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verdict of guilty against Hays, and a general verdict of not guilty against Flickinger. If you find them, or either of them, guilty on some counts, and not guilty on others, you will so indicate your finding by your verdict.

As I have heretofore said, you cannot find the defendant Flickinger guilty on any count, unless you shall also find the defendant Hays guilty on the same count.

AMERICAN BONDING CO. OF BALTIMORE . PUEBLO INV. CO.

(Circuit Court of Appeals, Eighth Circuit. November 7, 1906.)

No. 2,367.

1. PRINCIPAL AND SURETY-SURETYSHIP AND GUARANTY-CHARACTER OF CONTRACT.

The contract of suretyship is not that the obligee will see that the principal obligor pays his debt or fulfills his contract, but that the surety will see that the principal pays or performs.

[Ed. Note.-For cases in point, see Cent. Dig. vol. 40, Principal and Surety, 1.]

2. SAME-CONTRACTS OF, CONSTRUED BY SAME RULES AS OTHER AGREEMENTS. Written language has the same significance, and its meaning is to be ascertained by the same rules of law where it is found in the contract of a surety as where it appears in other agreements.

3. SAME--OBLIGATION OF SURETY NEITHER EXTENDED NOR REDUCED BY CONSTRUCTION OR IMPLICATION, BUT TO HAVE RATIONAL INTERPRETATION.

The obligation of a surety may not be extended or reduced by construction or by implication beyond the true meaning expressed by the contract.

His agreement, like other contracts, must have a rational interpretation, which, while it carefully restricts his liability to that which he agreed to undertake, does not fail to hold him to that liability which by the plain terms of his agreement he promised to assume.

[Ed. Note.-For cases in point, see Cent. Dig. vol. 40, Principal and Surety, §§ 103, 108.]

4. SAME-FACTS-CONCLUSION.

Tenants agreed by a written lease to put into the premises a heating plant, to renew the plumbing, to make other improvements, and to pay taxes and the premiums on insurance in lieu of rent, and to give a bond conditioned for their performance of their contract and to pay for the work and material used in the improvements, to the end that no liens should be fastened upon the property by their creditors. They gave a bond with a surety conditioned that they would perform all the obligations assumed by them by virtue of the lease, but this bond contained no additional condition that they would pay for the work and material. Held, the lease and the bond evidenced an express agreement of the lessees and the surety that the lessees would not only furnish the heating plant and the plumbing, but that they would pay for the work and material employed therein, to the end that no lien of any creditor of theirs should be fastened upon the property, and the surety was liable to the lessor for the amount the latter necessarily paid to relieve its property from a lien for this labor and material.

5. SAME-ALTERATION OF GUARANTIED CONTRACT WITHOUT HIS CONSENT DISCHARGES SURETY.

Any material alteration of the contract guarantied, without the consent of the surety, discharges him.

[Ed. Note. For cases in point, see Cent. Dig. vol. 40, Principal and Surety, §§ 169, 170.

Discharge of surety on alteration of contract, see note to Zeigler v. Hallahan, 6 C. C. A. 6.]

150 F.-2

6. SAME-WRONGFUL SURRENDER OF SECURITY DISCHARGES SURETY PRO TANTO. The wrongful surrender by the obligee of security for the performance of the obligation guarantied, without the knowledge of the surety, discharges him from liability entirely or pro tanto, according to the value of the security surrendered.

[Ed. Note. For cases in point, see Cent. Dig. vol. 40, Principal and Surety, §§ 244-268.]

7. LANDLORD AND TENANT-LEASE-SURRENDER TERMINATES AND DESTROYS RIGHTS CONDITIONED ON CONTINUANCE.

The surrender of leased premises by the lessee and their acceptance by the lessor during the term closes the term and the lease, and destroys all rights conditioned on its continuance thereunder.

[Ed. Note.-For cases in point, see Cent. Dig. vol. 32, Landlord and Tenant, § 368.]

