Bolivar Reorganized School Dist. No. 1, Polk County v. American Sur. Co. of N.Y.

• Decision Date: 12 November 1957
• Docket Number: No. 45866,No. 2,45866,2
• Citation: 70 A.L.R.2d 1361,307 S.W.2d 405
• Parties: BOLIVAR REORGANIZED SCHOOL DISTRICT NO. 1, POLK COUNTY, Missouri, Plaintiff-Respondent, v. AMERICAN SURETY COMPANY OF NEW YORK, a Corporation, Defendant-Appellant
• Court: Missouri Supreme Court

Page 405

307 S.W.2d 405

70 A.L.R.2d 1361

BOLIVAR REORGANIZED SCHOOL DISTRICT NO. 1, POLK COUNTY Missouri, Plaintiff-Respondent, v.AMERICAN SURETY COMPANY OF NEW YORK, a CorporationDefendant-Appellant.

No. 45866.

Supreme Court of Missouri, Division No. 2.

Nov. 12, 1957.

Motion for Rehearing or to Transfer to Court en Banc Denied

Dec. 9, 1957.

Clifford B. Kimberly, Kansas City, for appeallant.

Richard C. Collins, T. H. Douglas, Elvin S. Douglas, Bolivar, for respondent.

BARRETT, Commissioner.

In this action on a bid bond the obligee, Bolivar Consolidated School DistrictNo. 1, has recovered a judgment against the surety in the sum of $13,396.50, comprised of the principal sum of $8,283.20 interest, $1,794.98, and for vexatious delay and refusal to pay a penalty of $828.32 and attorneys' fees of $2,500.The school district proposed to and finally did construct three buildings, an elementary school in Polk, an elementary school in Bolivar, and an auditorium-gymnasium in Bolivar.Accordingly, in September, 1952, through its architect, Dan R. Sanford & Sons, the school board issued an advertisement and notice to contractors for sealed bids for the construction of the three buildings.The notice stated that 'Bids will be taken on the basis of a single contract for each building * * * and a combined bid may be submitted for the three buildings to be built under one contract.'The notice required that 'A bid guaranty shall be submitted with each bid in an amount equal to five percent (5%) of the bid,' either in the form of a certified check or 'approved bid bond'--the check or bond to be considered as liquidated damages 'for the failure of a bidder to whom a contract is awarded to execute the contract documents and surety bond.'In compliance with the notice and instructions Ozark Construction Company submitted four bids, for the elementary school at Polk, $65,555, for the elementary school in Bolivar, $125,363, for the auditorium-gymnasium, $165,664, and a combined bid for the construction of all three buildings of $335,555.55.The bids were received and opened on the appointed date, September 25, 1952, and on October 2, 1952, the school board adopted a resolution accepting the $165,664 bid of the Ozark Construction Company to construct the auditorium-gymnasium.Ozark Construction Company was unable to furnish a performance or construction bond, was 'in a financial bind,' did not sign or execute the contract, and in the following December became bankrupt.A contract for the construction of the building was awarded to another contractor and upon the trial of this casethe parties stipulated that the actual cost exceeded the bid of Ozark Construction Company more than $10,000.

