Title: City of Midland v. Waller
Citation: 430 S.W.2d 473
Docket Number: B-536
State: Texas
Issuer: Texas Supreme Court
Date: June 26, 1968

430 S.W.2d 473 (1968) CITY OF MIDLAND, Texas, Petitioner, v. Leonard E. WALLER et al., Respondents. No. B-536. Supreme Court of Texas. June 26, 1968. *474 J. M. Nuessle, Midland, for petitioner. Leonard Howell, Kerr, Fitz-Gerald &amp; Kerr, William L. Kerr, Midland, for respondents. GRIFFIN, Justice. The City of Midland, Texas, as plaintiff, brought this suit against Leonard E. Waller, a general contractor, hereinafter called contractor, and Travelers Indemnity Company, hereinafter referred to as surety, the contractor's surety on a performance bond, to recover damages for breach of a contract for the construction of a municipal swimming pool. In the trial court contractor and surety each moved for a summary judgment. The trial court granted the motions and entered a judgment that the City take nothing by its suits against contractor and surety. On appeal this judgment was affirmed. Tex.Civ.App., 418 S.W.2d 915. Following the advertisement for competitive bids, as required by law, the City of Midland, Texas, entered into a general construction contract with contractor dated December 28, 1962, calling for the construction of a 50-meter, Olympic size swimming pool in one of the City's public parks. In addition to voluminous, detailed plans and specifications, said contract incorporated and included the A.I.A. Standard Contract Documents, consisting of various general and special conditions. Pursuant to the requirements of the contract and of Article 5160 Vernon's Ann. *475 Civ.St., as amended, contractor furnished City with his performance bond, dated January 3, 1963, in the full amount of the contract price, with Travelers Indemnity Company as surety, conditioned that contractor would faithfully perform said contract according to the plans and specifications. Contractor then commenced construction of the pool. We will first dispose of the City's application for writ of error against the surety. In answer to this application the surety contends it is not liable because suit was not filed on the bond within one year from September 15, 1963, the date the City accepted the pool and began to use the same. The parties attached a copy of the bond to their "Stipulations and Agreed Statement of Facts." The stipulation recites: "* * * that pursuant to said contract documents and Article 5160 Revised Civil Statutes of Texas, 1926, as amended, the defendant Leonard E. Waller, as principal, and the defendant, The Travelers Indemnity Company, as surety, duly made and entered into a performance bond * * *." The copy of the attached performance bond contained the following provision: "Provided, however, that this bond is executed pursuant to the provisions of Article 5160 of the Revised Civil Statutes of Texas, as amended by the Acts of the 56th Legislature, Regular Session, 1959, and all liabilities on this bond shall be determined in accordance with the provisions of said Article to the same extent as if it were copied at length herein." The pertinent provisions of Art. 5160 are: "No suit shall be instituted on the performance bond after the expiration of one (1) year after the date of final completion of such contract." It is stipulated that the Certificate of Acceptance by the City's architect was dated September 15, 1963. The City's pleadings and the proof on the hearing established that the City accepted the swimming pool and paid to the contractor the balance due on the contract price on September 15, 1963, and opened the pool to the use of the public on that date. The City alleged that about May 27, 1965, defects of various kinds were discovered in the pool; that these defects were due to the failure of contractor to construct same according to the plans and specifications, and in a good and workmanlike manner, and under the exercise of ordinary care, all of which he was bound to do under the terms of the contract and according to common law. On November 12, 1965, this suit was filed against the contractor and the surety on the performance bond for damages. This was more than two years after the City had accepted and begun the use of the pool. The present suit was filed more than one year after the City accepted the pool and paid the contractor. The limitation imposed by Art. 5160 applies, and the trial court correctly rendered a summary judgment that the City take nothing against the surety. The Court of Civil Appeals correctly affirmed that judgment. We affirm the judgment of both courts below in favor of the surety. As to the City's cause of action against the contractor, the courts below have denied the City a recovery on the ground that the architect's certificate of completion given to the City was a final determination that the contractor had complied with his obligations set out in the contract to build the pool, and the City could not hold the contractor liable for the defects appearing for the first time some twenty months thereafter. Reliance is placed by the contractor on Art. 1.07 of the construction contract's "Special Conditions," to relieve him of any liability for damages due the City because the architect had issued his final certificate of completion and acceptance of the swimming pool September 15, 1963. The contractor also claims no liability to the City because there was nothing wrong with the pool until May, 1965, some twenty *476 months after the acceptance of the pool by the City. The construction contract defined the scope of the contract's special conditions as follows: "The A. I. A. General Conditions, and the Special Conditions bound herewith are included in this specification and form a part of every branch thereof, and shall govern the work under each SECTION. Where the Special Conditions conflict with the General Conditions, the Special Conditions shall govern." Among the Special Conditions is Art. 1.07, entitled "Authority of Architect." It provides: Also, there is special condition, Art. 