Court Opinion

ID: 3692310
Source: CourtListenerOpinion
Date Created: 2016-07-06 06:34:16.981549+00
Date Added: 2024-06-11T15:33:24.250511
License: Public Domain

I must respectfully dissent from the decision of the majority. I believe that the incorporation provision identifies only the principal contract. It does not impose on the surety any of the duties of the principal.
The duties of a surety may be co-extensive with those of the principal, to perform if the principal does not, or its obligation may be only to compensate the creditor for the principal's non-performance.
Hughes-Bechtol made two promises to Piqua. In the principal contract it promised to install the steam system and to arbitrate disputes. In the performance bond it bound itself to pay a sum as penalty should it fail to perform under the principal contract.
Ohio Farmers likewise bound itself to pay the penal sum, but only if Hughes-Bechtol both failed to perform and failed to pay the penal sum as it promised. The promise of Ohio Farmers to pay the penal sum was co-extensive with the promise of Hughes-Bechtol in the same regard. The promise of Ohio Farmers was not co-extensive with the promises of Hughes-Bechtol under the principal contract.
A penal bond is a promise to pay a sum of money as a penalty in the event of non-performance. The promise is voided when performance takes place, and there is no obligation to pay the penalty unless performance has failed.
On the foregoing analysis, I believe that the general terms of the incorporation provision operate to identify only the principal contract and the duties of the principal therein, the breach of which triggers the obligations of either principal or surety to pay the penalty to which they are bound. The incorporation provision does not create a co-extensive obligation in the surety to perform under *Page 623 
the principal contract or to be bound by the promises of the principal contractor, including its promise to arbitrate disputes. At most, the surety is obligated to satisfy only to the extent of its promise, and, as a penalty, the principal's failure to perform.
I would reverse and remand.