United States Fidelity & Guaranty Co. v. Citizens' Building & Improvment Co.

• Decision Date: 05 February 1917
• Docket Number: 8560.
• Parties: UNITED STATES FIDELITY & GUARANTY CO. v. CITIZENS' BUILDING & IMPROVEMENT CO.
• Court: Colorado Supreme Court

163 P. 281

62 Colo. 440

UNITED STATES FIDELITY & GUARANTY CO. v. CITIZENS' BUILDING & IMPROVEMENT CO.

No. 8560.

Supreme Court of Colorado

February 5, 1917

Error to District Court, Garfield County; John T. Shumate, Judge.

Action by the Citizens' Building & Improvement Company against United States Fidelity & Guaranty Company. Judgment for the plaintiff, and defendant brings error. Reversed and remanded.

Gillette & Clark, of Denver, for plaintiff in error.

J. W Bell, of Glenwood Springs, and H. B. Babb, of Denver, for defendant in error.

GARRIGUES J.

Action against the United States Fidelity & Guaranty Company defendant below, on a building contractor's bond to recover damages alleged to have been sustained through the failure of Matthews, the contractor, to comply with the terms of his contract in the construction and completion of a building. The case was tried to the court, and resulted in a judgment for plaintiff in the sum of $7,705.79.

January 13, 1913, Matthews entered into a written contract with the Citizens' Building & Improvement Company plaintiff below, hereinafter referred to as the owner, in which he agreed, as the principal contractor, to furnish the materials and perform all the work and labor for the erection and completion, according to plans and specifications, of a three-story and basement commercial building in Glenwood Springs, on or before September 1, 1913, for the sum of $32,141. The building was finished November 14, 1913; but there were unsettled accounts of the contractor at that time for labor and materials furnished on the building aggregating $7,350.33, which plaintiff was obliged to and did pay December 31, 1913.

The building agreement, among other things, provides that the contract price should be paid by the owner as follows: Eighty-five per cent. of the architect's estimates of all labor and materials on the ground and inwrought in the building the first of each and every month following the date of the contract; that before receiving any payment, the contractor shall exhibit vouchers, releases of lien right, or receipts, showing that all his bills are being paid as the work progresses; that final payment shall be made within 30 days after the completion of the work included in the contract; that if at any time there shall be evidence of any lien or claim for which, if established, the owner of the premises might become liable, and which is chargeable to the contractor, the owner shall have the right to retain, out of any payment then due or thereafter to become due, an amount sufficient to completely indemnify it against such lien or claims; that no certificate given or payment made under the contract, except the final certificate or payment, shall be conclusive evidence of the performance of the contract, either in whole or in part, and that the contractor shall furnish a good and satisfactory bond in the full amount of the contract price. Such a bond was executed January 22, 1913, and among other things, it recites that Matthews has entered into a contract with the building company, dated January 13, 1913, whereby he agrees to construct for it a building in Glenwood Springs, which contract, by reference, is made a part of the bond and a copy of which is thereto annexed. The conditions of the bond are:

'That if the said principal shall well and truly perform and fulfill all and every the covenants, conditions, stipulations and agreements in said contract mentioned to be performed and fulfilled, and shall keep the said obligee harmless and indemnified from and against all and every claim, demand, judgment, lien, cost and fee of every description incurred in suit or otherwise against the said obligee, growing out of or incurred in, the prosecution of said work according to the terms of the said contract, and shall repay the said obligee all sums of money which the said obligee may pay to other persons on account of work and labor done or materials furnished on or for said contract, and if the said principal shall pay to the said obligee all damages or forfeitures which may be sustained by reason of the nonperformance or malperformance on the part of the said principal or any of the covenants, conditions, stipulations and agreements of said contract, then this obligation shall be void; otherwise the same shall remain in full force and virtue.'

The complaint alleges that plaintiff fully complied with the conditions and performed each and every of the obligations imposed upon it by the terms and provisions of the contract and bond; that the building was completed November 14, 1913; that the contractor failed to pay certain enumerated bills for labor and materials aggregating $7,350.33, and that plaintiff, to prevent the filing of lien claims therefor, paid such bills.

1. On the part of the bonding company it is contended that the building company failed to carry out material provisions of the contract which were made a part of the bond, in that it neglected to require the contractor to exhibit receipted bills for material and labor before making payments, that it did not retain 15 per cent. of the estimates as required by the contract, and that it made the final payment nearly 30 days before the completion of the building, instead of retaining it until 30 days after the work was fully performed.

It appears from the evidence that the building was erected for the Citizens' National Bank of Glenwood Springs; that the building company was merely a holding company for the purpose of erecting the building; that the bank and the building company were controlled by the same directors, one George Bell being secretary and treasurer of the building company and also cashier of the bank; that Bell, as secretary and treasurer, exercised general management and supervision over the affairs of the building company in its construction work and at the same time handled the financial end of the building proposition through the bank. On the 17th of October, Matthews' foreman, the architect, and Bell met in the bank, where the architect handed the foreman the final certificate, showing that Matthews was entitled to $5,068 the balance due on the contract. The foreman gave the certificate to Bell, who handed him a check of the building company for the amount, drawn on the German American Trust Company, payable to the order of Matthews. The foreman then indorsed Matthews' name on the check, and returned it to bell, who deposited it in the Citizens' National Bank to the credit of Matthews. Matthews, when he took the contract, was practically without funds, and became more deeply involved financially until, at the time of the final payment, he owed the bank $2,200 on a note for borrowed money and $2,900 on an overdraft. Bell, as cashier, immediately applied the proceeds of this final certificate in payment of the...