City of Louisville v. Mehler, &c. Gosnell, &c., v. Wathen, &c. Wathen, &c., v. Bruck, &c. Gosnell, &c., v. Crider, &c. which it was provided that the work was to be done in accordance with the general ordinance, and that the general ordinance required the contractor to deposit bonds to the amount of ten per cent. of the contract price as a guaranty for five years, there was included in the contract price and in the warrants of the defendant property owners, a charge amounting to ten per cent. for repairs, and that they were not liable therefor, and that the warrants against them be scaled by ten per cent. OPINION OF THE COURT BY JUDGE PAYNTER-REVERSING. In Fehler v. Gosnell, 99 Ky., 380; (35 S. W., 1125), the court had under consideration a contract made by the city of Louisville for street improvements by original construction. Section 14 of the ordinance approved February 5, 1894, was made part of the contract. Part of that section reads as follows: "The contractor shall guaran ty the faithful performance of his contract according to this ordinance, and the pavement therein specified and the materials composing the same shall be kept in good repair for the period of five years from the completion of the work and its acceptance by the board of public works; and, to protect the city as to the character of said work and material and such repairs as may be needed, the board of public works to be the judge, the contractor shall deposit bonds of the city of Louisville or of the United States, amounting to 10 per cent. of the original contract price of the entire work, with the city treasurer, who shall hold the same, principal and interest, to be applied, so far as need be, in the necessary repairs of said work; and, at the end of said five years, the unexpended balance, if any, to be subject to the order of said contractor." Under the law the property owners are required to pay for the improvement, and the city the expenses of keeping the streets in repair. In passing upon the ques City of Louisville v. Mehler, &c. Gosnell, &c., v. Wathen, &c. Wathen, &c., v. Bruck, &c. Gosnell, &c., v. Crider, &c. tion (page 392, 99 Ky., and page 1128, 35 S. W.), the court, among other things, said: "This provision in our judg ment not only embraces a guaranty of faithful work, but also a provision for repairs rendered necessary by other causes than defects in the contractor's work." The court was of the opinion in that case that the ordinance and contract did not only require the property owner to pay the cost of the improvement, but also that the work should be kept in good repair for a period of five years; thus imposing upon the property owner an expense which should, under the law, have been borne by the city. Therefore the court adjudged that 10 per cent. of the contract price was in excess of the amount imposed by law on the property owners, and held they were not required to pay that excess. In order to follow the opinion of the court in Fehler v.. Gosnell, section 14 of the ordinance was not made part of the contracts here under consideration, but, in order to avoid the objection to it, the contracts which the city entered into with the contractors for the improvements, the payment of the cost of which is here involved, a pro-vision was inserted in the contracts as follows, to-wit: "The party of the second part hereby guaranties the work done under this contract, and the materials used in the construction of the same are free from defects or flaws, and this guaranty is for a term of five years from and after the acceptance of the work by the board of public works. It is hereby especially agreed and understood that this guaranty shall not include any repairs made necessary by any cause or causes other than defective work or materials used in the construction of the improvements. After the acceptance of the work by the board of public City of Louisville v. Mehler, &c. Gosnell, &c. v. Wathen, &c. Wathen, &c., v. Bruck, &c. Gosnell, &c., v. Crider, &c. works, the contractor agrees to deposit with the city treasurer bonds of the city of Louisville, or of the United States, amounting in the aggregate to 10 per cent. of the contract cost of the work herein provided for. Should any defect in the work or materials used become apparent during the said guaranty period of five years, the party of the second part shall have notice in writing from the board of public works of such defect, and he shall commence repairing same within three days after service of such notice, and shall prosecute the work of repairing, with all due diligence, to completion. Should he fail or refuse to begin said repairing of said defective work or materials within three days after the service of said notice, the board of public works may have said defects repaired, and charge the same to the contractor, and, to pay the expense of repairing such defects, they may sell for cash as many of the bonds herein mentioned as may be necessary, said sale to be at public auction, at such time and place as the board of public works may order, notice of said sale being given by one publication in the papers doing the public printing and advertising. At the end of said guaranty period of five years the unexpended balance of said bonds and interest, if any, shall be held subject to the order of said contractor. It is hereby further stipulated and agreed that the board of public works shall be the exclusive judge of the existence of defects in the work or materials herein mentioned, and of the extent of the repairs necessary to remedy same; and, further, that the appointment of inspectors by the board of public works, for the supervision of same, to insure that the work and materials are in accordance with the plans and specifications prepared by the board of public City of Louisville v. Mehler, &c. Gosnell, &c. v. Wathen, &c. Wathen, &c., v. Bruck, &c. Gosnell, &c. v. Crider, c. works for the improvement herein mentioned, and the supervision thereof by such inspector, shall in no wise relieve the contractor from the guaranty of his work and materials, as herein set forth." Under the provisions of this contract, the contractor only guaranties the work done under it, and that the materials used in the construction of the same are free from defects or flaws, and gives the city five years after the acceptance of the board of public works in which to ascertain and determine whether or not the work has been properly done, and that the materials used are free from defects and flaws. It is expressly provided that the guaranty does not include any repairs made necessary by any cause or causes other than defective work or materials used in the construction of the improvement. We are of the opinion that the city has the right to enter into a contract containing the provisions here in question, and that in doing so the property owner is not burdened with any expense which should properly fall upon the city in the matter of repairs after the improvement has been completed. It would certainly be a great misfortune for the taxpayers if the municipal authorities of the city of Louisville could not place a condition in a contract for street improvements which would make the contractor responsible to the city thereafter for defects in workmanship and material used in the construction of the improvement. If it could require personal security from the contractors that the improvements should be done in a workmanlike manner, and that the materials should be free from defects and flaws, it has the authority to require a deposit of securities which will afford the same protection. We are of the opinion that the rule Grant County Deposit Bank v. Littell's Ex'x. announced in Fehler v. Gosnell does not entitle the property owners here to be relieved from paying the full amount of the apportionment warrants. This being true, it necessarily follows that the city is not liable for the 10 per cent. of them which it was adjudged to pay. For the reasons indicated, the judgments are reversed on all appeals, and for proceedings consistent with this opinion. CASE 59-ACTION ON BOND OF CASHIER OF BANK-MAY 8. Grant County Deposit Bank v. Littell's Ex'x. APPEAL FROM GRANT CIRCUIT COURT. JUDGMENT FOR PLAINTIFF FOR ONLY PART OF ITS CLAIM AND IT APPEALS, AND DEFENDANT PROSECUTES CROSS APPEAL. REVERSED ON ORIGINAL AND AFFIRMED ON CROSS APPEAL. LIABILITY OF SURETIES OF CASHIER-FAILURE TO NOTIFY SURETIES OF PRIOR DEFAULT. Held: 1. Where a bank cashier renewed his bond each year, and the directors published each year a report showing that all was right, the fact that they might, by slight diligence, have discovered at the end of the first year that the cashier had permitted large overdrafts, does not release the sureties from liability for overdrafts permitted in subsequent years. 2. The gross negligence of the directors in failing to discover overdrafts permitted by a bookkeeper who was promoted to the office of cashier does not release the sureties in his bond as cashier from liability for subsequent overdrafts permitted by him, though the directors had published reports, before the sureties became bound, showing that all was right; there being no actual fraud or bad faith on the part of the directors. OPINION OF THE COURT BY CHIEF JUSTICE HAZELRIGG-REVERSING ON ORIGINAL AND AFFIRMING ON CROSS APPEAL. On January 8, 1892, one Nesbitt was elected cashier of the appellant bank, and on the 22d of the month he executed a bond for the faithful performance of his duties; and, |