Argument for Defendant in Error.

191 U. S.

A surety is discharged by a change, made without his consent, in the contract for the performance of which he is bound, regardless of whether or not he is damnified by such change. Miller v. Stewart, 9 Wheat. 680, 702; Rose's Notes on U. S. Reports, 314; Reese v. United States, 9 Wall. 13, 21; Bethune v. Dozier, 10 Georgia, 235; Burley v. Hitt, 34 Mo. App. 272; Norton v. Roberts, 4 T. B. Monroe (Ky.), 491.

Mr. T. J. O'Donnell for defendant in error:

We contend that the obligation assumed by these so-called guaranty and surety companies, in cases of this kind, is that of insurers and that they should be and are being so treated by the courts, and that the law which governs those who for a premium paid assume a possible risk should be applied to them, rather than that they should be deemed "favorites of the law," a term used (somewhat unhappily perhaps) with respect to that social surety, who from motives of kindness and friendship, without interest in the profit and without consideration, voluntarily assume liability for the performance of contracts by, and possible faults of, neighbors and friends. See United States &c. v. Rundle, 107 Fed. Rep. 227; 46 C. C. A. 251; United States &c.v. Kimpland, 93 Fed. Rep. 403; F. & G. Co. v. Omaha Bldg. & Const. Co., 116 Fed. Rep. 145; Griffith v. Rundle, 23 Washington, 453; United States &c. v. Hazzard, 53 N. Y. App. Div. 410; Mullin v. United States &c., 109 Fed. Rep. 817; 48 C. C. A. 677; United States v. Freel, 92 Fed. Rep. 299; 39 C. C. A. 491; 99 Fed. Rep. 237; 186 U. S. 39; Ludlow v. Simond, 2 Caine's Cases, 1, 29; Blest v. Brown, 6 Law T. N. S. 620.

That parties furnishing labor and materials protected by an undertaking such as that given in the case at bar, are not af fected by a change in the contract made by the principals, is held not only in the Federal cases which we have cited, but to the same effect is, Doll v. Croom, 41 Nebraska, 655; Kauffman v. Cooper, 46 Nebraska, 644; Steffes v. Lemke, 40 Minnesota, 27; Cohn v. State, 125 Indiana, 514; Dewey v. State, 91 Indiana, 173; United States v. Stratford, 65 N. Y. Supp. 1051, cited in the brief

191 U.S.

Argument for Defendant in Error.

of counsel for plaintiff in error, and see also Brown v. Markland, 22 Ind. App. 652.

It is not attempted to be set forth in the certificate that the notes were taken in payment of the debt, and it will not be so presumed. A certificate of this kind is the same as with respect to the pleadings, with which the rule is that the pleading must definitely aver that the plaintiff accepted the notes in settlement, satisfaction and discharge of the debt. Homas v. McConnell, 3 McLean, 381; Blunt v. Williams, 27 Arkansas, 374-376; Taylor v. Purcell, 60 Arkansas, 606, 611; Hughes v. Wheeler, 8 Cow. 77-81; Loux v. Fox, 171 Pa. St. 68-71; McGwire v. Bidwell, 64 Texas, 43.

And, besides, in a case where a creditor has a lien or security, the taking of a note does not constitute a payment. Mehan v. Thompson, 71 Maine, 492; Cotton v. Atlas Nat. Bank, 145 Massachusetts, 43; Bunker v. Barrow, 79 Maine, 62; Machine Co. v. Brock, 113 Massachusetts, 194.

Under mechanics' lien laws the giving of credit, taking of notes or other security, does not waive or release the lien. Mehan v. Thompson, 71 Maine, 492; Western Brass Mfg. Co. v. Boyce, 74 Mo. App. 343; Mt. Electric Co. v. Miles, 56 Pac. Rep. 284; 9 N. M. 512; Cuchwa v. Improvement L. & B. Assn., 32 S. E. Rep. 259–263.

This act gave by the bond a substitute for security given by the lien law on private buildings. private buildings. Surety companies are to be treated as insurers, and contracts of this kind construed and governed by the law applicable to insurance policies rather than the strict rule of law in relation to suretyship. See Frost on Guaranty Insurance Companies citing under § 3; People ex rel. v. Rose, 174 Illinois, 310; Guaranty Co. v. Mechanics' Savings &c., 80 Fed. Rep. 766; 26 C. C. A. 146; Am. Credit Indemnity Co. v. Athens Woolen Mills, 92 Fed. Rep. 581; 34 C. C. A. 161; Bank v. Fidelity & Dep. Co., 128 N. Car. 366; Jackson v. Fidelity & Cas. Co., 75 Fed. Rep. 359; 21 C. C. A. 394; Shackman v. U. S. Credit System Co., 92 Wisconsin, 366; Tebbets v. Mercantile Credit Guar. Co., 73 Fed. Rep. 95; 19 C. C. A. 281;

