State Highway Administration v. Transamerica Ins. Co.
Decision Date | 08 December 1976 |
Docket Number | No. 76,76 |
Citation | 278 Md. 690,367 A.2d 509 |
Parties | STATE HIGHWAY ADMINISTRATION v. TRANSAMERICA INSURANCE COMPANY et al. |
Court | Maryland Court of Appeals |
Paul W. Barnett, Cumberland (Francis B. Burch, Atty. Gen., and Nolan H. Rogers, Asst. Atty. Gen., Baltimore, and Charles C. Grice, Spec. Atty., Hagerstown, on the brief), for appellant.
Howard G. Goldberg, Baltimore (Wm. B. Somerville and Smith, Somerville & Case, Baltimore, on the brief), for Transamerica Ins. Co. and by Roberts S. Paye, Cumberland (Geppert, McMullen & Paye, Cumberland, on the brief), for E. C. Womack, Inc.
Argued before SINGLEY, SMITH, DIGGES, LEVINE, ELDRIDGE and ORTH, JJ.
This appeal stems from an action at law instituted in the circuit Court for Allegany County on 29 October 1971 by the State of Maryland against E. C. Womack, Inc. (Womack) and Transamerica Insurance Company (Transamerica). On 26 April 1967 the State entered into a contract with Womack for the construction of approximately four miles of the Cumberland Thruway, Maryland Route 48. Womack furnished a performance bond, sometimes called a contract bond, with Transamerica as surety. The suit was predicated upon actions of Womack in disposing of waste materials while it was engaged in the construction of the road. Womack had default in its performance of the contract in November 1968 when it went into receivership, and Transamerica, as required by the performance bond, had completed the job. The State's declaration sought damages resulting from Womack's negligence in disposing of the waste and from his breach of contract with respect thereto. Transamerica filed a counterclaim against the State for the unpaid contract balance which the State had retained. 1 The case went to trial on 15 July 1975. The court filed an opinion on 19 November 1975, rendering a verdict in favor of Transamerica and against the State with damages in the amount of $283,373.97 and interest and a verdict in favor of the State against Womack with damages in the amount of $142,818.33 and interest. Judgments absolute were entered on 2 February 1976. The State noted an appeal to the Court of Special Appeals. 2 We granted writ of certiorari before decision by that court.
The State presents four questions on appeal. Verbatim they read:
'1. Was the Trial Court an error in its determination that the surety, Transamerica Insurance Company, was released from liability for negligent acts of the principal, E. C. Womack, Inc.?
2. Was the Trial Court in error in its determination that the surety, Transamerica Insurance Company, was released from liability for the breach of contract of the principal, E. C. Womack, Inc.?
3. Was the Trial Court in error in its determination of the amount of compensatory damages, when it eliminated the construction costs of the section of the relocated drainage system from the west side of U.S. Route 220 to the Potomac River?
4. Was the Trial Court in error in its computation of damages, when it failed to include the internal engineering and design costs incurred by the State of Maryland?'
In the opinion accompanying the verdicts, the trial judge, in material part, accurately recounted the circumstances surrounding two wasting operations of Womack, one on a right-of-way of the State and the other on private property. With respect to the State's right-of-way, Womack requested permission to waste excess fill thereon, and its request was granted upon certain conditions. Womack completed this operation in accordance with the permission given and in full compliance with the conditions imposed. This operation demonstrated, the trial judge opined, the right method to be used to dispose of waste material:
No problems whatsoever arose from the wasting area on the State's right-of-way. Clearly, this operation had no adverse effect. There was no wash out, and the drainage system was no affected.
This was not so with respect to the wasting operation on the private property. It differed both in method and result. The trial judge observed that it demonstrated the wrong way to dispose of waste material. He described what was done:
The court expounded on this:
The landslide or washout of 14 July 1968 occurred during a heavy rain. '(P) art of the waste material placed (on the Liller property by Womack) washed down the hillside, and onto U.S. Route 220, making the natural ravine useless and causing considerable damage to property owners located at the foot of the hill.' The State cleaned up the debris deposited on Route 220 by the landslide and ultimately constructed an alternate area-wide drainage system because it alleged the landslide had rendered the natural drainage ravine useless. It sought, in the action instituted, to recover the costs of this work, and based the action with respect to Transamerica on the performance bond, also known as the contract bond. It declared: 'The terms of the contract bond make Transamerica responsible as surety for any damage arising out of the negligence of . . . Womack or for any expense incurred through Womack's failure to complete the work as specified.' 3Questions (1) and (2)
Code (1957, 1964 Repl.Vol.) Art. 89B, § 24 (see Acts 1975, ch. 566), concerning competitive bidding for the construction of a State highway, included the requirement that At the time Womack entered into the contract with the State, Code (1957, 1964 Repl.Vol.) Art. 90, § 11(a) 4 provided that before any contract exceeding $5,000 for the construction of any public work is awarded to any person, he shall furnish the State two bonds which shall become binding upon the award of the contract. The bonds were '(1) A performance bond executed by a surety company authorized to do business in this State satisfactory to the public body awarding the contract, and in such amount as it shall deem adequate, for the protection of the public body' and Womack furnished such a performance bond and a payment bond. It also obtained insurance coverage as shown by a certificate offered into evidence by Transamerica and included in the joint record extract appended to the State's brief. Liberty Mutual Insurance Company certified that Womack was insured by it under a comprehensive general liability policy in the amount of $1,000,000 for each of bodily injury liability and property damage liability with respect to the construction contract. 5
' The purpose of the (payment) bond, based on the statute, is to protect subcontractors and materialmen on State or other public projects where they have no lien on the work done.' Montgomery County v. Glossman, 245 Md. 192, 201, 225 A.2d 448, 453-454 (1967); Hamilton v. Board of Education, 233 Md. 196, 200, 195 A.2d 710, 712 (1963). The purpose of the performance bond, in the words of the statute, is 'for the protection of the public body', in this case the State. Its statutory object is to assure the construction and completion of the work contracted for. That is, the purpose of the performance bond, as its name implies, is to secure to the State that performance of the contract for the construction of the public work. The purpose of the liability insurance policy was to protect Womack itself against loss from...
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