8. SAME-SURRENDER RELEASES FROM RENT NOT DUE, ACCRUING AND TO ACCRUE, BUT NOT THAT ACCRUED AND DUE.

Such a surrender releases the lessee from liability for rents accruing, but not yet due, from rents to accrue, and from immature obligations, but leaves him liable for all rent accrued and due and for all obligations whose performance is due.

[Ed. Note. For cases in point, see Cent. Dig. vol. 32, Landlord and Tenant, §§ 788, 789.]

9. PRINCIPAL AND SURETY-DEFAULT OF PRINCIPAL.

There was a lease for a term of 30 months, which expired on September 12, 1905, in which the lessor granted to the lessees the option to purchase the leased premises during the lifetime of the lease, and the lessees agreed that upon their default the lessor might terminate the lease and take possession as of its former estate. They gave a bond with a surety for the performance of all their obligations under the lease, made default, and the surety was notified thereof in August, 1904. The defaults continued, and on December 27, 1904, the lessees, without notice to the surety, surrendered the leased premises and the lessor accepted them. Held this surrender terminated the lease, but it did not relieve the surety from liability for the matured obligations of the lessee, because it did not constitute an alteration, but an enforcement of the terms of the lease.

The option to purchase ceased with the lease, but the surrender did not wrongfully deprive the surety of its right to subsequently exercise this option, because that right was conditioned by the performance by the lessees of their obligations guarantied by the surety, and the lessees and the surety were both in default.

10. LANDLORD AND TENANT-SURRENDER-EFFECT ON LIABILITY FOR RENT ACCRUED AND RENT ACCRUING.

The lien for the work and material used in the heating plant and plumbing was fastened upon the property more than a year before the surrender, but the suit to foreclose it was pending, and did not ripen into a decree which determined its amount until a few days thereafter.

Held, the obligation to pay for this labor and material, as for rent accrued, matured before the surrender, which did not release the lessees nor the surety from liability therefor.

[Ed. Note. For cases in point, see Cent. Dig. vol. 32, Landlord and Tenant, §§ 788, 789.]

11. SAME.

The lessees agreed to pay the taxes of 1904 when they became due and payable. One half of them became due and payable on the last day of February, 1905, and the other half on the last day of July, 1905. The surrender was on December 27, 1904.

Held the obligation to pay these taxes, as for rent accruing, but not completely accrued nor due, had not matured at the time of the surrender, and by that act the lessees and the surety were released from liability therefor.

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12. SAME-SURRENDER BETWEEN RENT DAYS RELEASES FOR CURRENT PERIOD.
A surrender between rent days releases the lessees and their sureties
from liability for the rent for the current period between them.

[Ed. Note. For cases in point, see Cent. Dig. vol. 32, Landlord and Tenant, §§ 788, 789.]

(Syllabus by the Court.)

In Error to the Circuit Court of the United States for the District of Colorado.

The American Bonding Company of Baltimore, a corporation, was surety upon a bond of R. C. Miller and H. G. Bahne, lessees, which was conditioned that they would perform the obligations by them assumed under the lease. They made default and a judgment was rendered against the surety, upon a directed verdict in the court below, for the sum of $10,000, the penalty of the bond. This writ of error was sued out to reverse that judgment.

