United States Fidelity & Guaranty Co. v. Robert Grace Contracting Co.

• Decision Date: 16 January 1920
• Docket Number: 2442.
• Citation: 263 F. 283
• Parties: UNITED STATES FIDELITY & GUARANTY CO. v. ROBERT GRACE CONTRACTING CO.
• Court: U.S. Court of Appeals — Third Circuit

263 F. 283

UNITED STATES FIDELITY & GUARANTY CO. v. ROBERT GRACE CONTRACTING CO.

No. 2442.

United States Court of Appeals, Third Circuit.

January 16, 1920

Stonecipher & Ralston and Patterson, Crawford, Miller & Arensberg, all of Pittsburgh, Pa. (Thomas Patterson, of Pittsburgh, Pa., of counsel), for plaintiff in error.

Reed Smith, Shaw & Beal, Beatty, Magee & Martin, Richard W Martin, and Edwin W. Smith, all of Pittsburgh, Pa., for defendant in error.

Before BUFFINGTON, WOOLLEY, and HAIGHT, Circuit Judges.

HAIGHT Circuit Judge.

The defendant in error (hereinafter called the Contracting Company) brought suit in the court below against the plaintiff in error (hereinafter called the Surety Company) and recovered a judgment, a reversal of which is sought by this writ of error. The general facts, which it is necessary to recite in order that the questions in controversy may be understood, may be briefly summarized as follows:

In August, 1914, the 'county court of Mercer county,' W Va., entered into a contract with the Curtis-Ward Company, a contracting concern, for the construction of certain roads in that county. The Surety Company became surety on the bond of the Curtis-Ward Company for the performance of the contract. In May of the same year one Samuel Walton had entered into a like contract with the same municipality for macadamizing and grading another road. After some work had been done under this latter contract, Walton died, and his executors, in June, 1915, sublet the contract to the Curtis-Ward Company. The Surety Company also became the guarantor to the executors of Walton for the performance of that contract. The Curtis-Ward Company failed to fully perform either contract, and the county, in February, 1916, turned over the work of completing them to the Surety Company. The latter thereupon, on February 21, 1916, entered into a contract with the Contracting Company for finishing the work required to be done under the contracts. Work was begun under this latter contract in the early part of April, 1916, and was continued, with more or less friction between the parties, until the end of December of that year, when the Contracting Company, claiming that the Surety Company had broken the contract because it had failed to pay an installment, which the Contracting Company contended had become due for work done and materials furnished during November, notified the Surety Company that it declined to be longer bound by the contract, and of its intention to hold the Surety Company responsible for the consequences of the latter's assumed breach. The Contracting Company thereafter refused to do any further work on the contract, and subsequently brought this action.

The Surety Company took the position that the Contracting Company's action in abandoning further work under the contract was unwarranted, and accordingly not only denied all liability to the Contracting Company, but sought to recover from it, by way of counterclaim, the damages which the Surety Company had suffered as a result of what it contended was a breach of the contract on the part of the Contracting Company. These divergent contentions are primarily the result of different constructions of the contract of February 21, 1916. Consequently the main questions in the court below were, as they are here: (1) Whether the monthly payments which the Contracting Company was to receive were to be based on its own monthly estimates of the value of the work done and the materials furnished, or were to be based on the estimates made by the county engineer; and (2) whether the Contracting Company was obliged to do such work as the county engineer might require, in the way of repairing and making good any portions of the work theretofore done by either of the original contractors, and which, in the meanwhile, had become injured or damaged.

The learned trial judge construed the contract to mean that (1) the Surety Company undertook, at all events, to pay the Contracting Company in monthly installments for the actual work which it did and materials which it furnished, without regard to the estimates thereof made by the county engineer; and (2) that the Contracting Company was not compelled to do any of such repair work. We think that such a construction is erroneous in both respects.

