Maryland Casualty Co. v. City of South Norfolk, 3239.

• Decision Date: 12 January 1932
• Docket Number: No. 3239.,3239.
• Citation: 54 F.2d 1032
• Parties: MARYLAND CASUALTY CO. v. CITY OF SOUTH NORFOLK et al.
• Court: U.S. Court of Appeals — Fourth Circuit

54 F.2d 1032 (1932)

MARYLAND CASUALTY CO. v. CITY OF SOUTH NORFOLK et al.

No. 3239.

Circuit Court of Appeals, Fourth Circuit.

January 12, 1932.

J. W. Eggleston and Braden Vandeventer, both of Norfolk, Va. (Vandeventer, Eggleston & Black, of Norfolk, Va., and George W. Dexter, of Baltimore, Md., on the brief), for appellant.

Tazewell Taylor, Jr., and E. A. Bilisoly, both of Norfolk, Va. (Roland Thorp and James G. Martin, both of Norfolk, Va., on the brief), for appellees.

Before PARKER, NORTHCOTT, and SOPER, Circuit Judges.

PARKER, Circuit Judge.

This is the second appeal in a suit instituted in the court below to determine the liability of a surety under a contractor's bond. Hudson & Scruggs, Inc., was the contractor, the city of South Norfolk, Va., was the obligee, and the Maryland Casualty Company was the surety. We shall refer to them hereafter as "the contractor," "the city," and "the surety," respectively. The judge below referred the cause to a special master, who filed a report determining the amounts of the claims asserted by various materialmen under the bond. He reported that two general questions affecting the rights of all claimants were whether the surety was liable under the bond to subcontractors for labor and materials furnished, and whether, if liable thereunder, the liability extended to labor and materials furnished for work done under a supplemental contract claimed to be a mere extension of the original contract. He was of opinion that, if liability existed, it extended to labor and materials furnished under the supplemental, as well as under the original, contract, but that there was no liability under the bond with respect to either.

The case was heard by the District Judge upon exceptions to the report of the special master, and he held that there was no liability under the bond for materials furnished the contractor, and entered a decree in favor of the surety on that ground. The materialmen thereupon appealed to this court; and we reversed the decree below, holding that the bond was intended to protect, and did protect, laborers and materialmen. This was the only question decided on the former appeal. Daughtry et al. v. Maryland Casualty Co. (C. C. A. 4th) 48 F. (2d) 786.

Upon the receipt of the mandate from this court, the court below proceeded to pass upon and allow the claims of the defendants and interveners, and allowed the claims of those who had furnished materials to the contractor for the completion of the supplemental, as well as for the completion of the original, contract. From a decree in favor of these materialmen, the surety has appealed; and the principal question presented by its assignments of error is with respect to its liability for materials furnished the contractor under the supplemental contract. We shall come at once, therefore, to the consideration of that question.

The contract between the contractor and the city was entered into on October 22, 1928; and bond in the sum of $75,000 guaranteeing its performance and the payment of laborers and materialmen was executed by the surety at the same time. The contract was based on a proposal to do paving work at certain unit prices, and bound the contractor to do the work and furnish the materials necessary to construct and complete ready for use the street improvements of the city of South Norfolk in accordance with the specifications attached, the drawings, instructions to bidders, the proposal, and such detail directions, drawings, etc., as might be given by the engineer from time to time during the construction. It was understood and agreed between the contractor and the city that the amount to be expended for paving at the unit prices was approximately $150,000, and this fact was communicated to the surety. The amount of the bond was fixed at $75,000, because this was 50 per cent. of the estimated contract price; and a premium of $1,500 was collected from the contractor, same being 1 per cent. of that price. While the streets to be paved were not designated at the time the contract was executed, it was understood in a general way where the work contracted for was to be done; and within two or three weeks thereafter the city engineer determined upon a list of the streets which were to be paved under the contract "with question marks on two or three streets," and notified the contractor of his determination. Following this, there were only minor changes in the work as determined, "cutting off a block here and a block there, and adding one here," to use the language of the engineer.

The contract provided that work should be commenced not later than November 1, 1928, and completed not later than April 1, 1929, with provision for extension of time in case of interruption of work or delivery of materials by the council of the city, or in case the council in its discretion should agree to extend the time. Work was duly commenced as provided in the contract, and was continued until, on April 1, 1929, it was practically completed. Of the work laid out for the contemplated expenditure of the $150,000 under the contract, that which remained uncompleted amounted to less than $6,000.

On April 3, 1929, two days after the time for the completion of the work under the original contract, the council of the city, without in terms extending that time, passed a resolution directing the city engineer to instruct the contractor to proceed with the paving of thirteen additional streets at the unit prices prevailing under the original contract and at an estimated total cost of $42,551. On April 9th the city engineer directed the contractor to pave these streets, stating that the work would be executed as "an extension" of the contract then in force between the contractor and the city. On April 10th, in a letter to the city engineer, the contractor accepted the additional work, and agreed to proceed with its construction. No additional bond was given by the contractor, however, and none was required by the city. No notice was given the surety of the additional contract, and nothing was said by any one to indicate that the bond executed by it to guarantee the performance of the original contract was expected to cover this supplemental contract or "extension." On the contrary, one of the officers of the contractor stated to the agent of the surety, some time afterwards, that he was doing some additional work for the city which was not a part of the contract and on which he did not propose to pay a premium.

The contention of the appellees is that the agreement for the additional paving was not a supplemental or additional contract, but merely an agreement for additional work provided for under article 8 of the existing contract, and that same is protected by the bond securing the performance of that contract just as is the work originally contemplated. Article 8 of the contract is as follows:

"The council, through the engineer, shall have the right to make any alterations in the plans and quantity of the work or materials herein contemplated, and it is expressly agreed and understood that such alterations, additions, modifications, or omissions, shall not in any way violate this contract, and the contractor hereby agrees not to claim or bring suit for any damage, whether for loss of profit or otherwise. Whenever, during the progress of the work, any additional work or material, or changes or modifications in the work or materials contracted for, are agreed upon between the said council and the contractor, such additional work or materials, alterations or modifications shall be considered and treated as though originally contracted for, and shall be upon and subject to all terms, conditions, and provisions of the original contract."

With this article should be considered article 10, which provides: "The council may require the contractor to furnish additional materials, and to do additional work not provided in the contract or in the specifications, but which may be found necessary to the proper prosecution and completion of the work embraced in this contract, at prices to be fixed by the prices named in the proposal, or on material and force accounts, with 15 per cent. added for profit. But no work other than that included in the contract shall be done, and no additional material shall be furnished by the contractor without a written order from the engineer. In the absence of such written order from the engineer, the contractor shall not be entitled to payment for such additional work. Bills for extra work shall be filed with the council within ten (10) days after work is completed."

The contention of appellees is in reality twofold. They contend, in the first place, that no definite work was specified in the contract as originally executed, this matter being left to specification by the city engineer, that the specification in his letter of April 9th is as much a specification under the original contract as any of his prior specifications of work to be done, and that the obligation of the contractor to perform same is protected by the bond of the surety in the same way. They contend, in the second place, that, even if the work to be done be regarded as agreed upon at the time of the execution of the original contract, article 8 authorizes additions to the work of the character here involved, and that, when such additions are agreed upon, they are protected by the bond which guarantees the performance of the contract. We do not think that either of these contentions can be sustained.

As to the first, it is true that the written contract does not specify the streets to be paved and that the bids and specifications to which it refers contain mere approximate quantities of work to be done and provide for mere unit prices. We do not think, however, that the whole matter was left as vague as the argument of counsel indicates. If it were, the question would properly arise whether the contract were not void for...