Opinion ID: 1550665
Heading Depth: 1
Heading Rank: 2

Heading: The Appeal of the Steel Company.

Text: The steel company contracted with the construction company to ship the steel in sequence so as to facilitate erection, and plans were worked out which set forth the sequence in which it was to be shipped. The steel was not shipped in sequence and the special master has found that this increased the cost of the construction company in the sum of $3,585.87. The special master also found, however, that the construction company acquiesced in this departure from the contract but that the surety company did not acquiesce. The trial judge affirmed these findings, saying: Both parties to the controversy agree that the steel was not shipped in sequence and it is equally clear that by reason thereof, Pike & Cook was delayed in its work and was put to additional expense in handling the materials, storing the materials which could not be used upon arrival, etc. It has filed as an exhibit an itemized statement of its loss and expense in this respect and the witness, Van Slyke, testified to the items therein contained. Wheeling Structural Steel Company admits that the materials were not shipped in sequence, but claims that this change in the method of shipment was made at the suggestion of Mr. Pentecost, President of Detroit Steel Erection Company. While the evidence is conflicting on this point, it clearly preponderates in favor of the contention of the Wheeling Structural Steel Company and were this litigation solely between the Wheeling Structural Steel Company and Detroit Steel Erection, this claim for damages would have to be refused. The American Surety Company, however, did not consent to this deviation from the contract   . Upon these concurrent findings as to the facts, which we find no basis in the record to disturb, the lower court held that the surety company, as assignee of the construction company or by way of subrogation to its rights, was entitled to recover of the steel company the damages due to this deviation or departure from the contract. In this we think there was error. The rights of the surety company to recover of the steel company, whether as assignee of the rights of the construction company or by way of subrogation, could not rise above the rights of that company. Hartford Accident & Indemnity Co. v. Board of Education, 4 Cir., 15 F.2d 317; Hughes v. McDermitt 86 W.Va. 86, 102 S.E. 767; 4 Am.Jur. 304-305. It is not merely a question of an assignment by the construction company being subject to defenses against that company, but there is the more fundamental defect that there was nothing to assign. That company having acquiesced in a change in the contract respecting delivery, there was no breach of contract on the part of the steel company; and consequently there was no claim of damages to be assigned or for the surety company to be subrogated to. The learned judge below evidently had in mind the rule that departure from the contract releases the surety, at least to the extent of the damage sustained as a result of the departure. See Fidelity & Casualty Co. v. Metal Window Products Co., 4 Cir., 30 F.2d 56; Southern Surety Co. v. Plott, 4 Cir., 28 F.2d 698; Pickens County v. National Surety Co., 4 Cir., 13 F.2d 758, 759. Here, however, the question is not one of releasing the surety from liability under his bond, but of permitting him to recover damages, by way of subrogation or assignment, on account of breach of contract. Since the contract has been performed as modified, there has been no breach. Consequently there can be no recovery of damages on account of breach, whatever may have been the effect of the modification of the contract on the undertaking of the surety. For the reasons stated, the decree appealed from will be reversed on both appeals and the cause will be remanded for further proceedings in accordance herewith. The costs in this Court will be divided and the costs in the court below will be retaxed in such way as to cast upon each of the parties a just portion thereof in the light of the final decree. Certainly, the surety company should bear all of the cost properly attributable to the litigation of the claim for damages with respect to the shipment of the steel, and the steel company should bear all the cost properly attributable to the litigation of its claim of $10,527.47 under the bond. Reversed.