East Arkansas Lumber Co. v. Swink

• Decision Date: 26 March 1917
• Docket Number: 271
• Citation: 194 S.W. 5,128 Ark. 240
• Parties: EAST ARKANSAS LUMBER COMPANY v. SWINK
• Court: Arkansas Supreme Court

194 S.W. 5

128 Ark. 240

EAST ARKANSAS LUMBER COMPANY v. SWINK

No. 271

Supreme Court of Arkansas

March 26, 1917

Appeal from Lawrence Chancery Court, Eastern District; Geo. T Humphries, Chancellor; affirmed.

Decree affirmed.

Basil Baker and Horace Sloan, for appellant, Ruth Less.

1. The alleged provision for liquidated damages can not be enforced for the reason that the contractor was discharged prior to the completion of the building. Sutherland on Damages, § 280; 138 N.Y. 480; 34 N.E. 201; 115 S.W. 6, 12; 184 N.Y. 543 76 N.E. 1110; 91 N.Y.S. 582; 20 L. R. A. (N. S.) 350.

2. The provision for damages is a penalty and will not be enforced in equity. The district could only recover actual damages and none were shown. 122 Ark. 235, 241; 112 Id. 126 133; 87 Id. 545; 104 Id. 9; 72 Mo.App. 673; 6 Cyc. 114; 14 Ark. 329; 40 Barb. 175; 55 Ark. 376, 381; Sutherland on Damages, § 283, p. 729; 46 S.W. 1061. The contract itself settles the amount of recovery. Art. 5. The school district has at least $ 716.89, which should be paid to appellant.

H. L Ponder, for East Arkansas Lumber Co. and Pfeifer Stone Co.

1. We adopt the able brief for Ruth Less, but in addition call the court's attention to two matters. The district took charge and assumed the debts. The materials were sold to the district and it is liable as trustee.

2. Swink contracted with Snelling and all the directors assented to the contract and signed it. This was a waiver of the damages or penalty for delay.

3. The bond was sufficient and binding. 46 L. R. A. (N. S.) 326; Ib. 698; 27 Id. 578; 68 P. 576.

4. The money held by the district is a penalty and not liquidated damages. 13 Cyc. 94; 183 U.S. 642; 104 Ark. 9-16; 73 Id. 432; 122 Id. 163, 235.

No judgment was taken against Swink. In all fairness the district should not be permitted to keep this money to the loss and damage of these material furnishers.

W. P. Smith and G. M. Gibson, for appellees, School District et al.

1. The district never agreed to pay the bills. It acted within its rights when it retained 15 per cent. of the contract price, and is entitled to hold it as liquidated damages incurred by the delay. 122 Ark. 255; 14 Id. 315; 183 U.S. 642. Contracts for liquidated damages have been upheld in many cases. 112 Ark. 126; 121 Id. 45; 87 Id. 545; 122 Id. 163; 69 Id. 114; 56 Id. 504; 57 Id. 168; 108 U.S. 436; 72 Ark. 525; 83 Id. 114, 364; 87 Id. 52; 93 Id. 371. The rule is well settled in Arkansas and is sustained by the great weight of authority, citing many cases. The damages stipulated were reasonable. 56 Tex. 594; 112 Ark. 126; 183 U.S. 642; 122 Ark. 163, etc.

2. It is immaterial what the parties call it, whether "penalty," "forfeit" or "liquidated damages," the intention of the parties governs. 48 Pa.St. 450; 152 Mich. 386; 116 N.W. 193; 125 Am. St. 418.

3. No testimony as to the actual damages to the school board was necessary. The damages were stipulated. 56 Ark. 504; 56 Tex. 594; 121 F. 818; 57 Ark. 168; 10 Wisc. 30; 53 N.Y. App. 628; 59 N.E. 1125; 6 Cyc. 21. The sum is reasonable. 1 Sutherland on Damages, § 283; 122 Ark. 163. The burden was on the plaintiff to show that the provision was a penalty. 30 S.W. 558.

4. Swink's contract was properly terminated for noncompliance with section 5 of the contract. This section and section 6 should be read together and the district can recover. 46 S.W. 1061; 19 F. 239; 29 S.W. 467; 140 F. 465.

5. The decree is in all things correct. The district never agreed to pay the bills for freight, labor, materials, etc. The new contract with Snelling did not release Swink. No judgment against Swink was necessary, as the board under the contract had a right to retain the money now held as liquidated damages.

6. The appeal as to the East Ark. Lumber Co. and Pfeifer Stone Co. should be dismissed for failure to comply with Rule 9. The bond is not set out in the abstract.

