Commercial Cas. Ins. Co. v. Durham County

• Citation: 128 S.E. 469,190 N.C. 58
• Decision Date: 24 June 1925
• Docket Number: 337.
• Parties: COMMERCIAL CASUALTY INS. CO. v. DURHAM COUNTY.
• Court: United States State Supreme Court of North Carolina

128 S.E. 469

190 N.C. 58

COMMERCIAL CASUALTY INS. CO. v. DURHAM COUNTY.

No. 337.

Supreme Court of North Carolina

June 24, 1925

Appeal from Superior Court, Durham County; Calvert, Judge.

Controversy without action between the Commercial Casualty Insurance Company and Durham County. From a judgment in favor of plaintiff, defendant appeals. Affirmed.

Payments made to building contractor, in excess of amount specified in contract, relieved surety from liability on such amount.

Surety held to be relieved from liability to amount of checks issued for labor and material, on which payment was refused.

The following facts appear.

The plaintiff, doing a bonding business, executed with Walter Clark, contractor, a bond in the sum of $100,000, for the faithful performance of a contract to build the Durham County Home, on the part of the contractor, and to satisfy all claims and demands incurred for the same; to fully indemnify and save harmless the owner from all cost and damages which it might suffer by reason of his failure to do so. Walter Clark made default in the performance of said contract and abandoned the work thereon October 30, 1924. Defendant notified plaintiff of the default, and that defendant would expect plaintiff to complete the building according to plans and specifications included in the contract. It was also agreed that--

"The contract * * * provided that payments to the contractor should be made upon the certificate of the architect of the defendant, and that all payments to the contractor were so made. It is also admitted that the contractor was paid the sum of $27,076.76 in excess of the amount which he was entitled to receive by terms of the contract prior to the date of his default hereinbefore referred to, to which is to be added any unpaid claims for labor and material in or on the job."

Plaintiff agreed to complete the building in accordance with the plans and specifications, but reserved its right to have its liability with reference to the excess payments to the contractor determined. This amount of excess payments is again stated thus:

"$27,076.76 and labor and material claims unpaid, which amount it is agreed has been overpaid to said Walter Clark on said contract."

It was further admitted on October 15, 1924, that the architect approved an estimate rendered him by Walter Clark, and directed that a voucher for $15,827 be issued to said Walter Clark by defendant. This voucher was so issued, but, before approving the estimate, the architect required Clark to issue and mail checks to certain creditors for labor and material who had known claims against said contractor. Such checks were issued on the Murchison National Bank of Wilmington duly presented, but not paid, because said bank had condemned the deposit of Clark, and applied it to the payment of notes due said bank by Clark.

The following appears in the contract between Walter Clark and the defendant:

"The Architect's Status.--The architect shall have general supervision and direction of the work. He is the agent of the owner only to the extent provided in the contract documents. and when in special instances he is authorized by the owner to act, and in such instances he shall upon request show the contractor written authority. He has authority to stop the work whenever such stoppage may be necessary to insure the proper execution of the contract. As the architect is, in the first instance, the interpreter of the conditions of the contract and the judge of its performance, he shall side neither with the owner nor the contractor, but shall use his powers under the contract to enforce its faithful performance by both.

Certificates and Payments.--If the contractor has made application as above, the architect shall, not later than the date when each payment falls due, issue to the contractor a certificate for such amount as he decides to be properly due. No certificates issued nor payment made to the contractor, nor partial or entire use or occupancy of the work by the owner, shall be an acceptance of any work or materials not in accordance with this contract. The making and acceptance of the final payment shall constitute a waiver of all claims by the owner, otherwise than under article 16 and 28 of these conditions or under requirements of the specifications, and of all claims by the contractor, except those previously made and still unsettled. Should the owner fail to pay the sum named in any certificate of the architect or in any award by the arbitrators, upon demand, when due, the contractor shall receive, in addition to the sum named in the certificate, interest thereon at the legal rate in force at the place of building.

Payments Withheld.--The architect may withhold or, on account of subsequently discovered evidence, nullify the whole or a part of any certificate for payment to such extent as may be necessary to protect the owner from loss on account of:

(a) Defective work not remedied.

(b) Claims filed or reasonable evidence indicating probable filing of claims.

(c) A reasonable doubt that the contract can be completed for the balance then unpaid.

(d) Damage to another contractor under article 38. When all the above grounds are removed, certificates shall at once be issued for amounts withheld because of them."

By virtue of the building contract, Clark, the contractor, was to provide all material and perform all work shown on drawings or in specifications.

The court rendered the following judgment:

"Now therefore, upon the facts stated, the court is of the opinion and so adjudged, that the Commercial Casualty Insurance Company is, and the same is hereby, relieved from liability on account of its bond to the amount of $27,076.76, and the amount of unpaid bills that were due on the job at the time of the abandonment of the contract by the contractor, Walter Clark, which amount of unpaid claims for labor and

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