Westerhold v. Carroll
| Decision Date | 11 September 1967 |
| Docket Number | No. 52480,No. 2,52480,2 |
| Citation | 419 S.W.2d 73 |
| Parties | Fred WESTERHOLD, Jr., Appellant, v. Maurice CARROLL, Respondent |
| Court | Missouri Supreme Court |
David Y. Campbell, St. Louis, for appellant.
Keefe, Schlafly, Griesedieck & Ferrell, Robert F. Schlafly, St. Louis, for respondent.
STOCKARD, Commissioner.
Plaintiff has appealed from the judgment of the Circuit Court of the City of St. Louis sustaining a motion to dismiss plaintiff's petition on the ground that it fails to state a claim upon which relief may be granted.
We shall summarize portions of the petition, but shall quote other portions when necessary to set forth plaintiff's claim.
On May 6, 1959, Westerhold Construction, Inc. (hereafter referred to as 'contractor') entered into a written agreement (hereafter referred to as the 'construction contract') with the Archdiocese of St. Louis of the Catholic Church (hereafter referred to as 'owner') whereby the contractor was to construct a church and rectory in accordance with drawings and specifications prepared by defendant. On May 15, 1959, the contractor, as principal, and Maryland Casualty Company, as surety, executed a performance bond in the amount of $325,322.00, and a labor and material payment bond in the amount of $162,661.00, in favor of the owner, 'as required by and pursuant to the terms of said written agreement,' and on May 6, 1959, as an inducement to said Maryland Casualty Company to execute said bond as surety thereon, by written agreement plaintiff agreed to indemnify and hold harmless said Maryland Casualty Company against any liability for damages, loss, cost, charges and expenses which it might sustain or incur by reason of having executed said bonds as surety. By the terms of the construction contract, the performance of the contractor was 'under the supervision of and was subject to the inspection of defendant,' and payments by the owner to the contractor for work performed and materials furnished were required to be made 'upon certification by defendant, as the architect, to said owner that payments requested by (defendant) from time to time during the progress of said job, for work stated to have been performed * * * and for materials furnished and delivered * * * had, in fact, been performed and delivered on the job, and that the amounts of such payments so requested, from time to time, correctly reflected the percentage of the work actually then performed and the percentage of materials then supplied and delivered on the job.' At various times prior to May 4, 1960, defendant certified to the owner that the contractor had completed work and had furnished materials 'of the total value of $229,628.00,' and the owner, relying upon said certifications by defendant, had paid to the contractor the sum of $206,665.20, which represented 90% of the value of the work and material certified by defendant as having been performed and furnished. However, at the time of the said certificates made by defendant 'the amount of work which actually had been performed by (the contractor) was substantially less than the value thereof certified by defendant as having been performed and furnished,' and the said certificates 'were false and inaccurate' as to the total value of the work performed and materials furnished by the contractor by an amount in excess of $23,000. Subsequently the contractor defaulted under the construction contract, and the owner, pursuant to the terms of the construction contract, declared the contractor to be in default and called upon Maryland Casualty Company, as surety, to complete and carry out the terms of the construction contract. The surety did complete the contract and in doing so incurred expenses in excess of $93,234.23, and made demand upon plaintiff for payment pursuant to plaintiff's obligations under the previously described indemnification agreement, and plaintiff was required to expend and pay to the said surety the sum of $17,500.00 in full settlement of his liability as indemnitor, and was caused to incur other expenses in the amount of $2,250.00. The loss, damages, and expenses incurred by plaintiff was indemnitor 'were directly and proximately caused by the carelessness, negligence and wrongful acts of defendant in that defendant as architect * * * wrongfully and negligently failed to inspect and supervise the work performed and the materials furnished and delivered by said (contractor) * * *; and negligently, carelessly and wrongfully performed his duties as said architect, in falsely and incorrectly certifying, for payment by the (owner), to amounts and values of work performed and materials furnished and delivered by said (contractor), in an aggregate sum substantially in excess of the amount of work performed and the amount of materials actually furnished and delivered, so as to result in a substantial overpayment to said (contractor), thereby leaving an amount yet to be paid under (the construction contract) substantially smaller than the amount of work left to be performed and the amount of materials left to be supplied and delivered, in order to comply with the terms and provisions of said (construction contract).' Defendant, in his capacity as architect, knew or should have known, by the exercise of ordinary and reasonable care, that the amounts so certified by him for payment were substantially in excess of the value of the work actually performed and the materials actually supplied and delivered, and he 'thereby acted carelessly and negligently in the performance of his duties as such architect.' Plaintiff prayed judgment against defendant in the amount of $20,000.
