The question here involved is whether the language of the agreement requires the payment to the trustee of an amount equal to the principal of the bonds, and the interest accrued thereon to such time, or whether it requires the payment of a sum equal to the (Supreme Court of Pennsylvania. April 10, principal of the bonds, and all the interest

Corporations (§ 486*)-MORTGAGES-SINKING their maturity. If the interpretation first FUND.

Appeal from Court of Common Pleas, interest thereon will be, as is estimated by Philadelphia County.

Es

MOSCHZISKER, J. (dissenting). I dissent from the majority view for the reasons stated in the following excerpt from the opinion of the court below:

"On the basis of the conditions existing today, the continuance of the payments by the complainant into the sinking fund for a future period of 22 years is udoubtedly onerous and apparently unnecessary, but where is there any guaranty that the conditions existing today will continue during the next almost quarter century? What may be the market value of the securities in the sinking fund during all of that time? What assurance beyond all question is there of the continuance of the valuation of the coal lands relied upon to-day as a security, upon their assessed valuation of $905,037? If they are continued to be mined during all of that period, may not their treasures of coal bebondholders, who are the real parties in interest, that the excellent guaranty of the conditions existing to-day, will be as valLehigh Valley Railroad Company, under the uable during the whole period of twentytwo years? What may or may not be the rates of interest existing during all of that period, and what the effects upon corporations of iH-advised national or state legisgold coin during this period? What may be the value of parent that the most optimistic person cannot prognosticate conditions, or their effect, for such a long period in the future.

500,000; so that in round numbers the trus- by appellant securities sufficient to pay ali tee will then have a total sum of consider- outstanding bonds, and while appellant conably more than $3,500,000 to meet a demand tinues to pay all interest due on such bonds for the payment at maturity of only $1,- as it accrues, it be relieved from making ad082,000 of bonds. The accumulation of such ditional annual payments to the sinking fund; an excessive and unnecessary fund can and that, so long as these conditions continserve no useful or wise purpose, and could ue, the appellee be enjoined from foreclosing hardly have been within the contemplation the mortgage for default in the annual sinkof the parties; nor can we see any com- ing fund payments. pelling reason for the adoption of a construction of the wording of the agreement which would lead to such a result. If the plain words of the agreement required this extraordinary course to be pursued, there would be no alternative, but the provision is that payments to the sinking fund shall cease "when the amount in the hands of the trustee shall be equal to the principal and interest of the bonds then outstanding"; and this may fairly be taken to mean the amount of the principal and interest then due and accrued upon the bonds outstanding. pecially is this true when we remember that the office of the sinking fund is to take the place, as security, of the coal mined and taken away from the mortgaged premises. If a fund sufficient to meet the principal and the accrued interest upon the bonds be always maintained in the hands of the trustee, it is all that the bondholders have any right to require. Such an amount, as above stated, is now in the hands of the trustee. Appellant through its counsel states in the printed brief of argument that it is willing that the accumulation of the income from the securities now in the sinking fund shall be added to that fund; and, if this be done, there should, in 1932, be in the hands of the trustee a sum vastly in excess of what will be required to meet maturing bonds amounting to $1,082,000. Surely the margin from that source is quite sufficient to protect the bondholders from any reasonable contingency that may arise. The possibility of any failure to meet the payments of interest is very remote. The bondholders have the obligation of the mortgagor, or its successor, the appellant, and the further guaranty of the Lehigh Valley Railroad Company, and the security of the mortgaged premises, now shown to be worth more than $900,000. In view of all these circumstances, we do not see that the interests of the bondholders can suffer in any way, if the appellant is relieved from making further payments to the sinking fund, provided that it continues to make payment of the interest which may from time to time become due and payable upon the outstanding bonds.

The decree of the court below dismissing the bill of the plaintiff is reversed, and the bill is reinstated; and it is further ordered and directed that a decree be entered granting to the plaintiff the relief for which it asks in the first and third prayers of the bill, which is, in substance, that, so long as

come exhausted? What assurance have the

lation? *

It is ap

"It is clear that the trust continues until the bonds are all paid and that those holding them that is, 'the registered owners or the legal representatives of the registered owners'-are entitled to hold them until January 1, 1932, and to receive interest thereon from January 1, 1892, at the rate of 5 per centum per annum, payable in like gold coin, as the principal is to be paid. These payments are to be made without deduction for any tax or taxes which may be payable under any present or future law of the United States of America or of the state of Pennsylvania, the company agreeing to pay any such tax or taxes. It is the holder of the bonds who is entitled to the security; * the mode prescribed in the said mortgage for the recovery of the principal and interest of said bonds being exclusive of all others. The obligation of the complainant beginning with January 1, 1892, and continuing annually thereafter

