Maine Cent. R. Co. v. Nat'l. Sur. Co.

• Decision Date: 21 July 1915
• Citation: 113 Me. 465,94 A. 929
• Parties: MAINE CENT. R. CO. v. NATIONAL. SURETY CO. (two cases).
• Court: Maine Supreme Court

94 A. 929

113 Me. 465

MAINE CENT. R. CO.

v. NATIONAL. SURETY CO. (two cases).

Supreme Judicial Court of Maine.

July 21, 1915.

Report from Supreme Judicial Court, Cumberland County, at Law.

Action by the Maine Central Railroad Company against the National Surety Company. Reported on an agreed statement. Remanded, to be disposed of in accordance with stipulation and opinion.

Argued before SPEAR, CORNISH, KING, BIRD, HANSON, and PHILBROOK, JJ.

Symonds, Snow, Cook & Hutchinson, of Portland, for plaintiff. Hinckley & Hinckley, of Portland, for defendant.

KING, J. These actions are against the defendant as surety in the bonds given by a contractor to secure his contracts for construction work. They are reported on an agreed statement.

June 16, 1909, William J. McHale entered into two contracts with the plaintiff, one for the construction of masonry work, and the other for the doing of grading and formation work, in revising the line and grade and double-tracking a portion of the plaintiff's railroad. The defendant became the surety in each bond given by McHale to secure his performance of the respective contracts. Each bond contained the following condition:

"The condition of this obligation is that, if the party designated as contractor in the foregoing contract shall faithfully furnish and do everything required therein of said party, this obligation shall become of no effect; otherwise, shall continue in full force."

They contained no other provisions.

The masonry work was to be completed by November 1, 1909, and the other work by November 16, 1909. The following is the provision for payment in the grading contract:

"And the company agrees to pay the contractor at the rates aforesaid, monthly, on or about the 15th of each month, for all work done and materials furnished and delivered on the work, up to and including the last day of the preceding month, certified to by the company's chief engineer to be in accordance with this contract, less 15 per centum of such amount, which percentage shall be withheld by the company until the final completion and acceptance of the work, under the terms and agreements of this contract, when the percentage so retained, together with the balance due on the final estimate, shall be paid by the company upon the certificate of the company's chief engineer that the whole work provided for in this contract is completed and acceptably finished within the time specified."

The provision for payment in the masonry contract was to the same effect, providing for the payment on or about the 15th of each month—

"of eighty-five per cent. (85%) of the value of the work done during the preceding month, as shown by estimate of the chief engineer of the said railroad."

In each contract it was provided that in case the contractor made default in any of his undertakings, or failed to carry on the work with such efficiency as to insure its completion within the time provided, the company could take over the work and complete it at the contractor's expense; and in the grading contract it was provided that the company could take possession of the said work, or any part thereof—"with the tools, materials, plant, appliances, houses, machinery, and other appurtenances thereon, and hold the same as security for any or all damages or liabilities that may arise by reason of the nonfulfillment of the contract within the time herein stipulated, and furthermore may employ the said tools and other appurtenances, and such other means as said company may deem proper to complete the work at the expense of the contractor, and may deduct the costs of same from any payments then due or thereafter falling due to the contractor; and in case the contractor shall not complete the said work within the time herein specified, and the company shall, notwithstanding such failure, permit the contractor to proceed with and complete the said work as if such time had not elapsed, such permission shall not be deemed a waiver in any respect by the company of any forfeiture or liability for damages or expenses arising from such noncompletion of said work within the time specified, but such liability shall still continue in full force against the contractor as if such permission had not been granted. And it is further distinctly understood and agreed that 'time,' whenever mentioned in this agreement, is of the essence of this agreement."

Mr. McHale, the contractor, died September 3, 1909, while the work was in progress. Previous to his death, on August 25, 1909, an advance payment of $5,000 was made to him by the plaintiff without the knowledge of the surety. This payment was not due under the terms of the contracts until September 15, 1909. On the date when the payment was made no estimate of the work was made by the engineer, but, according to the agreed statement:

"It was believed that the work done was in excess of this amount, and the August estimate for the work done for that month showed this to be the fact."

