64 Colo. 421 | Colo. | 1918
delivered the opinion of the court:
November 21, 1904, The Taylor-Moore Construction Company, a Texas corporation, hereinafter called the contractor, entered into an agreement with the United States for the construction of the Gunnison Tunnel as a part of the Uncompahgre Valley Irrigation Project in this state. The work was prosecuted under the provisions of “The Reclamation Act,” 32 U. S. Stat. at Large, p. 388. The contract, by reference, included the advertisement for bids, the proposals of the contractor, and the specifications for the work, and obligated the contractor to give a bond, as required by the Act of Congress of August 13, 1894 (28 U. S. Stat. at Large, p. 278), in the sum of $150,000. Thereupon the contractor caused to be executed and presented to the Secretary of the Interior, as such bond, the instrument constituting the basis of this controversy. The instrument was unusual in form, in that it was composed of seven different writings, executed by different sets of individual sureties. Such writings constituted the completed instrument, and each recited the terms and conditions of the bond in identical language, except that the liability of each surety was designated separately, and the sum for which each became liable was less than the full $150,000 penalty designated in the bond, The following is a verbatim copy of the body of the instrument executed by sureties Leyner, Riggs, Elliott and Weigle, to-wit:
“Know All Men by These Presents, that we, The Taylor-
'Sealed with our seals and Attested by our signatures, this twenty-first day of November, in the year of our Lord, one thousand nine hundred and four.
The Nature of This Obligation Is Such that, whereas the said principal has entered into a certain contract, as hereinafter recited, and is required thereunder to furnish bond to the United States of America, in the sum of one hundred and fifty thousand dollars, this bond being a portion of the security so required. Therefore, if the said The Taylor-Moore Construction Company, its successors and assigns, or any of them, shall, and do, in all things, well and truly observe, perform, fulfill, accomplish and keep all and singular the covenants, conditions and agreements whatsoever, which, on the part of the said The Taylor-Moore Construction Company, its successors and assigns, are, or ought to be, observed, performed, fulfilled, accomplished and kept, comprised or mentioned in certain articles of agreement bearing date the twenty-first day of November, one thous- and nine hundred and four, between the said The Taylor-Moore Construction Company and E. A. Hitchcock, Secre
In Testimony Whereof, the said The Taylor-Moore Construction Company, as principal, and J. Geo. Leyner, R. L. Riggs, Jacob J. Elliott and William A. Weigele, as sureties, have hereunto subscribed and affixed their seals the day and year first above written.”
Each of the several parts of the bond is signed by the principal and the sureties therein named. Each surety justified before a notary public, and either the postmaster or some other Federal officer certified as to his citizenship and financial ability. The several parts of the bond were-introduced in evidence as Exhibit A, and therefrom it appears that the total of the sums for which sureties signed aggregated $155,000, but in each instrument it was recited that the same toas a part of the security in the bond of $150,000 required of the contractor. Three of the several instruments composing the bond were executed in Texas, by sureties residing there; the remaining four were executed by sureties residing in Colorado. In December, 1904, after the execution and delivery of the contract and bond, the contractor entered upon the work, but quit the same on May 26,1905, at which time it was taken over by the United States. At that time there were several outstanding obligations of the contractor for labor and materials furnished in the prosecution of the work, and supplies furnished the .boarding bouse and commissary department Maintained by the contractor near the scene of operation. September 11, 1905, some of such creditors instituted an action in the District Court of Montrose County upon the bond. The contractor and the sureties residing in Colorado were brought within the jurisdiction of the court, but the sureties
An agreed statement of facts was entered into between the plaintiffs and the defendant sureties, by which the latter admitted the various claims of the former, but submitted to the court for1 determination the question of! liability of the sureties on the bond. A like stipulation was made between the defendant sureties and the intervening creditors, The Hendrie-Bolthoff Manufacturing & Supply Company, and McPhee & McGinnity Company. The United States, by an instrument filed in this court, admits the same facts. The defense of the sureties was that the bond, after its execution and delivery, had been materially changed by reason of which the sureties were released from liability thereon; that the United States and the contractor, by mutual consent, modified the terms of the contract after the execution and delivery of the bond, and thereby released the sureties from liability to the United States; that the United States wrongfully ousted the contractor, and prevented him from completing the contract. Surety Orman pleaded and relied upon the additional defense of lack of consideration in the execution of the instrument signed by him, and that he had been adjudged a bankrupt, and thereafter discharged in such bankruptcy proceedings from all liability on account of the claim or undertaking sued on.
