suit brought to recover damages therefor. But we think, as did the court below, that when construed with the other provisions of the contract, as it should be, that is not its meaning. The insurance was against two kinds of liability-one of which was for damages on account of bodily injury sustained by any person, and the other was for expenses in defending any suit brought therefor. This last provision was not included in the first, and if it had not been expressly made, the insurance against the accident would not have included the cost and expenses of a suit to recover on account of it. They were not the necessary consequences of the accident, and so would not have been within the contemplation of the parties. For the same reason the restriction of the liability of the company in respect to injuries resulting from an accident would not extend to costs and expenses of a suit, for such language without more would not import that the parties had that subject in contemplation. And there is abundant reason shown by the contract why it would be most unlikely that the parties should intend such a limitation. By one of the conditions of the insurance, the Telephone Company was prevented from making any settlement, or incurring any expense, or interfering in any negotiation for settlement, or in any legal proceeding. If the Casualty Company should see fit to resist the claim, it could make any defense it pleased, hire such and as many lawyers as it wanted, and prolong the litigation to the last extremity. If its liability for the accident were converted into a fund for carrying on the contest, it could be done without the ordinary risks of litigation, and the only prospect for the assured would be in the remnant, if there should be any. A contract ought not to be construed to an absurd conclusion, if a reasonable one is possible. Moreover, a policy of insurance prepared with much care for the interests of the insurer should be construed favorably to the other party, if the language employed leaves the matter in doubt. These considerations lead us to think that when the Casualty Company reserved all power of control of the defence to actions brought by injured persons to establish the liability for the accident and recover damages, and insured the Telephone Company "against the expense of defending any suit for such damages," although it must needs be that the defense would be carried on in the name of the Telephone Company, and an adverse judgment would go against that company for damages and costs, yet in fact the Casualty Company would be defending the cause in its own interest, and for the purpose of performing its contract of indemnity against the expenses of any such suit; and at all stages of the litigation it would be for it to determine what expenses it would risk in the chances of defeating the claim.

It makes no difference that ultimately a larger liability was established against the Telephone Company than the limit of insurance, for the Casualty Company reserved the right to make the defense without regard to the amount claimed by the party injured by the accident, and the Telephone Company was as completely excluded in a case where the amount which might be recovered was as much as $25,000 as where it might not exceed $5,000. By its agreement it was ex

posed to the hazard of the course which the Casualty Company might see fit to pursue. If the defense proved successful, the Casualty Company would have done no more than it had agreed to do. If unsuccessful, still that company had done only that. There is no room for holding that the liability of the Casualty Company for the expenses of making the defense were at all dependent upon the result of the litigation. The court below gave judgment to the plaintiff for the $5,000, and for only a proportionate part of the expenses of the defense, upon a theory of an equitable division between the parties. The Casualty Company has no ground for complaint. It was not entitled to deduct from the amount insured what it had paid in making the defense, and it was bound to make good to the Telephone Company the expenses which the latter had been compelled to pay because primarily liable.

The judgment must be affirmed, with costs.

BROWN et al. v. UNITED STATES.

(Circuit Court of Appeals, Second Circuit, March 26, 1907.)

No. 61.

1. PRINCIPAL AND SURETY-BOND OF BIDder for GovERNMENT WORK-LIABILITY OF SURETIES.

A bond given by a bidder for government work conditioned that if his bid was accepted he would enter into a contract and furnish a bond for its performance within 10 days, or, in case of his failure to do so, the sureties would pay to the United States "the difference in money between the amount of the bid of said bidder so accepted and the amount for which the proper officer of the United States may contract with another party to do the work proposed, if the latter amount be in excess of the former," contemplates that, if the bidder fails to enter into a formal and binding contract in accordance with his proposal, the government may relet the work and enter into an essentially similar contract with another party, and then look to the sureties for indemnity to the extent of its loss. When such second contract is let, the measure of the sureties' liability is fixed at the difference in price under such contract and the bid of their principal, and cannot be affected by the fact that the contractor fails to complete the work and a third contract is made whether at greater or less cost to the government.

