School District No. 3 of Ford County v. Delano
| Decision Date | 06 November 1915 |
| Docket Number | 19,515 |
| Court | Kansas Supreme Court |
| Parties | SCHOOL DISTRICT NO. 3 OF FORD COUNTY, Appellee, v. C. W. DELANO et al. (THE UNITED STATES FIDELITY & GUARANTY COMPANY OF BALTIMORE, MARYLAND, Appellant) |
Decided July, 1915.
Appeal from Ford district court; GORDON L. FINLEY, judge.
Judgment affirmed.
SYLLABUS BY THE COURT.
1. BUILDING CONTRACT--Indemnity Bond--Withholding Final Payment--Terms of Bond. A guaranty company insuring the performance of a building contract for profit is not entitled to insist upon the withholding of the final payment, or that a percentage of the contract price shall be retained until the completion of the building, unless it is specifically provided for in the contract with the guaranty company.
2. SAME--Material Damage Must be Shown. In any event, such company has no right to complain of the time and manner in which payments are made by the owner unless it has been damaged in a material way by a departure from the provisions of the contract and of the obligation which it assumed.
3. SAME--Alterations in Plans--Guarantor Not Released. The guaranty company is not entitled to a release from its obligation because of alterations in the plans and specifications which are not unreasonable, where the contract specifically provides that alterations may be made.
4. SAME--Default of Contractor--Liability of Guaranty Company. The guaranty company is liable for the principal debt which arises from the nonperformance of the contract to the amount of the penalty named in its obligation, and in addition to that it may be held for interest on such debt from the time it should have been paid, although the amount of the principal and interest should exceed the penalty of the bond.
5. SAME--Liquidated Damages. Where the contractor agrees to become liable for liquidated damages at a certain rate per day for failure to complete the building at a fixed time, and he fails to finish it at the time agreed upon, and also abandons the work before completion, and the guaranty company does not, upon notice, complete the building itself, it devolves upon the owner to do so, and to commence the work within a reasonable time after the default and abandonment, and if he does so and prosecutes it with reasonable diligence to completion, he is entitled to liquidated damages from the time stipulated for completion until the building is finished, but he can not enhance his damages by unreasonable delay in taking up the work of completion or in carrying it on.
6. SAME--Architect's Estimate--Not Binding on School District. An indefinite and rough estimate by the architect of the cost of completing the abandoned work, made in a letter addressed to the guaranty company, which was not accepted or acted upon by it, is not conclusive on the owner as to the extent of recovery.
7. SAME--Passion or Prejudice of Court Not Shown. The evidence does not disclose that the court was actuated by passion or prejudice in making the findings herein on which its judgment was based.
W. G. Fairchild, John S. Simmons, and H. S. Lewis, all of Hutchinson, for the appellant.
L. A. Madison, and Carl Van Riper, both of Dodge City, for the appellee.
This was an action brought by School District No. 3 of Ford county against The United States Fidelity and Guaranty Company of Baltimore, Maryland, and C. W. DeLano to recover for the failure of DeLano to complete a contract for the erection of a schoolhouse. On June 25, 1909, DeLano contracted with the board of education to furnish the necessary labor and material and complete by December 15, 1909, an eight-room school building in Spearville for the sum of $ 15,000 upon the condition that he would pay $ 5 a day as liquidated damages if the building should not be completed within the agreed time, and the guaranty company gave bond in the sum of $ 5000 conditioned upon the faithful performance of the contract. It was an ordinary building contract and provided for the payment of ninety per cent of the contract price in installments upon estimates made by the architect and general superintendent. It also provided that work mentioned or shown in either the specifications or plans only should be considered as if in both. Provision was also made for additions or deductions and for alterations deemed to be proper or necessary. DeLano entered upon the work. He was paid, upon the architect's estimates, the sum of $ 12,595.73 and $ 1458.73 additional was paid by the board to claimants upon DeLano's orders. The time for completion of the building was extended by agreement to April 1, 1910, and notice of the extension was given the guaranty company, but in a letter dated December 21, 1909, the company advised that such a notice was unnecessary. DeLano continued work upon the school building until July 1, 1910, when he abandoned the work, locked the door and turned the key over to a member of the school board. The school board notified the guaranty company of DeLano's abandonment of the work when they learned that he was not coming back, and on October 6, 1910, attorneys for the board wrote the company in detail giving an estimate that the cost of completing the building would be from $ 1500 to $ 2000 and advising of a mechanic's lien of nearly $ 2000. The company took no steps to complete the building, and in fact made no response to the notices of the contractor's default, and the board engaged the architect to get some one to oversee the completion of the building. Work was not begun by the board until November 21, 1910, and it was finally completed on February 1, 1911. The case was tried without a jury and the court found the total sum due the school district to be $ 6379.84, including $ 1594.35 for liquidated damages for the delay, and rendered judgment against DeLano for that sum and against the guaranty company for $ 5868.08. The company appeals.
The defendant asks to be released from liability upon its bond because more than ninety per cent of the work done and material furnished had been paid to the contractor as the work progressed. The only provisions in the contract respecting the time and manner of payment were that ninety per cent of the estimates made by the architect should be paid to the contractor on or about every thirty days and all extras and the contract price were to be paid within ten days after the contract was fulfilled and accepted. It appears that payments were not made directly to the contractor in excess of ninety per cent of the estimates of the architect, but the board did pay legal claims for work done and material furnished in the erection of the building to the extent of $ 1458.73, which added to that paid to the contractor made a sum in excess of ninety per cent of the estimates. The stipulation requiring the owner to pay ninety per cent of the estimates as the building progressed is available to the surety where it is specifically provided for in the bond given by the surety. The contract did not stipulate for the retention of any part of the contract price until the building was completed and accepted, and there was no provision in the bond given by the surety company which specifically provided that a percentage of the estimates should be retained by the owner until the contract was carried out. As the company was insuring for profit it was not entitled to insist on the withholding of a final payment or that a particular percentage of the contract price should be retained since it was not specifically provided for in the bond which it gave. (The Y. M. C. A. v. Ritter, 90 Kan. 332, 133 P. 894.) Aside from this consideration it appears that the claims paid by the board to others than the contractor were for material furnished and work done in the erection of the building. They were reasonable and proper charges which had to be paid and which might have become liens upon the building if payment had not been made. Being valid claims it was immaterial to the company whether they were paid when due or withheld until the end, as the company had obligated itself to the owner to pay all legal...
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