*

apart for a sinking fund and pay over to the
(trustees)
a sum equal
to 10 cents per ton for each and every ton
of coal of sizes above pea shipped during
the preceding year (provided, that in no case
shall such sum be less than thirty thousand
dollars in any one year), to be appropriated
to the purchase of such of the said bonds
as can be obtained at prices not exceeding
par, with accrued interest, which bonds shall
be forthwith canceled, and in case the bonds
cannot be procured at or under par, with

accrued interest, then the

said trustees or

trustee for the time being shall invest the amount then remaining in the said sinking fund in such securities (including the bonds intended to be hereby secured), as shall be approved by the party of the first part, which said securities and the proceeds thereof, when sold, together with all accumulations of interest thereon, shall form a part of the said sinking fund, and be applied to the purchase of bonds as aforesaid, when the same can be secured at or below par with accrued interest. Can it be then held that it was the intendment of the parties—that is, of the complainant, of the bondholders to be secured by the mortgage, and of the trustee mortgagee-that the words, 'And when

all said bonds shall have been purchased, or

when the amount in the hands of the trustee shall be equal to the principal and interest of the bonds then outstanding, the payments into the hands of the party of the second part (the respondent herein) for a sinking fund, as aforesaid, shall cease,' mean only the 'interest' to the date when the amount of the sinking fund equals the amount of the then outstanding principal of the bonds, and that it does not refer to the 'interest' recited in the first clause, viz.:

CONTRACT.

A surety company is not relieved from liability on a bond by an extension of time, where the bond was given to a city under an ordinance for the benefit of all persons who might furnish labor or material under a public contract, whether such contracts for labor and material were in existence when the bond was executed or not, and whether the terms of purchase were for cash or on credit; and an extension did not go beyond the time limit for suit on the bond, and the sureties suffered no material harm. Surety, Cent. Dig. § 1992; Dec. Dig. § 107.*] [Ed. Note. For other cases, see Principal and Appeal from Court of Common Pleas, Philadelphia County.

Action by the City of Philadelphia, to use ity & Deposit Company of Maryland. From of William P. Thompson, against the Fidelan order making absolute rule for judgment for want of a sufficient affidavit of defense, defendant appeals. Affirmed.

Argued before FELL, C. J., and BROWN, MESTREZAT, POTTER, ELKIN, and MOSCHZISKER, JJ.

William A. Glasgow, Jr., for appellant. Frank P. Prichard, for appellee.

MOSCHZISKER, J. On December 11, 1907, the firm of Lynch Bros. contracted to

which is to be paid to the holders of the erect a schoolhouse for the city of Philadelbonds * * * semiannually 'as the same phia, to be finished by August 1, 1908. A shall become due and payable according to percentage of the contract price was to be the terms in the said bonds contained and on retained by the city until the acceptance of the days therein respectively mentioned for the building, and the sum of $3,723.58 for a the payment of the same,' which, as recited period of 12 months after completion, as a in the bonds, is already shown to be 'in-guaranty for the sufficiency of the work. terest thereon from the first day of January, 1892, at the rate of five per centum per annum, payable in like gold coin semiannually on the first day of the months of July and January in each year,' until, 'the principal sum of the bond shall become due and payable' * on the first day of January, 1932? We cannot so interpret this contract."

The Fidelity & Deposit Company of Maryland, the defendant, became surety on a bond given by the contractors under the city ordinance of March 30, 1896, to securé payment to subcontractors and others for labor and materials supplied in the prosecution of the work. On November 14, 1907, the firm of Thompson Bros., the use plaintiffs, contracted with Lynch Bros. to furnish labor and With all respect for the opinion of the materials for certain portions of the work, majority, so to interpret the contract, to my and on May 14, 1908, they entered into an mind, is to change the plain meaning of the additional contract. At or before the time words used in the bond and to reform the in- when the debt to Thompson Bros. became strument to the possible prejudice of the due and payable, they accepted a note from bondholders. It seems to me that the words, Lynch Bros., dated December 2, 1908, for an "when the amount in the hands of the trus- amount sufficient to cover the balance now tee shall be equal to the principal and in-claimed, and with an express agreement that

