State v. Wilco Const. Co., Inc.

393 So. 2d 885, 1981 La. App. LEXIS 3466
CourtLouisiana Court of Appeal
DecidedJanuary 13, 1981
Docket11490
StatusPublished
Cited by15 cases

This text of 393 So. 2d 885 (State v. Wilco Const. Co., Inc.) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
State v. Wilco Const. Co., Inc., 393 So. 2d 885, 1981 La. App. LEXIS 3466 (La. Ct. App. 1981).

Opinion

393 So.2d 885 (1981)

STATE of Louisiana et al.
v.
WILCO CONSTRUCTION CO., INC. et al.

No. 11490.

Court of Appeal of Louisiana, Fourth Circuit.

January 13, 1981.

*888 State of Louisiana Department of Justice, William J. Guste, Jr., Atty. Gen., Robert E. Redmann, Stephen J. Caire, Asst. Attys. Gen., New Orleans, for plaintiffs-appellees.

Dodge, Friend, Wilson & Spedale, Douglas S. Draper, Gordon F. Wilson, Jr., New Orleans, for defendants-appellants Wilco Const. Co., Inc. and St. Paul Fire and Marine Ins. Co.

Deutsch, Kerrigan & Stiles, Frederick R. Bott, New Orleans, for defendants-appellants Register & Cummings and Associates, Architects.

Before GULOTTA, SCHOTT and SARTAIN, JJ.

GULOTTA, Judge.

The State of Louisiana, through its Capital Outlay Budget Board, brought this action against Wilco Construction Co. (general contractor), St. Paul Fire and Marine Insurance Co. (contractor's surety), and Register and Cummings & Associates Architects, for specific performance and damages resulting from defects in the design and construction of additions to the Orleans Area Vocational Technical School, New Orleans, Louisiana.[1] The matter was referred to a commissioner for hearing and the trial court, after review of his report, awarded the State $20,121.00 against the contractor and its surety, in solido, for various construction defects attributable solely to the contractor,[2] $153,754.00 *889 against the architects for certain design defects,[3] and $4,883.00 against all defendants, in solido, for defects attributable to both the contractor and the architects.[4]

Appealing, the surety contends that it is entitled to a discharge from the judgment to the extent of $10,000.00 because the State, having withheld $15,000.00 of the contract price to insure completion of the defectively constructed roof, prematurely made a $10,000.00 final payment to the contractor without notifying the surety or safeguarding that the contractor would make the promised roof repairs. The architects, also appealing, contend that they should be held liable for only the cost of repairing the defectively designed east and west walls of the building instead of the cost of demolishing and replacing them as awarded by the trial court. In answer to these appeals, however, the State significantly expands the scope of our review by specifying nine alleged errors in the judgment.[5] Before turning to the merits of these contentions, however, a brief chronology is in order.

A contract between the Capital Outlay Budget Board and Register and Cummings, the defendant architects, was signed on November 20, 1969 and the architects' fee was set at 6.25% of the contract price. The contract between the Board and Wilco Construction Co. was signed on May 5, 1971 for a price of $428,000.00. According to the original agreement, the contractor was to begin work on May 20, 1971 and the project was set for completion on January 24, 1972. The State approved various change orders, however, and a new completion date was set for January 20, 1973. After inspecting the work, the architects informed the State on January 24, 1973 that the construction was "substantially complete" in accordance with the contract and ready for occupancy. At that time, the State retained over $40,000.00 of the contract price. On February 15, 1973, the State informed the contractor that the project had been accepted as complete with the exception of a brief punch list. In March, 1973, a portion of the roof was blown off by a storm. The State made temporary roof repairs in April, 1973, and in May State officials met and corresponded with the contractor and the architect to discuss the roof problem and other deficiencies in the structure. On May 30, 1973, after the contractor's request for final payment, the architects proposed that $15,000.00 be retained to cover roof repairs and other deficiencies in the construction. Shortly thereafter the State made final payment to the contractor except for this $15,000.00 retainage. The State claims that it occupied the building on October 1, 1973. On November 16, 1973 another $10,000.00 payment was made to the contractor upon *890 its promise to repair the roof. The contractor made no such repairs, however, and the State filed suit against it and the architects on May 3, 1974. Roof repairs were made in October, 1976 at the State's expense. The State continued to occupy the building until June 10, 1977, when the City of New Orleans found it "in serious structural condition" and recommended that it be "evacuated" immediately.

PRO TANTO DISCHARGE OF SURETY

We consider first the surety's contention that because $10,000.00 was released prematurely to the contractor without notice to the surety, it should be exonerated from liability for that part of the judgment rendered against the contractor. In support of its argument, the surety cites LSA-C.C. Art. 3061,[6] and private works construction cases holding that the premature release of retainage by an owner without safeguards insuring performance operates as a release to the surety pro tanto.[7] We agree.

The record indicates that on November 16, 1973 the state released the $10,000.00 payment to the contractor without notifying the architect or the surety. The State's then chief engineer, Fred Bell, Jr., whose job was to examine state projects to make sure the work was properly done, testified that he had released the $10,000.00 upon the contractor's letter stating that it would install a blown-off section of the roof, repair blisters in the roof surface, and work with pitch pockets to bring the roof to contract specifications. This witness testified that he had not contacted the architect or the surety before release of the $10,000.00 and did not know if the surety had any knowledge of the payment. Bell testified that he had felt that retaining the final $5,000.00 of the contract price would cover the work required of the general contractor. As the evidence indicates, however, the entire roof must be replaced at a cost of $13,500.00. Accordingly, we conclude the retainage was released without notice to the surety and that this oversight has resulted in prejudice to it. We believe that it is precisely this situation that is contemplated by the codal article and the cited jurisprudence. Accordingly, we conclude that the surety is entitled to a $10,000.00 release from its ultimate liability to the State.

In so holding, we reject the State's contention that LSA-R.S. 38:2241, which provides in part:

"No modification, omission, additions in or to the terms of the contract, in the plans or specifications or in the manner and mode of payment shall in any manner affect the obligation of the surety."

considerably broadens in public works contracts, the scope of a surety's responsibility to such an extent that the surety would be liable even though the contract had been modified without the surety's consent. We are of the view that the cited language of the revised statute dealing with public works contracts contemplates the surety's liability to third parties to the building contract, such as laborers, material men and sub-contractors, and not liability of the surety to the owner under the circumstances of the instant case. As pointed out by counsel for the surety, the statutory interpretation offered by the state and subscribed to by the commissioner, would effectively make LSA-C.C. Art. 3061 nugatory and would strip protection from the surety when the owner acts to the surety's prejudice without its knowledge.

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Bluebook (online)
393 So. 2d 885, 1981 La. App. LEXIS 3466, Counsel Stack Legal Research, https://law.counselstack.com/opinion/state-v-wilco-const-co-inc-lactapp-1981.