Horne v. State Bldg. Commission, 40716

• Decision Date: 09 June 1958
• Docket Number: No. 40716,40716
• Citation: 233 Miss. 810,103 So.2d 373
• Court: Mississippi Supreme Court
• Parties: Arthur HORNE, d/b/a Horne Plumbing, Electric & Supply Company, v. STATE BUILDING COMMISSION and Western Casualty & Surety Company.

Page 373

103 So.2d 373

233 Miss. 810

Arthur HORNE, d/b/a Horne Plumbing, Electric & Supply Company, v. STATE BUILDING COMMISSION and Western Casualty & Surety Company.

No. 40716.

Supreme Court of Mississippi.

June 9, 1958.

Vardaman, S. Dunn, Jackson, for appellant.

deQuincy Sutton, Meridian, Mass., John E. Stone, Jas. T. Kendall, Jackson, for appellees.

HOLMES, Justice.

This litigation arose out of contracts awarded by the State Building Commission of the State of Mississippi to Arthur Horne, d/b/a Horne Plumbing, Electric and Supply Company, in connection with the construction of the State Office Building and the Mississippi Schools for the Blind and Deaf.

On January 16, 1948, the State Building Commission awarded to Arthur Horne, d/b/a Horne Plumbing, Electric and Supply Company, a contract for the electrical work in connection with the construction of the State Office Building. The contract price was $257,456. Horne furnished a performance bond, dated January 21, 1948, in the amount of the contract with Western Casualty and Surety Company as surety.

On May 8, 1948, the State Building Commission awarded to Arthur Horne, d/b/a Horne Plumbing, Electric and Supply Company, a contract for the mechanical work, consisting of plumbing and heating, in connection with the construction of the Mississippi Schools for the Blind and Deaf. The contract price was $279,051. Horne furnished a performance bond for this job, dated May 8, 1948, in the amount of the contract with the same surety, Western Casualty and Surety Company.

In each instance, Horne executed to the surety a written application for the performance bond. The applications and the bonds were of like tenor and effect, except as to the amount and the work to be performed. The application for the bond on the State Office Building job was dated January 21, 1948. The application for the bond on the Schools for the Blind and Deaf job was dated May 8, 1948. The applications contained the following pertinent provisions:

(a) The principal agreed to indemnify the surety against all loss, costs, damages, expenses and attorneys' fees, and against any and all liability sustained or incurred by the surety by reason of the execution of the bonds.

(b) The surety was to have the right and was authorized but not required to take possession of the work in case of default and to complete the same at the expense of the principal, or to contract for the completion of the same, or to consent to the reletting or completion of the contract by the obligee, and the surety was also given the right to adjust, settle, or compromise any claim or demand.

(c) The principal agreed to assign, and did assign, transfer and set over to the surety as collateral to secure the obligations of the bond, and any other indebtedness or liability of the principal to the surety, with said assignment to become effective as of the date of the contract, and, in the event of any abandonment, forfeiture, or breach of said contract, or of any breach of any bonds executed on behalf of the principal, or in the event of any proceeding which deprived the principal of the right to proceed with the contract, the assignment was then made to cover all rights of the principal in and growing out of the contract and any and all percentages retained on account of the contract, and any and all sums due under the contract at the time of abandonment, forfeiture, or breach, or might thereafter become due.

(d) It was provided that the liability of the principal should include all sums paid by the company on good faith under the belief that it was liable therefor whether liable or not.

(e) It was provided that in the event of such payment in good faith, an itemized statement thereof sworn to by any officer of the surety, or the voucher or vouchers or other evidences of such payment should be prima facie evidence of the fact of payment and the extent of the principal's liability.

The following provisions are quoted verbatim from the applications:

'That liability hereunder shall extend to, and include, the full amount of any and all sums paid by the company in settlement or compromise of any claims, demands, suits, and judgments upon said bond or bonds, or any of them, on good faith, under the belief that it was liable therefor whether liable or not, as well as any and all disbursements on account of costs, expenses, attorneys' fee, as aforesaid, which may be made under the belief that such were necessary whether necessary or not.'

