COLUMBUS FIRE c. CO. v. AM. DRUGGIST INS. CO

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Docket Number

66057.

Attorney(S)

Danny L. Dupree, for appellant. H. Baxter Harcourt, Allen C. Levi, for appellee.

Judges

BANKE, Judge.

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Smart Summary

Factual and Procedural Background

This case arises from a contract dispute involving a performance bond issued by the appellee surety guaranteeing a subcontractor's performance on a contract for installing fire-suppression equipment at the Marshall Space Flight Center in Huntsville, Alabama. The appellant contractor sought to recover on the bond after the subcontractor defaulted. The case was tried before a jury, which found in favor of the appellant for the bond amount and additionally awarded a bad-faith penalty and attorney fees under OCGA § 10-7-30. The trial court later granted the appellee's motion for judgment notwithstanding the verdict, removing the bad-faith penalty and attorney fees from the award. The appellant appealed this ruling. The jury also awarded damages and attorney fees against the subcontractor, but that issue is not before the court on appeal.

Legal Issues Presented

Whether the appellee surety is liable for a bad-faith penalty and attorney fees under OCGA § 10-7-30 given the timing of the notice of default, demand for payment, and filing of suit.
Whether the appellant is entitled to additional attorney fees on appeal.

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Guarantee Reserve c. Ins. Co. v. Norris, 219 Ga. 573, 134 S.E.2d 774 (1964)	Interpretation of statutory 60-day waiting period before filing suit to claim bad-faith penalty and attorney fees under a statute analogous to OCGA § 10-7-30.	The court relied on this precedent to hold that failure to wait 60 days after demand before filing suit bars recovery of bad-faith penalties and attorney fees, affirming the trial court's ruling striking those awards.

Court's Reasoning and Analysis

The court analyzed the timing of the appellant's notifications and demands. The initial notice of default dated February 5, 1981, was effectively withdrawn by the appellant's own vice-president and subsequent letter of February 16, 1981, which explicitly stated no claim was made against the bond at that time. The subcontractor was not declared in default again until April 16, 1981, the same date that demand was made against the surety. Since suit was filed only 27 days later, less than the 60-day statutory waiting period mandated by OCGA § 10-7-30, the court concluded that the surety could not be liable for bad-faith penalties and attorney fees. The court followed the precedent set by Guarantee Reserve c. Ins. Co. v. Norris, which held that failing to wait 60 days after demand before filing suit is an absolute bar to such claims. Additionally, the court denied the appellant’s motion for attorney fees on appeal, citing lack of statutory authority and the prior holding.

Holding and Implications

Judgment affirmed.

The court upheld the trial court’s judgment striking the bad-faith penalty and attorney fees awarded to the appellant, holding that the appellant did not comply with the statutory 60-day waiting period after demand before filing suit. The appellant’s motion for additional attorney fees on appeal was denied. This decision directly affects the parties by limiting recovery of bad-faith penalties and fees to cases where the statutory waiting period is observed. The opinion does not establish new precedent beyond reaffirming existing statutory interpretation.

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COLUMBUS FIRE SAFETY EQUIPMENT COMPANY, INC. v. AMERICAN DRUGGIST INSURANCE COMPANY, INC.

BANKE, Judge.

This case involves a claim by the appellant contractor to recover on a performance bond executed by the appellee, guaranteeing a subcontractor's performance on a contract for the installation of fire-suppression equipment in the Marshall Space Flight Center in Huntsville, Alabama. The case was tried before a jury, and a verdict was returned in favor of the appellant for the amount of the bond. In addition, the jury awarded the appellant a bad-faith penalty and attorney fees pursuant to OCGA § 10-7-30 (Code Ann. § 103-210). The trial court subsequently granted the appellee's motion for judgment notwithstanding the verdict with regard to the bad-faith penalty and attorney fees, and the appellant filed this appeal. The jury also returned a verdict in favor of the appellant against the subcontractor for compensatory damages and attorney fees, but no issue as to that award is before us.

The appellant first notified the appellee of the subcontractor's default in a letter from its attorney dated February 5, 1981. However, on February 16, 1981, the subcontractor was notified that it would be allowed additional time to perform its obligations under the subcontract. This notification was made in a letter from the appellant which closed as follows: "In summary, your rights to proceed are unchanged and no claim has been made against your bond, at this time." On April 16, 1981, appellant's attorney notified the subcontractor in writing that its right to proceed had again been terminated. On the same date, demand was made against the appellee surety for payment on the bond. This suit was filed 27 days later, on May 13, 1981. Held:

1. OCGA § 10-7-30 (b) (Code Ann. § 103-210) provides, in pertinent part, as follows: "In the event of the refusal of a corporate surety to commence the remedy of a default covered by, to make payment to an obligee under, or otherwise to commence performance in accordance with the terms of a contract of suretyship within 60 days after receipt from the obligee of a notice of default or demand for payment, and upon a finding that such refusal was in bad faith, the surety shall be liable to pay such obligee, in addition to the loss, not more than 25 percent of the liability of the surety for the loss and all reasonable attorney's fees for the prosecution of the case against the surety."

The person serving as the appellant's vice-president at the time the events in question transpired admitted that his company had "nullified" the initial February 5th notice of default in order to give the subcontractor another chance to perform on the subcontract. Furthermore, as previously indicated, the appellant's February 16th letter to the subcontractor specified that no claim was being made against the performance bond "at this time." Thus, the February notice of default was clearly intended to be withdrawn. Since the subcontractor was not again declared in default until April 16, 1981, less than 60 days before suit was filed, and since no demand for payment was made against the appellee until that same date, it follows that the appellee cannot be held liable for a bad-faith penalty and attorney fees unless its continued failure to pay the claim after the suit was filed may also be counted as part of the 60-day deadline set forth in the statute.

An identical issue was before the Supreme Court in Guarantee Reserve c. Ins. Co. v. Norris, 219 Ga. 573 ( 134 S.E.2d 774) (1964), with regard to application of former Code Ann. § 56-1206 (OCGA § 33-4-6). That statute is virtually identical to OCGA § 10-7-30 (Code Ann. § 103-210), except that it deals with the liability of insurance companies on their insurance contracts rather than the liability of corporate sureties on their suretyship contracts. The court concluded in that case that the insured's failure to wait at least 60 days between making demand for payment and filing suit constituted an absolute bar to its statutory claim for a bad-faith penalty and attorney fees. We are constrained by this holding to conclude that the trial court did not err in striking the bad-faith penalty and attorney fees awarded to the appellant in the case before us now.

2. The appellant's motion for an award of additional attorney fees on appeal is, perforce, denied, both because of our holding in Division 1, supra, and because this court is not empowered by statute or otherwise to grant such relief.

Judgment affirmed. Deen, P. J., and Carley, J., concur.

DECIDED APRIL 18, 1983 — REHEARING DENIED MAY 4, 1983 — CERT. APPLIED FOR.