Federal Surety Co. v. A. Bentley & Sons Co.

• Decision Date: 02 July 1931
• Docket Number: No. 5599,5604.,5599
• Citation: 78 ALR 1041,51 F.2d 24
• Parties: FEDERAL SURETY CO. et al. v. A. BENTLEY & SONS CO. A. BENTLEY & SONS CO. v. FEDERAL SURETY CO. et al.
• Court: U.S. Court of Appeals — Sixth Circuit

78 ALR 1041, 51 F.2d 24 (1931)

FEDERAL SURETY CO. et al. v. A. BENTLEY & SONS CO.

A. BENTLEY & SONS CO. v. FEDERAL SURETY CO. et al.

Nos. 5599, 5604.

Circuit Court of Appeals, Sixth Circuit.

July 2, 1931.

Herman R. Miller, of Toledo, Ohio, for Federal Surety Co.

Ray Martin, of Toledo, Ohio (Marshall, Melhorn, Marlar & Martin, E. G. Davies, and Crary Davis, all of Toledo, Ohio, on the brief), for A. Bentley & Sons Co.

Before DENISON and MOORMAN, Circuit Judges, and SIMONS, District Judge.

SIMONS, District Judge.

While in form the appeals entitled as above are separate and independent, and have come to this court upon two separate records and two sets of briefs, and while some difficulty was experienced at the outset in apprehending the relationship to each other of the two causes, there being no apt explanation introductory to either set of briefs, it becomes clear upon consideration that the appeals seek to review the decision in the same case below, and are appeals from a single decree therein entered. They will therefore be treated together as appeal and cross-appeal, as in fact they are.

The Bentley & Sons Company was the plaintiff below. It filed its bill in equity against the Federal Surety Company and other defendants, seeking equitable relief in the way of accounting, marshaling and ascertainment of liens, impounding of funds, and injunction, and also money damages for breach of contract. The defendant filed a cross-petition in the nature of a counterclaim. The cause was by consent referred to a master, and, upon the return of the master's findings, exceptions were filed by each of the parties above named, and upon hearing thereon the decree, which is by each of the parties appealed from, was entered. No. 5599 is the appeal of the Surety Company, defendant below. No. 5604 is the plaintiff Bentley's cross-appeal. All claims by and against other parties to the suit have been settled in accordance with the decree of the trial court, and they are not here involved.

The original suit grew out of the construction of the United States Veterans' Bureau Hospital at Battle Creek, Mich., in 1923 and 1924. Bentley entered into a contract with the government to build the hospital, which consisted of some twenty-nine buildings. All were to be heated by a central steam heating plant, and the general contract price was approximately $2,000,000. The general contractors sublet the contract for the mechanical work, including plumbing and heating equipment, trench excavation, and concrete work, to S. W. Rittenhouse for about $400,000. Rittenhouse indemnified Bentley against loss or damage directly arising out of his failure faithfully to perform his contract by a surety bond in the penal sum of $100,000, with the Federal Surety Company as surety. Rittenhouse entered upon the performance of his contract on or about March 27, 1923. Some time thereafter, he needed financial aid, and in August, 1923, the Surety Company financed him, and Rittenhouse assigned to it monies due and to become due him thereafter under his subcontract. Under this arrangement, he continued to perform until early in January, 1924, when he was declared in default, and notice of the said default was given to the surety. Following that, on January 10, 1924, the Surety Company undertook the completion of the contract. The work under the subcontract was completed and accepted by the United States as of August 30, 1924. The final estimate due from Bentley to the Surety Company upon the completion of the subcontract was $86,942.90, which is not disputed. The amount covered by this final estimate was retained by Bentley to cover liens and as against damages claimed to be the result of the default of the subcontractor, Rittenhouse, and his successor, the Surety Company.

The principal issue centers about the findings of the master, that the Surety Company was liable in damages for delay in completing the heating system and the water system in accordance with the directions of Bentley. The subcontract provided that all work should be completed on or before July 6, 1924. The heating and water systems having been installed before that date, it is argued by the Surety Company, subject to a concession hereinafter noted, that this was the only obligation of the subcontractor with respect to time of performance. Section 4 of the contract, however, reads as follows: "Supervision of contract. That the work herein contracted for shall be done under the jurisdiction and control of the contractor, the Quartermaster General of the Army, or such contracting Quartermaster as he may designate."

The Surety Company concedes that by virtue of this provision the subcontractor could not conduct his work with absolute disregard of the progress of other work on the job, but that he was obliged to carry on his work in conformity with the general course of construction. It is claimed, however, that the control provided to be exercised by the contractor was a reasonable control, and not an unreasonable one; that Bentley having directed that the heating and water systems should be made operative for furnishing temporary heat and water during construction by November 21, 1923, and such progress on the subcontract constituting by far the greater portion of the work specified in the subcontract, it was unreasonable to demand that the subcontractor do in seven months substantially the work that under the contract he was permitted to finish within sixteen months. To determine the merits of Bentley's contention, it is necessary to consider other provisions in the contract, and other facts disclosed by the record. Incorporated in the principal contract of Bentley with the government were the War Department's specifications. The subcontract between Bentley and Rittenhouse was entered into with specific reference to such specifications. Paragraph 29, of the specifications, reads as follows: "If he (Bentley) so chooses ...