Golden West Construction Company v. United States, 6780.

• Decision Date: 02 July 1962
• Docket Number: No. 6780.,6780.
• Citation: 304 F.2d 753
• Parties: GOLDEN WEST CONSTRUCTION COMPANY, a corporation, and General Insurance Company of America, a corporation, Appellants, v. UNITED STATES of America for the Use and Benefit of George BERNADOT, d/b/a George W. Bernadot, Red-E-Mix Concrete Company; and Joseph Campbell, Comptroller General of the United States of America, Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

304 F.2d 753 (1962)

GOLDEN WEST CONSTRUCTION COMPANY, a corporation, and General Insurance Company of America, a corporation, Appellants, v. UNITED STATES of America for the Use and Benefit of George BERNADOT, d/b/a George W. Bernadot, Red-E-Mix Concrete Company; and Joseph Campbell, Comptroller General of the United States of America, Appellees.

No. 6780.

United States Court of Appeals Tenth Circuit.

May 31, 1962.

Rehearing Denied July 2, 1962.

Richard I. Singer, San Diego, Cal. (William J. Cayias, Salt Lake City, Utah, Ben B. Rubin, Norman T. Seltzer, Herbert J. Solomon, San Diego, Cal., and D. Eugene Livingston, Salt Lake City, Utah, on brief), for appellants.

Max K. Mangum, Salt Lake City, Utah (H. Arnold Rich and Leonard W. Elton, Salt Lake City, Utah, on brief), for appellees.

Before MURRAH, Chief Judge, and BREITENSTEIN and HILL, Circuit Judges.

MURRAH, Chief Judge.

By this appeal Golden West Construction Company and its surety, General Insurance Company of America, attack a judgment in a Miller Act (40 U.S.C.A. § 270a et seq.) case for the reasonable value of labor and materials furnished by appellee-Bernadot in connection with the construction by Golden West of government radar stations in Utah.

Shortly after Bernadot began work under its subcontract with Golden West, a new agreement was orally entered into between the parties which the jury, by special interrogatory, found to require Golden West to take over and perform the sub-contract; pay Bernadot's outstanding obligations incurred in connection with the sub-contract; reimburse Bernadot a reasonable amount, to be determined at a later date, for the use of equipment left on the job site by Bernadot. Judgment was entered in the amount stipulated by the parties as reasonable in the event the issues were resolved in favor of Bernadot.

Appellants contend that Bernadot's suit was not commenced within the limitation period prescribed by the Miller Act; that the trial court erred in the admission and exclusion of evidence; that General Insurance Company was relieved from its surety liability by reason of the substitution of a new agreement between Golden West and Bernadot; and that the trial court erroneously allowed interest against General Insurance Company prior to its notice of Golden Wests' default.

The timeliness of Bernadot's suit is governed by 40 U.S.C. § 270b, which, prior to amendment in 1959, provided that "Miller Act" claims must be commenced within one year of the "final settlement" date of the general contract under which the obligation sued upon arose.¹ At that time, Section 270c provided that the date certified by the Comptroller General of the United States as the "final settlement" date "* * * shall be conclusive as to such date upon the parties."² The parties agree that this suit was commenced within one year from the date certified by the Comptroller General. Appellants contend, however, that the Comptroller General's certificate is reviewable for fraud or bad faith and assert that the determination of the final settlement date was so erroneous as to imply bad faith. And see Peerless Casualty Company et al. v. United States for Use and Benefit of Bangor Roofing and Sheet Metal Company (1 C.A.), 241 F.2d 811; United States of America for Use of Soda v. Montgomery et al. (U.S.D.C.M.D.Pa.), 170 F.Supp. 433; 269 F.2d 752 (3 C.A.).

