American Bonding Co. of Baltimore v. City of Ottumwa

• Decision Date: 01 May 1905
• Docket Number: 2,131.
• Citation: 137 F. 572
• Parties: AMERICAN BONDING CO. OF BALTIMORE v. CITY OF OTTUMWA.
• Court: U.S. Court of Appeals — Eighth Circuit

137 F. 572

AMERICAN BONDING CO. OF BALTIMORE v. CITY OF OTTUMWA.

No. 2,131.

United States Court of Appeals, Eighth Circuit.

May 1, 1905

Syllabus by the Court

Under a contract to keepin repair the pavement of a street for seven years, which provided that such repairs would be made on notice from the city engineer and street committee, where one or more previous notices were signed by the city solicitor reciting that it had been so ordered by the city council, and the guaranty company had recognized the sufficiency of such notice by making the required repairs and paying therefor held, that these facts justified the reliance of the indemnitee upon the sufficiency of a third like notice calling for further repairs.

A contract called for the paving of a street in the city of Ottumwa, Iowa, to be constructed with a stone curbing, with a foundation of broken stone and sand, and a six-inch concrete superstructure thereon, with a surface layer of two inches of asphaltum, to be kept in repair by the contractor for seven years. After its completion and use it soon became perforated with holes, which the contractor undertook to repair by patchwork. The condition of the asphalt surface continued however, to grow worse, greatly interfering with the use of the street. After thorough examination by experts, they reported that on account of the rotten material and bad workmanship in the asphalt coating what was left of the asphalt would not be sufficient to make a serviceable binding for the patchwork, and therefore it was in the interests of economy and business judgment to relay the entire surface asphaltum coating. Held, that as applied to the whole pavement as a unit this resurfacing was of the nature of repair work.

While the undertaking of the surety must be narrowly construed, and can neither be varied nor enlarged, like any other contract it is the spirit as much as the letter that gives to it vital effect. So where the original contract for asphalt coating of the street called for two inches, and the repair work thereof by the city consisted of an asphalt coating of one and one-half inches, with a one-inch binder, and the contract further provided that the estimated qualities for paving etc., should be considered as approximate, reserving to the city the right to increase or diminish said quality as in its opinion may be necessary, held, that such variation did not discharge the surety from its liability for such repair work it appearing that this change entailed no additional cost to the guaranty company.

The defense of ultra vires, based upon the contention that a supplemental contract for paving a street varied in some particular from the original contract, cannot avail the guarantor when its indemnifying bond expressly refers to such supplemental contract, and there is no evidence in the record that the city in making such supplemental contract did not observe the provisions of the state statute in the matter of advertising.

Where, under such paving contract, it is provided that the contractor shall guaranty his work for the period mentioned from deterioration caused by improper materials or neglect in the construction of the same, and that upon due notice of such deterioration the contractor shall repair the same, and in default thereof said work shall be done by the city, and that then suit shall be instituted against the principal and his surety for the collection of said cost of repairs, held, that it is no defense by the guarantor to an action by the city to recover such cost of repairs that the city council in raising the necessary money with which to make such repairs proceeded under the statute authorizing it to issue bonds, as in the case of an original construction work in grading and paving a street.

Although the court in its charge to the jury stated that the guaranty company was organied to transact business of this kind within the state, not as an accommodation guarantor, but for a consideration, held, that this could not constitute reversible error, where it is immediately followed with the statement that notwithstanding such fact the guaranty company was entitled to be fairly dealt with; that as a surety it was a favorite in law; that its liability could not be in any way changed or extended; and that it has the rights and privileges that any other surety would have.

On the 6th day of July, 1898, the city of Ottumwa, in the state of Iowa, entered into a contract with the Assyrian Asphalt Company, of Chicago (hereinafter for convenience called the contractor), for the grading, curbing, and paving of a portion of West Second street in said city. The portions of said contract bearing upon the questions to be decided are substantially as follows:

The contractor was to furnish all the necessary materials, labor, and tools to grade, pave, gutter, and curb, in a good and substantial manner, West Second street to the east line of Clay street, to be completed on or before the 15th day of October, 1898. The work under the contract was to be staked out by the city engineer. Upon the completion of the grading and setting of the curb the contractor was to notify the city engineer, who should proceed to examine the same. Section 15 of the contract is as follows:

'The contractor expressly guarantees to maintain the pavement and curbing in good order for a period of seven years, and binds himself, his heirs and assigns, to make all repairs which may, from any imperfection in said work or materials, or from any crumbling, or disintegration of the materials become necessary in that time and the said contractor shall, whenever notified by the city engineer and street committee, or if they are not made within the proper time, the street committee shall have the power to cause such repairs to be made and have the cost of the same charged to the said contractor, and deducted from any moneys due under the contract, or that may afterwards become due; or, if in case there be no funds due the said contractor, then suit shall be instituted against the principal and his sureties for the collection of said cost of repairs, and said bond shall be conditioned.

'At the end of the seven year period, the city engineer and street committee must determine whether or not the street is in good order, and the principal and his sureties shall not be discharged from liability on their guarantee and maintenance bond until the city engineer or street committee shall certify in writing that the said pavement is in good order, natural ordinary wear and tear excepted. If at any time during the seven year period, the pavement or curbing or any part of it has deteriorated through neglect in construction or improper material, to such an extent as to require reconstruction in the opinion of the city engineer and street committee, by the consent of the city council, then upon due notice, or within a period of three months from date of said notice, the contractor shall proceed to reconstruct the pavement or such part as is deemed necessary as aforesaid.

'If the contractor fails to do so at the end of three months, the street committee may, with the consent of the city council, proceed to reconstruct the pavement and curbing and the cost thereof shall be collected by suit from the said contractor or his sureties.

'There shall be nothing in the above guarantee clause that shall require the contractor to make repairs, or relay any pavement made necessary to repair or relay by the taking up and relaying of the same by water, gas, steam or plumbing companies, or street railroads, or through any improvements made by the city or by any private parties, of any nature, it being the intention that the contractor shall guarantee his work for the period mentioned, from deterioration caused by improper materials or neglect in the construction of the same; the ordinary natural wear and tear to be excepted.

'The contractor shall execute to the city of Ottumwa a good and sufficient bond, with sureties approved by the mayor, for the faithful performance of the requirements of this guarantee clause to the amount of forty (40) per cent. of the contract cost of all the work covered by this contract, which bond shall be in addition to the bonds required by law and the ordinance of the city of Ottumwa, and shall be executed to the city and approved by the mayor before the certificates herein provided are endorsed and turned over to the contractor.'

By section 17 the contractor was required, without cost over and above the contract price per square yard for brick paving, to remove, where necessary, the present stone pavement within the seven-foot strip of the street railway, and to excavate the entire seven feet to a depth of fifteen inches below the center grade of the finished pavement.

Section 19 prescribed how the railroad company should lay its ties, etc., after the subgrade of the track was prepared, and subsequent provisions directed how the brick should be laid, etc.

After prescribing the grading, section 24 described the foundation for the sheet asphalt pavement between the street railway and the curb. There was to be a base of four inches of hard limestone, vitrified brick, or slag, two inches of clean coarse sand and gravel, each layer of sand to be flooded, the whole well rolled with a steam roller of ten tons. After the lower portions had thus been brought up to the eight-inch surface below the finished pavement, all portions of the surface that are more than two inches, but not more than six inches, below the surface of the finished pavement shall be filled with a layer of hydraulic cement concrete, of such depth that the top surface of the concrete after ramming shall be two inches, and parallel to the surface of the finished...