The case was tried to the court without a jury, and July 7, 1914, findings of fact were made and judgment entered, to which exceptions were saved by the United States, and all the defendant sureties, except Orman. Some of these findings and portions of the judgment which we now desire to consider may be briefly stated as follows: That because the bond recited on its face that it was taken in the sum of $150,000, and the total amount for which the several sureties bound themselves individually totaled the sum of $155,000, it constituted a material change in the bond, rendering it inoperative and void so far as the United States
1. The defendant sureties criticise the complaint and the amended petition in intervention of the United States. They.assert that the allegations of the different obligees under the same instrument, in respect to the construction of the instrument, are in conflict with each other, and that each of such pleadings contains within itself contradictory allegations or recitals, and that it is uncertain whether the individual creditors treat the alleged obligations of the sureties as liabilities under a bond for $150,000 or $155,000; while the United States in its petition admits that said instruments constitute a bond for $155,000. Such pleadings are subject to criticism, but are not fatally defective when properly considered. The sureties did not, in the trial court, ask the elimination of the objectionable features of the pleadings. The allegations of the complaint charge
2. The contention of the sureties, and the finding of the court, that there was a material alteration in the bond after its execution and delivery, have no support in the record. The facts in relation to the entire matter are undisputed. The question involved is, therefore, one of law, not of fact. Every surety had full knowledge of the advertisement for bids, the proposal of the contractor and the specifications for the work, as they were made a part of the construction contract, and the latter instrument, by reference, was embodied in the bond. The contractor was required to “furnish bond in the sum of $150,000 for the faithful performance of the work,” with “good and approved security,” and each of the seven instruments recites such facts in specific terms and declares that it is “a portion of the security so required.” Each surety, with full knowledge of such facts, executed one of the seven instruments
There was no limitation as to the number of sureties or their individual liability, but the total penalty of the completed bond was designated in each instrument as $150,000. Each surety had full knowledge that there were to be other sureties and other like instruments to the one that he signed, sufficient to satisfy the United States. The case is unlike those cited by counsel, where, on the face of the bond, there was a disclosure of the number and personnel of the sureties. In the instant case the United States was at liberty to require any number of sureties, and that each obligate himself to pay the full amount of the bond, or any less sum. In either event the instrument would be a bond in the sum of $150,000, and in the event of the default of the principal therein the obligees could collect from each surety the amount he bound himself to pay until the total of the sums so collected equalled the penalty of the bond, together with any interest properly recoverable; and thereupon the liability to the obligees would cease and the adjustment of the rights and equities among the sureties would be for them to determine. In a bond given by a principal and his sureties there is a primary obligation resting upon the former to which the obligation of the latter is incident. The penal sum designated measures the aggre
3. The court erred in finding and adjudging that on May 27, 1905, the United States, by its officers and agents, ousted the contractor from the work and prevented its completion under the contract, and thereby discharged the sureties from liability on the contractor’s bond. The facts in relation to the matter are undisputed and justify but one conclusion; and that is, that the contractor refused to comply with the contract and voluntarily abandoned the work, and surrendered the same to the United States. The contract (Clause 21 of the specifications) provides that, should the contractor fail to begin work, or delivery of material, or prosecute the work in such manner as to complete the contract within the time limit, etc., “notice thereof in writing shall be served upon him, and upon his neglect or refusal to provide means for a more energetic and satisfactory compliance with the contract within the time specified in such notice, then, and in either case, the Secretary of the Interior shall have the power to suspend the operation of the contract, and he may take possession of all machinery, tools, appliances,” etc., and continue -the work, etc.