'That in the event of payment, settlement or compromise, in good faith, of liability, loss, costs, damages, expenses and attorneys' fees, claims, demands, suits and judgments as aforesaid, an itemized statement thereof, sworn to by any officer of the company, or the voucher or vouchers or other evidence of such payment, settlement or compromise shall be prima facie evidence of the fact and extent of the liability of the undersigned, in any claim or suit hereunder, and in any and all matters arising between the undersigned and the company. * * *'

The State Office Building job was completed according to contract and accepted by the State Building Commission on August 30, 1950, at which time there were retainage funds in the hands of the State Building Commission amounting to $43,812.36.

The general contractor on the project for the construction of the Schools for the Blind and Deaf was M. T. Reed Construction Company. Horne and the general contractor began work on this project under their respective contracts. The general contractor completed his work on or about February 2, 1950, at which time the Commission entered an order reciting the completion of the work of the general contractor, and setting forth that Horne should complete his work within ten days as provided by the contract. At a meeting of the Commission held on February 15, 1950, the architects on the project for the construction of the Schools for the Blind and Deaf presented to the Commission their certificates certifying that Horne had failed to supply enough skilled workmen and proper materials to complete his contract within the required time and had failed to comply with certain other provisions of his contract, and recommending that for these failures and his persistent disregard of the instructions of the architects, he be declared in default under this contract.

The Commission entered an order accordingly, and then by subsequent order entered on February 20, 1950, granted Horne thirty days from February 20, 1950 to substantially comply with his contract provided he made satisfactory day to day progress. On March 7, 1950, the Commission entered an order declaring Horne in default for unsatisfactory day to day progress, and for failure to comply with his contract, and terminating his contract, and calling upon the surety to perform the obligations of its bond. Horne demanded an arbitration in accordance with the terms of the contract and the same was had and resulted in an award in favor of the State Building Commission on April 24, 1950, finding that there was sufficient cause to warrant the Commission in declaring Horne in default and in terminating his contract. The award was filed in the circuit court and the cause involving the arbitration proceedings was later transferred to the chancery court, where it was numbered Cause No. 40,802 on the docket of that court. The chancellor confirmed the award and on appeal to the Supreme Court, the action of the chancellor was affirmed. Horne v. State Building Commission, 222 Miss. 520, 76 So.2d 356. Thus Horne was judicially determined to be in default on his contract and the obligation of the surety to complete the contract immediately attached.

In the meantime, Horne sued the State Building Commission in the chancery court, seeking to enjoin the Commission from putting into effect the award of the arbitrators, and seeking to recover certain sums alleged to be due him under his contracts with respect to the State Office Building and with respect to the Schools for the Blind and Deaf. This cause became Cause No. 40,695 on the docket of the chancery court and was later consolidated with said cause No. 40,802 involving the arbitration proceedings, and the two causes are consolidated on this appeal.

Horne filed an amended bill of complaint in which he joined as defendants the State Building Commission, the architects, and his surety, Western Casualty and Surety Company, and in which he alleged that the Commission was without power or authority to terminate his contract, and sought the recovery of sums claimed to be due him under both of his contracts, and claimed actual and punitivie damages for the alleged wrongful act of the Commission in declaring him in default and in terminating his contract with respect to the construction at the Schools for the Blind and Deaf. Later an order of dismissal was entered as to the architects. A general demurrer of the State Building Commission was sustained and the cause proceeded as between Horne and the Western Casualty and Surety Company.

In the meantime, the Western Casualty and Surety Company took over the contract with respect to the mechanical work at the Schools for the Blind and Deaf and completed it at large expense, as will more particularly appear hereafter from a recital of the findings of the chancellor. The surety employed Davis Plumbing Company to complete the work on a cost-plus basis. It was understood that the Davis Plumbing Company was to complete the work under the supervision of one A. F. Fisher. It was conceded by all concerned that the Davis Plumbing Company was a competent and reputable firm, and that A. F. Fisher was a competent and reputable master plumber, who for approximately twenty years had been in the employment of the Davis Plumbing Company in a supervisory capacity. Horne protested the letting of the work on a cost-plus basis, but conceded the competency and high reputation of both the ...