American Surety Co. of New York v. Woods

• Decision Date: 08 January 1901
• Docket Number: 919.
• Citation: 105 F. 741
• Parties: AMERICAN SURETY CO. OF NEW YORK v. WOODS. [1]
• Court: U.S. Court of Appeals — Fifth Circuit

105 F. 741

AMERICAN SURETY CO. OF NEW YORK v. WOODS. ^[1]

No. 919.

United States Court of Appeals, Fifth Circuit.

January 8, 1901

On December 7, 1894, Stewart & McDermott made a written contract with the New Orleans Sewerage Company for the construction of certain sewers and their appurtenances in the city of New Orleans. By this contract the sewerage company agreed at its own cost and expense to furnish all the material required in the construction of the sewers and their appurtenances. The contractors, Stewart & McDermott, bound themselves to furnish all the labor required to properly construct the sewers and their appurtenances in a territory or portion of the city of New Orleans defined by certain maps 'now on file in the office of the sewerage company. ' The nineteenth section of the contract is in these words: 'In case of any unnecessary delay in doing the work, in the opinion of the engineer, he shall notify the contractors, in writing, to that effect. If the contractors shall not within fifteen (15) days after receipt of such notice take such measures as will in the judgment of the engineer, insure the satisfactory completion of the work, the engineer may then, by and with the consent of the company, notify the aforesaid contractors to discontinue all work under this contract; and it is hereby agreed that the contractors are to immediately respect said notice and stop work, and cease to have any right to possession of the ground, provided all things hereby agreed to be furnished or done by the company shall have been promptly furnished or done. The engineer shall thereupon have the power, under the direction of the company, to place such and so many persons as he may deem advisable, by contract or otherwise, to work at and complete the work herein described and to charge the expense of said labor to the aforesaid contractors, and the expenses so charged shall be deducted and paid by parties of the first part out of such money as may then be due or at any other time thereafter becomes due to the said contractors under and by virtue of said agreement, or any part thereof; and, in case such expense is less than the sum which would have been payable under this contract if the same had been completed by the parties of the second part, they shall be entitled to receive the difference, and in case such expense is greater the parties of the second part shall pay the amount of such excess so due. ' The chief engineer of the sewerage company was to estimate on the last day of each month the total amount of work completed according to specification. Ninety per cent of the amount earned on work so completed was to be paid the contractors before the 10th of the succeeding month, 10 per cent. being reserved. These payments were to be made according to specified prices for different kinds of work, all stated in detail in the contract. The contract recites the execution and delivery by the American Surety Company, as surety for the contractors, of a bond in the sum of $100,000, bearing even date with the contract. The condition of the bond is that Stewart & McDermott 'shall well and truly, and in good, sufficient, and workmanlike manner, perform the work mentioned in the aforesaid agreement, in accordance with the terms and conditions therein stipulated, and in each and every respect comply with the conditions and covenants therein contained, and shall from time to time furnish a new bond for a proportionately reduced amount, as provided in said contract. ' In January, 1895, Stewart & McDermott began work, and continued until November 4, 1895. On that day they refused to proceed further with the work, and repudiated the contract, on the grounds that a fraud had been practiced upon them in obtaining it, and that, even if the contract were valid in its inception, they had been released from it by reason of a violation of its terms on the part of the sewerage company. In June, 1896, the sewerage company went into the hands of a receiver, on the petition of creditors applying to the civil district court for the parish of Orleans. The sewerage company made no attempt, after the repudiation of the contract by Stewart & McDermott, either to complete the work itself, or to procure it to be done by others. It was never completed. All of the assets of the sewerage company, including the franchise or right to construct the sewers, but excepting the claim urged in the present suit, were sold at public auction for about $90,000. In March, 1897, this suit was brought by A. A. Woods, receiver of the New Orleans Sewerage Company, against the American Surety Company, for the full amount of its bond; the plaintiff averring that said sewerage company had sustained damages in excess of that sum by reason of the breach of the contract. The petition alleged the breach of the contract by Stewart & McDermott, and then alleged, as a ground of damage, 'that if said Stewart & McDermott had done the work which they agreed to do under said contract in a proper and workmanlike manner, and within the delay provided by said contract, the cost of said work to said New Orleans Sewerage Company would have been the sum of seven hundred and thirty-nine thousand five hundred dollars, whilst the cost of the work already done by said Stewart & McDermott, together with the amount which it would have cost and will cost said company to complete the work which said Stewart & McDermott by said contract agreed to do, will be, and would at the time when said Stewart & McDermott abandoned said work have been, the sum of nine hundred and twelve thousand and ninety-nine 09/100 dollars ($912,099.09), and that the difference between said two sums is the sum of one hundred and seventy-two thousand five hundred and ninety-nine 09/100 dollars, which amount petitioner is entitled to recover from said Stewart & McDermott and the said American Surety Company, their solidary surety. ' An answer was filed by the American Surety Company, traversing the plaintiff's claims, and making special defenses not material to be stated. There was evidence in the case tending to show that it would have cost the sewerage company greatly more to construct the sewers than the sum for which Stewart & McDermott had agreed to construct them. At the request of the counsel for the plaintiff the circuit court charged the jury as follows: '(1) In cases of contract between employer and contractor, providing for the performance and completion of constructions as described in the contract, if the contractor abandons the work before completion, and refuses to complete the same, having no lawful cause for such action, the measure of damages which the employer is entitled to recover is the difference between the cost of completing the work at the contract price, and what it would cost him to complete the work or to procure the work to be completed by others. (2) After the abandonment of the contract by Stewart & McDermott, the sewerage company would have had the right to have gone on and completed the work itself, or to have let out a contract for the completion of the work to other contractors, upon the best terms attainable; and in that case they would have had the right to recover, as damages, the difference between what it would have cost them if Stewart & McDermott had complied with the contract and what it actually cost the company to complete the work. But the sewerage company was not bound to complete the work, or to employ anybody else to complete it, and they had the right to prove by competent testimony what it would have cost them to complete the work or have it completed, and to recover from Stewart & McDermott the difference between the necessary cost of completion, as thus established, and what it would have cost under their contract with Stewart & McDermott. ' The American Surety Company duly excepted the plaintiff, A. A. Woods, as receiver of the sewerage company, against the American Surety Company, for $90,000. To review and reverse the judgment on this verdict the American Surety Company has sued out this writ of error.