On May 23, 1905, a notice in writing, based upon and in accordance with this provision of the contract, was prepared by the United States, addressed to and served upon the contractor. The notice referred to the aforesaid clause of the contract, and recited that the contractor had agreed to begin work promptly, and within ninety days thereafter to have a force and plant at work sufficient to complete the work required on or before the 15th day of April, 1908, and continued, “the plant and force which you have now on the ground is entirely inadequate to fulfill these conditions, and
It is true that the contractor had the full period of time fixed in the notice in which to perform the things therein specified. However, by the terms of the contract, conditions might arise authorizing the United States to suspend the contract and take over the work prior to the expiration of such time. The language of the contract is that upon the contractor’s “neglect or refusal to provide means for a more energetic and satisfactory compliance with the contract within the time specified in such notice,” the United States, through a designated agent, may, in either event, suspend the contract. The language of the contract, together with that of the notice, acceptance thereof and alleged waiver of time by the contractor, together with the latter’s acts in the premises, will not permit the conclusion that the contractor was unlawfully ousted. On the contrary, it establishes, we think, very clearly that the contractor, immediately upon service of the notice, refused to proceed with the work and abandoned the contract. Under these circumstances, it was neither necessary for the United States to wait the full ten days’ time to take over the work nor to notify the sureties of its intention so to do. More
Under the undisputed facts, we conclude that the contractor was not ousted, but voluntarily quit the work and abandoned the contract. One of the claimed modifications of the terms of the contract after the execution and delivery of the bond, so far as relied upon by the sureties, is the waiver by the contractor of the ten days’ time he had, after notice served upon him, to provide means for a more energetic and satisfactory compliance with the contract. The fact that the contractor delivered to the United States the written statement of waiver and authority for it to take charge of the work, etc., and the United States did take immediate charge thereof, did not constitute a modification of the contract. It was not an agreement between the United States and the contractor. It was only proof that the contractor refused to proceed further and had abandoned the contract. The taking over of the work by the United States was by virtue of the construction contract.
4. The record discloses that surety Orman filed a petition in bankruptcy in the proper court on January 16, 1908, and was thereafter, on June 25th of the same year, dis
If Congress found it necessary, as it did, to expressly excépt taxes due the United States, etc., from the operation of a discharge, it would seem that if it intended that other debts due the United States should be excepted, it would have so declared. The omission of any exception of such debts is significant. The insertion of the provision with respect to taxes, without a like provision in regard to ordinary debts due to the United States, must be attributed to some purpose on the part of the law-making body. The purpose in view, we think, was that a bankrupt should be discharged from provable debts, to whomsoever owed, except as specified. Ascribing this meaning to the language is in keeping with the purpose and spirit of the bankruptcy act. The purpose of such acts, it has been frequently declared, is to relieve the honest debtor from the weight of oppressive indebtedness and to permit him to start afresh, free from the obligations and responsibilities consequent upon business misfortunes. Burlingham, et al. v. Crouse, 228 U. S. 459, 57 L. Ed. 920, 33 Sup. Ct. 564, 46 L. R. A. (N. S.) 148. The United States, when it engages in business enterprises, should be subject to the same laws and occupy no different position than individuals when so engaged. The judgment in favor of Orman is affirmed.
5. The court held and adjudged that each surety was liable for interest at the legal rate on the amount of his obligation, from the date of the commencement of the action, and the sureties contend that this was error. There is a conflict in the authorities upon the question of allowing interest upon the penalty of a bond. The weight of American authority, however, is in favor of allowing it, and such is the rule in this jurisdiction. Empire State Surety Company v. Lindenmeier et al., 54 Colo. 497, 131 Pac. 437, Ann Cas. 1914 C. 1189. The penalty in a bond
“If he gets it then, he gets what the contract provides; if he gets it later, he gets less than what the contract provides. If, then, the penalty be paid after the breach, interest should be added for the detention of the penalty, to make it equivalent to a payment at the date of the breach.
