United States Fidelity & Guaranty Company v. Board of Commissioners Sewer Improvement District No. 1 of Blytheville
| Decision Date | 17 February 1919 |
| Docket Number | 118 |
| Citation | 209 S.W. 88,137 Ark. 375 |
| Parties | UNITED STATES FIDELITY & GUARANTY COMPANY v. BOARD OF COMMISSIONERS SEWER IMPROVEMENT DISTRICT NO. 1 OF BLYTHEVILLE |
| Court | Arkansas Supreme Court |
Appeal from Mississippi Chancery Court, Chickasawba District; Archer Wheatley, Chancellor; affirmed.
Decree affirmed.
Wm. M Hall and Lamb & Frierson, for appellants.
1. The facts proven show substantial performance of the contract and the engineers of the district so found and reported and the sewer was accepted. Knowing of all defects and having $ 12,000 to remedy these defects assumed the task of remedying them and expended over $ 8,000 foolishly and for additional matters which were the fault of the board's engineer and not of the contractor. A careful inspection should have been made and attention of the contractor called thereto. It was unjust for the board to sit back without complaint, to assume the possibility of defective work and rely upon a reserved right to make a test on the completion of the entire system and if that test was not satisfactory to disregard all the acts of the board's agents in accepting the work from time to time. That is not fair dealing. The finding of the chancellor is contrary to the evidence.
2. The chancellor was correct in holding the surety company not liable for the liquidated damages at $ 50 per day. That provision was in the specifications but not in the contract or bond. 100 Ark. 284.
3. He was also correct in finding that district was not entitled to recover moneys expended by it in endeavoring to complete the system. The expenditures by Monie under the direction of Phillips were made in absolute disregard of all intelligent direction toward the completion of the contract that it was unjust to hold the surety or even the contractor responsible. The appellee is estopped under the law and evidence. 101 P 308; 23 L. R. A. (N. S.) 317; 90 N.W. 700; 25 Mich. 419; 72 N.W. 372; 81 Id. 136; 21 A. 306; 37 N.E. 16; 35 Id. 1006, 1012; 79 N.W. 330; 4 A. 903; 95 N.W. 78; 57 S.W. 746; 90 N.W. 700; 95 Id. 78; 50 So. 166; 3 Col. 15; 126 N.W. 796; 81 Id. 136; 1 L. R. A. 826.
Partial payment during the progress of the work with knowledge of defects or improper material is evidence of acceptance and waiver. 90 N.E. 864.
Where there is substantial compliance in good faith, a contractor may recover disregarding immaterial changes, deductions being made for defects. 18 N.W. 543; 24 L. R. A. (N. S.) 543, note 327; 97 Ark. 278; 72 P. 126.
Acceptance for the purpose of completing the work is a waiver of any claim that there is not substantial performance. Cases supra. Appellee having made current payments and having accepted the work is not entitled to recover the full amount paid the contractor. 60 Ark. Law Rep., No. 4, 280.
If the work was worthless any payment was over-payment releasing the surety. 164 U.S. 227; 120 Ark. 519; 73 Id. 473; 79 Id. 523; 122 Id. 522.
In conclusion the findings are clearly against the preponderance of the evidence, because the evidence shows a substantial performance and, second, because of the estoppel by the conduct of appellee in acquiescing in the work during its progress and by taking over the work for completion. Further as to the surety, if the work was in fact worthless the surety was released by over-payment. Authorities supra.
A. Y. Little and P. A. Lasley, for appellee.
1. There was no substantial performance of the contract. 97 Ark. 278; 102 Id. 152; 57 N.E. 412; 41 L. R. A. 238; 118 N.W. 543; 24 L. R. A. 327.
2. Plaintiffs are not estopped because they did not complete the work. They were not aware of the defective work. 100 Ark. 166; 207 S.W. 33; 185 Id. 474; 51 U.S. (L. Ed.), 811; 10 Am. Rep. 449; 84 N.W. 724; 45 N.E. 1013; 175 F. 650; 72 Ark. 525; 97 Id. 43.
Where an engineer fails to exercise honest judgment or makes such gross mistakes as to imply bad faith, his decision is not binding. 88 Ark. 213-224; 48 Id. 522; 41 Am. Rep. 29; 64 Ark. 34; 111 Id. 373; 114 Id. 330.
3. Plaintiffs are not estopped by taking possession and endeavoring to complete the work after Brooks quit. 97 Ark. 278; 64 Id. 34. They had the right to complete the work. 111 Ark. 373. The acceptance does not bind nor estop from claiming damages where the defects are latent. 161 P. 1151; L. R. A. 1917, C. 322; 15 Ann. Cas. 970, and note; 83 S.W. 634; 115 Am. St. Rep. 254; 114 Ark. 330.