The lease was dated March 9, 1903. The Pueblo Investment Company, a corporation, was the lessor, and Miller and Bahne were the lessees. The term of the lease was 30 months, from March 12, 1903, to September 12, 1905. The property was a hotel building and the grounds upon which it stood. The lessor demised the premises to the lessees for the term of the lease, and also granted to them an option to purchase the property for $120,000 at any time within the lifetime of the lease. In lieu of a cash rent for the property, the lessees agreed to make certain improvements and repairs, to pay certain premiums for insurance and certain taxes upon the premises. They covenanted that they would, as rent for the premises, at once upon taking possession of the property, "put steam heat in the said hotel including seventy-one (71) guest rooms, the said steam-heating plant to be in all respects first class, competent and sufficient properly to heat said rooms, replace the present bath tubs and closets throughout the hotel except in the mineral baths with the latest modern tubs and closets, renew the plumbing in said hotel in first class shape," recarpet the halls and such of the rooms as might reasonably need it, pay the premiums upon $70,000 of insurance upon the hotel property during the term of the lease so as to keep it insured for that amount, pay the taxes assessed against the property for the years 1903, 1904, and the first half of the taxes for the year 1905, and that they would perform various other acts not material to this action which are specified in the lease. One of the terms of the lease was that if default should be made in any of the covenants or agreements to be kept by the lessees, except as to such matters as might be under arbitration at the time of such default, it should "be lawful for the party of the first part, its successor, agent, or assigns or attorney, at its election, to declare said terms of lease ended and to enter upon said premises or any part thereof, either with or without process of law, to re-enter and to expel, remove and put out, using such force as may be necessary, the said parties of the second part, or any other person or persons occupying or upon said premises, and re-gain, re-possess and enjoy said premises as in its first and former estate, and shall not in such action be liable to, or indebted for any cause of action or damages upon the part of the parties of the second part, their executors, administrators or assigns." Another paragraph of the lease read in this

"In case the said parties of the second part fail to purchase or sell the said property at a cash price of one hundred and twenty thousand dollars within the lifetime of this lease, they will, at its expiration, turn back the said property to the party of the first part or its assigns, with all additions thereto made by them in the way of furniture, fixtures, equipment; and, upon the signing of these presents, they will give a good and satisfactory bond to the party of the first part in the penal sum of ten thousand dollars ($10,000) conditioned upon the faithful performance of this contract on their part and of all the provisions therein contained by them to be done and performed; and that they will justly pay for all material and labor used or employed in the betterment or repair of said property

and to the end that no liens of any character shall be placed against the said property by any creditor of the parties of the second part."

On March 12, 1903, the lessees, as principals, and the bonding company, as surety, gave a bond to the investment company in the sum of $10,000, which recited that the investment company had executed the lease with the option to the lessees of purchasing at a certain cash price, and that "in and by said lease the said lessees in lieu of a fixed rental for the said property are to do and perform certain things in the way of putting the said hotel in first class repair, adding steam-heating and electric light plant thereto, and make certain payment of taxes and insurance, to which said lease reference is hereby made for the purpose of ascertaining in detail the exact obligations assumed by the said lessees thereunder," and covenanted that, if the lessees should "well and truly perform the obligations by them assumed under the said lease to the true intent and meaning thereof, then this obligation to be void and of no effect, otherwise to remain in full force and virtue." The lessors entered into possession of the property at the commencement of the term, and remained in possession until December 27, 1904. Prior to that date they had made default in the payment of the taxes assessed for the year 1903 upon the property and the furniture, in the payment of insurance premiums provided in the lease to the amount of $416, in the recarpeting of the hotel, halls, etc., to the damage of the plaintiff in the sum of $446.40, and, although they had installed a heating plant and renewed the plumbing, they had failed to pay therefor, so that a lien for a large amount on account thereof had been fastened upon the property by the contractor, and he had brought a suit against the investment company to enforce this lien. The investment company had notified the bonding company that the lessees had failed to pay the taxes for the second half of the year 1903, due on August 1, 1904, that they had failed to pay the insurance premium on policies of fire insurance which the lease required them to satisfy, and that this suit to enforce this lien had been commenced. But the bonding company paid no taxes or premiums for insurance, and did nothing to discharge the lien or to defend against it. On December 26, 1904, the lessees notified the lessor that they could not continue to operate the hotel, and that they wished to turn the property over to it on the next day. On December 27, 1904, they refused to continue to operate the hotel under the lease, surrendered the property to the lessor, and it accepted it. The investment company sued the bonding company on the bond for the damages It sustained by reason of the failure of the lessees to keep their covenants and recovered the judgment assailed.

