Heffernan v. United States Fidelity & Guaranty Co.

Fullerton, J. In 1902, the respondent, Heffernan, contracted with the Port of Portland to build and equip for it a tug.boat, to be known as the “John McCracken,” according to plans and specifications furnished him by that corporation. The respondent sublet a part of the work to the defendant Ballard Dry Dock & Ship Building Company. The contract was in writing, and expressed in the form of a letter addressed to the respondent by the defendant, and an acceptance of the proposition therein contained by the respondent. In the letter the Ballard Dry Dock & Ship Building Company offered “to build the hull of the steamer John McCracken, according to the drawings submitted and specifications attached, including all terms and conditions therein, for the sum of eight thousand six hundred dollars. . . .” Attached to the letter were the specifications of the hull, as furnished the respondent by the Port of Portland; these having been submitted to the company by the respondent at the time of the negotiations leading up to the contract. The contract was dated July 23, 1902. The specifications provided, under the title, “General Conditions,” among other things, that the “hull house and equipment are to be furnished by the hull contractor,” and that the hull should be ready for machinery September 15, 1902, and completed ready for trial, October 15, 1902. Then followed, under the title “Specifications of Hull,” specifications for the construction and equipment of a steam sea-going vessel, complete with the exception of the engines and boilers. [479] The respondent exacted, of the ship building company, surety for the faithful performance of the contract, as a condition precedent to his entering into it. The ship building company offered the appellant as such surety, and, on being accepted as such, it gave a bond in the amount of the contract price, conditioned that it would save harmless the respondent from any pecuniary loss resulting from the breach of any of the terms, covenants, or conditions of the contract, on the part of the ship building company to be performed. The general condition was, however, subject t»o several provisos, among which was the following : “First — That no liability shall attach to the surety hereunder unless, in the event of any default on the part of the principal in the performance of any of the terms, covenants or conditions of the said contract, the obligee shall promptly upon knowledge thereof, and in any event not later than thirty days after the occurrence of such default, deliver to the surety at its office in the city of Baltimore, written notice thereof with a statement of the principal facts showing such default and the date thereof; nor unless the said obligee shall deliver written notice to the surety at its office aforesaid before making to the. principal the final payment provided for under the contract herein referred to.” The ship building company failed to carry out its contract, and the respondent was compelled to build and equip the hull at his own cost. In doing so he paid for labor and materials the sum of $1,616.50 in excess of the contract price, and $1,029.15 as demurrage to the Port of Portland because of his failure to deliver the vessel on the contract time, making a total of $2,645.65 more than the contract price. .This action was brought- to recover from the ship building company and the appellant the amount so paid. Judgment went against them for the amount claimed, and this appeal is from that- judgment. [480] The appellant, first contends that the recovery allowed for the excess of labor and materials is too large, in that the court allowed a recovery for the costs of the superstructure built on the main deck, the masts and their rigging, the life boats, compass, and other equipments used about a ship, which, it argues, can be no part of the “hull” of a vessel, and cannot, therefore be included within a contract for the construction of a “hull.” Had the contract of the Ballard Dry Dock & Ship Building Company been for the construction of the hull of a steam vessel without further specification, it may be that the appellant could successfully claim that the furnishings above enumerated would not fall within the descriptive term. But such was not its contract It contracted “to build the hull of thn steamer John McCracken according to ... specifications attached,” and the furnishings mentioned were specially and particularly enumerated as a part of the hull in the specifications attached to the contract. These specifications, therefore, became as much a part of the contract by this reference as they would have been had they been especially incorporated in it; and being thus a part of the contract, it can make no difference what the heading was, under which they were designated. The other contention is that appellant was relieved from its liability because of the failure of the respondent to give it timely notice of the breach of the contract on the part of the ship building company. By the terms of the contract, as we have said, the ship building company agreed to have the vessel ready for machinery by September 15, 1902, and completed ready for trial by October 15, 1902. It did not have the vessel ready for machinery at the first date named, nor did it have the boat completed and ready for trial at the latter date. Hotice was sent the appellant of these failures on October 17, 1902. The appellant contends that this notice was too late to comply with the con [481] dition of the bond above quoted, because given more than thirty days after the breach of that condition of the contract wherein the builder agreed to have the vessel ready for machinery by September 15, 1902. But we have held, in similar cases, that it was not necessarily fatal to the right of the obligee to recover on the bond that notice of the failure of the principal to comply with the terms of the contract was not given at the time the bond prescribes. While it is true that the requirement of notice is for the surety’s benefit, and it may insist on a strict compliance with the terms of the bond in that respect wherever failure to give such notice might result in a loss to it, yet when the notice serves its purpose as well when given after the prescribed time as it does before — that is, when it is equally effective in protecting the surety from loss — it is inequitable, and a manifest abuse of the purposes of this provision of the bond, to hold that the mere technical variance shall relieve the obligor entirely; the surety, being a compensated surety, can insist only on those forfeiture clauses of its contract the failure to comply with which probably inflicts upon it a loss. How in this case, notice given within the time limited might possibly have relieved the surety from the' payment of a part of the demurrage, charged for the non-completion of the vessel on time, and because the law cannot say how much of this demurrage, timely notice might have saved, the law, for fear of exacting too much, will not require payment of any part of it: But the most exacting search of the record fails to disclose why the failure to give notice of the first breach in any way changed the relation of the appellant with reference to the second, the failure of the contractor to go on and complete the vessel. It not only had notice of the abandonment of work thereon, but a specific demand was made upon it to complete the vessel, and the respond [482] ent took up the work only after the appellant ha.d, hy its inattention and silence, made it apparent that it intended to do nothing in the matter. We think the appellant should he held liable for the cost of the vessel paid hy the respondent in excess of the contract price. This sum we find to he $1,616.50. The judgment of the trial court will he reversed and the cause remanded with instructions to enter a judgment against the defendant, the Ballard Dry Dock & Ship Building Company, and the appellant, The United States Fidelity and Guaranty Company, for the sum of $1,616.50, together with interest thereon from the 1st day of March, 1904, at the legal rate. The appellant will recover its costs on this appeal. Mount, C. J., Hadley, and Dunbar, JJ., concur. Rudkin,Root, and Crow, JJ., took no part.