Upon the contractor's default the school district instituted this action against the surety, American Surety Company, on Ozark's bid bond.When Ozark's bids were submitted, instead of a separate bid bond accompanying each bid, there was but a single bond.Since the bond recited that Ozark Construction Company was about to submit 'a proposal for school buildings' and the guaranty was 'if the said proposal is accepted, the American Surety Company denied liability on the bond.The company admits the execution of the bond but contends that it was issued and intended to cover the 'combined bid' for all three buildings only and was not written or intended to cover the 'single' contract or bid for the construction of the auditorium-gymnasium.In its answer the surety's defense is stated in this language, 'that said bid bond was submitted with the last bid stated above which was a combined bid for all three of said buildings and had no connection with any other bid other than said combined bid,' and it specifically denied executing a bond for Ozark's separate bid on the auditorium-gymnasium or for any of the bids on the individual or separate buildings.In its letter of November 20, 1952, in which it denied liability to the board, its resident manager explained its position in this language: 'The bond which we furnished specified that it covered a proposal for school buildings and it accompanied a combination proposal for the construction of three school buildings.It is our information that this proposal was approximately $357,000.Your board did not accept this proposal and therefore it is our position that there is no liability under the bid bond for such proposal.It is also our position that there is no liability under this bid bond for any single building.The bond did not specify any single building.The instructions to bidders specify that each separate bid should be supported by a bid bond.We issued no bid bond supporting a proposal for the construction of any auditorium-gymnasium.When furnishing a bid bond covering a combination proposal the surety company does not contemplate that it will be subjected to the liability of guaranteeing that the bidder will enter into contract and furnish bond on some one of the buildings involved.This is because of the possibility that some building on which the bid was particularly low might be singled out and it appears that this is precisely what happened in this case.'To further make plain and illuminate its defense in both the trial court and here, appellant's brief is quoted 'the bond shows plainly that it covers a proposal for 'School Buildings' and that one proposal only is contemplated is shown by the use of the word 'proposal' in the last line' in which the surety agrees to pay the obligee damages suffered 'not exceeding the sum of 5% of amount of proposal.'In short, since the board did not accept the contractor's combined bid of $355,555.55 for all three buildings, it is urged that there was no award of a contract within the language and meaning of the bond, hence there was no liability for the contractor's default as to the single contract for the auditorium-gymnasium.

Upon this appeal it is urged that the court erred in admitting evidence to vary and interpret the plain, unambiguous language of the bond, and that it erred in awarding damages and attorneys' fees for vexatious delay.But the essential claim, as indicated, is that it is not liable on the bond in this action and that the fact should be declared by this court.The case was tried 'upon the facts without a jury' and is reviewable here upon both the law and the evidence as in suits of an equitable nature (V.A.M.S. Sec. 510.310), this court considering such evidence as it deems admissible and excluding from consideration evidence improperly damitted.Hussey v. Robison, Mo., 285 S.W.2d 603.

In support of its position the appellant invokes the general rules of construction, that its liability as a surety is measured and strictly limited to the terms of its contract and may not in the guise of construing or interpreting ambiguities be enlarged.City of St. Joseph ex rel. Consolidated Stone Co. v. Pfeiffer Stone Co., 224 Mo.App. 895, 26 S.W.2d 1018;Blanke Bro. Realty Co. v. American Surety Co., 297 Mo. 41, 247 S.W. 797;72 C.J.S.Principal and SuretySecs. 91, 94, pp. 569, 574.The general rules are applicable, of course, but they may not be blindly applied, ignoring the circumstances in which the contract was awarded to the bidder, Ozark, and the circumstances in which the bond was executed by the surety, delivered, and accepted by the obligee school district.

As stated, the appellant admits the execution and delivery of the bond, but these were the attendant circumstances: The bids were received and opened in accordance with the previous notice and instructions on September 25, 1952.In conformity with instructions the bids of Ozark Construction Company and the bid bond of the American Surety Company were enclosed in a sealed, opaque envelope, and 'all bids were stapled to this bond.The first document was the bid bond, * * * the next was--the first one under the bond was the Polk Elementary School, the next one was the Bolivar Elementary School and then the gymnasium, then there was a combined bid, in that order.'The envelope containing the bids and the bond was submitted and delivered to the school board by the president and the secretary of Ozark Construction Company.The appellant says that it had no notice or knowledge that three separate bonds were required or that three was more than one bid, having been told that 'they were going to bid on numerous buildings.'The resident vice-president and general manager of the company's Kansas City branch office, who signed and mailed the bond to Ozark Construction Company in Joplin, did not testify.But the assistant manager and underwriter detailed the circumstances in which the bond was executed and mailed.Bearing in mind that the bids were to be submitted and opened at 7:30 p.m., September 25, 1952, (and the bond bears that date), the assistant manager testified that 'the bond was requested by telephone, from Mr. Scott, (secretary of Ozark) on ...