After the penalty is forfeited, it becomes a debt due. The sureties then stand in the relation' of principles to the obligee, owing him so much money then due. To ascertain the precise sum may require calculation, but that is certain which can be made certain. The rule common to contracts generally applies that where money is due and there is a default in payment, interest is to be added as damages. The defendants should pay damages for detaining the damages which they bound themselves to pay at a prior date. The penalty of the bond is payable because the principal did not fulfill his obligation; the interest is the penalty upon the sureties for not fulfilling theirs.”
The sureties make the claim, however, that it was impossible for them to pay the respective sums for which they were liable, because of the danger of double liability; and the further fact that they did not know, and could not ascertain, what proportion of their liability was due to the individual creditors. The bond performs a double function. It is intended to secure to the United States the faithful performance of the contract, and to protect persons from whom the contractor obtained labor or materials in the prosecution of the work. As said in United States to Use of Anniston P. & F. Company v. National Surety Company, 92 Fed. 549, 551, 34 C. C. A. 526, 528 (approved in Equitable Surety Company v. United States, etc., 234 U. S. 448, 58 L. Ed. 1394, 34 Sup. Ct. 803) : “The two agreements which the bond contains, the one for the benefit of the government, and the one for the benefit of third persons,
Moreover, it seems that the government and the persons supplying the contractor with materials in the prosecution of the work, in case of default by the contractor, may each maintain a separate action against the sureties in the bond. United States, etc., v. Perth Amboy S. & E. Co., (C. C.) 137 Fed. 689. The act does not postpone the right to have payment, because it may be that a cause of action had also arisen, or may arise, against the sureties in favor of another party for whose benefit the bond was likewise given. If one, so entitled, is paid, the obligation of the surety is discharged to the extent 'of the payment. Whether there were other, or how many other, creditors secured by this bond, or whether all their claims had been paid, was, under the Act of Congress, of no concern to the sureties in reference to the payment demanded by plaintiffs. The sureties would have been fully protected in the premises by paying the amount for which each was obligated into court, as was done in United States v. Heaton, 128 Fed. 414, 63 C. C. A. 156. The action of the court relative to allowing interest is approved.
6. The court held that, as the government did not complete the tunnel earlier than January 1, 1912, and, in fact, could not complete it prior thereto, it should, in justice and right, be precluded from recovering from the sureties on the bond for failure of the principal to comply with the contract, and that the instant case is controlled in that respect by the rules announced in United States v. O’Brien, 220 U. S. 321, 55 L. Ed. 481, 31 Sup. Ct. 406, and United States v. Weisberger, 206 Fed. 641, 124 C. C. A. 429. The court’s action in the premises was error. The question was' not at issue, because the court had, as heretofore stated, refused to permit the issue to be made.
7. The contention is made that certain claims were allowed as for labor and material that were not chargeable against the sureties. The bond follows the words of the statute and provides: “That such contractor or contractors
In considering the question presented, it is necessary that these matters be kept in mind. For to properly interpret the meaning of the words requiring the contractor to make prompt payment to all persons supplying him or them labor or materials “in the prosecution of the work provided for in such contract,” it is essential to look to the contract, the ultimate character of the job to be completed, the location of the work, and the facilities that must be supplied for the doing of it. The labor and material essential in the prosecution of an ordinary job do not measure that which is necessary in the prosecution of the work covered by this contract. Its location was miles away from the habitation of man and the sources of supplies. It was understood that it would take months to complete it, and a large expenditure of money. The United States actually consumed seven years in its completion and expended over $1,000,000 in excess of the contract price.
