Maryland Casualty Co. v. Board of Water Com'rs

• Decision Date: 06 August 1930
• Citation: 43 F.2d 418
• Parties: MARYLAND CASUALTY CO. v. BOARD OF WATER COM'RS OF CITY OF DUNKIRK, N. Y., et al.
• Court: U.S. District Court — Western District of New York

43 F.2d 418 (1930)

MARYLAND CASUALTY CO. v. BOARD OF WATER COM'RS OF CITY OF DUNKIRK, N. Y., et al.

District Court, W. D. New York.

August 6, 1930.

Gibbons & Pottle, of Buffalo (Frank Gibbons, of Buffalo, N. Y., George F. Cushwa and Richard Pausch, both of Baltimore, Md., and Maynard C. Schaus, of Buffalo, N. Y., of counsel), for complainant.

A. E. Nugent, of Dunkirk, N. Y., for defendant Board of Water Com'rs.

T. P. Heffernan, of Dunkirk, N. Y., for defendants H. Schriber Sheet Metal Co. and Norwood Engineering Co.

Joseph C. White, of Dunkirk, N. Y., for defendant Dunkirk Dock Corporation and others.

J. L. Hurlbert, of Dunkirk, N. Y. (Philip A. Laing, of Buffalo, N. Y., of counsel), for defendant Merchants' Nat. Bank and others.

Palmer & Rowe, of Dunkirk, N. Y. (M. L. Rowe, of Dunkirk, N. Y., of counsel), for defendants W. W. Phinney Plumbing & Heating Corporation and others.

Locke, Babcock, Hollister & Brown, of Buffalo, N. Y. (H. W. Huntington, of Buffalo, N. Y., of counsel), for defendant U. S. Cast Iron Pipe & Foundry Co.

William S. Stearns, of Fredonia, N. Y., for defendant Arthur P. O'Connell.

Stanley & Gidley, of Buffalo, N. Y. (Ellis H. Gidley and Arthur E. Otten, both of Buffalo, N. Y., of counsel), for defendant Warsaw Elevator Co.

Shire & Jellinek, of Buffalo, N. Y. (Joseph Swart, of Buffalo, N. Y., of counsel), for defendant Buffalo Steel Co.

Wilcox & Van Allen, of Buffalo, N. Y. (E. H. Farnham, of Buffalo, N. Y., of counsel), for defendant Buffalo House Wrecking & Salvage Co.

Elton D. Warner, of Dunkirk, N. Y. (Joseph C. White, of Dunkirk, N. Y., of counsel), for defendant American Locomotive Co.

Glenn W. Woodin, of Dunkirk, N. Y. (Joseph C. White, of Dunkirk, N. Y., of counsel), for defendant Dunkirk Lumber & Coal Co. and others.

Palmer, Garono, Houck & Wickser, of Buffalo, N. Y. (D. W. Haring, of Buffalo, N. Y., of counsel), for defendant Western New York Par-Lock Appliers Co.

ADLER, District Judge.

This is an action in equity in which the rights of all parties to the action are to be determined. The relationship of the parties and their various claims will be hereinafter set forth.

The board of water commissioners of the city of Dunkirk, N. Y., a municipal corporation, in the year 1925, engaged the J. N. Chester Engineers of Pittsburgh, Pa., to prepare plans and specifications for the erection of a filtration plant and clear water basin for the city of Dunkirk. The contracts for the project were awarded to the Loyd Contracting Company in 1926. Two contracts are concerned in this case — one for the filtration plant for $136,900; another for the clear water basin for $14,000. Bonds covering both of these contracts were written by the Maryland Casualty Company of Baltimore, Md., the plaintiff in this action. Some of the conditions of these bonds will be set forth when the liability of the surety is considered.

The Loyd Contracting Company began work under the contracts in 1926. When it applied to the Maryland Casualty Company to write the bonds, it assigned to the bonding company all of its interest in and to the moneys to be received upon the two contracts. Thereafter, in the fall of 1926, the Loyd Contracting Company executed another assignment of its interest in the moneys to be received under these two contracts to the Merchants' National Bank of Dunkirk, N. Y. From time to time while the work was under way the Loyd Contracting Company borrowed money on its notes from the Merchants' National Bank.

