353 U.S. 210 (1957), 48, United States v. Carter

Docket Nº:No. 48
Citation:353 U.S. 210, 77 S.Ct. 793, 1 L.Ed.2d 776
Party Name:United States v. Carter
Case Date:April 29, 1957
Court:United States Supreme Court
 
FREE EXCERPT

Page 210

353 U.S. 210 (1957)

77 S.Ct. 793, 1 L.Ed.2d 776

United States

v.

Carter

No. 48

United States Supreme Court

April 29, 1957

Argued December 5, 1956

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Syllabus

As required by the Miller Act, a contractor who had a contract with the United States for the construction of federal buildings furnished a payment bond with a surety. The collective bargaining contract under which employees of the contractor were hired obligated the contractor to pay them wages at specified rates and, in addition, to pay 7 1/2 cents per hour of their labor to the trustees of a health and welfare fund established for their benefit and that of other construction workers. When the contractor failed to pay in full the required contributions to the health and welfare fund, the trustees of the fund sued (in the name of the United States) the surety to recover the balance due the fund, plus liquidated damages, attorneys' fees, court costs and expenses.

Held: the surety was liable under § 2(a) of the Miller Act, 40 U.S.C. § 270a. Pp. 211-221.

(a) The surety's liability on a Miller Act bond must be at least coextensive with the obligations imposed by the Act if the bond is to have its intended effect. Pp. 215-216.

(b) In this case, the trustees' rights against the surety depend upon, and are to be measured by, the applicable provisions of § 2(a) of the Act. P. 216.

(c) The Miller Act is to be given a liberal construction to effectuate its protective purposes. P. 216.

(d) The essence of the policy of the Miller Act is to provide a surety who, by force of the Act, must make good the obligations of a defaulting contractor to his suppliers of labor and material. Pp. 216-217.

(e) The Miller Act does not limit recovery on the statutory bond to "wages." P. 217.

(f) The contractor's employees will not have been "paid in full" for their labor in accordance with the collective bargaining agreements until the required contributions to the health and welfare fund have been made. Pp. 217-218.

(g) The contractor's obligation to contribute to the fund was covered by the statutory bond, even though that obligation was not

Page 211

set forth in the construction contract with the United States, but appeared only in the master labor agreements. P. 218.

(h) In the circumstances here, the trustees stand in the shoes of the employees, and are entitled to enforce their rights. Pp. 218-220.

(i) The trustees of the fund have an even better right to sue on the bond than does the usual assignee, since they are claiming recovery for the sole benefit of beneficiaries of the fund, and those beneficiaries are the very ones who have performed the labor. P. 220.

(j) For purposes of the Miller Act, contributions to the fund are, in substance, as much "justly due" to the employees who have earned them as are the wages paid to them directly in cash. P. 220.

(k) The trustees are also entitled, under the Act, to recover liquidated damages, attorneys' fees, court costs, and other related expenses of this litigation, since these items must be included if the employees are to be "paid in full" the "sums justly due" them. P. 220.

229 F.2d 645 reversed and remanded.

BURTON, J., lead opinion

MR. JUSTICE BURTON delivered the opinion of the Court.

This case concerns the extent of the liability of the surety on a payment bond furnished by a contractor, as required by the Miller Act, for the protection of persons supplying labor for the construction of federal public buildings.1 The collective bargaining contract under

Page 212

which the laborers were hired obligated the contractor to pay them wages at specified rates and, in addition, to pay 7 1/2 cents per hour of their labor to the trustees of a health and welfare fund established for their benefit and that of other construction workers. When the contractor failed

Page 213

to pay in full the required contributions to the health and welfare fund, the trustees of the fund sued the surety on the contractor's payment bond to recover the balance due the fund, plus liquidated damages, attorneys' fees, court costs and expenses. For the reasons hereafter stated, we hold that § 2(a) of the Miller Act imposes liability on the surety.

In November, 1952, the respondent contractor, Donald G. Carter, contracted with the United States to construct certain public buildings at Air Force bases in California. As required by the Miller Act, he filed performance and payment bonds executed by the respondent, Hartford Accident and Indemnity Company, as surety. The payment bond was in the penal sum of $52,434.30, and provided that the obligation of the surety shall be void

if the principal shall promptly make payment to all persons supplying labor and material in the prosecution of the work provided for in said contract . . . otherwise to remain in full force. . . .

The terms under which Carter employed laborers for the prosecution of the work were prescribed in master labor agreements governing the conditions of employment in the construction industry in 46 counties of northern California. Those agreements had been negotiated in June, 1952, through collective bargaining between the local council of a labor union representing construction workers and several associations of employers, one of which acted as an agent for Carter. The agreements obligated Carter to pay wages to his employees at specified rates which were to be not less than the prevailing rates determined by the Government. The agreements required also that, beginning February 1, 1953, Carter was to pay to the trustees of a health and welfare fund 7 1/2 cents for each hour worked by his construction employees.

The specified fund was established by a trust agreement dated March 4, 1953, and negotiated by the parties

Page 214

to the master labor agreements. Its pertinent provisions were as follows: the fund was to be administered by a board of trustees representing employers and employees. The trustees were authorized to use employer contributions to purchase various types of insurance, such as life, accidental death, hospitalization, and surgical benefit policies, with eligible employees and their dependents as the beneficiaries.2 The employees had no rights to the insurance benefits except as provided in the policies. Also, they had no right, title, or interest in the contributions, and it was expressly stated that the contributions "shall not constitute or be deemed to be wages" due the employees.

The trustees had the sole power to demand and enforce prompt payment of employer contributions. Those contributions were payable in monthly installments. Any installment not paid by the 25th of the month in which it came due was delinquent, and the sum of $20 per delinquency or 10% of the amount due, whichever was greater, was owed by the delinquent employer as liquidated damages, [77 S.Ct. 796] and not as a penalty. If the trustees filed suit to secure payment of any installments, the defaulting employer was to pay the reasonable attorneys' fees, court costs and all other reasonable expenses of the trustees incurred in the litigation.

Carter became insolvent after completing the construction work and paying his employees the wages payable

Page 215

directly to them. However, he failed to make his required contributions to the fund for February, March, and April, 1953. Pursuant to § 2(b) of the Miller Act, the trustees of the fund, in the name of the United States, instituted this action on the payment bond against Carter and his surety in the United States District Court for the Northern District of California. The complaint sought recovery of the unpaid contributions and the prescribed liquidated damages, attorneys' fees, court costs and expenses, in the total amount of about $500. The facts were stipulated, and the court, after hearing, granted the surety's motion for summary judgment. The Court of Appeals affirmed, holding that the trustees had no right to sue on the bond under § 2(a) of the Act, since they were neither persons who had furnished labor or material nor were they seeking sums "justly due" such persons. 229 F.2d 645. We granted certiorari to resolve the questions of statutory construction which are at issue. 351 U.S. 917.

Section 1(a)(2) of the Miller Act provides that, before any contract exceeding $2,000 for the construction of any public work of the United States is awarded to any person, such person shall furnish to the United States a payment bond with a satisfactory surety "for the protection of all persons supplying labor and material in the prosecution of the work provided for in said contract. . . ." 49 Stat. 793, 40 U.S.C. § 270a(a)(2). Section 2(a), which is at issue here, provides that

Every person who has furnished labor or material in the prosecution of the work provided for in such contract . . . and who has not been paid in full therefor . . . shall have the right to sue on such payment bond . . . for the sum or sums justly due him. . . .

(Emphasis supplied.) 49 Stat. 794, 40 U.S.C. § 270b(a).

The surety's liability on a Miller Act bond must...

To continue reading

FREE SIGN UP