Lake Michigan Water Company v. United States Fidelity & Guaranty Company

• Decision Date: 18 June 1919
• Docket Number: 9,832
• Parties: LAKE MICHIGAN WATER COMPANY v. UNITED STATES FIDELITY AND GUARANTY COMPANY
• Court: Indiana Appellate Court

123 N.E. 703

70 Ind.App. 537

LAKE MICHIGAN WATER COMPANY v. UNITED STATES FIDELITY AND GUARANTY COMPANY

No. 9,832

Court of Appeals of Indiana

June 18, 1919

From St. Joseph Superior Court; Walter A. Funk, Judge.

Action by the Lake Michigan Water Company against the United States Fidelity and Guaranty Company. From a judgment for defendant the plaintiff appeals.

Affirmed.

Collins & Collins and Anderson, Parker, Crabill & Crumpacker, for appellant.

Kenefick & Kenefick and McInernys, Yeagley & McVicker, for appellee.

OPINION

REMY, J.

On June 9, 1908, the Lake Michigan Water Company, appellant herein desiring to improve its water supply system at Michigan City, Indiana, entered into a contract with the M. H. McGovern Company, hereinafter called the contractor, to make such improvement. The United States Fidelity and Guaranty Company, appellee, became surety on said contractor's bond for the faithful performance of the contract. This action is by appellant on said bond. The contractor and said guaranty company were each made defendants, but process was never served upon the former. The complaint was in two paragraphs, to each of which appellee successfully demurred for want of sufficient facts. Appellant refused to plead further, and judgment was rendered that appellant take nothing, and that appellee recover costs. The appeal is from this judgment, and the only errors assigned are based on the rulings of the court on the demurrers to the two paragraphs of complaint. Appellant in its oral argument expressly waived the error, if any, as to the court's ruling on the demurrer to the second paragraph of complaint, and rested its case on the alleged error of the court in sustaining appellee's demurrer to the first paragraph.

The first paragraph of complaint, hereinafter denominated the "complaint," is in substance as follows: Appellant on June 9, 1908, entered into a written agreement with the M. H. McGovern Company, by the terms of which agreement said contractor was to furnish the materials and install in Lake Michigan a crib and intake pipe, in consideration of $ 50,000 to be paid by appellant, for which amount the contractor was to, and did, give a bond to secure the faithful performance of said agreement, with appellee as surety, which bond is made the basis of the action. The written agreement of the contractor and the plans and specifications for the improvement are incorporated in the complaint, and provide that the contractor shall furnish all labor and material, and do all the work in accordance with said plans and specifications, which, as alleged, had been prepared by appellant's engineer. The plans and specifications, in substance, provide that all materials shall be furnished and labor performed to the satisfaction of said engineer, who was employed by appellant to design and supervise the construction of the work; that, in the event of discrepancy between the plans and specifications, the judgment of the engineer shall be final; that any doubt as to the meaning of the specifications shall be explained by the engineer; that, in the event of any leaks, the same shall be stopped to the satisfaction of the engineer; that any materials or work may be rejected by the engineer at any time before the final acceptance of the work; that the contractor is to afford the engineer proper assistance and facilities for the proper inspection of the work and materials; and that, "in case the rate of progress shall be in all respects satisfactory to appellant, monthly estimates will be made of the value of the work fully completed, constructed and in its proper place, and a voucher for eighty-five per cent. of the estimated value of the work so done during the previous month will be issued, the remaining fifteen per cent. to be reserved till the completion and acceptance of the whole work, at which time two-thirds of the said fifteen per cent. so reserved shall be paid to the contractor, and the remaining one-third retained for sixty days to insure the reconstruction by the contractor of defective work." It is further averred that the contractor negligently failed to perform the work in certain respects in accordance with the terms of the contract, and by reason thereof the intake pipe was rendered weak, leaky and unstable, and admitted sand and gravel into the pumps whereby said intake pipe became wholly useless to the damage of plaintiff in the sum of $ 50,000. It is further averred that the defects in the work complained of were latent, and of such a character that plaintiff did not discover and, in the exercise of reasonable care could not have discovered, until the time of the commencement of this action, which was approximately five years after the completion and acceptance of the work and the payment therefor. The usual clause in contracts of this character, providing for repair or maintenance for a definite period after the acceptance of the work, was omitted...