2. SAME-DEFAULT OF BIDDER-MEASURE OF SURETY'S LIABILITY.

Defendants became sureties on the bond of a bidder for a government contract for furnishing and laying in place toward the construction of a riprap breakwater such a quantity of stone "dependent upon the price per ton of stone bid" as could be furnished in place for $45,000; the bond being conditioned that if the bid was accepted and the bidder failed to enter into the contract defendants would pay to the United States the difference in money between the amount of the bid so accepted, and the amount for which the government might contract with another party to do the work proposed, if the latter amount should be in excess of the former. The bid was accepted, but the bidder failed to enter into contract, and the work was let under the same conditions to a second bidder at an increased price per ton for stone; the necessary result being that the second bidder was required to furnish a smaller quantity of stone. Held, that such fact did not render the second contract one for doing substantially different work from that proposed by the first bid, so as to relieve defendants from liability, but that they were liable for the value of the stone in

place which the government would have obtained under the first bid in excess of that which it obtained under the second at the price bid by their principal.

In Error to the Circuit Court of the United States for the Southern District of New York.

Writ of error by the defendants in the court below to review a judgment for the plaintiff.

H. E. Lippincott, for plaintiff in error.

F. W. Bird, Winfred T. Denison, and Henry L. Stimson, for defendant in error.

Before WALLACE, LACOMBE, and COXE, Circuit Judges.

PER CURIAM. This in an action against Brown and Fleming as sureties on a bond executed to the United States. By the bond, they undertook that if the bid of Charles Frey, Jr., "herewith accompanying, dated June 12,. 1899, for building a riprap breakwater at Larchmont Harbor, Long Island Sound" should be accepted within 60 days from the date of the opening of proposals therefor, Frey would, within 10 days after notice of such acceptance, enter into a contract with the proper officer of the United States to do the work proposed by said bid, at the prices offered by said bid, and in accordance with the terms and conditions of the advertisement inviting said proposals, and that he would give bond with good and sufficient sureties for the faithful and proper fulfillment of such contract; and they further undertook to pay to the United States, in case Frey should fail to enter into such contract or give such bond within 10 days after said notice of acceptance, "the difference in money between the amount of the bid of said bidder so accepted and the amount for which the proper officer of the United States may contract with another party to do the work proposed, if the latter amount be in excess of the former."

By the advertisement mentioned in the bond the government invited proposals from bidders for furnishing and laying in place toward the construction of a riprap breakwater such a quantity of stone, "dependent upon the price per ton of stone bid," as could be furnished in place for $45,000. The proposal or bid of Frey mentioned in the bond was to "furnish the riprap stone in place at 43 cents per Frey's bid was accepted by the government; but, after due notification thereof, he failed to enter into the contract, and, more than 10 days after such notification having expired, the government readvertised the work and invited proposals similar to those originally invited, and, having accepted the bid of one Conkling pursuant thereto, entered into a contract with him. By the bid of Conkling he undertook to furnish the stone and lay it in place at the price of 51 cents per ton. Conkling partly performed his contract, but subsequently abandoned it; and thereupon the government contracted with Anderson & Murphy to complete the work, and they fully performed it.

Upon the trial both parties moved for the direction of a verdict, and the court directed a verdict for the plaintiff.

The assignments of error challenge merely the ruling of the trial judge in directing a verdict for the plaintiff. Most of the questions which have been argued by the plaintiffs in error are not presented by the facts of the case. The only contention which merits consideration is that the contract with the government made with Conkling was not one to do the same work which Frey offered to do by his proposal. If this is true, the amount for which the sureties became liable was not established upon the trial according to the mode provided for in their undertaking; that amount being the "difference in money between the amount" of Frey's bid and "the amount contracted for with another party to do the work proposed," and only nominal damages were recoverable.

