Federal Surety Co. v. Lalonde

• Decision Date: 25 March 1929
• Docket Number: No. 5618.,5618.
• Parties: FEDERAL SURETY CO. v. LALONDE et al.
• Court: U.S. Court of Appeals — Ninth Circuit

31 F.2d 673 (1929)

FEDERAL SURETY CO. v. LALONDE et al.

No. 5618.

Circuit Court of Appeals, Ninth Circuit.

March 25, 1929.

Ware & Melrin and Philip F. Sherman, both of Minneapolis, Minn., and O. B. Kotz, of Great Falls, Mont., for appellant.

Hurd, Hall & McCabe, H. C. Hall, and E. J. McCabe, all of Great Falls, Mont., for appellees.

Before RUDKIN and DIETRICH, Circuit Judges, and BEAN, District Judge.

RUDKIN, Circuit Judge.

September 21, 1924, Lalonde, Peck & Powers, a copartnership, entered into a contract with the state of Montana, through its highway commission, for the construction of about ten miles of road; the contractors agreeing to furnish and supply all labor and material. The Federal Surety Company executed a bond to the state for the faithful performance of the contract. On October 27, 1924, the contractors sublet the work to one Windsor; the subcontractor obligating himself to fully perform the contract with the state for 87½ per cent. of the original contract price. The Federal Surety Company also executed a bond to the original contractors on behalf of the subcontractor for the faithful performance of the subcontract. The subcontractor began work on the road under his subcontract soon thereafter, but in the latter part of October, 1925, the work was abandoned. The surety company thereupon completed the contract with the state according to its terms. The present action was brought by the original contractors against the surety company to recover the unpaid balance of the 12½ per cent. of the contract price, reserved by them, the amount of certain liability insurance paid by them for and on account of the subcontractor, and certain advances made by them to the subcontractor, amounting in all to the sum of approximately $9,000. The contractors recovered judgment in accordance with the prayer of their complaint, and the surety company has appealed. While numerous defenses were set up in the answer, the only defense relied on in this court is based on the claim that in the performance of the contract after taking over the work, the appellant paid out and expended more than the amount of the penalty of the bond.

In actions of this kind, where a contract has been abandoned by the contractor, the measure of damages is the reasonable cost of completing the contract according to its terms over and above the contract price; and if the owner has already completed the contract, the measure of damages is the amount necessarily and prudently expended in excess of the contract price. And if we assume that a surety company, upon taking over work after abandonment by a contractor, is discharged from further liability when in the completion of the contract it has expended an amount equal to or in excess of the penalty of the bond, it must at least appear that the money was prudently and necessarily expended under competent supervision. In this regard the appellant has...