Peachtree Roxboro Corp. v. U.S. Cas. Co., 38142
| Decision Date | 09 March 1960 |
| Docket Number | No. 2,No. 38142,38142,2 |
| Parties | PEACHTREE ROXBORO CORPORATION v. UNITED STATES CASUALTY COMPANY et al |
| Court | Georgia Court of Appeals |
Syllabus by the Court
The court committed reversible errors for the reasons set out in the body of the opinion.
This is an appeal from orders of the Civil Court of Fulton County sustaining general demurrers and certain special demurrers to the petition of Peachtree Roxboro Corporation, hereinafter called the plaintiff. We shall hereinafter designate United States Casualty Company as the defendant casualty company and Ivey Brothers, Construction Company, Inc., as the defendant construction company.
A simple statement of the facts is that on August 7, 1958, the plaintiff brought a petition in two counts against the defendants. The petition, which was later twice amended, adding two additional counts, alleges in each count that on August 7, 1956, the defendant construction company entered into a written agreement with the plaintiff for the construction of an apartment building and that the defendant construction company contracted to furnish all the materials and perform the work in the construction of the building for a price not to exceed $400,000.
Counts I and II alleged that the defendant construction company breached the contract in that it did not complete the building for $400,000, which the plaintiff paid, but that in addition the plaintiff was required to pay and did pay $165,244.09 to subcontractors, laborers and materialmen who furnished labor and material to the defendant construction company, in the construction of the building in order to prevent liens being filed.
Count I alleges that the defendant casualty company, as surety, along with the defendant construction company, as principal, executed in favor of the plaintiff, as obligee, a 'performance bond' which is attached as an exhibit. The performance bond is conditioned upon the faithful performance of the contract by the defendant construction company and provides that whenever the defendant construction company should be, and declared by the plaintiff to be, in default under the contract, the defendant casualty company may 'promptly remedy the default' or shall promptly complete the contract or arrange for others to complete the contract for the plaintiff.
Count II alleges that the defendant casualty company, as surety, along with the defendant construction company, as principal, executed in favor of the plaintiff, as obligee, a 'Labor and Material Payment Bond' which is attached as an exhibit. The labor and material payment bond is conditioned on the prompt payment by the defendant construction company to all claimants for all labor and material used or reasonably required for use in performance of the contract. A claimant, under the bond, must have a direct contract with the defendant construction company or one of its subcontractors. The bond gives the claimants the right to sue if they have not been paid in full within 90 days of the furnishing by them of their last labor or material, providing any two of the principals, surety and obligee are given written notice of the claim, by registered mail, within such 90 day period. It is alleged that these conditions were fulfilled, that the plaintiff paid such claimants $165,244.09 to prevent the filing of liens, and that, therefore, the plaintiff is subrogated to the rights of such claimants under the labor and material payment bond.
Count III is an action on the labor and material payment bond. It is alleged that the plaintiff had a direct contractual relationship with the defendant construction company to furnish, and did furnish to such defendant, labor and material used or reasonably required for use in the performance of the contract, and that such defendant has not paid the plaintiff for labor and material thus furnished of a value of at least $165,244.09. Count III further alleges that all of such labor and material were furnished at least 90 days prior to the filing of this action and that the plaintiff gave written notice of its claim to the principal and owner of the bond.
Count IV is an action on the performance bond, and sets forth the following allegations: Before the work was commenced the plaintiff and the defendant construction company mutually agreed that the plaintiff, as agent for the defendant construction company, and its direction, would contract with subcontractors for the performance of the work on the building, and that the plaintiff would deposit into a construction account such sums not to exceed $400,000 as the defendant construction company would direct, in lieu of making payments under the contract to such defendant construction company, and would cause to be paid from such account, bills of laborers, materialmen and subcontractors incurred in the construction of the building. The defendant casualty company knew of their arrangement, and acquiesced therein and assented thereto, and has waived its right to rely upon, and is estopped from relying upon, a strict performance of the terms of the original contract. After $400,000 was so deposited by the plaintiff, and so paid out to subcontractors, laborers and materialmen at the direction of the defendant construction company, the building was not completed according to the contract, and the plaintiff was required to, and did enter into contracts with subcontractors, and hired laborers and furnished material, and paid $165,244.09 therefor, in order to complete the building. The defendant casualty company had notice of such breach by the defendant construction company and has not performed any of its obligations under the performance bond. The reasonable cost of completing the building after the defendant construction company so defaulted, was $165,244.09, and had such defendant completed the building according to the contract, its market value would have been at least $565,244.09.
In each of the counts it is alleged that the bond sued on was executed by the defendant casualty company in consideration of a premium paid by the plaintiff. In each count it is alleged that the plaintiff has performed all of its obligations under the contract.
In each count it is alleged that on April 2, 1958, the plaintiff made a written claim upon both the defendants and on May 14, 1958, a written demand upon the defendant casualty company, for the payment of $165,244.09, which claim and demand the defendants have ignored and have failed and refused to honor, and that such refusal by the defendant casualty company was in bad faith.
In each count the plaintiff prays for recovery of $165,244.09, plus interest and costs of court, against the defendants, jointly and severally, and of $41,311.03, plus reasonable attorney's fees, against the defendant casualty company. In addition to sustaining the general demurrers of the defendant casualty company to Counts I, II and III, and an oral motion of the defendant casualty company to dismiss Count IV, and dismission all of the counts, the trial court sustained grounds 4 and 5 of the defendant casualty company's 'additional demurrers', filed on December 17, 1958, the latter two being special demurrers directed to paragraphs 4 and 5 of Count III and overruled certain of the plaintiff's special demurrers to the answers of the defendant casualty company. It is on these judgments of the trial court that the case is here for review.
Moise, Post & Gardner, Allen Post, J. William Gibson, Albert G. Norman, Jr., Atlanta, for plaintiff in error.
Nall, Miller, Cadenhead & Dennis, Robert E. Hicks, Alex McLennan, James W. Dorsey, Atlanta, for defendant in error.
As has been stated herein above, Count I of the petition alleges that the defendant construction company agreed, by contract with the plaintiff, to build for the plaintiff a building for a stipulated price, and to furnish all labor and materials for the building of the same, and that after the plaintiff had paid to such principal the amount due under the terms of the contract, the plaintiff was required to pay, and did pay $165,244.09 to subcontractors, laborers and materialmen who furnished material and performed work on the construction of the building, in order to prevent the filing of liens on the building.
On page 2 of the performance bond it is provided that the defendant casualty company, as surety, on default of the...
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