Opinion
October 5, 1967
Judgment for plaintiffs in the sum of $65,701.30, entered upon a jury verdict in an action by the plaintiff-obligee named in a surety bond against the defendant-appellant surety to recover the estimate excess cost of completion of an incomplete construction contract, unanimously reversed on the law and on the facts and new trial ordered, with $50 costs and disbursements to appellant to abide the event. Application to the bond in issue of those rules of construction and interpretation governing a compensated surety was made difficult by virtue of the circumstances under which the re-executed bond was issued and the job was halted and the ambiguous language of the bond itself upon which the surety wholly relied as a defense. In this state of the record the task of the trial court was not made easy by the failure of counsel to assist the court in giving the jury an accurate understanding of the law. The error into which the court fell in the circumstances was in no small measure counsel's own doing. Since exception was taken, nevertheless, we are constrained to hold that prejudicial error was committed in charging the jury that the appellant surety was required to give notice to the obligee [owner] that the failure to make payments to the principal [contractor] was prejudicial to it and would result in cancellation of its bond. A surety is paid for assuming the risk of performance by its principal. It is not obligated to supervise actively performance by the obligees so as to be able to notify them when they are defaulting on their obligation. Upon the new trial plaintiffs should be prepared to offer proof of those items of damage necessary and reasonable to the cost of completion over and above the contract price.
Concur — Steuer, J.P., Tilzer, Rabin, McNally and McGivern, JJ.