W. E. Beloate, for Swink and the U. S. Fidelity Co

1. No damages whatever were proven. 87 Ark. 52.

2. The right to liquidated damages was lost by the discharge of the contractor prior to the completion of the building. 46 S.W. 1061.

3. Only actual damages were contemplated by the contract, not liquidated damages. 115 S.W. 6.

4. The lumber company had no right to sue. 107 Ark. 501. The provisions of the bond were for the benefit of the district and not for laborers or material men. The bond is not set out in the abstract. The bonding company is not liable. There was no fund subject to garnishment.

OPINION

HUMPHREYS, J.

W. E Swink entered into a contract with the Portia School District, on the 28th day of August, 1914, to erect a two-story brick school building, in accordance with plans and specifications, for the consideration of $ 6,675.00.

Article 5 of the contract is as follows: "Should the contractor at any time refuse or neglect to supply a sufficiency of properly skilled workmen, or of materials of the proper quality, or fail in any respect to prosecute the work with promptness and diligence, or fail in the performance of any of the agreements herein contained, such refusal, neglect or failure being certified by the architect, the owner shall be at liberty, after three days written notice to the contractor, to provide any such labor or materials, and to deduct the cost thereof from any money due or thereafter to become due to the contractor under this contract; and if the architect shall certify that such refusal, neglect or failure is sufficient ground for such action the owner shall also be at liberty to terminate the employment of the contractor for said work and to enter upon the premises and take possession for the purpose of completing the work included under this contract, of all materials, tools, and appliances thereon, and to employ any other person or persons to finish the work, and to provide materials therefor; and in case of such discontinuance of the employment of the contractor he shall not be entitled to receive any further payment under this contract until the said work shall be wholly finished, at which time, if the unpaid balance of the amount to be paid under this contract shall exceed the expenses incurred by the owner in finishing the work, such excess shall be paid by the owner to the contractor, but if such expenses shall exceed such unpaid balance, the contractor shall pay the difference to the owner. The expense incurred by the owner as herein provided, either for furnishing materials or for furnishing the work, and any damages incurred through such default shall be audited and certified by the architect, whose certificate thereto shall be conclusive upon the parties."

Article 6 of the contract is as follows: "The contractor shall complete the several portions, and the whole of the work comprehended in this agreement by and at the time or times hereinafter stated, towit:

"All work to be completed on or before the 20th day of January, 1915. In case of failure of contractors to complete building within the time above mentioned he agrees to forfeit the sum of $ 10 per day as liquidated damages."

W. E. Swink had contracts elsewhere and could only be present a part of the time during the construction of the building. He appointed a foreman and arranged with the secretary of the school board to pay his freight, material and labor bills, when O. K'd by himself or his foreman, out of the advances that might be due him from time to time, according to the architect's estimate. He also executed a bond to the Portia School District with the United States Fidelity & Guaranty Company of Baltimore, Md., as his surety. His bond was filed with the circuit clerk, as required by law. It was the intention of the parties to give a bond required by chapter 101, subdivision 2, of Kirby's Digest of the Statutes of Arkansas. On January 20, 1915, the secretary of said school board notified W. E. Swink in writing that the building was not completed and ready to be accepted. The work progressed on the building until February 12, 1915, at which time W. E. Swink sublet the completion of the building to J. H. Snelling, for the sum of $ 250, by and with the consent of the school board. The work to be done by the sub-contractor was to be to the satisfaction of Clyde A. Ferrell, architect on the building. The building not having been completed by the sub-contractor, on April 12, 1915, the school board, through its secretary, on that day notified W. E. Swink that he had often violated article 5 of the original contract and that under the advice of the architect, the school board intended to take charge and complete the building, and according to said notice did take charge of said building on the 19th day of April, following, and completed it at an expense of $ 299.36. After completing the building, the school board sold the balance of the material on hand for $ 121.94.

East Arkansas Lumber Company furnished materials for the construction of this building, upon which there was a balance due of $ 2,243.34 when the building was completed. Pfeifer Stone Company furnished materials used in the construction of said building, upon which there was still due $ 123 when the building was completed.

W. E Swink was indebted to Ruth Less in the sum of $ 875, for which amount she had obtained a judgment in the circuit court for the Eastern District of Lawrence county, Arkansas. Under the terms of the contract, the school board withheld fifteen per cent. of the contract price, or the sum of $ 1,016.25, and applied $ 299.36 of said amount to labor and materials in completing the building, and now has $ 716.89 of the contract price in hand and claims the right under the contract to appropriate it as liquidated damages on account of the failure of the contractor to complete the...