Travelers Indem. Co. v. National Gypsum Co.

• Decision Date: 17 February 1981
• Docket Number: No. 79-2375,79-2375
• Citation: 394 So.2d 481
• Parties: TRAVELERS INDEMNITY COMPANY, a Foreign Corporation, Appellant, v. NATIONAL GYPSUM COMPANY, a corporation, Appellee.
• Court: Florida District Court of Appeals

Page 481

394 So.2d 481

TRAVELERS INDEMNITY COMPANY, a Foreign Corporation, Appellant, v. NATIONAL GYPSUM COMPANY, a corporation, Appellee.

No. 79-2375.

District Court of Appeal of Florida, Third District.

Feb. 17, 1981.

Britton, Cohen, Kaufman, Benson and Schantz and J. Robert Olian, Miami, for appellee.

Before HENDRY, SCHWARTZ and NESBITT, JJ.

NESBITT, Judge.

The issue before us is whether a materialman may recover against a surety on a construction bond absent compliance with a condition precedent requiring written notice be given within ninety days after the claimant has furnished the materials for which the claim is made. We hold that the materialman's failure to comply with the notice provision of the bond precludes recovery and reverse the judgment of the trial court.

In 1977, appellee, National Gypsum Company (National Gypsum) filed a suit against Goodnow Company of Florida, Inc. (Goodnow), a subcontractor to whom it had supplied material. The amended complaint also named Travelers Indemnity Company (Travelers), the surety on the labor and material payment bond, as a defendant. A default was entered against Goodnow. Travelers then moved to dismiss the action against it for failure by National Gypsum to meet the notice provisions set forth in the bond and because the amended complaint "laid improper venue in that the doctrine of forum non conveniens (was) applicable ..." ¹ The trial court denied the motion to dismiss. Pleadings were filed and memoranda were submitted. Motions for summary judgment were subsequently filed by both Travelers and National Gypsum. The trial court granted National Gypsum's motion for summary judgment and this appeal ensued.

The notice provision of the bond provided as follows:

3. No suit or action shall be commenced hereunder by any claimant,

(a) Unless claimant, other than one having a direct contract with the Principal, shall have given written notice to any two of the following: The Principal, the Owner, or the Surety above named, within ninety (90) days after such claimant did or performed the last of the work or labor, or furnished the last of the materials for which said claim is made, stating with substantial accuracy the amount claimed and the name of the party to whom the materials were furnished, or for whom the work or labor was done or performed. Such notice shall be served by mailing the same by registered mail or certified mail, postage prepaid, in an envelop addressed to the Principal, Owner or Surety, at any place where an office is regularly maintained for the transaction of business, or served in any manner in which legal process may be served in the state in which the aforesaid project is located, save that such service need not be made by a public officer. (emphasis supplied).

Admittedly, National Gypsum, the materialman, failed to give the required notice. In W. F. Thompson Construction Co. v. Southeastern Palm Beach County Hospital District, 174 So.2d 410 (Fla.3d DCA), cert. denied, 180 So.2d 659 (Fla.1965), we construed an identical provision in a statutory bond given on a public project and upheld similar notice requirements. Parties enjoy the fundamental principle to make contracts and have them enforced without being re-written by the courts. Century Federal Savings and Loan Association v. Madorsky, 353 So.2d 868 (Fla. 1st DCA 1977), cert. denied, 359 So.2d 1217 (Fla.1978). It follows then, with greater force of reason, that parties in a purely common law bond are entitled to have such a plain and unambiguous notice provision enforced. Consequently, we align ourselves with Balboa Insurance Company v. Alpha Electric Supply, Inc., 373 So.2d 391 (Fla. 1st DCA 1979) and our own decision in W. F Thompson Construction Co. v. Southeastern Palm Beach County Hospital District, supra. Admittedly, we cannot harmonize this decision with our earlier and conflicting decision in Carnival Cruise Lines, Inc. v. Financial Indemnity Company, 347 So.2d 825 (Fla. 3d DCA 1977) and consequently we recede from that decision.

Carnival Cruise Lines, Inc. provided that a surety must show actual damages resulting from failure to give notice to relieve it from its obligation on the bond and that the failure to give the surety notice of a principal's default did not relieve the surety where such failure resulted in no loss. While it is true that sureties are in the business of writing bonds for profit, it is equally true that they may contract for notice as a condition precedent to trigger the responsibility on the bond. Notice provisions help sureties determine the amount of reserves they must keep on hand for potential claims. The amount of reserves required are one of the factors which determine the premium rates on the bond. If proper notice is given, as contracted for, the surety may have an opportunity to intervene on the project and attempt to utilize its business or legal remedies and thereby minimize potential losses and ultimately keep premium rates down. Forcing a surety to prove up actual damages may leave the surety in the difficult or impossible position of trying to demonstrate how much of the loss he could have prevented.

When businessmen or other parties enter into contracts, they bargain for a bundle of rights against which are imposed certain obligations. In this case, Travelers was obligated to keep certain reserves on hand and to pay those claims, if any, which arose as a result of the principal's default. In exchange, certain obligations were imposed on those seeking to benefit from the construction bond. Those included payment of a specific premium as well as written notice within ninety days. As we have stated, it is a long-standing principle that parties have the right to have their contracts enforced without being re-written by the courts. The rule enunciated in Carnival Cruise Lines would require the surety to maintain increased reserves for undetermined claims. This would ultimately increase the cost of procuring a bond and the resulting increased cost would assuredly be passed on to all consumers. Consequently, the better rule is the one which enforces the contract as written while leaving available to the subcontractor or materialman the right to seek reformation of bonds where otherwise permitted. National Gypsum's failure to meet the condition precedent, of giving written notice within ninety days as required under the bond, precludes recovery.

For the foregoing reasons, we find the trial court improvidently entered summary judgment in favor of National Gypsum and erroneously denied Travelers' cross-motion for summary judgment. Accordingly, we reverse the judgment appealed from with directions to grant Travelers' motion for summary judgment.

Reversed and remanded with directions.

HENDRY, Judge (dissenting).

I respectfully disagree with the holding of the majority.

The disposition of the surety's appeal turns upon the legal effect of a provision in the bond which requires, as a precondition of the surety's performance under the bond, that a party claiming a right of payment thereunder to notify, within a certain period, any two of the group comprised of the owner, the contractor, and the surety. It is agreed that such notice was not given.

Appellant urges that, by reference to Balboa Insurance Co. v. Alpha Electric Supply, Inc., 373 So.2d 391 (Fla. 1st DCA 1979), and W. F. Thompson Construction Co. v. Southeastern Palm Beach County Hospital District, 174 So.2d 410 (Fla. 3d DCA), cert. denied 180 So.2d 659 (Fla. 1965), we must find that the notice requirement was a condition precedent to appellant's performance, and that appellee's recovery under the bond must be refused. I cannot agree.

In Balboa, a supplier to a...