The contract recites that the county had turned over to the Surety Company 'the work of completing the contracts' entered into between it and the Curtis-Ward Company and Samuel Walton, respectively, and that the Surety Company was desirous of entering into a contract with the Contracting Company 'to complete the work mentioned in the contracts * * * in accordance with the terms of the said contracts. ' There is then a covenant by the Contracting Company 'to complete the work' called for in the contracts 'in the manner and in accordance with the plains and specifications * * * set forth in said contracts * * * to the satisfaction and acceptance of the chief engineer' of the county. The Surety Company on its part agreed to pay the Contracting Company, 'as a consideration for completing the said work, the schedule of prices specified in the said contracts with the county court of Mercer county, West Virginia, and with the executors of the will of Samuel Walton, deceased,' plus any unpaid 'retained percentages on estimates theretofore made for work done or material furnished,' and plus 'the amount of any estimate' for work done and materials furnished by the Curtis-Ward Company, for which no monthly estimate had as yet been made. The Surety Company further guaranteed that such retained percentages should amount to at least a certain sum, and it undertook, at all events, to pay that amount to the Contracting Company; it being also specifically agreed that no deduction should be made from any moneys that the latter was to receive, so far as the Contracting Company and the Surety Company were concerned, by reason of any overpayment theretofore made to the Curtis-Ward Company.

The consideration thus provided for was to be paid to the Contracting Company by the Surety Company 'at the time and upon the terms mentioned in the said original contracts. ' But in order to facilitate the payments it was further agreed that the Surety Company should give its written order to the county to pay the Contracting Company 'such sums as may be due under said contracts as the work progresses,' and the Contracting Company agreed that, 'so long as said payments are made by the county court in accordance with the terms of said contracts,' it would accept them from the county rather than from the Surety Company. However, to prevent any payments to which the Contracting Company would otherwise be entitled from being withheld by the county, either permanently or temporarily, it was provided that the Surety Company should pay any money that the county might fail or refuse to pay by reason (1) of any claim made thereto by any creditor of the Curtis-Ward Company, (2) or by reason of any action or claim asserted by any trustee in bankruptcy or other trustee, (3) or for any other reason or cause other than the default of the Contracting Company. Provision was also made for the use by the Contracting Company, without payment therefor, of any materials left on the ground by the original contractor, or to which it would have been entitled, had it gone ahead with the performance of the contract; for the furnishing by the Surety Company of any of such materials as the Contracting Company might be unable to use because of any action by any creditor or representative of creditors of the Curtis-Ward Company; for the indemnification of the Contracting Company by the Surety Company in case the former was required to pay for any of the supplies so used, or was held liable in any action brought against it by any creditor or representative of creditors of the Curtis-Ward Company; and for the substitution of the Contracting Company to any rights that the Surety Company might have to use the machinery, tools, and other appliances of the Curtis-Ward Company.

There is thus a very complete and comprehensive contract, clearly expressed, as to the work to be done, the materials to be furnished, and by whom, the prices to be paid therefor, and how and by whom the payments were to be made, and as to other details. We have no difficulty in gathering therefrom that it was the intention of the parties that the Contracting Company was to do all the work and furnish all the materials, except such as were on the ground, etc., as before mentioned, necessary to complete the Walton and Curtis-Ward contracts with the county of Mercer, and was to be paid therefor by the Surety Company, either directly or through the county, the schedule of prices provided in such original contracts, without deduction for defaults not due to any act or failure on the part of the Contracting Company; the payments to be made at the times and upon the terms mentioned in the original contracts. One of the terms of the original contracts in respect to payments was that the county should--

'upon or about the 15th day of each calendar month * * * make the contractor advance payment for and on account of the work done and materials furnished during the last preceding calendar month; the quantity, character, and value of such work done and material to be estimated and certified by the chief engineer, with his written approval; such advance payment not to exceed 90 per cent. of the value as thus estimated and certified.'

According to the original contracts, therefore, the monthly payments were to be paid upon or about the 15th day of the month according to and only upon the estimates of the county engineer, and were not to exceed 90 per cent. of the value of the work done and...