U.S. Fidelity & Guaranty Co. v. North Am. Steel Corp.
| Decision Date | 07 July 1976 |
| Docket Number | No. 74--1436,74--1436 |
| Citation | 335 So.2d 18 |
| Parties | 19 UCC Rep.Serv. 1343 UNITED STATES FIDELITY AND GUARANTY COMPANY, a Maryland Corporation, Appellant, v. NORTH AMERICAN STEEL CORPORATION, a Florida Corporation, Appellee. |
| Court | Florida District Court of Appeals |
Monroe E. McDonald of Sanders, McEwan, Mims & McDonald, Orlando, for appellant.
Kingswood Sprott, Jr., Lakeland, for appellee.
We have for review of final judgment rendered for the appellee, North American Steel Corporation (NASCO), against the appellant, United States Fidelity and Guaranty Company (USF&G), on a performance bond.
USF&G executed a performance bond in which Lurgi-Knost, Inc. was principal and USF&G was surety. Homer Knost Construction Company, Inc. entered into a contract with the Orlando Utilities Commission to construct a certain plant owned by the Commission. The Commission was created by a special act of the legislature which defined it as being a part of the government of the City of Orlando. Homer Knost Construction Company was in the process of liquidation and dissolution and their contract with the Commission was assigned to Lurgi. Lurgi became insolvent, went into bankruptcy and failed to complete its contract with the Commission.
The performance bond provided that if Lurgi:
'(S)hall fail to pay all just claims and demands by, or in bahalf of, any employee or other person, or any firm, association, or corporation, for labor performed or materials, supplies, or equipment furnished, used, or consumed by the Assignee-Contractor or its sub-contractors in the performance of the work, then the surety will pay the full value of all such claims or demands in any total amount not exceeding the amount of this obligation, together with interest as provided by law.'
NASCO contracted with Lurgi to furnish, fabricate and deliver certain steel piping systems for the construction project of the Commission.
NASCO filed its complaint for damages against USF&G on the performance bond alleging that it had fulfilled its contract with Lurgi and certain sums due under the contract remained unpaid and Lurgi had failed and refused to pay the balance due.
USF&G filed a motion to dismiss, motion for more definite statement or compulsory amendment, and motion for change of venue. The motion to dismiss was based, among other things, on the fact that the complaint on its face showed that the contract for which the performance bond was posted was for the construction of a public building and that the action was barred by the one-year limitation set forth in § 255.05, Fla.Stat.
The trial court specifically held that the bond was not a statutory bond under the statute but was a common law bond. This holding was based on the decision in United Bonding Insurance Company v. City of Holly Hill, Fla.App.1st 1971, 249 So.2d 720. We affirm the trial court in its decision on this question and the denial of the motion.
The motion for more definite statement or compulsory amendment and the motion for change of venue were also denied by the trial court and we affirm the trial court in its denial of those motions.
After final hearing the trial court entered the final judgment appealed, holding that it was without dispute that all of the fabricated pipe furnished by NASCO was eventually accepted and installed in the project. The trial court further held that with the exception of one shipment, 93% Of the purchase order (contract) had been filled and delivered to the project at least 30 days prior to any rejection by Lurgi and entered final judgment for NASCO in the sum of $55,838.93.
USF&G had filed an answer and counterclaim alleging that the pipe fabricated by NASCO under the contract was defective, inadequate and unacceptable in that the fabricated pipe furnished by NASCO had defective welds. Many of the defects were said to be latent as they could not be discovered except upon X ray. USF&G contended that it spent large sums of money in correcting the defective piping. To the extent of any payments properly made by USF&G to correct defects in NASCO's piping, USF&G is subrogated to the rights and remedies of its principal, Lurgi. 1 The fact that Lurgi went into bankruptcy does not preclude USF&G from asserting its subrogated rights and remedies of Lurgi under the contract, as the trustee in bankruptcy rejected any rights under Lurgi's contract with the Commission. 2
The contract between NASCO and Lurgi provided that the piping systems fabricated by NASCO would be in complete accordance with the plans and specifications as prepared by Black & Veatch, the consulting engineers for the Commission. There was substantial evidence that the fabricated piping systems were not in accordance with the plans and specifications prepared by Black & Veatch. Paragraph 7 of the contract provided:
The contract provided under paragraph 8 that:
'Vendor guarantees the workmanship and material entering into the items supplied on this order and agrees to replace or repair, without cost to Purchaser, any item on which defective workmanship or materials is found, provided claim is made within one year from Date of Shipment.'
Approximately a week prior to trial and subsequent to pretrial conference, NASCO took the position that the Uniform Commercial Code was applicable in that Lurgi was obligated to inspect and accept or reject the work of NASCO within 30 days and that Lurgi, by not having rejected the pipe within 30 days, made the surety absolutely obligated to pay NASCO for the pipe irrespective of any defects in the pipe or any breach of warranty as to the workmanship in fabricating the pipe: e.g., defective welds.
We cannot determine from the final judgment or the record on appeal whether or not the trial court applied the UCC or paragraph 7 of the contract quoted above. In either event, the trial court specifically held that the failure of Lurgi to reject the pipe within 30 days from delivery made it liable for the 93% Of the pipe delivered.
NASCO contends that the fabricated pipes are goods defined in Fla. Stat § 672.105 and that under Fla.Stat. §...
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