Brown v. Maryland Cas. Co.

• Decision Date: 26 May 1969
• Docket Number: No. 5--4723,5--4723
• Citation: 442 S.W.2d 187,246 Ark. 1074
• Parties: Stanley BROWN et al., Appellants, v. MARYLAND CASUALTY COMPANY et al., Appellees.
• Court: Arkansas Supreme Court

Page 187

442 S.W.2d 187

246 Ark. 1074

Stanley BROWN et al., Appellants, v. MARYLAND CASUALTY COMPANY et al., Appellees.

No. 5--4723.

Supreme Court of Arkansas.

May 26, 1969.

Acchione & King, Little Rock, for appellants Brown and Laird.

S. Hubert Mayes, Jr., Little Rock, for appellee Maryland Cas.

Clark, Clark & Clark, Conway, for appellee Con-Ark.

FOGLEMAN, Justice.

The Housing Authority of Pike County, Arkansas, contracted with Plez Lewis & Son, Inc., for the construction of a housing project according to plans and specifications prepared by architect Stanley Brown. After Plez Lewis defaulted, the housing authority called upon Maryland Casualty Company, surety on the contractor's performance bond, to complete the contract. Maryland contracted with Con-Ark Builders, Inc., to complete the construction in accordance with the original plans. Apparently, it was contemplated that a change would be made in the plans and specifications as to foundations, because mention of this was made in the contract between Maryland and Con-Ark. After Con-Ark took over, 'Change Order G--2' was added requiring the installation of 124 piles, a minimum of ten feet in length or a total of 1,240 lineal feet. Con-Ark's proposal to Maryland had contained an item of $6,500 for this work plus $4.75 per foot in excess of 1,240 feet. Con-Ark subcontracted this work to Piling & Repairs, Inc., for 5,084 plus $3.85 for each additional lineal foot. After the piling work started, R. W. Laird, the architect's representative on the job site, instructed Piling & Repairs' workmen to drill the pilings deeper than the originally specified ten feet. Accordingly, this resulted in an additional 1,268 lineal feet of drilling over the original specification of 1,240 lineal feet.

Piling & Repairs, who had been paid by Con-Ark for a portion of the overrun, brought suit against Con-Ark for the balance due on the overrun. Con-Ark admitted the overrun and cross-complained against Maryland Casualty Company on the premise that should Con-Ark be liable to Piling & Repairs, Con-Ark should have judgment against Aryland. Maryland then cross-claimed against the housing authority and Stanley Brown and R. W. Laird seeking judgment against them, jointly and severally, for any amount for which it was held liable.

At the trial it was stipulated that Stanley Brown was the housing authority's agent and that Laird was Brown's agent.

The trial court entered judgment for Piling & Repairs against Con-Ark as prayed; for Con-Ark against Maryland Casualty Company as prayed, and for Maryland against the housing authority, Stanley Brown and R. W. Laird, jointly and severally, for anything Maryland might be required to pay to satisfy the judgment in favor of Con-Ark. Brown and Laird filed notice of appeal. Con-Ark gave notice of appeal from the judgment in favor of Piling & Repairs. The appeal by the housing authority was designated as a cross-appeal in the sense used in Ark.Stat.Ann. § 27--2106 (Repl.1962), Brown v. Maryland Casualty Co., 245 Ark. 70, 431 S.W.2d 258. Maryland also appealed.

Maryland contends that it is not liable to Con-Ark unless and until it is paid for the extra work by the housing authority and its architect. Under the terms of the contract between Con-Ark and Maryland allowance of the amount to be paid by the owner was a condition precedent to payment from Maryland to Con-Ark. The pertinent contract portions are as follows:

'7. Maryland agrees to pay the Contractor, as full compensation for all liability assumed hereunder, the sum of $109,500.00, subject to additions and deductions resulting from change orders or extras issued by the Owner, to be paid as follows:--

a. The sum of $101,729.83, being the balance of the Contract price remaining under the said Contract between Lewis and the Owner, out of the estimate and retained percentages to be received by Maryland from the Owner periodically, as provided for in the Contract between Lewis and the Owner, for work performed by the Contractor, and to be paid to the Contractor within five (5) days after receipt thereof by Maryland, such payment to be in like amounts as Maryland receives from the Owner.

