332 U.S. 234 (1947), 847, United States v. Munsey Trust Co.

Docket Nº:No. 847
Citation:332 U.S. 234, 67 S.Ct. 1599, 91 L.Ed. 2022
Party Name:United States v. Munsey Trust Co.
Case Date:June 23, 1947
Court:United States Supreme Court
 
FREE EXCERPT

Page 234

332 U.S. 234 (1947)

67 S.Ct. 1599, 91 L.Ed. 2022

United States

v.

Munsey Trust Co.

No. 847

United States Supreme Court

June 23, 1947

Argued May 6, 1947

CERTIORARI TO THE COURT OF CLAIMS

Syllabus

1. Notwithstanding claims of a surety on a statutory payment bond (given under 40 U.S.C. § 270a) for reimbursement for sums paid to laborers and materialmen, the Government may set off, against unappropriated percentages of progress payments withheld by it and due to the contractor on the construction contract, a debt owed to it by the contractor as a result of a separate and independent transaction. Pp. 236-244.

2. When a receiver is appointed for a contractor with instructions to collect money owing to the contractor by the Government and to hold it for reimbursement of a surety on a payment bond for payments made to laborers and materialmen, a suit in the Court of Claims by the receiver against the Government for money due the contractor is in the right of the contractor, but the receiver may assert the surety's rights also. P. 239.

Page 235

3. Under Judicial Code § 145, 28 U.S.C. § 250, when a receiver asserts in the Court of Claims a contractor's title to a sum owing to him by the Government, that Court is under statutory duty to recognize an undisputed claim of the Government against the contractor. Pp. 239-240.

4. With reference to withheld and unappropriated percentages of progress payments on a construction contract, performance of which has been completed and accepted, the Government is not a mere general creditor, but a secured creditor entitled to withhold what it owes the contractor until it is paid whatever the contractor owes the Government. P. 240.

5. A surety on a payment bond who has paid laborers and materialmen for labor and material furnished under a Government construction contract is not entitled, by subrogation to their rights, to a lien on unappropriated percentages of progress payments retained by the Government for its own protection. Pp. 241-242.

6. The right of the Government to retained percentages of progress payments on a construction contract does not devolve on a surety who has paid laborers and materialmen, so as to prevent the Government from applying the unappropriated sum to the satisfaction of its own claim growing out of a separate and independent transaction. Pp. 242-243.

7. The provisions of 40 U.S.C. § 270a requiring a separate bond for payment of laborers and materialmen were enacted for their benefit, and do not give sureties who have paid them rights to the detriment of the Government. Pp. 243-244.

8. When the work to be done under a Government construction contract has been completed at the contract price and accepted by the Government, the law of damages is not pertinent to the rights of a surety on a payment bond given under 40 U.S.C. § 270a who has paid laborers and materialmen. P. 244.

107 Ct.Cl. 131, 67 F.Supp. 976, reversed.

Notwithstanding the existence of a claim by the Government against the contractor growing out of another transaction, the Court of Claims gave judgment against the Government to a receiver for a contractor for withheld and unappropriated percentages of progress payments on a construction contract, to be used by the receiver in reimbursing a surety on a payment bond for payments made

Page 236

to laborers and materialmen. 107 Ct.Cl. 131, 67 F.Supp. 976. This Court granted certiorari. 330 U.S. 814. Reversed, p. 244.

JACKSON, J., lead opinion

MR. JUSTICE JACKSON delivered the opinion of the Court.

This case presents a problem arising out of contracts for public building construction and repair. The rights inter sese of contractor, surety, assignees, and government have been productive of much litigation, but we have not heretofore had to decide whether percentages retained pursuant to contract by the United States may be subjected to its setoff claims despite the claims of a surety who has paid laborers and materialmen.

In May and July, 1940, six contracts were made between the United States and the Federal Contracting Corporation, in which the corporate contractor agreed to paint and repair certain federal buildings. Each contract conformed to the requirements of statute, 49 Stat. 793, 40 U.S.C. § 270a et seq., by providing for two surety bonds, one conditioned on the completion of the work within the contract period and the other on the payment of those furnishing labor and material to the contractor. The Aetna Casualty and Surety Company signed those bonds, each of which assigned to it the contractor's claims against the government for sums due on the contracts whenever the surety should be compelled

Page 237

by default of the contractor to fulfill its obligations.1 The work was completed by the contractor, apparently, in 1940, and accepted by the government. The surety therefore was not called upon to make good the promise of the performance bonds. But the contractor did not pay $13,065.93 owed to persons who had supplied labor and material for performance of five of the six contracts. This indebtedness the surety paid...

To continue reading

FREE SIGN UP