1.12 "Guaranty Warranty": The Construction Contract also contained the following "General Conditions": Article 25 of the General Conditions in its first paragraph provides for the architect to issue his certificate to the contractor for the progress payments upon the contractor complying with the requirements of Art. 24. Then Art. 25 continues: Art. 38, Architect's Status, provides in part: Art. 39, Architect's Decisions, provides in part: Special Conditions Art. 1.29, Payments, provides as follows: We are aware of those cases such as Boettler v. Tendick, 73 Tex. 488, 11 S.W. 497, 5 L.R.A. 270 (1889); State v. Martin Bros., 138 Tex. 505, 160 S.W.2d 58, 60 (1942); City of San Antonio v. McKenzie Construction Co., 136 Tex. 315, 150 S.W.2d 989, 996 (1941); Kettler Brass Mfg. Co. v. O'Neil (1909), 57 Tex.Civ.App. 568, 122 S.W. 900, writ refused, which hold that if the contract provides that the decision of the architect or engineer in charge of the construction project shall be final and binding on all parties that the contractor has fulfilled his contract, then the liability of the contractor to the owner is ended when a final certificate of acceptance is issued. In the case at bar there would be a further liability of the contractor to the owner for defects becoming apparent in one year, as provided in Art. 20, General Conditions, and Art. 1.12, Guaranty Warranty, Special Conditions. The "Stipulation and Agreed Statement of Facts" herein set out that no defects were evident until some twenty months after acceptance and the architect had issued his final certificate that contractor had fulfilled all of his obligations under his contract and advised the City to accept the swimming pool, which it did. However, none of the cases cited above contained the provisions we find in Arts. 20 and 25 and special conditions Art. 1.12. The language of these articles is clear and unambiguous to the effect that neither the architect's final certificate of acceptance and payment of the balance due to the contractor nor use and occupancy of the premises (in this case a swimming pool) will constitute an acceptance of work not done in accordance with the contract document or relieve the contractor of liability or responsibility for faulty materials *478 or workmanship. (All emphasis added.) These provisions in these three Articles seemingly conflict with the provision in Special Conditions Art. 1.07 that the architect's decisions and estimates shall be final as to the acceptable fulfillment of the contract and the determination of the amount and quality of the work performed and materials furnished. In this situation of conflict between provisions in the same contract, it is the duty of this Court to read, construe, and consider the contract within its four corners so that all of its provisions will be taken into consideration and construed together to give effect to all, if possible, and ascertain the meaning and effect of the contract. 13 Tex.Jur.2d 269, Contracts, Sec. 113, and the authorities cited therein. Thus considering the contract in its entirety, we hold it means that latent defects at the time the architect issued his final certificate of payment and accepted the premises, becoming evident after the one-year warranty contained in the contract and which could not have been discovered by the exercise of ordinary care, may be made the basis of a suit for damages on account of such defects. See Ann. 54 A.L.R. 1266. The architect's final certificate is binding on all parties as to the actual physical final completion of the work in erecting the structure or making the improvement called for by the construction contract. Insofar as defects are concerned which are unknown and could not have been discovered by ordinary care, the four-year statute of limitations applies. City of Osceola v. Gjellefald Construction Co., 225 Iowa 215, 279 N.W. 590 (1938); Elliott Consolidated School District v. Busboom, 227 F. Supp. 858 (1964); 13 Am.Jur.2d 59, Building, etc. Contract, Sec. 55. The case of American Employers' Ins. Co. v. Huddleston, 123 Tex. 285, 70 S.W.2d 696 (1934), was a suit by Huddleston against a contractor, Woodruff, and his surety, the insurance company, for damages resulting to plaintiff Huddleston from the failure to build the improvements in accordance with the building contract and also for the use of defective materials and faulty workmanship. Plaintiff recovered in the trial court, and the Court of Civil Appeals affirmed. This Court affirmed the judgments of both courts below. The defects were discovered within one year after the architect issued his final certificate, but the principle of law stated also applies to our case. In affirming, this Court said: That case discusses Arts. 20, 25 and 31 of the building contract, and they are substantially in the same wording as the contract in the case at bar. Substantially the same result was arrived at in the case of Houston Fire &amp; Cas. Ins. Co. v. Riesel Ind. Sch. Dist. (Tex.Civ.App., 1964), 375 S.W.2d 323, writ refused, n. r. e. That case is easily distinguishable from the case at bar, but the discussion of Arts. 20 and 25 announce correct principles of law which are applicable to our case. On rehearing that court quotes from the A. I. A. Standard Contract Forms and Laws, William Stanley *479 Parker and Faneuil Adams, pp. 38 and 39 as follows: We approve of this reasoning. It follows from what we have said above that the trial court was in error in granting summary judgment in favor of the contractor, and likewise the Court of Civil Appeals erred in affirming that judgment. The City's cause of action against the surety is severed out, and we affirm the judgments of both courts below in favor of the surety, Travelers Indemnity Company. We reverse the judgments of both courts below in favor of the contractor, and that cause is remanded to the trial court for a trial on the merits. One-third of the costs are assessed against the City of Midland and two-thirds against the contractor, Leonard E. Waller.