Nick Peay Construction Co. v. Miller

Kirby, J., (after stating the facts.) It is contended by appellants, the sureties on the bond of Nick Peay Construction Company: 1. That they were discharged by reason of the failure of the commissioners to give the required notice of the default of the contractor within the time specified in the bond. 2. That the sureties were released by reason of material changes made in the work to be done without their consent. 3. That in any event there was no liability on their part for the payment of liquidated damages, no such provision being included in the body of the contract, and the only reference thereto being in the specifications. 4. That they are not liable for the payment of any sum whatever because of the contractor’s abandonment of the work, since the commissioners of the district have not paid out for its completion more than the amount specified in the contract, which was to be paid it upon the completion thereof. 1. The bond provides “that the sureties shall be notified in writing of any act on the part of the principal, or his agents or employees, which may involve a loss, for which said sureties are responsible hereunder, within five days after knowledge by the commissioners of such act, with a verified statement of the facts in the case.” It was also stipulated that if the principal failed to comply with the conditions of the contract to such an extent as to forfeit it, the sureties should have the right and privilege of assuming the contract and subletting the work or completing it in accordance with its terms, whichever they might elect to do. It is not disputed that the principal, the Nick Peay Construction Company, did abandon the contract, and that its president, on January 6, 1907, notified the city council of Marianna by letter that he had stopped the work on the sewer contract, and notified the commissioners of the district in writing that “I have ordered the work stopped on your district until such time as you may see fit to accord me an equitable adjustment of differences on contract, which has been repeatedly broken.” On the 9th, the commissioners, regarding such action by the construction company as an abandonment of the work, notified it and the bondsmen that they “had taken charge of the construction of the sewer and appurtenances as provided for in said contract, and will complete the construction of said sewers and appurtenances according to the terms and specifications,” and that “you and your bondsmen will be charged with the expense of completing your contract and the per diem penalty provided for the time now having expired within which you were to have completed same.” A copy of this notice was mailed from Marianna, and received by L. W. Cherry at Little Rock on the 11th of January, and the registry receipt was signed for ,Furth, by person authorized to receive it for him, on the 15th of January. A copy of the notice was handed J. A. Plummer on that date. The notices were mailed at Marianna, a short distance from Little Rock, properly addressed, and doubtless both reached there about the same time. It is true that this notice was not sworn to, but it was not stipulated in the bond that it should be. Since it advised that the contract had been wholly abandoned by the contractor, it was not necessary to make any further statement of the facts, nor contemplated that it should be further verified, and, after written notification by the contractor of the 6th of January to the council and the commissioners that it had stopped work on the sewers, they had five days in which to notify the sureties thereof, and we hold that the notice mailed within the time shown reached them in the usual course of the mail within the time specified, and was a sufficient compliance with the terms of the bond. The sureties will not be heard to complain that the notice by its terms informed them that the commissioners of the district had taken charge of the work, and would re-let and complete it, holding them responsible for the damages, and thereby prevented them from assuming the contract and completing it in accordance with its terms as they might have done since they did not offer to do so. According to the law and without regard to the provision in the specifications to that effect, the commissioners had the right to re-let the work, if it was abandoned, and the sureties, according to their undertaking, also had the right to assume the contract and do the work or re-let it, and, having been notified of the default of the contractor, it was their duty, if they had desired to do so, to offer to complete the work themselves, or by subletting it to a contractor of their own in accordance with their undertaking, and the notice that the district would have the work done by another contractor at the time of the notice of the forfeiture of the contract by their principal did not deprive them of this right, nor relieve them of the duty to offer to complete the work if they preferred to do so. The notice was sufficient, and, having failed to offer to have the work completed after its receipt, they are held to have waived their right to do so, and are not discharged because of the letting of the contract for its completion to others. 2. We do not find the findings of the chancellor that no material alteration or change was made in the plan or improvement is against the weight of the testimony, and the changes made were not material, and their consent to such changes was not necessary, and the sureties were not released from their obligation because thereof. 8. There was no stipulation in the contract providing for the payment of a penalty or liquidated damages upon the failure of the contractor to complete the work within the time specified, and such provision is found in the specifications, which, it is true, were referred to in the contract and made a part of it. The sureties, however, should not be held bound for the payment of any such sum, whether it be regarded liquidated damages or a penalty, because they undertook that the contractor should perform the work in accordance with the terms of the contract and specifications, and within the time agreed upon, and there was no agreement in the contract for a deduction on account of delay in the completion of the work. It is, no doubt, true that they would be bound by the specifications, so far as they relate to the work to be done and the manner of doing it, but certainly it could not be held that liquidated damages for failure to complete a certain improvement within a limited time was a proper part of the specifications of such improvement or the manner of making it, and the sureties in the execution of the bond to secure the faithful performance of the contract, there being no agreemen t by the contractor for such deduction as liquidated damages on account of the failure to complete the work within the time, cannot be bound to the payment thereof because of any provision in the specifications relating thereto. In other words, such provision, having no proper relation to the specifications for the improvement and not being signed by the contractor, and being one of contract and mutual agreement, should have been included within the contract itself to bind the sureties, who agreed to be bound only for its faithful performance. 4. It is doubtless true that there is no liability against the surety upon the contractor’s bond for completion of the work after its abandonment by the contractor, unless its completion costs more than the price agreed to be paid to the contractor for the performance of it. In this case the contract price was $21,000, $7,843.69 was. paid the first contractor before the abandonment of the work, and a new contract was let for its completion at a certain' price; and only $12,444.06 was paid to the second contractor, and the proof shows that the work still uncompleted is of the value and will require the expenditure of $1,267.19 to complete it; all these amounts making the total sum of $21,656.94, an amount larger than $21,000, for which the first contractor agreed to make the improvement. The difference between these amounts is $656.94, the additional amount required to complete the work first undertaken by the contractor for whose performance of it the sureties became liable. The sureties should be held only to the payment of said difference, the amount required to complete the improvement in excess of the contract price, and not for a further sum as additional expense of engineering, there being no testimony in the record to sustain the chancellor's finding that any sum was paid out by the commissioners or debt incurred for engineering because of the abandonment of the contract by the Nick Peay Construction Company. The decree is erroneous as to the amount of the recovery, which should be $656.94, with interest from the date of the default, January 6, and it is modified and will be affirmed, and a decree entered here for that sum. McCulloch, C. J., being disqualified, did not sit in this case.