John M. Waldron (R. D. Thompson and Peete & Abrahams, on the brief), for plaintiff in error.

Robert S. Gast and Chas. E. Gast, for defendant in error.

Before SANBORN and VAN DEVANTER, Circuit Judges, and PHILIPS, District Judge.

SANBORN, Circuit Judge, after stating the case as above, delivered the opinion of the court.

A surety who guaranties by his bond the performance by his principal of the latter's contract with the obligee is bound for the fulfillment of no new or modified agreement, and any material alteration of the bonded contract without his consent releases him from liability for its fulfillment. The wrongful surrender by the obligee in the bond of security for the performances of the guarantied obligation, without the knowledge of the surety, discharges him from liabilty therefor entirely or pro tanto, according to the value of the security thus surrendered. Brown v. First National Bank, 66 C. C. A. 293, 298, 132 Fed. 450, 455; Brown v. First National Bank, 112 Fed. 901, 904, 50 C. C. A.

602, 605, 56 L. R. A. 876; Bank v. Colcord, 15 N. H. 119, 41 Am. Dec. 685; Rogers v. School Trustees, 46 Ill. 428; Colebrooke on Collateral Securities (2d Ed.) § 239; Hays v. Ward, 4 Johns. Ch. (N. Y.) 123, 130.

By the terms of the lease, whose performance by the lessees was warranted by the bond in suit, the obligee in the latter granted to the tenants, the principals in the bond, the option to purchase the leased premises for $120,000 at any time during the lifetime of the lease. The surety in the bond had the right to acquire and to exercise this option by discharging the obligations of the lessees to the investment company, the lessor, and by invoking the principle of subrogation. The surrender of leased premises by the tenants during the term of the lease and the acceptance of the property by the landlord, without a notice that the latter takes it and will hold and use it during the remainder of the term for the use and benefit of the tenants exclusively, closes the term of the lease, and destroys all rights conditioned upon its subsequent continuance. Prout v. Roby, 15 Wall. 471, 476, 21 L. Ed. 58; Watson v. Merrill, 136 Fed. 359, 362, 69 C. C. A. 185, 188, 69 L. R. A. 719. The term specified in the lease was to expire on September 12, 1905, and the lessees and their surety, if they fulfilled their covenants, had the right to purchase the property for $120,000 on or before that date. The surrender of the hotel by the tenants and its acceptance by the landlord on December 27, 1904, closed the term of the lease on that day, and deprived the lessees and the surety of the right to make that purchase thereafter.

The first and the chief complaint of counsel for the surety is that the court below refused to hold that this surrender, which was made and accepted without notice to the surety, discharged it from all liability under its bond. They argue with commanding ability and great force and ingenuity that this surrender modified the terms of the lease and deprived the surety of the security of the right to purchase between December 27, 1904, and September 13, 1905, and that either effect was sufficient to release it. In support of this position they cite authorities which sustain the general rules of law which have already been stated, and Stern v. Sawyer (Vt.) 61 Atl. 36, where, without notice to the surety of the tenant, the landlord accepted a release of part of the leased premises which he sold for $2,250 and the lessee waived the performance of the lessor's covenant to repair, Holme v. Brunskill, Law Rep. 3 Q. B. D. 495, in which, without notice to the surety, the principal released a part of the demised premises to the lessor in consideration of a reduction of the rent ten pounds annually, Brandt on Suretyship & Guaranty, § 429, where a case is cited in which a yard, shed, and frame dwelling house were rented for $375 per month, and, without notice to the surety for the lessee, the latter surrendered the dwelling house to the landlord in consideration of a reduction of the rent for the remainder of the premises to $300 per month (Penn v. Collins, 5 Rob. [La.] 213), and Warren v. Lyons, 152 Mass. 310, 25 N. E. 721, 9 L. R. A. 353, in which there was a lease for a specified term for a rental of $108.30 per month, and a covenant by the lessee to pay the same rent as long as he held the premises after the expiration of the term, and before the term lapsed the

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