In July, 1927, the engineers in charge of the work for the board of water commissioners certified to them that the contracting company had failed to pay for labor and material and that the work was not progressing satisfactorily. Thereupon the contracting company and its surety were cited to make answer to the certificate of the engineers, and on July 28, 1927, proof was taken relative thereto. Thereafter the board of water commissioners adopted a resolution terminating the employment of the Loyd Contracting Company, taking possession of the property, and requesting the Maryland Casualty Company to proceed at once and complete the contract. Conferences were had with representatives of the casualty company, and in the latter part of August, 1927, the Maryland Casualty Company entered into a contract with the Pitt Construction Company for the completion of the work described in the two original contracts. The construction work was completed and accepted by the board of water commissioners in the summer of 1928. Between July, 1927, and September, 1927, many liens were filed with the board of water commissioners on account of labor and materials furnished to the Loyd Contracting Company and used in this work. All of these lienors are parties to this action. Their right to recover is to be determined herein. Another class of defendants are those who have not filed mechanics' liens but who claim to have a right of action against the Maryland Casualty Company by reason of the terms and conditions of the bonds. Their rights are also to be determined in this action.

When the Loyd contract was terminated, a small amount of material on the ground and not yet worked into the structure was turned over to the Maryland Casualty Company for the completion of the contract. At that time the larger contract was about 85 per cent. completed and the smaller contract was about 30 per cent. completed. The amount retained and unpaid by the board of water commissioners on both contracts at the time of the trial was about $46,000. The contract price in the contract between the Maryland Casualty Company and the Pitt Construction Company for the completion of the work was $50,750. Extra work, including additional excavation and filling, brought the cost of the work of completion according to the Pitt Company's estimate up to $65,000.

First. It is the contention of the Maryland Casualty Company that a new contract was made between it and the board of water commissioners following the termination of the Loyd contract, and that it did not complete the Loyd contract as its surety.

When the board of water commissioners had determined that the Loyd Company was not going to satisfactorily complete its contracts, it passed a resolution on July 28, 1927, and entered it on its minutes in the following language:

"Resolved, by this Board that the employment of the contractor, the Loyd Contracting Company, be and the same is hereby terminated, and further be it

"Resolved, that this Board take possession of the premises and all material, tools and appliances thereon and hold the same to be used by the person, corporation or company that shall finish the filtration plant according to the contract, and be it further

"Resolved, that the Maryland Casualty Company, the surety upon the bond of the Loyd Contracting Company be and they are hereby required to proceed at once and finish the contract of April 20, and August 12, 1926, of the Loyd Contracting Company which was guaranteed by them, and be it further

"Resolved, that all material, tools and appliances now on the job be turned over to the Maryland Casualty Company for the purpose of finishing the contract."

At the same meeting a resolution was entered on the minutes to the following effect:

"Resolved, that the Assistant Secretary wire the Maryland Casualty Company by night letter advising them of the action of the Board in regard to the Loyd contract, requiring an answer."

A further resolution was entered as follows:

"Resolved, that the Assistant Secretary send certified copy of the resolution adopted by the Board relative to the Loyd Contracting Company to the Maryland Casualty Company and the Loyd Contracting Company."

On August 17, 1927, a special meeting of the board of water commissioners was held at which a representative of the Maryland Casualty Company and an attorney of that company were present. At this meeting it was proposed by the attorney of the bonding company that the board of water commissioners enter into a contract with the Pitt Construction Company to complete the work. There was considerable discussion, and my conclusion from an examination of the minutes is that the board refused to enter into the contract with the Pitt Company, and that it was left to the bonding company to take such action with reference to the Pitt Company's completing the work as they chose to take.

A further meeting was held on August 25, 1927. At that meeting there were three representatives of the Maryland Casualty Company present. There was a long discussion, in which the representatives of the casualty company took part, which culminated in the passage of the following resolution.

"Whereas, the Maryland Casualty Company are completing the filtration plant which was left in an incompleted state by the Loyd Contracting Company at the time their employment was terminated, now, therefore, be it,

"Resolved, that the Board of Water Commissioners agree with the Maryland Casualty Company that they will pay for all work done by the Maryland Casualty Company in the completion of said filtration plant and clear water basin according to the engineers' estimate of work performed, retaining the fifteen per cent (15%) thereof until final completion; which fifteen per cent (15%) together with all retained percentages, will be due and payable thirty days (30) after the completion and acceptance of the filtration plant and clear water basin."

It appears from the evidence and exhibits in the case that, after the termination of the Loyd contracts, the work was completed by the Maryland Casualty Company in the manner and under the terms and conditions as prescribed in the original contracts made with the Loyd Company. The only question to be determined under this point is whether or not the Maryland Casualty Company, under the facts just set forth, was completing this work as the surety of the Loyd Company, or whether it made a new contract with the board of water...