Thomas W. Bullitt and W. B. Spencer (W. W. Howe, Wm. Marshall Bullitt, and C. P. Cocke, on the brief), for plaintiff in error.

E. B. Kruttschnitt and Chas. E. Fenner, for defendant in error.

Before PARDEE, McCORMICK and SHELBY, Circuit Judges.

SHELBY Circuit Judge, after stating the case as above, .

The question to be considered is the charge of the court on the measure of damages. The instruction, in effect, was that the measure of damages was the difference between the contract price and what it would have cost to finish the sewers, and that, to recover this difference, it was not necessary for the sewerage company to complete the work. 'Where the object of the contract is anything but the payment of money the damages due to the creditor for its breach are the amount of the loss he has sustained and the profit of which he has been deprived,' under certain exceptions and modifications not material to this case. Rev. Civ. Code La. art. 1934. This statute merely undertakes to secure full indemnity to the aggrieved party. Reading v. Donovan, 6 La.Ann. 491. Article 2769 is the same in legal effect. To authorize recovery under the statute, two things must concur,-- the in execution of the obligation, and damages to the party complaining. This statute does not conflict with the common law, for by its rule there must be, to authorize a recovery, a breach of the contract, which causes damages. If the breach only is shown, there could be only a verdict for a nominal sum. Sedgw. Meas. Dam. (8th Ed.) Sec. 98. When a contractor is discharged unlawfully, he can, in a suit for damages, recover his outlay and the probably certain profits he would have made if he had been permitted to...