Jones v. Kelley

• Decision Date: 27 February 1936
• Docket Number: No. 3301.,3301.
• Citation: Jones v. Kelley, 91 S.W.2d 969 (Tex. App. 1936)
• Parties: JONES et al. v. KELLEY et al.
• Court: Texas Court of Appeals

91 S.W.2d 969

JONES et al. v. KELLEY et al.

No. 3301.

Court of Civil Appeals of Texas. El Paso.

February 27, 1936.

Rehearing Denied March 19, 1936.

Appeal from District Court, Bexar County; F. Stevens, Judge.

Action by Donald F. Jones against R. F. Kelley and the Eagle Indemnity Company, wherein defendant Kelley filed a cross-action against the plaintiff and the State Highway Commission, and the Eagle Indemnity Company filed a cross-action against defendant R. F. Kelley.

Judgment in favor of plaintiff against R. F. Kelley and the Eagle Indemnity Company, and for the Eagle Indemnity Company on its cross-action against R. F. Kelley, and against defendant R. F. Kelley on his cross-action, and all parties appeal.

Affirmed.

Eskridge & Groce, of San Antonio, for appellants.

W. F. Nowlin and Templeton, Brooks, Napier & Brown, all of San Antonio, for appellee Kelley.

Nowlin Randolph, of San Antonio, for appellee Eagle Indemnity Co.

HIGGINS, Justice.

On June 22, 1932, Donald F. Jones entered into a contract with the state of Texas acting through the state highway engineer to construct the Salado and Cibolo Creek bridges and approaches on state highway 3A in Bexar and Guadalupe counties. The contract provided:

"It is understood that the following quantities of work to be done are approximate only, and are intended principally to serve as a guide in figuring out the bids.

"It is further agreed that the quantities of work to be done and materials to be furnished may be increased or diminished as may be considered necessary, in the opinion of the Engineer, to complete the work fully as planned and contemplated, and that all quantities of work, whether increased or decreased are to be performed at the unit prices set forth below except as provided for in the specifications."

By contract dated November 16, 1932, Jones sublet to R. F. Kelley the excavation, overhauling, embankment, jetting, ponding, and certain other work in connection with the approaches to the Salado Creek bridge in Bexar county according to the plans and specifications of the highway department. The subcontract covered work commonly known as "dirt work." The subcontract provided: "It is also agreed that the work shall be completed within forty (40) working days from the date of this agreement and for each day over, the party of the second part shall pay to the party of the first part, the sum of $50.00 per day, the second party getting the benefit of any time extension granted first party on this work."

To secure the faithful performance of the subcontract, Kelley gave Jones a bond in the penal sum of $6,000, with Eagle Indemnity Company as surety.

The bond provides: "And provided, that any alterations which may be made in the terms of the contract, or in the work to be done under it, or the giving by the contractor of any extension of time for the performance of the contract, or any other forbearance on the part of either the principal or the Contractor to the other shall not in any way release the Principal and the Surety, or either or any of them, their heirs, executors, administrators, successors, or assigns from their liability hereunder, notice to the Surety of any such alteration, extension or forbearance being hereby waived."

On December 9, 1932, by agreement between the state and Jones, the amount of work to be done on the approaches to the Salado Creek bridge was reduced in amount. The work as thus reduced was done by Kelley.

Kelley was 40 days late in the completion of the work sublet to him. He also failed to pay certain amounts owing to materialmen and laborers on the work, who filed their claims with Jones and the highway department. Out of the moneys due Jones, the department paid said claims.

Jones filed this suit against Kelley and his surety to recover the amount paid to said materialmen and laborers and the sum of $2,000 as damages for the 40 days' delay in the completion of the subcontract.

Kelley answered and filed a cross-action against Jones and the highway commission, seeking to recover a balance alleged to be due him by Jones for work done under the subcontract. The cross-action against the commission was later dismissed.

The surety answered by exceptions, general denial, special pleas, and cross-action over against Kelley.

Upon an instructed verdict judgment was rendered as follows:

In favor of Jones against Kelley and the surety for $1,024.44, being the amount paid by Jones for Kelley to materialmen and laborers. Recovery of the $2,000 sought by Jones was denied. Against Kelley upon his cross-action against Jones. In favor of the surety over against Kelley. All parties appeal.

Opinion.

The assignments of error and their two supporting propositions submitted by Jones present but one contention, which is, that the stipulation in the subcontract obligating Kelley to pay $50 per day for each day's delay in the completion of his contract, as a matter of law, should be interpreted as a provision for liquidated damages; and, since the undisputed evidence shows 40 days' delay by Kelley, judgment for $2,000 in favor of Jones for such sum should have been rendered, and verdict for such amount should have been instructed.

The question thus raised is whether the stipulation is to be treated as an agreement for liquidated damages or as a penalty. The decision depends upon the real intention of the parties. Eakin v. Scott, 70 Tex. 442, 7 S.W. 777, 778; Collins-Decker Co. v. Crumpler, 114 Tex. 528, 272 S.W. 772.

In the case first cited Judge Gaines said: "Stipulations for liquidated damages are generally for amounts in excess of the actual damages, and in such cases work a hardship upon the parties in default. In consequence, the courts strongly incline to treat all agreements to pay a lump sum in case of the failure to perform the terms of a contract as a mere penalty; and in all doubtful instances, to allow a recovery only for the actual damages." (Italics ours.)

Other cases holding that in doubtful cases such provisions will be construed as a penalty rather than an agreement for liquidated damages are Kellam v. Hampton, 58 Tex.Civ.App. 484, 124 S.W. 970, and Durst v. Swift, 11 Tex. 273.

In Britton v. Cotton States Petroleum Co. (Tex.Civ.App.) 283 S.W. 887, 890, Justice Smith said: "Unless it is...