Pickens County v. National Surety Co.

• Decision Date: 15 June 1926
• Docket Number: No. 2479.,2479.
• Citation: 13 F.2d 758
• Parties: PICKENS COUNTY v. NATIONAL SURETY CO.
• Court: U.S. Court of Appeals — Fourth Circuit

13 F.2d 758 (1926)

PICKENS COUNTY v. NATIONAL SURETY CO.

No. 2479.

Circuit Court of Appeals, Fourth Circuit.

June 15, 1926.

E. M. Blythe and B. F. Martin, both of Greenville, S. C. (Martin & Blythe, of Greenville, S. C., and Craig & Keith and W. E. Findley, all of Pickens, S. C., on the brief), for plaintiff in error.

H. J. Haynsworth, of Greenville, S. C. (C. F. Haynsworth, of Greenville, S. C., on the brief), for defendant in error.

Before WADDILL and PARKER, Circuit Judges, and ERNEST F. COCHRAN, District Judge.

PARKER, Circuit Judge.

This action was instituted to recover on two bonds, in the sum of $8,500 and $28,590, respectively, executed by the National Surety Company, to guarantee the performance by J. B. Ross, Jr., of two contracts for road construction entered into by him with Pickens county, S. C. At the conclusion of the evidence the District Judge directed a verdict in favor of the defendant surety company, and the correctness of this ruling is the only point presented by the assignments of error. The county was the plaintiff in the court below, and the surety company was defendant, and they will be so designated in this opinion.

On January 5, 1923, Ross contracted with plaintiff to build two sections of highway from the town of Pickens to the North Carolina line, known as state highway projects Nos. 162-B and 164, and gave the two bonds sued on, with the defendant surety company as surety, for the faithful performance of the contracts. These contracts provided, among other things, that Ross should be paid 20 cents per cubic yard for common excavation, and 70 cents per cubic yard for solid rock excavation, and that he should complete the work within 240 working days. Ross began work under these contracts, but suspended work in January, 1924, and notified plaintiff that he would have to go into bankruptcy unless he was given an increase in the compensation allowed him for the work. A meeting was thereupon held in Columbia in February, 1924, between Ross and representatives of plaintiff and the state highway department, at which Ross submitted a proposal in writing that the entire excavation called for in the contracts be paid for at 40½ cents per cubic yard, including both common excavation and solid rock, that this revised price should apply to work already done, as well as future work, and that he be allowed an extension of time of 240 working days for the completion of the work under the contracts. The proposal stipulated that any increase coming due, under this revised arrangement, for work already done, should not be paid unless and until his forces on the two projects should be reorganized in a manner satisfactory to the county board and the state highway department. This proposed change in the contracts was approved in writing by the defendant surety company, and was submitted to the county board and approved by it March 29, 1924.

After the conference in February, Ross proceeded with the work under the contracts, and estimates thereof were prepared by the highway department as of March 20th, which were presented to the county board on April 4th and approved for payment. In these estimates, the amount due for excavation work was computed on the unclassified basis, in accordance with the amendment to the contracts, and the estimates included all of the work previously done, with credits for the amounts previously paid. The amount included as additional payment for work already done was $7,741.77. Ross was promptly paid the amount due under the estimates for current work, and was also paid the sum of $3,879.35, which was approximately one-half of the amount calculated as additional payment for work previously done. He continued with the work until May 31st, when he abandoned it and refused to proceed further under the contracts. Between March 29th and May 31st, plaintiff paid Ross, on account of road work, the sum of $16,560.39, of which amount the sum of $4,822.53 was paid on the May estimates, which were not payable until June 10th. After he refused to proceed further with the work, the county, after due notice to him and the defendant surety company, advertised for bids and let contracts for its completion. Under these contracts, it has been required to pay, over and above the amounts stipulated in the contracts with Ross, a sum considerably in excess of the amount of the bonds sued on.

The facts stated up to this point are practically undisputed. The dispute arises in connection with plaintiff's reasons for not paying to Ross the remaining $3,800 difference in work done prior to the modification of the contract, and Ross' reasons for abandoning the work on May 31st. Defendant contends that plaintiff breached its contract with Ross, in not paying him the $3,800 prior to May 31st, and that this default on the part of plaintiff rendered it impossible for Ross to proceed with the work, and justified him in refusing to proceed further. Plaintiff contends that the extra compensation for the work done prior to the change in contract was not to be paid unless and until Ross had organized his forces in a manner satisfactory to plaintiff and the state highway department, and that this was never done; that plaintiff's representatives agreed with Ross in February that, if the modification of the contract should be accepted, plaintiff would pay him one-half of the amount due for difference in work previously done, at the time of payment of the March estimates, so as to enable him to reorganize his forces, and would pay the remainder thereof in 60 days thereafter, if the forces had been properly reorganized; that the one-half due with the March estimates according to this arrangement was paid according to promise, and that the remainder was not paid, because Ross' forces were not properly reorganized; that, instead of Ross not being paid the amount due him, the May estimates were paid in advance of the time when they were payable, and that, at the time he quit work, he had received more than $1,000 in excess of the amount due him under the contract, including the $3,800 in dispute; that Ross was behind with his work, and was unable to finish it in the time specified in the contracts; that he had allowed his forces to run down, and was doing the work in such manner as clearly to indicate that his sole purpose was to get the maximum under the monthly estimates; that he had no intention of finishing the jobs; and that plaintiff's refusal to pay him the $3,800 demanded was not his real reason for abandoning the work, but a mere pretext given for abandoning the contracts, which he intended to abandon at all events.

In reply to these contentions of plaintiff, defendant contends that by approving for payment the March estimates, including the difference in work already done, plaintiff bound itself to make immediate payment of the entire $7,741.77, and estopped itself from disputing the proper organization of Ross' forces, and that, if in fact the forces were not properly reorganized, the payment of the $3,879.35 in advance of the proper organization of the forces was such a modification of the terms of the contract as would release it from liability under the bonds. Two questions are presented, therefore, for our determination: (1) Whether the evidence conclusively shows such a breach of the contracts on the part of plaintiff as justified Ross in rescinding them or abandoning further performance...