Assuming that the certification by the Comptroller General under the pre-amended statute was reviewable in the manner suggested, the trial court specifically found that there was "* * no evidence of bad faith or fraud in connection with the certification of the Comptroller General of the United States" and that the certification is supported by "substantial evidence." We agree with the trial court. The record shows that the Comptroller General had, prior to his certification, information in the form of letters indicating that work had been completed and accepted by January 16, 1959; that an Equalization Order had been entered on March 20, 1959, making final account for all unfinished items on the contract; and that the final balance due on the contract had been determined as of the date of the Equalization Order. The Order itself however, states that some of the work had not been completed as of the date of its entry, and it was estimated that another 60 days would be required. And, the record further shows that changes in the contracted work made pursuant to the Equalization Order were not accepted by the United States until April 15, 1959 — the date certified by the Comptroller General as the "final settlement" date. We accordingly hold that Bernadot's suit was timely filed.

During the course of the trial, a letter from Bernadot's attorney to M. L. Lawrence, an officer of Golden West, containing Bernadot's version of the oral agreement, was introduced into evidence over appellants' objection. Prior to receiving the exhibit, the trial court asked whether the addressee of the letter would testify, and counsel for appellants assured the court that he would. Indeed, Mr. Lawrence, the addressee, admitted on direct examination that he had received the letter and he was cross-examined as to the accuracy of its contents. But appellants contend that the letter was a self-serving declaration and that Golden West's failure to respond thereto improperly imputed an implied admission on its part that the letter had accurately reported the terms of the oral agreement. It is, of course, settled law that one may not make his case by pulling on his own evidentiary bootstraps. See Leach & Company, Inc. v. Pierson, 275 U.S. 120, 48 S.Ct. 57, 72 L.Ed. 194; Farris v. Sturner (10 C.A.), 264 F.2d 537. But this does not mean that all writings with self-serving propensities are, ipso facto, inadmissible. In this instance, the parties had orally abrogated a written contract and the substituted parol agreement was incomplete. Important matters were left for future negotiations and the evidence indicates that further communications were contemplated. The subject letter was written by appellee's counsel, who was present during the oral negotiations, and understandably sets forth appellee's version of the events leading to the cancellation of the written agreement as well as the terms and conditions of the new agreement. It was, to be sure, designed to advocate the interest of the appellee and, to that end, it was argumentative as well as expository. But it did purport to perpetuate the oral understanding of the parties and it invited close scrutiny and corrections of "any inaccuracies." It was not admitted as the "written agreement" of the parties. Rather, it was admitted under careful instructions to the effect that it might be considered by the jury as some evidence of the oral agreement between the parties. And we think it was admissible for that purpose.

Appellants next contend that General Insurance Company was relieved from any and all liability on its payment bond because the oral change in the contractual relationship between Bernadot and Golden West was prejudicial to its interest and negotiated without its knowledge or consent. Generally, a surety company is discharged from liability under its payment bond when a material change between the principal and the sub-contractor, without the consent of the surety, results in prejudice to the surety's interest. See American Bonding Co. of Baltimore et al. v. United States to Use of Francini et al. (3 C.A.), 233 F. 364; Piel Construction Co. v. Commonwealth of Pennsylvania to Use of Hendricks (3 C.A.), 35 F.2d 265; National Surety Co. v. Lincoln County, Mont. (9 C.A.), 238 F. 705; Bank of Eng., Ark. v. Maryland Casualty Co. (D.C.E.D.Ark.), 293 F. 783; Pickens County v. National Surety Co. (4 C.A.), 13 F.2d 758; United States v. Quaker Industrial Alcohol Corp. (D.C.E.D.Pa.), 2 F.Supp. 863, 866-867; American Auto Insurance Co. v. United States for Use and Benefit of Luce (1 C.A.), 269 F.2d 406. But "(T)echnical rules otherwise protecting sureties from liability have never been applied in proceedings under this statute" or its predecessor, the Heard Act (28 Stat. 278, and 33 Stat. 811). See Illinois Surety Co. v. John Davis Co., 244 U.S. 376, 380, 37 S.Ct. 614, 61 L.Ed. 1206; Fleisher Engineering & Construction Co. v. United States for Use and Benefit of Hallenbeck, 311 U.S. 15, 61 S.Ct. 81, 85 L.Ed. 12; Fanderlik-Locke Co. v. United States (10 C.A.), 285 F.2d 939, and cases there cited. "The purpose of the Miller Act is to provide security for those who furnish labor and material in the performance of government contracts, and a liberal ...