The Surety Company is not released by the failure to retain 15 per cent. of the contract price. 84 Ark. 158; 111 Id. 373. Not being estopped, plaintiffs are entitled to recover the partial payments made with interest. 79 Ark. 506; 166 S.W. 556; 102 Ark. 152-9.
The contract provision for $ 50 per day's delay is for liquidated damages and not penalty. 57 Ark. 168; 122 Id. 308; 128 Id. 240. The Surety Company however is not liable for the liquidated damages as the provision is only in the specifications and not in the contract or bond. 100 Ark. 284. But Brooks is liable. Since plaintiffs rejected the system defendants may remove same. 102 Ark. 51; 85 Id. 570.
The plans and specifications were not complied with substantially nor was it such a system as was contemplated by the plans and contract. 97 Ark. 278. Appellee was entitled to what it contracted for. 202 S.W. 712, and same case ms. op.
There was no equitable estoppel. 2 Pomeroy, par. 805; 33 Ark. 465; 82 Id. 366; 97 Id. 465; 202 S.W. 712; 100 Ark. 166; 51 U.S. (Law Ed.), 811; 10 Am. Rep. 449; 84 N.W. 724; 45 N.E. 1013; 175 F. 650; 72 Ark. 579.
While the lower court did not find any actual fraud on part of the engineer, it did find such indifference as to imply bad faith. If an engineer makes such gross mistakes as to imply bad faith or a failure to exercise an honest judgment, his decision does not bind the board in the inspection and acceptance of work or material during the progress of the work or upon final inspection. 48 Ark. 522; 88 Id. 213; 79 Id. 514. The decision of the engineer is not binding. 95 N.W. 1097. See also 79 Ark. 516; 175 F. 650.
Appellant was liable for the whole amount paid the contractor. 79 Ark. 506; 132 U.S. 271; 3 Wendell 412; 102 Ark. 51; 166 S.W. 566.
The bond was for the faithful performance of the contract including all the plans and specifications. 62 Ark. 330; 6 Cyc. 9; 4 Elliott on Cont., 1007, par. 3798, and p. 800, par. 3620; 25 N.E. 663. Corporations as sureties are not now favored. 73 F. 95; 79 Ark. 530. The cause should be affirmed on appeal and on the cross-appeal appellee should have additional judgment for $ 10,550 for liquidated damages for delay.
OPINION
Sewer Improvement District No. 1 of the city of Blytheville was formed in 1912 to construct a sewer system for that city, and Messrs. Lange, Mahan and Fields were appointed commissioners. These commissioners employed R. C. Huston, a civil engineer of Memphis, Tennessee, to prepare plans and specifications for the district, and the plans thus prepared were submitted to Hiram Phillips, a civil engineer of St. Louis, Missouri who was at the time the consulting engineer for the water works system of Blytheville. Huston redrafted his plans to conform to the suggestions made by Phillips, and the numerous engineers who have testified in this case agreed that these plans were practical and substantial and, having been properly executed, should have given the district a good and sufficient sewer system. The contract for the construction of the improvement was let on August 27, 1914, to appellant A. C. Brooks, but on account of the difficulty experienced by Brooks in obtaining a surety the contract was not actually entered into until April 1, 1915, and the bond guaranteeing its faithful performance was filed April 15, 1915. This bond was executed by the appellant surety company.
The specifications for the improvement were very elaborate and provided that in case of delay beyond the period permitted by the contract the contractor should pay fifty dollars per day as liquidated damages for each and every day the work remained incomplete; but this provision appeared only in the specifications and not in the contract nor in the bond.
Huston gave this work only supervisory attention and placed in immediate charge of it his nephew, a young engineer of only limited experience named Gay. The construction work began about May 1, 1915, and it soon became apparent that much of the pipe would have to be laid through quicksand. The contractor and engineer appear to have known that quicksand would be encountered, but no one had anticipated the extent of this condition. On this account Huston recommended to the commissioners in all wet excavations the use of jointite, which is a patented compound, instead of cement and oakum, for sealing joints. This recommendation was not acted upon favorably, and that circumstance comes to have a very important bearing on the case. Huston testified that the refusal of the commissioners to adopt his suggestion was responsible for the failure of the system to meet the requirement of the plans to the extent to which he admitted that there was a failure. The commissioners admit this recommendation was made, but say that the jointite was much more expensive than the cement and oakum and that they were assured by Huston that while jointite was preferable, the cement and oakum would make an air-tight joint, which was the end desired.
There is a conflict in the testimony as to whether or not the original plans and specifications provided for a by-pass. The plans contemplated pumping the sewage from a pump-pit into a septic tank, where it would run into Pemiscot Bayou.
The pumps were to be electric pumps. Whether originally contemplated or not, the by-pass was adopted before construction began, which by-pass led out...
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