American Fidelity Co. v. Velie

196 F. 190, 116 C.C.A. 22, 1912 U.S. App. LEXIS 1464

• Court: Court of Appeals for the Eighth Circuit
• Decided: April 22, 1912
• Docket: No. 3,651
• Status: Published

Opinions

ADAMS, Circuit Judge

(after stating the facts as above). The contract obligated the contractor to complete the garage on or before December 15, 1909, and the owner to pay him $16,548.50 therefor. It also contained a provision empowering a named architect to determine whether the contractor was prosecuting his work with prompt-' ness and diligence, and if in the judgment of the architect he was not doing so, and the architect should so certify, enabling the owner' to terminate the contract, take possession of the premises, complete the job, and charge any excess of the cost of doing so, over and above the contract price, to the contractor. It also contained this provision:

“The expense incurred by the owner as herein provided, either for furnishing material or for finishing the work, and any damage incurred through such default, shall be audited and certified by the architect, whose certificate thereof shall be conclusive upon the parties.”

The bond sued on obligated the principal and surety to make good to the owner any loss and damage which he might sustain by reason of any failure or default of the contractor.

The evidence conclusively showed that the architect determined and duly certified that the contractor was not performing his work according to the requirement of the contract; that the owner terminated the same,.took possession of the work, and finished it at a cost for the work contemplated by the contract over and above the contract price of $6,143.77; and that this amount was duly audited and certified to by the architect.

There is no proof that the owner failed in any respect to give the notices required by the bond to the Surety Company or failed to permit the Surety Company to take possession of the work and finish it. On the contrary, it affirmatively appears that those requirements of the bond were duly performed by the owner.

[1] The defense predicated upon the alleged fact that the owner paid installments of the contract price to the contractor without requiring him to produce receipted bills for material furnished and work done is without any merit.

It is true the bond obligated the owner to require such receipted bills before paying the stipulated installments of the contract price. But, according to the provisions of the bond, the failure to do so. constituted no ground of its defeasance. This was the stipulated consequence: That the owner should immediately notify the Surety Company of it and “upon demand pay to the company all moneys which would have been due and payable to the principal had the principal. produced such receipted bills.” The proof shows that the Surety Company was duly notified, and there is no proof that a demand was ever made by the Surety Company for the moneys according to the stipulation. The parties, having stipulated for a certain consequence in the nature of a remedy for a breach of the covenant which did not include the invalidation of the bond, must be held bound by it.

[2] The next question is whether the contract for the building of the garage was so changed dr altered without the consent of the surety as released it from its obligation on the bond.

-The contract contained this stipulation:

’ “No alterations shall be made in the work except upon written order of the architect; the amount to be paid by the owner or allowed by the contractor by virtue of such alterations to be stated in said order.”

Only one change was made before the contractor abandoned the work and the owner entered upon its completion, and that arose out of a mistaken estimate connected with the south wall of the building for which an allowance was approved and made in writing by the architect of $190. This change was made pursuant to the provisions of the contract under and subject to which the bond was executed, and manifestly constitutes no ground of defense to this action.

There was no attempt to show any other change except what is involved in the following offer of proof, made by defendant’s counsel:

“I want to make an offer to show by this witness that there are certain alterations in the building from the plans and specifications; that there is a brick wall in the basement that is not in the plans; that there are par-: titions on the second floor not in the plans and specifications; and that the lire wall has been carried up * * * J8 inches higher than the plans and specifications provide, thereby showing that the building, as constructed by the owner after he had taken possession, is different from that provided in the contract in these respects."

According to this offer of proof, there was no claim that any change was made before the contractor breached his contract. On the contrary, the alterations proposed to be shown were limited to such as were made after the breach and after the owner had taken possession and undertaken to finish the work. They imposed no additional obligations or burdens upon the contractor, which could by any possibility have induced or brought about the failure to perform liis contract. That was a thing of the past. The failure had already occurred, and the owner by reason thereof was left independent and free to make such changes as he pleased, provided only he made them at his own cost and expense. All the Surety Company could be concerned in was that nothing should be charged against it on account of such subsequent additions or changes. Its liability was measured by the actual cost of the building as contracted for and by no consideration of the .cost of subsequent changes. George A. Fuller Co. v. Doyle (C. C.) 87 Fed. 687.

[3 ¡ It is next contended that the Circuit Court erred in not permitting defendant to make proffered proof that the building could actually have been constructed by the owner for the contract price — • that is, at no loss.

Article 5 of the contract, after providing that the owner might take possession and complete the work in case the contractor failed to prosecute it diligently, authorized the architect to audit and certify the additional cost for finishing tine work over and above the contract price, and expressly provided that his certificate thereof should be conclusive upon the parties.

This was binding, not only upon the parties to the contract, but upon the Surety Company which assumed the obligations and stood in the shoes of the contractor. The plaintiff below counted on an audit and certificate of the chosen architect as the basis of his right of recovery, and these were abundantly proven. They have never been impeached for fraud or gross mistake. They stand, therefore, as the deliberate, honest judgment of an arbitrator chosen by the parties, and are final and conclusive. Cook v. Foley, 81 C. C. A. 237, 152 Fed. 41, and cases cited.

In fact, no attempt was made to impeach or criticise them. The defendant simply ignored them and sought to proceed notwithstanding the agreement of its principal to be bound by them. There was no error in refusing to accept the proof so offered.

Some other propositions were advanced in argument by counsel for plaintiff in error. They have all been adequately considered and found to be without merit.

The judgment below is affirmed.