South Carolina Public Service Commission v. Colonial Const. Co.

• Court: South Carolina Supreme Court
• Writing for the Court: GREGORY; LEWIS
• Citation: South Carolina Public Service Commission v. Colonial Const. Co., 266 S.E.2d 76, 274 S.C. 581 (S.C. 1980)
• Decision Date: 01 May 1980
• Docket Number: No. 21215,21215
• Parties: The SOUTH CAROLINA PUBLIC SERVICE COMMISSION; Guy Butler, Chairman, Fred A. Fuller, Jr., Abney Moss, J. Henry Stuckey and Henry G. Yonce, Commissioners, Respondents, v. COLONIAL CONSTRUCTION COMPANY, Gene E. Phillips d/b/a Phillips Construction Co. and James E. Gremillion, as liquidating trustees for Colonial Construction Co., and National Grange Mutual Insurance Company, of whom National Grange Mutual Insurance Company is Appellant.

Page 76

266 S.E.2d 76

274 S.C. 581

The SOUTH CAROLINA PUBLIC SERVICE COMMISSION; Guy Butler Chairman, Fred A. Fuller, Jr., Abney Moss, J Henry Stuckey and Henry G. Yonce Commissioners, Respondents, v. COLONIAL CONSTRUCTION COMPANY, Gene E. Phillips d/b/a Phillips Construction Co. and James E. Gremillion, as liquidating trustees for Colonial Construction Co., and National Grange Mutual Insurance Company, of whom National Grange Mutual Insurance Company is Appellant.

No. 21215.

Supreme Court of South Carolina.

May 1, 1980.

Thornwell F. Sowell, III, of Nelson, Mullins, Grier & Scarborough, Columbia, for appellant.

Robert T. Bockman and William E. Booth, III, Columbia, for respondents.

GREGORY, Justice:

This appeal is from an order of the circuit court declaring total forfeiture of a sewer utility bond filed with respondent South Carolina Public Service Commission. Appellant National Grange Mutual Insurance Company is surety. We affirm the declaration of forfeiture, reverse the amount forfeited and remand for entry of judgment consistent herewith.

The essential facts are not in dispute. Colonial Construction Company, Inc. (Colonial) owned and Phillips Construction Co. (Phillips) serviced the sewage treatment and disposal facility for Lakeview Manor Subdivision near Spartanburg, South Carolina. Pursuant to what is now codified as Section 58-5-720, Code of Laws of South Carolina (1976) ¹ a performance bond was filed with respondent naming Phillips principal and appellant surety. The effective dates of the bond extended coverage from August 31, 1970 until August 31, 1973.

Both Colonial and Phillips abandoned the project some time during the term of the bond, and consequently service and maintenance for the Lakeview Manor system came to a halt. An administrative order of respondent found that Colonial and Phillips had failed to provide "adequate and sufficient service . . . for an unreasonable length of time" and demanded forfeiture of the bond. See § 58-5-720.

Respondent then brought this action seeking a declaration of forfeiture and an order requiring appellant "to pay over . . . all or any portion of the bond declared forfeited." The lower court ordered the $10,000.00 bond forfeited in its entirety with interest on that sum from the date of respondent's administrative order. This appeal followed.

Appellant admits the terms of the bond were breached by Phillips' failure to adequately service and maintain the facility and accepts liability therefor to the extent of $1,760.00. This sum is not in dispute and represents the damages caused by Phillips' failure to adequately service and maintain the facility.

The gravamen of this appeal is the finding of the lower court that appellant is liable under the bond for not only the cost of maintenance and service to the existing facility, but also for the expense of installing improvements to the system. We conclude appellant is not liable for the cost of improvements, in this case mandated by administrative regulations promulgated subsequent to the execution of the bond, ² either under the terms of the bond or its authorizing statute, § 58-5-720.

A surety's obligation is contractual and cannot extend beyond the terms of the bond and the intent of the parties thereto. McKenzie v. City of Florence, 234 S.C. 428, 108 S.E.2d 825 (1959); National Loan & Exchange Bank v. Gustafson, 157 S.C. 221, 154 S.E. 167 (1930). The pertinent portion of Phillips' bond states:

WHEREAS, The said Principal has entered into an agreement with the obligee dated ______ to maintain sewer lagoon, and said agreement to become a part of this bond as if fully written herein. (emphasis added)

The agreement referred to in the bond contains the following language:

The servicer and the owner enter into this agreement that the servicer shall service said oxidization (sic) pond and existing sewage lines. . . . (emphasis added)

From the above-quoted language of the bond and agreement it is clear the parties intended to condition Phillips' performance upon the maintenance and servicing of the existing sewage treatment facilities at Lakeview Manor. Nowhere in the bond or the agreement are the terms "improvement", "expansion" or the like used. Where, as here, an agreement is incorporated into a bond so as to become a part thereof, we will read the two together and construe them as a whole to ascertain the intent of the parties. 12 Am.Jur.2d, Bonds, Section 27; 11 C.J.S. Bonds § 43.

While the language of the preamble to the agreement states that the facility is to be operated "in a manner satisfactory to the South Carolina Department of Health and the South Carolina Public Service Commission", this general expression does not warrant the result reached by the lower court. The express terms reciting the intention of the parties concerning maintenance to the system control over general language to prevent a more extensive operation of the bond than was intended. See 11 C.J.S. Bonds § 42. It is the terms of a performance bond which control the surety's liability. United States Fidelity and Guaranty Company v. Gulf Florida Development Corporation, Fla.App., 365 So.2d 748 (1978).

The lower court's order erroneously extends appellant's liability beyond the terms of the bond and the intent of the parties by conditioning performance upon the subsequently promulgated regulations. Se...