City of Osceola v. Gjellefald Const. Co.
| Decision Date | 10 May 1938 |
| Docket Number | 43888. |
| Citation | 279 N.W. 590,225 Iowa 215 |
| Parties | CITY OF OSCEOLA v. GJELLEFALD CONST. CO. et al. |
| Court | Iowa Supreme Court |
Appeal from District Court, Clarke County; Homer A. Fuller, Judge.
Action for damages brought by the City of Osceola against the principal contractor and the surety on his bond, which bond was given for the faithful performance of a contract for the construction of a dam providing a reservoir for the city's use. From a judgment in favor of the plaintiff the defendants have appealed.
Modified and affirmed.
Alan Loth, of Fort Dodge, for appellants.
O. M Slaymaker, R. E. Killmar, and D. D. Slaymaker, all of Osceola, for appellee.
The solution of the question involved in this case calls for a construction of the " contractor's bond." By the terms of the bond, the specifications as well as the contract are by reference incorporated in the bond. In construing any instrument in writing the primary object is to arrive at what the parties to such instrument had in mind when it was prepared. 8 Amer.Jur., p. 722. In this case, the parties had in mind the construction of a dam, made out of earth, across a creek bed between two hills for the purpose of creating a reservoir from which the city would obtain its water supply. If it was to be of any use at all, it was necessary that the dam be so constructed as to hold water. An engineer was employed by the city who prepared plans and specifications detailing the material to be used and the way and manner in which the dam was to be built which gave the engineer broad authority in the supervision of the work and the selection of the material; but, as to the one absolutely essential feature, namely, water-tight construction, the responsibility was placed squarely upon the contractor by the specific provision found in the specifications, to wit " The Dam shall be water-tight when finished, and the contractor shall assume entire responsibility for the obtaining of a water-tight structure."
The specifications also provided:
These specifications were before the contractor when he made his bid. On October 9, 1933, the contract was entered into between Gjellefald Construction Company and the City of Osceola for the construction of this dam and in this contract the specifications are made a part of the contract and the contract contained the following provisions: " First party also agrees to furnish within ten days after signing this contract an acceptable legal bond for 100% of the contract price guaranteeing complete and proper fulfillment of the Contract, and also providing a one year guarantee on the labor, materials of construction and mechanical equipment of said installations from date of acceptance by second party."
Following the execution of this contract, on the same date, a bond, designated " Contractor's Bond," with Gjellefald Construction Company as principal and AEtna Casualty & Surety Company as surety in the sum of $18,100 with the City of Osceola named as obligee, was executed, the material provisions of which are as follows:
" The condition of this obligation is such that whereas the principal, on October 9, 1933, entered into a contract with the City to construct an earthen dam as included in Division C of the plans and specifications for the City of Osceola, Iowa, as prepared by Lafayette Higgens, Jr., of Des Moines, Iowa, copy of which contract, together with all of its terms, covenants, conditions, and stipulations is incorporated herein and made a part hereof as fully and completely as if said contract were recited at length herein and
Whereas, the principal and surety hereby agree to pay to all persons, firms, or corporations having contracts directly with the principal or with subcontractors, all just claims due them for labor performed or materials furnished, in the performance of the contact on account of which this bond is given, when the same are not satisfied out of the portion of the contract price which the public corporation is required to retain until completion of the public improvement, but the principal and sureties shall not be liable to said persons, firms or corporations unless the claims of said claimants against said portion of the contract price shall have been established as provided by law.
Now, if the principal shall in all respects fulfill said contract according to the terms and tenor thereof, and shall satisfy all claims and demands incurred for the same, and shall fully indemnify and save harmless the Obligee from all costs and damages which it may suffer by reason of failure to do so and shall fully reimburse and repay the Obligee all outlays and expenses which it may incur in making good any such default, then the obligation is to be void and of no effect; otherwise to remain in full force and effect.
Every surety on this bond shall be deemed and held, any contract to the contrary notwithstanding, to consent without notice:
1. To any extension of time to the contractor in which to perform the contract.
2. To any change in the plans, specifications or contract, when such change does not involve an increase of more than twenty per cent (20%) of the total contract price, and shall then be released only as to such excess increase.
3. That no provision of this bond or of any other contract shall be valid which limits to less than one year from the time of the acceptance of the work the right to sue on this bond for defects in workmanship or material not discovered or known to the Obligee at the time such work was accepted."
Work was commenced the latter part of October, 1933, and completed in December, 1933. The work was inspected by the engineer and on February 22, 1934, the final estimates for said improvement were made and a resolution passed by the city council which provided: " * * * That the improvement so constructed by the contractors above named be accepted and approved by the Council."
The dam, extending east and west between two hills across a water course, was 510 feet long and was 20 to 25 feet high with a spillway near the west end which was 5 feet lower than the top of the dam. On both sides of the spillway were built concrete walls which ran across through the dam. The water fall was toward the north, the reservoir situated south of the dam. The south slope of the dam was sheeted over with cement slabs 4 inches thick and 8 feet square, with expansion joints between them, and these slabs also extended over the spillway and down the north slope of the spillway portion of the dam. Because of the extreme drought which existed in that part of the state in 1934, the major portion of this structure was exposed above the water level until late in the fall of 1934. On July 7, 1934, there were 4 or 5 feet of water behind the dam covering a surface of 15 or 20 acres; the water was 33 inches lower than the overflow at the spillway. At this time the city started to pump but in about three weeks the water got too low. In October, 1934, the water had risen to a height of 6 or 8 feet. When the water got up to the spillway it started to run underneath the spillway due to the fact that the earth portion of the dam had settled away from the cement slabs and some of the slabs had fallen down and the water ran through these openings and seeped out on the north side of the spillway. On the 12th of September, 1934, the city clerk wrote a letter to the construction company stating that " the council wishes you to repair a defective slab of cement on the earthen dam which is part of the spillway which needs attention before the reservoir is filled with water." This letter was answered on the 21st of September, 1934, in which the company stated, " We will send a man down to look at this as quickly as we can get a man available." No one came.
Some time during the months of October, November, or December of 1934, the city made some repairs on the spillway at the cost of $145.06 but as the water rose higher the repairs proved ineffectual and on January 16, 1935, the city attorney, Mr. Slaymaker, notified both the construction company and the bond company to the effect that the workmanship and material used in the construction of the spillway and other parts of the dam were defective and that it would be necessary, at once, to spend a large sum of money for material and labor to repair, renew, and rebuild (the) same to keep the dam from washing out and attention was called to the $145.06 already expended and demanding payment thereof and notifying them of the necessity of making the additional repairs at once and that the city was going to proceed to do said work and hold them liable for all of the expenses incurred and would bring suit on the bond to recover the same. The bond company replied but the construction company did not answer this letter. Thereafter, the city made the repairs and in February, 1935, brought this suit to recover its damages in the alleged sum of $10,000. Jury was waived and trial had to the court resulting in a judgment for $2,500 plus interest and costs. Hence, this appeal.
The principal defense was that the city had accepted the work settled for it and took it over, and this fact of acceptance was set out in the petition and admitted in the answer and nothing...
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