Maryland Casualty Co. v. State

Plea 11, if not otherwise faulty, purports to set up a modification of the contract and the facts therein set up and relied upon do not amount to a modification of the contract, and may have been a mere indulgence as to payments after maturity.

Pleas 2 to 6, inclusive, attempt to set up laches, or a failure upon the part of the agents of the state to exact monthly collections, to institute suit, and to notify this appellant of the respective defaults. The contract does not expressly require this, and, even if the statute does, which we do not decide, the state cannot be defeated in the enforcement of its rights because of laches or nonaction on the part of its officers in this respect. State ex rel. Lott v. Brewer, 64 Ala. 287.

Pleas 7, 8, 9, and 10 attempt to set up a breach of the contract by the state in removing the convicts or in taking them over after Thoele-Phillips Manufacturing Company became bankrupt. Under the provisions of the contract and the terms of the law, the state had the right to terminate the contract at any time without reason. Code 1907, §§ 6527, 6562. It was not therefore incumbent upon the state to serve formal notice of a purpose to terminate, but it could do so by retaking or reclaiming the convicts, which was the sole subject-matter of the contract.

Plea 14 seeks to avoid liability because of an accrual of liability to the state by the defendant's principal prior to the final approval of the bond by the Governor. The bond shows that it was executed May 14, 1914, and expressly states that it is to stand for all things required by the contract from its beginning. The delay in approving the bond did not affect this defendant's liability. American Co. v. Lawrenceville Cement Co. (C. C.) 110 Fed. 717. Especially so in the absence of a fraudulent representation or concealment of facts developed between the execution and approval of the bond, and which is not set up in said plea 14. 32 Cyc. p. 63 (c).

Section 2 of the contract, among other things, says:

"And if default be made in such payment and suit at law be instituted to recover said hire, then 20 per cent. damages shall be added to said hire."

An interpretation of the foregoing quotation presents the only debatable question involved in this appeal, and it is insisted that said 20 per cent. is not collectible because it is the mere imposition of a penalty upon the Thoele-Phillips Company for a default in the payment, notwithstanding the law provides interest as the measurement of damages for said default. If the 20 per cent. was provided as for a mere default and nothing more, there might be merit in the contention, but the payment of same is not dependent solely upon a default, but upon the further condition that suit is brought to recover the hire. In other words, it was the evident intention of the parties that if default be made and the state had to sue or litigate to collect the hire, then it should be indemnified as to all costs and damages incurred in the enforcement of its rights, such as attorney's fees, traveling expenses of its agents, accountants, etc., and the measure of same was not at the time readily ascertainable, and could not be until after the controversy should be finally settled. It was, no doubt, within the contemplation of the parties that there might be a series of suits, the incurring of special counsel fees, the expenses of public examiners, etc., and that the state should be indemnified against all damages not then readily ascertainable, but not to exceed 20 per cent. Had the agreement provided a fixed sum for attorney's fees or a reasonable sum, there could be no question of its validity, as such provisions have been repeatedly enforced by the courts of this and other states, and the fact that the parties may in advance have agreed to indemnify the state as to expenses to be incurred in the collection of the hire, not to exceed a certain sum, and that specific charges were not enumerated, did not render the same a nonenforceable penalty.

We think that the word "suit" as used in the contract included the plural as well as the singular, and that the same applied both to the proceedings in the bankruptcy court as well as the present suit. The fact that 20 per cent. was not claimed or proven in the bankruptcy proceedings does not preclude the state from doing so in the present action. It may be questionable as to whether or not the same had accrued when the Thoele-Phillips Company became a bankrupt, and was therefore provable, but if it could have been there established, the plaintiff's failure to do so does not estop it from claiming the same upon the suit against this defendant, the surety, and which was not a party to the bankruptcy proceedings. Fidelity Deposit Co. v. Robertson, 136 Ala. 379, 34 So. 933.

It is next insisted that the judgment includes too much interest; that is, that interest was not claimed in the bankruptcy court, and should not now run except from the final affirmation of the claim by the Circuit Court of Appeals. The judgment does not include interest from the maturity of the claim, but only from the filing of same in the bankruptcy court. The claim had then matured, and whether the order of approval did or did not mention interest matters not, as the claim was due and the law provides interest.

Finding no reversible error in the record, the judgment of the circuit court is affirmed.

Affirmed.

SAYRE, GARDNER, and BROWN, JJ., concur.