejected.
The length of the fact recital given leaves no place for more than a statement of the reason for the rejection of certain items of claim. This is that the undertaking of the Warehouse Company was to do two things. One was to construct the warehouses. The other was to finance the whole project. A failure to do either meant loss to all who had invested in the venture. The defendant was surety for the undertaking to pay taxes and rent and to complete the construction. It did not underwrite the financing obligations of the Warehouse Company. The plaintiff had the right to recover, and has recovered, for the taxes, the rent, and the cost to it of completing the construction after the default of the warehouse. As we have said, any one was at liberty to have rendered the financial aid which the plaintiff gave before default, and in order to escape it. Had a third party furnished this help, he surely would have had no claims against the defendant. The circumstance that the plaintiff was the one who supplied the assistance does not render the defendant liable. We adhere to the rulings made.
The rule for a new trial is discharged, and judgment may be entered on the verdict.
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