Jack v. Craighead Rice Milling Co.

• Decision Date: 24 May 1948
• Docket Number: 13608.,No. 13607,13607
• Citation: 167 F.2d 96
• Parties: JACK et al. v. CRAIGHEAD RICE MILLING CO. NEW AMSTERDAM CASUALTY CO. v. SAME.
• Court: U.S. Court of Appeals — Eighth Circuit

167 F.2d 96 (1948)

JACK et al. v. CRAIGHEAD RICE MILLING CO.

NEW AMSTERDAM CASUALTY CO. v. SAME.

Nos. 13607, 13608.

Circuit Court of Appeals, Eighth Circuit.

March 25, 1948.

Writ of Certiorari Denied May 24, 1948.

Lowell W. Taylor, of Memphis, Tenn. (Arthur L. Adams, of Jonesboro, Ark., on the brief), for appellants.

Charles Frierson and Archer Wheatley, both of Jonesboro, Ark. (Joe C. Barrett, of Jonesboro, Ark., on the brief), for appellee.

Before GARDNER, THOMAS, and COLLET, Circuit Judges.

Writ of Certiorari Denied May 24, 1948. See 68 S.Ct. 1340.

GARDNER, Circuit Judge.

These are appeals by the defendants from a judgment in an action brought to recover damages for failure of a contractor to perform a building contract.

The plaintiff, Craighead Rice Milling Company, entered into a contract with defendant J. M. Jack Construction Company for the construction of a rice drier at Gibson, Arkansas. The contract provided that the contractor should furnish all labor, material, tools, equipment, supplies and other materials of any nature to construct a rice drying plant and storage bins attached thereto, in accordance with plans and specifications, for the sum of $350,000. The contract, dated May 1, 1945, contained the following provisions:

"It is understood between the parties that the plans hereinbefore mentioned are of a preliminary nature, but the contractor agrees that detailed plans embodying all functions and dimensions indicated in the preliminary plans shall be prepared by Horner & Wyatt, Engineers, of Kansas City, Missouri, as the work progresses, and sufficiently in advance of each operation so that the Owner shall have opportunity to check and approve such detailed plans.

"It is understood between the parties hereto that the plans and specifications will be in sum and substance the same as those prepared for the Wheatley Plant of the Arkansas Rice Growers Association by Horner & Wyatt insofar as type of construction, quality of workmanship and material are concerned.

"The Contractor agrees that if notice to proceed is received by him on or prior to May 2, 1945, to provide facilities for receiving and drying rice not later than September 10, 1945, and to have at least two driers with their appurtenant equipment in operation at that date, and to have the entire plant complete and ready for drying and storage by November 1, 1945.

* * * * * *

"Time being of the essence of this contract, the Contractor agrees that should he fail to provide facilities for receiving and drying rice on the dates hereinbefore mentioned he shall cause to be paid to the Owner a sum of One Hundred ($100.00) Dollars per day for each calendar day thereafter, until such facilities as above mentioned have been provided, not as a penalty but as liquidated damages herewith agreed to that the Owner shall suffer by reason of his failure to comply with the terms of this agreement."

The building contract also contained provision that the contractor should furnish a construction bond executed by a good and substantial bonding company, for its faithful performance. The contractor accordingly furnished a bond in the penal sum of $350,000, executed by defendant New Amsterdam Casualty Company as surety. This bond provided that the contractor should indemnify plaintiff against any loss or damage directly arising by reason of the failure of the contractor faithfully to perform the contract. This bond contained the following, among other provisions:

"Provided, however, that this Bond is executed and accepted upon the following express conditions, each of which shall be a condition precedent to any right of recovery thereon, anything in the contract to the contrary notwithstanding:

"First, that in the event of any default on the part of the Principal, a written statement of the particular facts showing such default and the date thereof shall be delivered to the Surety by registered mail, at its office in the City of Baltimore, Maryland, promptly and in any event within ten (10) days after the Obligee or his representatives, or the Architect, if any, shall learn of such default; * * *

"Third. That the Surety shall not be liable for any damages resulting from * * * strikes or labor difficulties * * * the elements * * *; nor for the non-performance of any guaranties of the efficiency or wearing qualities of any work done or materials furnished, or the maintenance thereof or repairs thereto; * * * nor for damages caused by delay in finishing said contract in excess of ten per centum of the penalty of this instrument; * * *"