People ex rel. v. Fidelity & Cas. Co., 153 Illinois, 25; Eickoff v. Fidelity & Cas. Co., 74 Minnesota, 139; Fidelity & Cas. Co. v. Yoder, 64 Pac. Rep. 1027; 63 Kansas, 880; Seaton v. Heath, 1 L. R. Q. B. D. 1899, 782; Dane v. Mtg. Ins. Corp., 1 L. R. Q. B. D. 1894, 54; Finley v. Mex. Ins. Corp., 1 L. R. Q. B. D. 1897, 517; Fidelity & Cas. Co. v. Crays, 76 Minnesota, 450; Fidelity & Cas. Co. of N. Y. v. Eickoff, 63 Minnesota, 170; State v. Hogan, 8 N. D. 301; Robertson v. U. S. Credit System Co., 57 N. J. L. 12; Claflin v. U. S. Credit System Co., 165 Massachusetts, 501; Hayne v. Metropolitan Tr. Co., 67 Minnesota, 245; Strouse v. American Credit Ins. Co., 91 Maryland, 244; Trenton Potteries Co. v. Title Guar. & T. Co., 64 N. Y. Supp. 116; 50 N. Y. App. Div. 490; Minnesota Title Ins. & T. Co. v. Drexel, 70 Fed. Rep. 194; 17 C. C. A. 56; Wheeler v. Real Estate Title Ins. & T. Co., 160 Pa. St. 408.

And see Frost on Guar. Ins. Cos. § 4, citing Walker v. Holtzauer, 57 So. Car. 459; 35 S. E. Rep. 754; Com. v. Equitable Ben. Assn., 137 Pa. St. 412; Am. Surety Co. v. Pauly, 170 U. S. 133.

The parties to a contract which has been executed by another party as surety may still deal with each other in matters outside of the contract of the surety with the same effect as if no such contract or suretyship existed, and such dealings do not release the surety. Benjamin v. Hillard, 23 How. 149; Roach v. Summers, 20 Wall. 165; Cross v. Allen, 141 U. S. 528, and cases cited; Stuts v. Strayer, 60 Ohio St. 384; Joyce v. Auten, 179 U. S. 591, and cases cited; Fertig v. Bartles, 78 Fed. Rep. 866; Wood v. Brown, 104 Fed. Rep. 203; 43 C. C. A. 474; Mullin v. United States, 109 Fed. Rep. 817.

MR. JUSTICE BROWN, after making the foregoing statement, delivered the opinion of the court.

This bond was given in pursuance of the act of 1894, 28 Stat. 278, c. 280, "for the protection of persons furnishing materials and labor for the construction of public works." The act

requires, in substance, that persons contracting with the United States for the construction of any public building, etc., shall be required, before commencing such work, to execute the usual penal bond, "with the additional obligations that such contractor or contractors shall promptly make payments to all persons supplying him or them with labor and materials in the prosecution of the work provided for in such contract," with a right on the part of the materialman to bring suit in the name of the United States for his use and benefit against the contractor and his sureties. The bond in this case contained two entirely distinct and separate obligations: First, that McIntyre should fulfill all the conditions and covenants of his contract, whatever changes in or additions to such contract might thereafter be made; and, second, promptly make payment to all persons supplying him labor and materials in the prosecution of the work. Of course, these covenants are to be read together and the latter interpreted in the light of the former.

The question involved is whether the ordinary rule that exonerates the guarantor, in case the time fixed for the performance of the contract by the principal be extended, applies to a bond of this kind executed by a Guaranty Company, not only for a faithful performance of the original contract, but for the payment of the debts of the principal obligor to third parties. It is conceded that, by the general law of suretyship, any change whatever in the contract for the performance of which the guarantor is liable, made without his consent, such, for instance, as an extension of time for payment, if made upon sufficient consideration, discharges the guarantor from liability. Miller v. Stewart, 9 Wheat. 680; Smith v. United States, 2 Wall. 219; Reese v. United States, 9 Wall. 13.

Counsel for the Brick Company argued with much persuasiveness that this rule of strictissimi juris, though universally accepted as applicable to the undertaking of an ordinary guarantor, who is usually moved to lend his signature by motives of friendship or expectation of reciprocity, and without pecun

iary consideration, has no application to the Guaranty Companies, recently created, which undertake, upon the payment of a stipulated compensation and as a strictly business enterprise, to indemnify or insure the obligee in the bond against any failure of the obligor to perform his contract. It is, at least, open to doubt, however, whether any relaxation. of the rule should be permitted as between the obligee and the guarantor, which may have signed the guaranty in reliance upon the rule of strictissimi juris, and with the understanding that it is entitled to the ordinary protection accorded to guarantors against changes in the contract or extensions of the time of payment. The government wisely protects itself in these cases by providing in the bond that the obligation of the surety shall extend to all changes in or additions to the contract, which may thereafter be made-a clause which we have held extends to such changes as might be found advantageous or necessary in the plans or specifications, but does not extend to a change in the location of the structure to be built. United States v. Freel, 186 U. S. 309. But no provision was made in the bond in that case with respect to the obligation of the principal and his surety to make payment to all persons supplying labor or material to the contractor in the prosecution of his work.

We do not, however, deem it necessary to express an opinion upon this subject, as we prefer to rest our decision upon the perculiar character of the covenant upon which this action is brought. In an ordinary guaranty the guarantor understands perfectly the nature and extent of his obligation. If he becomes surety for the performance of a building contract, he is presumed to know the parties, the terms of their undertaking, the extent and feasibility of the work to be done, the character and responsibility of the principal obligor, and his ability to carry out the contract. If he guarantees the payment of a particular debt, he usually knows the exact amount of the debt, the time when it matures, and something of the ability of the principal to meet it. If he becomes responsible for the payment of the principal's debts generally, or lends his credit