Howard County v. Pesha

• Decision Date: 27 March 1919
• Docket Number: 19986
• Citation: 172 N.W. 55,103 Neb. 296
• Parties: HOWARD COUNTY ET AL., APPELLEES, v. GEORGE C. PESHA, DEFENDANT: AMERICAN BONDING COMPANY, APPELLANT. JAMES SCHEE ET AL., APPELLANTS, v. HOWARD COUNTY ET AL., APPELLEES
• Court: Nebraska Supreme Court

172 N.W. 55

103 Neb. 296

HOWARD COUNTY ET AL., APPELLEES, v. GEORGE C. PESHA, DEFENDANT:

AMERICAN BONDING COMPANY, APPELLANT.

JAMES SCHEE ET AL., APPELLANTS, v. HOWARD COUNTY ET AL., APPELLEES

No. 19986

Supreme Court of Nebraska

March 27, 1919

APPEAL from the district court for Howard county: JAMES R. HANNA JUDGE. Reversed in part, and affirmed in part.

Reversed in part, and affirmed in part.

Fawcett & Mockett, C. G. Ryan, Claude S. Wilson and S. S. Bishop, for appellants.

T. J Doyle and Charles Dobry, contra.

ROSE J. LETTON, CORNISH and ALDRICH, JJ., not sitting.

OPINION

ROSE, J.

Four suits growing out of controversies relating to the construction of a courthouse at St. Paul, Nebraska, were consolidated below for trial. The appeals herein involve two of those cases, which, for the purposes of review, will be stated separately.

In one of the cases in which an appeal is taken, Howard county sued George C. Pesha, the original contractor, and his surety, the American Bonding Company, to recover damages in the sum of $ 25,000 for alleged breach of the building contract. Pesha agreed to construct a courthouse in keeping with plans and specifications prepared by Berlinghof & Davis, architects, and adopted by the county board. The price of construction recited in the contract was $ 69,510, payments to be made from time to time to the extent of 85 per cent. of estimates of the architects during the progress of the building operations. Pesha obligated himself to commence work immediately and to complete the courthouse by January 1, 1914. To secure performance of the contract on the part of Pesha, the American Bonding Company became his surety November 14, 1912, in the penal sum of $ 25,000, on the following terms:

"If the said George C. Pesha shall well and truly keep and perform all the conditions of this contract and pay off and settle in full with the person or persons entitled thereto all accounts and claims that may become due by reason of laborers' or mechanics' wages, or for material furnished, or services rendered said George C. Pesha in executing or performing the obligations of said contract, so that each of such persons shall receive his just dues in that behalf, then this obligation shall be of no effect; otherwise it shall remain in full force and effect in law."

The county, in its petition, pleaded in detail that on and prior to June 18, 1913, Pesha failed to pay his laborers, who, for that reason, refused to work; that he thereafter neglected his duties and refused to perform his contract; that Pesha and his surety were notified of the former's default, were warned of a forfeiture in the event of further delay, and were directed November 20, 1913, to complete the courthouse; that nevertheless Pesha and his surety refused to proceed further with the work, and abandoned the contract when there was nothing due the contractor; that by reason of the default the county, acting under the contract, took the unfinished job out of the hands of Pesha and his surety, and directed the architects to complete the building for the county; that the county paid Pesha $ 32,527.69, and expended in addition for completing the courthouse $ 57,206.64, making a total cost of $ 89,734.33, or $ 20,224.33 in excess of Pesha's contract price. Including stipulated damages of $ 25 a day for Pesha's delay, the county prayed for judgment against him and his surety in the sum of $ 25,000.

Pesha filed an answer and a cross-bill, denying that he had violated his contract in any respect, and pleading, in substance, among other things, that the delays of which the county complained were caused by the county board and the architects; that the architects illegally and fraudulently refused to make estimates or certificates of progress to which Pesha was entitled under the contract, and thus prevented him from receiving compensation justly due; that the county board knowingly refused to make payments due him; that he did not delay the work or abandon the contract, but that he was wrongfully prevented by the architects and the county board from completing the building; that the forfeiture of the contract was illegal and was declared without his consent; that the county board, over his protest, unlawfully and forcibly took possession of the partially constructed building, and wrongfully seized and used his materials and machinery. He prayed for the dismissal of the county's suit and for a judgment in his favor for damages in the sum of $ 30,445.56.