an extension of time should be granted until ecuted or not, and without regard to the the maturity of the note. This note was re- terms of purchase, whether for cash or on newed on four occasions, with like agree- credit. In its nature the obligation was ments for extensions till November 19, 1909. more of a contract of insurance than of sureAll of the renewals and extensions were tyship; so long as the extensions of credit without the knowledge or consent of the did not go beyond the two-year limit for suit surety. There was a sufficient consideration fixed in the bond, and in the absence of to support the several extensions, and there fraud or unfair dealing on the part of the is no claim that the notes were taken in pay- subcontractors to the prejudice of the surement of the debt. On or before November 18, ty, or of material harm actually suffered, 1909, the moneys retained by the city were the surety was not released. The surety does paid to Lynch Bros., who became insolvent not aver any of these elements, but relies upbefore November 19, 1909, and on November on a presumption of injury because the mon24, 1909, were adjudged bankrupts. On Feb-eys retained by the city were paid over beruary 11, 1910, this suit was instituted against fore the expiration of the extensions. These the defendant company as surety on the bond, moneys were not retained for the benefit of claiming a balance due and unpaid for work the surety, but, in the words of the contract, and material furnished by the use plaintiffs, "as a guaranty that * * (the contracwith interest "from October 19, 1908, the tors) * shall keep all of said work date when the work * * was complet done by them in good order and repair for said period of twelve months;" nor could the subcontractors have enforced their claim against this fund. Lesley v. Kite, 192 Pa. 268, 43 Atl. 959.

ed." Affidavits of defense were filed avering the facts substantially as above set forth. The court entered judgment for want of a sufficient affidavit of defense, and the defendant has taken this appeal.

We find no direct averment in the affidavits of defense that the surety was actually harmed by the extensions granted to the contractors, and the facts as stated therein are not sufficient in themselves to raise such a presumption. For all that appears, the contractor may have paid every cent of the cash received to other materialmen or mechanics who did work upon the building. In a case of this kind, there is no presumption that the surety company is harmed, the prejudice must be made to appear, and the suggestion of mere contingencies or possibilities is not enough.

The assignments of error are overruled, and the judgment is affirmed.

The appellant contends that the extensions of time granted by the use plaintiffs to the contractors, without notice to or consent from the surety, released the latter from its liability on the bond. This would be true if the bond were an ordinary contract of suretyship with an individual as surety. But, as we said in the recent case of Young v. American Bonding Company, 228 Pa. 373, 77 Atl. 623: "The trend of all our modern decisions, federal and state, is to distinguish between individual and corporate suretyship where the latter is an undertaking for money consideration by a company chartered for the conduct of such business. In the one case the rule of strictissimi juris prevails, as it always has, with respect to the other, because it is essentially an insurance against risk, underwritten for a money considera- JOHN HANCOCK ICE CO. v. PERKIOMEN tion by a corporation adopting such business for its own profit, the courts generally hold (Supreme Court of Pennsylvania. March 20, that such a company can be relieved from its obligation for suretyship only where a departure from the contract is shown to be a material variance. While such corporations may call themselves surety companies, their business is in all essential particulars that of insurance. Their contracts are usually in the terms prescribed by themselves, and should be construed most strictly in favor of the obligee."

Here the bond was for the protection of subcontractors and others in the construction of a public building. It differs from the ordinary suretyship, in that it is not an obligation for the performance of any particular contract. It was given for the benefit of all persons who might furnish labor or material in the course of the work, whether the contracts for such labor and material were in existence at the time the bond was ex

R. CO.

1911.)

(231 Pa. 117)

RAILROADS (§ 182*)-FIRES-NEGLIGENCE.

In an action for a fire caused by sparks from a locomotive, a verdict for plaintiff would be sustained, where the evidence showed that the property was destroyed by a live spark from an ascertained engine of defendant, and there was some evidence of the insufficiency of the spark arrester on the engine.

[Ed. Note.-For other cases, see Railroads, Cent. Dig. §§ 1730-1736; Dec. Dig. § 482.*]

Appeal from Court of Common Pleas, Montgomery County.

Action by the John Hancock Ice Company against the Perkiomen Railroad Company. Judgment for plaintiff, and defendant appeals. Affirmed.