The motion to dismiss the petition alleged not only that the petition fails to state a claim upon which relief may be granted, but also that the action is barred by limitations. The trial court sustained the motion on the first ground only. In his brief to this court, respondent has not attempted to demonstrate that if the petition does state a claim the action is barred by limitations. We consider this latter issue as not before us.
The construction contract is not attached to and made a part of the petition. From the allegations in the petition we cannot determine whether defendant was a party to the construction contract in the sense that he signed it along with the contractor and owner, or whether there was a separate contract between the owner and defendant. In any event, defendant's duties, or at least those duties material to the issue in this case, were set forth in the construction contract, and he purported to perform them pursuant thereto. No issue on this appeal is made concerning the source of his contractual obligations, or that they were other than alleged. Under the standard form of contract prepared by the American Institute of Architects the architect is designated as an arbitrator, see 12 Vanderbilt Law Rev. at p. 718 et seq., and in some contracts the architect's certificate as to work performed is stated to be conclusive. See § 2 of Annotation, 54 A.L.R.2d 1227. However, the allegations in the petition do not demonstrate that either of these conditions exist, and for the purposes of this appeal we do not presume their existence or rule their effect if present.
By the terms of the construction contract defendant was to inspect and supervise the performance of the work by the contractor, and payment to the contractor was authorized upon a certificate by defendant that the work actually had been done and the materials actually had been furnished by the contractor for which payment was sought. The construction contract also required that the contractor furnish a performance bond and a labor and material payment bond, and this was done by Maryland Casualty Company. While it is not specifically alleged that in issuing the bonds Maryland Casualty Company relied on the provisions of the construction contract providing for inspection and supervision of the work by defendant and also relied on the provisions for payment by the owner only upon certificates of defendant, it is a fair inference from the facts alleged that Maryland Casualty Company knew of those provisions and appreciated the fact that 'to guarantee the performance of a contract where progress payments are adequately safeguarded is a less hazardous risk than to guarantee the performance of a contract where there are no safeguards.' Hall v. Union Indemnity Co., 8th Cir., 61 F.2d 85, 88. As expressly stated in that case, 'such provisions in a contract are as much for the protection of the surety as of the owner.'
Plaintiff is not the surety, but is the indemnitor of the surety. Plaintiff does not specifically allege that the indemnity agreement provided that he would be subrogated to claims by the surety against the architect. However, he does allege that as indemnitor of the surety he was compelled to satisfy, at least in part, the liability of the surety. Generally speaking, an indemnitor of a surety compelled to satisfy the liability of a surety is subrogated to all rights to which the surety would have been subrogated. 83 C.J.S. Subrogation § 62; 50 Am.Jur. Subrogation § 36. In compliance with our rule to construe the petition liberally and to accord to it every reasonable inference from the facts alleged, Myers v. City of Palmyra, Mo., 355 S.W.2d 17, 92 A.L.R.2d 791, we shall proceed on the theory that plaintiff is subrogated to the claims of the surety, and that he may maintain such action against the architect for the negligence alleged which could have been maintained by Maryland Casualty Company. In our following discussion we shall refer only to the right of the surety in this respect.
Plaintiff's petition is based on negligence, and the immediate issue is whether in the absence of privity of contract the facts stated in the petition imposed upon defendant a legal duty to the surety to exercise ordinary...
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