Cincinnati, N.O. & T.P. Ry. Co. v. Fidelity & Deposit Co. of Maryland

• Decision Date: 04 March 1924
• Docket Number: 3917.
• Citation: 296 F. 298
• Parties: CINCINNATI, N.O. & T.P. RY. CO. v. FIDELITY & DEPOSIT CO. OF MARYLAND.
• Court: U.S. Court of Appeals — Sixth Circuit

296 F. 298

CINCINNATI, N.O. & T.P. RY. CO. v. FIDELITY & DEPOSIT CO. OF MARYLAND.

No. 3917.

United States Court of Appeals, Sixth Circuit.

March 4, 1924

Edward Colston, of Cincinnati, Ohio (Harmon, Colston, Goldsmith &amp Hoadly, of Cincinnati, Ohio, on the brief), for plaintiff in error.

James G. Stewart, of Cincinnati, Ohio (Albert H. Morrill, of Cincinnati, Ohio, Washington Bowie, Jr., of Baltimore, Md H. B. Lindsay, of Knoxville, Tenn., and Nichols, Morrill Stewart & Ginter, of Cincinnati, Ohio, on the brief), for defendant in error.

Before DONAHUE and MACK, Circuit Judges, and ROSS, District Judge.

ROSS District Judge.

The parties to this suit were plaintiff and defendant, respectively below, and shall be referred to in this opinion as such.

Prior to, on, and subsequent to, July 9, 1917, plaintiff, an Ohio corporation, was operating a line of railway known as the Cincinnati Southern Railway from Cincinnati, Ohio, to Chattanooga, Tenn., and on said date of July 9, entered into a contract with the Sheahan Construction Corporation for the building of a track 6 3/10 miles in length between Helenwood and Robbins, in the state of Tennessee.

Defendant executed a bond in the sum of $20,000 on said date, to guarantee plaintiff against loss by reason of any failure of the construction company to build the road as contracted.

On or about October 17, 1918, plaintiff, in the exercise of what it deemed to be its right under the contract, took charge of the work and completed the undertaking at a cost greatly in excess of the contract price. It thereupon instituted this proceeding to recover from the defendant the amount of the bond.

In the view we have taken of the case, plaintiff's right to a recovery depends upon whether or not there was a compliance with section 12 of said contract wherein it is provided:

'That the railway company shall have the right, and the same is hereby reserved to it, to itself take charge of the said work at any time, and to exclude the contractor therefrom, and to complete the same for account of the contractor; provided, however, that such right shall only be exercised when, and in the event that, the chief engineer of construction of the railway company shall certify to it that the contractor is not progressing satisfactorily with said work, and is not employing thereon sufficient forces and equipment to insure the completion of the same within the time specified in this agreement for such completion, or that the said contractor is in default under this contract, and that there is no reasonable expectation that within any reasonable time the said contractor can make good such default.'

October 17, 1918, there was addressed to defendant at Baltimore, Maryland, the following communication:

'L.E.J.: Please note. 10/19, H.B.S.

'Southern Railroad and Associated Lines.

'Washington, D.C., October 17, 1918.

'Fidelity & Deposit Company of Maryland, Baltimore, Md.-- Dear Sirs: Re Bond $20,000, dated July 9, 1917, indemnifying C., N.O. & T.P. Ry. Co. against failure of H. H. Thrasher to perform his contract with C., C., N.O. & T.P. Ry. Co. of July 9, 1917, for construction work between Helenwood, Tenn., and Robins, Tenn.

'Referring to my letter of October 2, 1918, to Sheahan Construction Company, copy to you, in re above contract, to which I have received no reply.

'I advise that Sheahan Construction Company is not progressing satisfactorily with the work under its contract and is not employing thereon sufficient forces and equipment to insure the completion of the same within the time specified in the agreement for such completion, and I have so certified to the C., N.O. & T.P. Ry. Co.

'This is notice to you of the default of the contractor, and call is made upon you to see that the contractor performs his contract, or to take over the contract and complete it for his account. Please advise if you will do this.

'Should you not do so immediately, this company or its agents will itself take charge of said work and exclude the contractor therefrom, and this is notice to you that it will hold your company responsible under your bond for the failure of the contractor to perform the work in accordance with the contract.

'Yours truly,

Chief Engineer Construction.

'SRP/B

'Copy to:

'Mr. H. B. Spencer, Vice President, C., N.O. & T.P. Ry. Co.

'Mr. E. H. Coapman, Federal Manager, C., N.O. & T.P. Ry. Co.'

On the trial of the case before the court below, and a jury, the above communication was offered by plaintiff in evidence as a certificate made in compliance with section 12 of the contract. Upon objection by defendant the paper was excluded as such certificate, and, upon the submission of the case to the jury, a verdict was returned in favor of defendant, and a judgment was entered for defendant.

Plaintiff assigns as error, among others, the action of the court in excluding the so-called certificate as evidence, and here contends, as in the trial court, that this communication was a substantial, if not a full and complete, compliance with the provisions of section 12, above quoted.

We are of opinion there was no error committed in the exclusion of this paper as evidence. Before plaintiff was warranted in ejecting the contractor from the work or in taking charge thereof upon the assumption that the contractor was not complying with the contract, it was necessary: First, that the chief engineer of construction of the railway company should certify to plaintiff that the contractor was not progressing satisfactorily with the work, and not employing sufficient forces and equipment to insure that the same would be completed within the time specified in the contract or, second, that the contractor was in default under the contract, and that there was no reasonable expectation that within any reasonable time the contractor would make such default good.

A compliance with the provisions of this clause was a condition percent to the exercise of the privileges given plaintiff therein, and the first and chief...