The facts appear in the report of the same case in 224 Pa. 74, 73 Atl. 194, and in the opinion of Swartz, P. J., refusing new trial and judgment n. o. v., as follows:

"This action was brought to recover dam- | motive engineers who attacked the efficiency ages for the destruction of the plaintiff's of the vertical screen in engine 846. The icehouse and its contents. The plaintiff com- criticism was not very serious, in our opinpany contended that engine No. 846 threw a ion; but the jury may have taken a more spark or sparks on the roof of the icehouse; favorable view of this testimony. The plainthat the fire which destroyed the building tiff also found a new witness for the second and the ice stored therein was caused trial in Grover Carl. This man knew 846 through the negligence of the defendant rail- and had worked on the engine. He says road company. that, shortly after the fire at the icehouse, he noticed the engine, near Hosensack, throw sparks as big as a shellbark, and that they set the grass and fence on fire. All the other witnesses of the first trial repeated their evidence of fire throwing at the second trial. Counsel for the defendant, at the argument for a new trial, contended very earnestly that the evidence of negligence was so meager and doubtful that the plaintiff should not be permitted to recover.

"That the property was destroyed by a live spark emitted from engine 846 was clearly established. While it was not formally admitted by the defendant, there was no denial of the allegations. In fact, if counsel for the defendant company had disputed the origin of the fire, so clearly shown, he would have injured his defense before the jury on the other branches of the case. No. 846 stood on the siding running along the icehouse. It pulled out five loaded cars, on a curve and on an upgrade. The engine labored, and there was a heavy exhaust. The smoke was emitted in large volumes, and the wind carried it right over the roof of the icehouse. There was no stove or fire in the building and no fire in the neighborhood of the icehouse. The fire started on the roof of No. 9 compartment of the building; that is, at a point almost immediately above the smokestack when the engine started to pull out, the loaded cars. The building was 35 feet high, and the siding was 6 or 7 feet above the floor of the icehouse. The roof was nearly flat, for the first 12 feet, and covered with tar paper and gravel. Beyond this point the shingle roof began and had a much steeper pitch. The fire started on the shingle roof just beyond the junction of the gravel roof and the shingle roof. The fire was discovered about 15 minutes after the engine pulled from the siding, and, when the men ran up to put it out, it had eaten a hole through the shingle roof.

"At the trial the real issue resolved itself into the single inquiry: Was the spark thrown upon the roof through the negligence of the defendant company?

"We do not see how this case could have been taken from the jury; especially so, in the light of the declarations by the Supreme Court when this question was under review, in John Hancock Ice Co. v. Perkiomen R. R. Co., 224 Pa. 74, 73 Atl. 194. The railroad company contended there was no negligence, or that it was so meager that it did not raise a presumption of negligence. The court then said: "The evidence was sufficient to send the case to the jury on the question of whether the fire from the engine had been communicated to the house, and the court properly held that it was also sufficient for submission to the jury on the question of the defendant's negligence.' Again: 'When the learned judge ruled the question, the plaintiff had shown, not by a presumption of law arising from the fact that the building had been fired by sparks from the engine, but by affirmative evidence, that through the negligence of the defendant sparks had been emitted which set fire to the plaintiff's building and caused its destruction.' The additional witness on fire throwing and the new evidence which attacked the efficiency of the style, form, and pattern of the spark arrester,, certainly strengthened the presumption of negligence, on the second trial.

"At a former trial, reported in John Hancock Ice Co. v. Perkiomen R. R. Co., 224 Pa. "It is claimed that the late case of Ameri 74, 73 Atl. 194, we held there was not suffi- can Ice Co. v. Penna. R. R. Co., 224 Pa. cient evidence for submission to the jury 439, 73 Atl. 873, rules that our case should that the spark arrester was not of a proper not have been submitted to the jury. There style, form, or pattern. In so ruling we is a marked difference at the very threshold were in error. At that trial there was no of these cases. In the American Ice Comevidence by any witness making a direct at-pany, 'there was no direct evidence to show tack upon the style, form, or pattern of the that the railroad company caused the fire.' spark arrester used in engine 846. There 'No locomotive was identified as being near was evidence which showed the bad conduct the building when the fire started. Indeed, of this engine for fire throwing. In other there was no testimony to show how or exwords, there was negligence shown by the actly where the fire started or from what plaintiff company, and the burden was cast cause it originated.' In our case the onupon the defendant company not only to clusion was inevitable that engine 846 caussatisfy the jury that the spark arrester was ed the fire. It was shown where and how in good repair, and that the engine was op- the fire started. The locomotive stood be erated with due care, but also that the spark side the building, and, when it moved out. arrester in use was of a proper design or the smoke, and exhaust, the curve, the grade, pattern. Upon the second trial there was and the puffs, indicated that the engine la.