The substance of the principal defense pleaded by Pesha's surety, the American Bonding Company, is that Pesha did not violate the building contract in any respect justifying the forfeiture; that the architects arbitrarily and fraudulently refused to make estimates and to issue certificates of progress showing the sums justly due under the contract; that the county board with full knowledge of the facts acquiesced in the fraud of the architects, wrongfully refused to make payments known to be due, and thus violated the contract and released the contractor and his surety from further liability thereunder.

The trial court rendered a judgment in favor of Howard county and against Pesha and his surety for $ 20,156.49, and dismissed the cross-petition of Pesha. From this judgment the surety, the American Bonding Company, alone has appealed.

In the other case in which an appeal is taken Schee & Callahan are plaintiffs, and Howard county, George C. Pesha, and his surety, the American Bonding Company, are defendants. The claims of Schee & Callahan arose in the following manner: June 24, 1913, Pesha, to procure money to continue his work on the partially constructed courthouse, assigned to Schee & Callahan his right to receive from Howard county future payments to the extent of $ 10,000, the county accepting the assignment. The building contract, the suretyship of the American Bonding Company, the assignment, the acceptance, the furnishing of $ 10,000 to Pesha, the use of $ 8,782.36 for labor and material in the work on the courthouse, and the failure of the county to pay any part of the claims of Schee & Callahan are pleaded in detail. Two causes of action are stated. The first is an unpaid claim of $ 5,509.30, with interest from November 13, 1913, established by an estimate of the architects, and the second is an unpaid claim of $ 3,273.06, with interest from November 13, 1913, and is like the first, except that the amount due was not determined by an estimate of the architects, who, as it is alleged, failed to perform their duty in that particular.

Howard county pleaded, in substance, as a defense that Pesha violated his building contract; that he abandoned the job when partially completed; that the contract was properly forfeited by the county after default of Pesha and notice to him and his surety; that the county completed the unfinished courthouse; that there was nothing due Pesha when he defaulted or afterwards; that Schee & Callahan acquired by the assignment no greater rights than those of Pesha, and that there was nothing due either from the county.

The trial court dismissed the suit as to Howard county and as to the American Bonding Company, and entered a judgment in favor of Schee & Callahan and against Pesha for $ 11,902. From this judgment Schee & Callahan have appealed.

Questions common to both appeals may be stated as follows: Who first broke the contract? Did Pesha abandon it? Did the architects fraudulently refuse to make or to properly certify estimates for labor and materials as the work progressed? Did the county wrongfully refuse to make payments justly due under the terms of the contract? On the part of the county was there a breach of contract to justify the contractor in refusing to proceed further under it? These questions are raised by the pleadings in both cases. An examination of the evidence is necessary to a decision.

The building contract was executed October 26, 1912, and among other provisions therein are the following:

"Estimates will be made and progress certificates will be issued by the architect from time to time as the work progresses, for materials furnished, on the ground or incorporated into the building, and for labor performed thereon in accordance with the meaning of all the plans, and both the technical and general specifications; and the amount to be paid to the contractor shall be eighty-five per cent. (85%) of the amount of such estimate on the presentation of the progress certificate."

Pesha commenced his building operations under the contract and proceeded therewith until June 6, 1913, when he had used in the work of partial construction $ 38,267.35, and had received 85 per cent. thereof, or $ 32,527.69, on estimates and progress certificates. By June 24, 1913, he was financially embarrassed, and the laborers quit work temporarily because wages due them had not been paid. The architects declined to make any further estimate, and Pesha, to procure funds to comply with his contract, according to its terms, executed the following assignment:

"For a valuable consideration to me in hand paid, receipt of which is hereby acknowledged, I, the undersigned hereby sell, assign and transfer to James Schee and D. R. Callahan of College View, Neb., the first ten thousand dollars ($ 10,000) that is awarded and made payable to me by reason of the contract and construction and erection of the county courthouse in St. Paul, Howard county, Nebraska.

"And I, the undersigned, do hereby authorize and direct the board of county commissioners of Howard county, Neb., to pay the said James Schee and D. R. Callahan all sums of money that may now be due to me or that may become due and payable to me from time to time for the construction of said...