Federal Union Surety Co. v. Commonwealth

• Decision Date: 17 June 1910
• Parties: FEDERAL UNION SURETY CO. v. COMMONWEALTH, for Use of VANDIVER et al.
• Court: Kentucky Court of Appeals

129 S.W. 335

139 Ky. 92

FEDERAL UNION SURETY CO. v. COMMONWEALTH, for Use of VANDIVER et al.

Court of Appeals of Kentucky.

June 17, 1910

Appeals from Circuit Court, Franklin County.

"To be officially reported."

Actions by the Commonwealth, for use of M. C. Vandiver and others, W C. Wulff & Co., and another, Joseph Elias and others Grainger & Company and others, Ahrens & Ott Manufacturing Company, and the Carrollton Brick Company, against the Federal Union Surety Company. Judgment for the use plaintiff in each case, and defendant appeals. Affirmed.

Hazelrigg & Hazelrigg and Samuel Dowden, for appellant.

H. V McChesney, McQuown & Beckham, and Brown & Nuckols, for appellees.

CLAY C.

The first five cases set out above were originally instituted in the Franklin circuit court as separate suits. Thereafter they were consolidated and heard together, and one judgment entered. The case of Federal Union Surety Company v. Commonwealth, for Use of Carrollton Brick Company, was not consolidated with the other cases. As the questions involved in the latter case are the same as those involved in the other five cases, we have deemed it best to consider all the cases together and discuss all the questions raised in one opinion.

On February 6, 1904, the General Assembly of the commonwealth of Kentucky passed an act entitled "An act for the erection and completion of the capitol, and other necessary buildings at the seat of government." Laws 1904, c. 2. By this act the commissioners of the sinking fund of the state of Kentucky were authorized as a board to carry out the provisions of the act and to erect the capitol buildings. To that end, the board was authorized and empowered to adopt plans and specifications for the construction and completion of the capitol buildings at Frankfort as it might deem best and most suitable for the accommodation of the General Assembly and the state officials and the departments thereof, having due regard for the safety and preservation of the state records. The board was given authority to change the plans as the necessity might arise during the progress of the work. After adopting plans and specifications, the board was directed to advertise for sealed proposals for bidders for said work, or any part thereof; and the act provided that the work should be awarded to the lowest and best bidder, due regard being had to the responsibility of the bidder. Among the provisions of the act were the following: "Subcontractors shall in no case be recognized by the board, the responsibility to continue in the principals and their sureties. *** Every contractor for work or material to be furnished under this act, shall execute to the board, a bond, conditioned for the faithful performance of his contract, with surety to be approved by said board." It was further provided in the act that the total expenditure for all purposes under said act should not exceed $1,000,000. Section 7 of the act is as follows: "All original and supplemental contracts made by the board shall be in writing and signed by the party or parties, in duplicate, and one of the originals deposited in the office of the Auditor of Public Accounts, as a public record therein, and properly authenticated copies thereof shall be evidence in all courts and other places. And the Franklin circuit court is given jurisdiction of all matters and issues which may arise under the provisions of this act." On August 10, 1905, the board of sinking fund commissioners, in pursuance of the power conferred upon it by the act of 1904, entered into a written contract with the General Supply & Construction Company, as general contractors, by the terms of which the latter agreed to erect the capitol building in accordance with the plans and specifications prepared by the architect selected by the board. The provisions of this contract that are material on this appeal are as follows:

"Article IV, a. Said contractor agrees to protect and save harmless the owner from any loss, cost, or damage to it on account of any damage or injury to third persons, or to property, occasioned by the act of negligence of said contractor, his servants, agents, employés or any subcontractor; and said contractor further agrees to keep said real estate free of all mechanic's liens, and in the event of suits against the owner on account of such act or acts of negligence, or to enforce any lien, the contractor, upon notice by the owner, will appear and defend any suit or suits and hold the owner clear of cost, loss or expense therein; and before final payment is made, the contractor shall furnish satisfactory evidence that he has paid for all materials used in the construction of said work, and satisfy the claims of all laborers and subcontractors doing work thereon."