As the work progressed, other advance payments were made to subcontractors before they were due, but only after estimates had been made showing that the amount of work done was in excess of the advance payments.

Administration on the estate of Mr. McHale was taken out in Penobscot county, Me., and his widow, Evelyn F. McHale, was appointed administratrix thereof, and she undertook to complete said contracts. On September 30, 1909, after previous notice to her as provided for in the contract, the plaintiff notified her:

"That the Maine Central Railroad Company does hereby take possession of the said work, with the tools, materials, plant, appliances, horses, machinery and other appurtenances thereon, and hold the same as security for any and all damages or liabilities that may arise by reason of the nonfulfillment of said contract, and will employ said tools and other appliances as it may be deemed proper to complete the work at your expense, and will deduct the cost of the same from any payments now due or hereafter falling due to you."

On November 16, 1909, the plaintiff notified the defendant that the work had not been completed in accordance with the terms of either contract and demanded damages to the full penalty of the bonds. Prior to November 16, 1909, the defendant had no knowledge of Mr. McHale's death, or of the failure of either the contractor or the administratrix to perform the contracts according to their terms. The plaintiff completed the work provided for in each contract, that under the masonry contract at a profit of $832.51, and that under the other contract at a loss of $6,782.44; but the work was not completed within the time specified in either contract, and it is not shown at what time it was finished.

In August, 1910, the estate of Mr. McHale was represented insolvent, and the plaintiff was named as a creditor to the amount of $6,840. In the warrant to the commissioners, however, it was not named as a creditor, and in March, 1911, it petitioned the probate court for an extension of time to file its claim, which was granted, and an additional warrant was issued to commissioners, in which the plaintiff was named as a creditor to the amount of $22,070.13. Its claim was disallowed by the commissioners, whereupon an appeal was taken to the Supreme Judicial Court, and an action was brought thereunder by the plaintiff, claiming therein to recover $6,782.44, its direct loss under the grading contract, and $16,120 as consequential damages resulting to it from the failure of the contractor to complete the work under the contracts within the times provided therefor, less the $832.51 profit on the masonry contract, leaving a balance as claimed of $22,070.13. The plaintiff also filed in Penobscot county, Me., a bill in equity against the administratrix. The administratrix on the other hand brought against the plaintiff an action of trover in the county of Suffolk, Mass., to recover the value of the plant and other property which the plaintiff had taken possession of as above stated, and she also brought, another action against it under the contracts. Subsequently a compromise was made between the plaintiff and the estate of McHale, by which the administratrix was to have judgment for $7,299.50 and costs in her action of trover, judgment was to be entered for the defendant, without costs, in her other action against the plaintiff, the bill in equity was to be dismissed, without costs, and the plaintiff was to take judgment for $5,950.13 in its suit pending in Maine on its claim against the estate. That compromise was carried out. The plaintiff paid the administratrix the said sum of $7,299.50 and costs, and retained possession of the plant. In the action pending in Maine on the plaintiff's claim the auditor, therein previously appointed in accordance with the compromise agreement and by consent, reported that the amount due the plaintiff was $5,950.13, whereupon judgment was rendered by said court for that amount and a certificate of the judgment was filed in the probate court. In his report the auditor states:

"The question of consequential damages was not considered by me."

It is stated in the agreed statement that:

"Owing to the fact that the contracts were not completed within the specified time, the Maine Central Railroad Company was compelled to continue to operate its trains over the old grade at Damascus between Etna and Hermon Pond, and in so doing incurred an additional operating cost, which cost is claimed in these cases as consequential damages."

It is stipulated that, if the court shall find that the defendant is liable, the cases shall be referred to an auditor to ascertain and report the amount of damages according to such rules as the law court shall determine.

1. The defendant complains that it was not notified by the plaintiff as to the progress of the work in the contractor's lifetime, or of his death and what was done thereafter in respect to the completion of...