b. The additional sum of $7,770.17 * * *

c. Within five (5) days after receipt by Maryland from the owner of any payment to it for extra work ordered, including but not limited to contemplated change in foundations, on or after the effective date of this AGREEMENT and performed by the Contractor, Maryland will make payment of an amount equal to the amount received by Maryland from the Owner for the aforesaid extra work.

d. Within five (5) days after the Owner notifies Maryland in writing that the Contract has been completed and accepted and the Owner has paid the final estimate and retained percentage to Maryland, then Maryland will pay to the Contractor the balance due under this AGREEMENT, if any. If is distinctly unstood and agreed by the parties hereto that the payments provided for hereunder are to be made only after Maryland receives from the Owner the estimate payments, payments for extras and changes, and retainages to be paid to Maryland by the Owner and Lewis. It is further understood and agreed that the payments shall, in no event, exceed the sum of $109,500.00, subject to any additions or deductions provided for hereunder. Any change or increase in the amount of this AGREEMENT hereinafter provided for shall be paid to the Contractor only in such amount as is allowed therefor by the Owner, anything in this AGREEMENT to the contrary notwithstanding.

It is understood that the payments provided for as above are to be made only after Maryland receives from the Owner the estimate payments, the payments for extras and changes, and retainages to be paid Maryland by the Owner under the terms of its Contract with Lewis, provided, however, that should the Owner withhold any estimate payment, payment for extras, or retainage for a period of twenty (20) days beyond the time it would normally be paid because of any reason not the fault of the Contractor, then Maryland shall nevertheless make payment to the Contractor for any such estimate, extra, or retainage earned by the Contractor and without awaiting payment from the Owner, as provided for in subparagraphs a, b, and c; provided further, however, that should the Owner withhold any payment herein referred to for a period of twenty (20) days beyond the time it would normally be paid, for reasons not the fault of the Contractor, then Maryland shall have the right to cancel this AGREEMENT upon notice to the Contractor. In the event of such cancellation, the Contractor shall be entitled to payment from Maryland for all amounts earned by the Contractor, including retainage under this AGREEMENT, up to the date of cancellation.' (Emphasis ours.)

It is obvious that all parties knew that this was an undertaking to complete a job on which the original contractor had defaulted. Con-Ark was Maryland's subcontractor for the completion of the work. There is no reason why the parties could not contract for this work on any terms they agreed upon. There is no reason why the terms of the contract which both parties agreed to should not be enforced.

In Blair v. United States for Use and Benefit of Gregory-Hogan, 147 F.2d 840 (8th Cir. 1945), there was a contract between a contractor and a subcontractor which contained provisions very similar to those in this case. A fixed completion date in the contract between the government and Blair, the general contractor, had been extended. By a later supplemental contract, this date was advanced to the original one, upon agreement of the government to reimburse Blair for additional costs resulting from the reduction of time on the basis of expenditures approved by the government's contracting officer. Blair notified his subcontractors that they were committed to the original completion date, "with additional compensation as approved by the Government being granted you where applicable, in accordance with Article II of attached Supplemental Agreement.' In reversing a judgment in favor of the subcontractor, the court said:

'* * * The above quoted letter discloses not a promise by Blair to pay, but that additional compensation as approved by the government would be granted where applicable. This implied a promise that Blair would turn over funds if and when realized by allowance and payment by the government. As such payment has not been received by him and no claim is made that he has not diligently attempted to make collection, and it affirmatively appears that he has done so, defendant should not be held liable contrary to the terms of his agreement. * * * (Citations omitted.) We conclude that plaintiffs were not entitled to recover on account of the speedup agreement though they may be entitled to such recovery dependent upon whether or not defendant Blair received additional compensation from the government on account of the adjustment in the date of the completion of the work under his contract.'

The rule stated there is applicable to this situation. There is no escape from the conclusion that, as to changes adding to the contract price, the liability was not absolute but conditional. While some of the clauses of the contract might be construed as only fixing a time for payment of an absolute liability, the provision of Section 7 d that any change or increase be paid to Con-Ark 'only in such amount as allowed therefor by the Owner, anything in this AGREEMENT to the contrary notwithstanding' can only create a liability conditional upon approval of the change by the owner.

Language contained in Mascioni v. I. B. Miller, Inc., 261 N.Y. 1, 184 N.E. 473 (1933) is pertinent. In that case, the contractor agreed to pay a subcontractor 55 cents per cubic foot for erection of concrete walls. The promise to pay contained the proviso 'Payments to be made as received from the Owner.' The court reversed a holding by the appellate...