It is the meaning of the undertaking that the sureties will be responsible that Frey will enter into a formal and binding contract pursuant to his proposal, and if he fails the government may relet the work and enter into an essentially similar contract with another party, and then look to the sureties for indemnity to the extent of its loss. The undertaking does not contemplate that if the second contract is not performed the government may enter into a third, and still look to the sureties for indemnity for the performance of the contract; but it contemplates that when the second contract shall be made the government is to rely for its protection against loss upon that contract, and the responsibility of the party who enters into it. It contemplates that, if by the second contract the government secures as favorable terms as it would have obtained by the original contract, no occasion for indemnity from the sureties can arise; but, if the terms are not as favorable, the occasion will arise, and the loss is to be measured by the difference in the contract prices of performance. It does not mean that if the second contract shall not be performed, and a third is made, the sureties are to be thereby released from their obligation. It does mean that, if by the terms of the second contract no apparent loss has accrued to the government, they are no longer liable; but, if by its terms an apparent loss has accrued, they shall be liable; and whether a third contract is made or not, or whether the government incurs a larger or smaller subsequent loss, or whether it abandons the work altogether, are matters of no concern to them.

The obligation of a surety is not to be extended beyond its terms, and it follows that if the contract made by the government with Conkling was not to do substantially the work which Frey proposed to do, the deviation precludes the government from establishing the amount of the loss.

It appears that the contract which Frey should have entered into would have required him to furnish 104,000 tons of stone, while the contract entered into with Conkling only required him to furnish 88,000 tons. Such a difference in the quantities of stone to be furnished would render the two contracts radically different were it not that the difference was created necessarily by the difference in the two bids for doing the same work. Both contractors by their bids promised to supply such a quantity of stone as at the prices per

1

ton mentioned by them, respectively, should amount to the sum of $45,000, and the difference in the quantities of stone results simply from the difference between their bids in the price per ton. Frey's bid at 43 cents a ton was equivalent to a proposal to furnish 104,000 tons. Conkling's bid at the price of 51 cents per ton was equivalent to a proposal to furnish 88,000 tons. The contract with Ĉonkling was a contract to do the work proposed to be done by Frey; but with a limitation in quantity necessitated by the difference in the price. This difference was an incident contemplated by the undertaking of the sureties, and the purpose and object of the bond was to protect the government from any loss which might arise in consequence thereof.

Owing to the failure of Frey to enter into and perform his contract, the government obtained under the Conkling contract 16,000 tons less stone than it would have obtained from Frey. It was obliged to pay $45,000 for 16,000 tons less than it would have obtained by the terms of Frey's proposal. The phraseology of the bond is not happily chosen, but, read as it must be, with the advertisement and the proposal of Frey, which are annexed to and form a part of it, we are unable to doubt that it obligated the defendants to pay to the government the difference, at the price fixed in Frey's proposal, between the quantity of stone which he promised to deliver, and the quantity which the government was able to obtain by the Conkling contract. It follows that a verdict was properly directed for the plaintiff.

The assignments of error do not challenge the correctness of the computations adopted by the trial judge in directing a verdict, and consequently we are not called upon to consider whether or not the computation was correct.

The judgment is affirmed.

WILLIAM H. PERRY CO. v. KLOSTERS AKTIE BOLAG.

(Circuit Court of Appeals, First Circuit. April 18, 1907.)

No. 694.

1. COURTS-JURISDICTION OF FEDERAL COURTS-SUFFICIENCY OF RECORD. While parties cannot confer jurisdiction on a federal court by consent. still where the jurisdictional facts are properly alleged, and thus properly appear on the record, and the parties proceed to trial on pleadings which go to the merits, and, particularly, when the jurisdictional facts are not subsequently put in issue by the defendant nor seriously denied, the case ordinarily will not be dismissed for want of jurisdiction, where the proofs do not create a legal certainty that it is not within the jurisdiction.

[Ed. Note. For cases in point, see Cent. Dig. vol. 13, Courts, §§ 155, 156.]

2. SALE-DELIVERY-PASSING OF TITLE.

Under a contract for the sale of a cargo of foreign iron to be delivered from the ship, custom house charges paid, the unloading of the iron on a wharf, from which it was being removed by the purchaser without any objection to the quality or quantity at the time of its loss, and the payment of the duties constituted such a delivery as to pass the title.