"Article VI. The contractor shall complete the several portions and the whole of the work embraced and comprehended in this contract and agreement within two years from this date; and, should said contractor fail so to do, it is agreed by and between the owner and said contractor that the measure of liquidated damages forfeited by the contractor to the owner aforesaid shall be two hundred dollars ($200.00) per day for each day in excess of said two years that said contract remains uncompleted, and the time of two years in which this contract is to be completed constitutes a part of the consideration therefor."

"Article IX. It is hereby mutually agreed between the parties hereto that the sum to be paid by the owner to the contractor for said work and materials shall be eight hundred and eighty thousand ($880,000.00) dollars, subject to the additions and deductions as hereinbefore provided, and that such sum shall be paid by the owner to the contractor in current funds, and only upon the certificate of the architect, as follows:

"Certificates to be issued upon the first Monday of each month, throughout the progress of the work, for an amount equal to the value of the work, and materials delivered in place in the building during the preceding month, less ten (10) per cent. of said value, which shall be retained until date of final payment.

"The final payment shall be made within thirty (30) days after the completion of the work in this contract, and all payments shall be due when certificates for the same are issued.

"If at any time there shall be evidence of any lien or claim under which, if established, the owner of the said premises might become liable, and which is chargeable to the contractor, the owner shall have the right to retain out of any payment then due, or thereafter to become due, an amount sufficient to completely indemnify it against such lien or claim. Should there prove to be any such claim after all payments are made, the contractor shall refund to the owner all moneys that the latter may be compelled to pay in discharging any lien on said premises made obligatory in consequence of the contractor's default."

Upon the same day that the above contract was entered into the General Supply & Construction Company and the Federal Union Surety Company, as its surety, executed and delivered to the commonwealth of Kentucky the following bond:

"Know all men by these presents, that we, the General Supply and Construction Company, a corporation organized and existing under the laws of the state of New York, as principal, and the Federal Union Surety Company, a corporation organized and existing under the laws of the state of Indiana, and having its principal office in the city of Indianapolis, Indiana, as surety, are held and firmly bound unto the commonwealth of Kentucky, in the sum of two hundred and twenty-five thousand dollars ($225,000), lawful money of the United States, for the payment of which well and truly to be made to the commonwealth of Kentucky, we bind ourselves, our successors and assigns, jointly and severally, firmly by these presents.

"Sealed with our seals and dated this fourteenth day of August, A. D. 1905.

"The condition of this obligation is such: That whereas the said the General Supply and Construction Company has entered into a certain written contract, hereto attached, with the board of sinking fund commissioners acting for and in behalf of the commonwealth of Kentucky, bearing date the tenth (10th) day of August, A. D. 1905, for the construction of the capitol building at Frankfort, Kentucky.

"Now, if the said the General Supply and Construction Company shall well and truly fulfill all the covenants and conditions of said contract, and shall perform all the undertakings therein stipulated by it, to be performed, and shall well and truly comply with and fulfill the conditions of, and perform all of the work and furnish all the material and labor required by any and all changes in or additions to, or omissions from said contract which may hereafter be made, and shall perform all the undertakings stipulated by it to be performed in any and all such changes in or additions thereto, notices thereof to the said surety being hereby waived, and shall promptly make payment to all persons supplying labor or materials in the prosecution of the work, contemplated by said contract, then this obligation to be void, otherwise to remain in full force and virtue.

"In testimony whereof, the General Supply and Construction Company, as principal, and the Federal Union Surety Company, as surety, have hereunto subscribed their hands and affixed their seals this fourteenth day of August, A. D. 1905. The General Supply and Construction Company, by R. P. Taylor, president. Federal Union Surety Company, by Robert M. Nugent, Res. Vice President. Attest: May E. McCabe, Res. Asst. Secretary."

About 10 months later the board of sinking fund commissioners deemed it desirable to make certain...