The bond also contained the following provision:

"Sixth. That no right of action shall accrue upon or by reason hereof, to or for the use or benefit of anyone other than the Obligee herein named; and that the obligation of the Surety is, and shall be construed strictly as, one of suretyship only; that this Bond shall be executed by the Principal before delivery, and that it shall not, nor shall any interest therein or right of action thereon be assigned without the prior written consent of the Surety, duly executed by its President or one of its Vice Presidents and its corporate seal affixed thereto, duly attested by its Secretary or one of its Assistant Secretaries."

The complaint of the plaintiff alleged that the contractor did not erect the structure in accordance with the contract plans and specifications and that damages of $100 per day for delay of completion on the day provided by the contract were due plaintiff. It claimed damages in the sum of $350,000.

The Surety Company, in its answer, alleged that the contractor had almost performed; that plaintiff terminated and cancelled the contract; that plaintiff gave no notice of the defaults alleged in the complaint; that many of the matters complained of resulted from strikes, labor conditions and acts of God over which the contractor had no control; that plaintiff had an engineer on the job while the work was in progress; that he was well aware of the manner in which the work was being done, but made no complaint and gave no notice to the Surety; and that plaintiff, prior to the commencement of the action, had made an absolute assignment of the bond and of all its claims upon it, to the Union Planters National Bank and Trust Company, in Memphis.

The contractor, while not made a party to the action originally, intervened, asserting a primary liability for any judgment that might be entered, and filed answer denying default in performance and alleging that when the building was almost completed plaintiff, without just cause, terminated the contract and refused to permit the contractor to complete the work; that the work was performed in substantial compliance with the plans and specifications; that there remained very little to be done to effect completion, and that plaintiff "was deliberately refusing to do the things necessary to finish the structure and machinery in accordance with the plans and specifications and is deliberately refusing to utilize the building and equipment for either the drying or storage of rice."

Plaintiff filed a reply, denying substantially all the affirmative defenses pleaded in the answer, except that it admitted the assignment.

The action was tried to a jury, and at the close of all the testimony defendant New Amsterdam Casualty Company interposed a motion for directed verdict, which was denied. The case was submitted to the jury on instructions to which certain exceptions were saved. The jury returned a verdict for $150,000.00, upon which judgment was entered, and the defendants have separately appealed, presenting the appeals upon a single record and a joint brief. Defendants seek reversal on substantially the following grounds: (1) The court erred in denying the motion of the Surety Company for a directed verdict predicated upon the plaintiff's violation of a condition precedent by assigning its claim on the bond; (2) the court erred in refusing to sustain the Surety's motion for a directed verdict on the ground that the plaintiff had not given notice of any of the many defaults which it alleged resulted in the damages claimed; (3) errors were committed in admitting proof of the cost of waterproofing above grade; (4) the court erred in the manner of submitting the question of liquidated damages for delay in completion; (5) the court erred in permitting the plaintiff to offer in evidence the plans and specifications and to permit witnesses to testify with reference to the Wheatley plant; (6) the court erred in failing to give requested instructions proposed by defendants.

The contentions of the defendants are directed largely to the ruling of the court in denying the motion of New Amsterdam Casualty Company for a directed verdict. This motion is brief and reads as follows:

"We move for a directed verdict in favor of the New Amsterdam Casualty Company upon the ground that the plaintiff made an assignment of the bond and of its claim on the bond in violation of the terms of the bond, and upon the ground that the plaintiff failed to give the surety notices, as required by the bond, of the alleged defaults upon which this suit is predicated."

It seems to have been the contention of defendants in the trial court, and they renew the contention here, that the assignment of this bond as a pledge or collateral security, had the effect of invalidating it. In overruling the motion for a directed verdict, the court, among other things, said:

"On the question of the assignment clause the court is going to hold that the assignment does not render this contract invalid."

It is observed that there is no suggestion in this motion that the assignment was effective, and hence, the plaintiff was not the real party in interest. Nor does the original brief of defendants in this court contain any such suggestion. But it is contended that this assignment violated the terms of the bond, and hence, the bond was invalid. The provision which w...