A stipulation was entered into in relation to the claims
“That in the prosecution of said work under said contract, it became and was necessary for the said contractors to use, furnish and provide material consisting of powder, steel, fuse, hammers, shovels, picks, nails, bolts, piping, and other hardware, merchandise and material, including tools and repairs for the machinery necessary to be used thereon, apartments for the men employed, and cooking, feeding, and sleeping accommodations and apartments, with furniture and implements, and supplies for, food and provisions for the large number of men employed by them, and for the government officials as is required in said contract and specifications, blacksmithing and supplies for the prosecution of said work, coal and fuel for the power and heating plants and cooking and other purposes necessary for the prosecution of said work, to provide and construct buildings and provide all material therefor, to employ and work steam shovels in the excavation of the extensive and deep excavation work to be done under said contract, to provide special clothing for the men at work in the tunnels and in water, to provide teams and outfits therefor, including feed for same, to provide medical attendance and service for the men engaged in such work, to use and provide hay, wood and material for the filling in of holes caused by cave-in of earth and rock in said tunnel work, to use and provide oil, packing and other material for the operation of the machinery and power plants used by them, and to furnish, provide and use various other kinds of material necessary for use in and about the said contract work, all of which*440 was so used under and in accordance with the provisions of said contract, and of the bonds given in pursuance thereof, and, as plaintiffs are informed and verily believe, are a part of the material necessary for such work, and constitute, are included in and form-a part of the labor and material provided for and covered by the said contract and bond, for the prompt payment of which said bonds were given by these defendants.”
Section 6 of the stipulation is to the effect that, because of the location and inaccessibility of the work, the contractor was under the necessity of making accommodations, housing and feeding the workmen and supplying them with necessaries while they were at work on the job. By Section 28 it was stipulated that provisions, dining room and kitchen furniture, sleeping apartments and bedroom furniture furnished by the contractor, as shown by bills referred to, were for the purpose of providing food and lodging for the men engaged in the prosecution of the work under the contract in the construction of the tunnel, and “were so used while the men were engaged in such work, and that deductions were made from the amounts due them for labor for the purpose of paying for same.” By Section 29 it was stipulated “That upon the taking over of the contract by the United States from The Taylor-Moore Construction Company, the United States took possession and charge of all the kitchen furniture and utensils, dining room furniture and utensils, sleeping rooms, apartments and furniture, also of all the provisions, clothing, tobacco, coal, hardware, and other material not used by said contractors, and refused to return same to plaintiffs, or the parties who furnished same, or any part thereof, and made use of same in the continued prosecution of the work of the construction of said tunnel.” By Section 31 it was agreed that the time-checks for labor and services therein shown to have been rendered were rendered under the contract here involved “for the construction of the Gunnison Tunnel.”
Under these facts we are unable to say that the trial court was not justified in finding that the various items
8. An argument has been advanced as to the right of the United States to pro-rate with the laborers and material men in whatever sum the sureties are required to pay. We think the question is not before us for determination. The trial court held that the sureties were not liable to the United States because of the invalidity of the bond. The government was, therefore, eliminated, and there has been no issue or finding between it and the individual creditors as to the distribution of the fund. Moreover, there has been no fund realized that may be distributed. The parties claiming against the sureties are here in an action at law seeking solely a judgment upon their respective claims. The case is unlike those where sureties paid the penalty of the bond into court or assets were marshaled in equity for distribution according to the rights of the parties. The act under which the bond in question was given allows each creditor to bring a separate action for the establishment of his claim. He can sue without respect to the claim of other creditors; and they can sue without regard to his claim, since all have independent causes of action. This is also true as to the government. When the contractor fails to pay for labor and material furnished, a cause of action instantly arises upon his bond in favor of such creditors. A cause of action in favor of the government, however, may not arise until the completion of the work. The primary express promise of the contractor was to complete the work by a designated date. An additional agreement was that under certain conditions the government could take over the work and complete the same. Should this be done, a second material promise of the contractor was that after the government had completed the work, “any excess of cost arising therefor over and above the contract price will be charged against the contractor and his sureties, who shall be liable therefor.” Such is the language of the contract. Therefore, in the instant case, while a cause of action arose in favor of the individual creditors when their re
The record discloses neither legal right nor equitable consideration that requires that these individual creditors should be further delayed in collecting that which has been their due for these many years. Clearly, the fact that the government had an independent cause of action against the same persons, arising some seven years thereafter, is not sufficient. The judgment in favor of the individual creditors against the Colorado sureties, except Orman, is affirmed; the judgment in favor of Orman, discharging him from all liability on the bond, is affirmed; the judgment against the United States in favor of the Colorado sureties, except Orman, is reversed and remanded, and if further
Judgment affirmed in part and reversed in part.
Chief Justice Hill and Mr. Justice Bailey concurring.