Increasing the Penal Sum of a Performance Bond

[tough2fight4justice]

My question relates to legal practice in the state of:Michigan

A circuit court judge ruled in my favor that the penal sum of my performance bond could not be increased for the intention of collecting liquidated damages. I did some researched and it looks like there is an existing "rule" that states the penal sum can increase only in certain circumstances such as change orders. What is the "rule" and if it is a "rule" then why is the defendant appealing the judges decision? plaintiff

[Mr. Knowitall]

Got facts?

[tough2fight4justice]

I'm afraid I have more facts than I need.

[Mr. Knowitall]

We have the opposite problem.

If you cannot share enough facts to give your question context or structure, all we can do is tell you to consult a lawyer.

[tough2fight4justice]

I entered into a contract with a County to finish the remaining 40% of a special assessment bond project. I was told the previous contractor ran into an electrical interference prohibiting his use of underground guiding equipment needed to install HDD pipe under a roadway. The interference could not be resolved within a timely manner so the County and contractor agreed to termination by convenience.

[Mr. Knowitall]

Look at MCL 129.201 et seq, and MCL 570.101 et seq.

You say "I did some researched [sic] and it looks like there is an existing 'rule'", but you have chosen not to tell us what you're looking at. If you're looking at something that points you to the "rule", you don't need to be asking us to find it for you - you already have it in front of you.

[tough2fight4justice]

I was reading “Liability of the Performance Bond Surety for Damages” by Keith A Langley. In my case the County is claiming “actual” damages that exceed the penal sum of the bond. The claims do not include any “Liquidated Damages”. I have been trying to get to trial for 5 years now. Up to this point, I “understood” the reasons for delays brought forth by the County. But this time around I can find no reason for them to appeal the Circuit Courts decision. My Bonding Company is still a party to the lawsuit and even at this point, they refuse to bend over for the County. They are telling me that the bond is specifically worded to limit “liquidated damages” against the penal sum and that there is a “rule” stating so. Please be patient with me. My case is “politically complicated”. I am just a down home gal who beats the pavement everyday trying to stay in business and follow the "rules".

[Mr. Knowitall]

Okay... If I follow, you contracted with the county to perform certain services. For one reason or another you did not perform your duties under your contract and were sued. The County has filed a claim against your bond and, for reasons you have not shared with us, is taking the position that the surety should cover all of its claimed damages. Meanwhile the surety is asserting that its liability is limited to the penal sum - the maximum amount specified in the surety bond for what the surety will have to pay in the event of your nonperformance. The Circuit Court rejected the County's argument, which would make the surety company happy, but potentially leaves your company on the hook for damages in excess of the penal sum. The County is now appealing, presumably because it fears that it will not be able to recover the full damages it seeks from your company.

If you look at the briefs the parties submitted to the Circuit Court when asking it to decide the issue or, if filed, the appellate briefs submitted by the insurance company arguing that its liability is limited to the penal sum, you should find the authority that the surety believes limits its exposure to the penal sum. I expect from your description of the case and issues that you're represented by counsel - if you are having difficulty reviewing the briefs yourself, your lawyer should be able to explain the surety's argument to you. Perhaps they're alluding to the rule of Genesee County Board of Road Com'rs. v. N. American Development Co., 369 Mich. 229, 119 N.W.2d 593 (1963), applying the surety bond as liquidated damages when actual cannot be easily ascertained.

[tough2fight4justice]

I agree with much of what you state. I’d like to share with you additional details of my case. Prior to my contract with the County, the project was already underway. The prior contractor experienced an array of difficult and problematic site conditions. Sudden “blowouts” of water pouring out and down into his 25’ deep trench was a big one. When it happened, the water carried silt and sand to the bottom of the trench causing him to undercut and stone 3 to 5 feet below the bottom of the pipe. Bank failure and the inability to compact properly followed.
Before he was terminated by convenience, he suggested installing the remainder of the pipe with a Horizontal Directional Drill method instead of open cut…or, an additional 25 feet of ROW in which to “safely” work. All of this information was received through discovery. Nobody ever said a word about it. Every single thing he experienced or requested I did and did too, and still…Nobody said a word. He was paid for his stone undercutting and additional tree removal. My change order requests for the same were denied. He walked away with, over and above his original contract price by 30%, with only 60% of the project completed. My bid documents were just as bad if not worse. The soil borings were materially inaccurate and soil boring location map indicated that 2 of them were taken a mile north of the project. The Road Commission, after observing the other contractors construction, grew concerned over the integrity of their road and its shoulder. They added 7 additional provisions for “use of road shoulder” which basically meant “you can’t use it”. It was not in my bid documents. My bid documents contained a copy of the “old” permit. My plans included a barricade plan of “shoulder work ahead” and the use of the shoulder was permitted. My bid documents contained technical data in the form of a MDEQ permit, submitted through the projects design engineer, asking, ”Do you expect groundwater dewatering to take place on this project”, and the answer was…no.
I received the County’s own engineer’s project peer review stating:

1. “HRC is concerned that the plans do not give adequate information to the bidders on the severity of construction of this project, especially related to the potential issues associated with the depth of the proposed sewer along much of the route. This could place unwarranted liability on the Livingston County Drain Commission for problems encountered during construction.”

Nothing was done.

“3” contractors and 7 years later, the project is still not done. The damages the County is suing for, against the performance bond only, is maintenance of an open hole excavation and the work the 3rd contractor performed “buttoning up the project”. In addition they contacted him to install an additional 170 ft of pipe in order to hook up a bar across the street. It took him 3 weeks and an additional 130 feet of ROW the whole length to do it.
As far as “Genesee County Road Commissioners vs. North American Development Company”, the defendant didn’t do any work but still had a contractual obligation to do so. Since there were no actual damages to collect, liquidated damages against the bond fulfilled the obligation. At least that’s what makes sense to me. The plaintiff deserved it.

Do you think differently now?