United States v. Glassman Construction Company, 11631.

• Decision Date: 03 May 1968
• Docket Number: No. 11631.,11631.
• Parties: The UNITED STATES of America for the Use and Benefit of CLARK-FONTANA PAINT COMPANY, Inc., Appellant, v. GLASSMAN CONSTRUCTION COMPANY, Inc., and Home Indemnity Company, Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

397 F.2d 8 (1968)

The UNITED STATES of America for the Use and Benefit of CLARK-FONTANA PAINT COMPANY, Inc., Appellant, v. GLASSMAN CONSTRUCTION COMPANY, Inc., and Home Indemnity Company, Appellees.

No. 11631.

United States Court of Appeals Fourth Circuit.

Argued February 7, 1968.

Decided May 3, 1968.

Sebert H. Keiffer, Washington, D. C. (Joseph F. Vallario, Jr., Washington, D. C., on the brief) for appellant.

Leonard S. Melrod, Washington, D. C. (Joseph V. Gartlan, Jr., and David S. Goldberg, Washington, D. C., on the brief) for appellees.

Before HAYNSWORTH, Chief Judge, and BRYAN and CRAVEN, Circuit Judges.

CRAVEN, Circuit Judge:

The question, correctly framed by the district judge, is whether a supplier of materials, who has not in fact been fully paid, can recover under the Miller Act, 40 U.S.C. § 270b, the balance due when it has received and endorsed checks from the general contractor that were more than sufficient to cover that balance. We think so and reverse the judgment of the district court entered in favor of the general contractor.

Glassman Construction Company undertook, by written contract with the United States, to build 150 family housing units at Andrews Air Force Base, Maryland. Elmore Decorators then subcontracted with Glassman to perform the painting work on the project for $56,500 and arranged for Clark-Fontana Paint Company, Inc. to supply the necessary paint. To assure itself of payment, Clark-Fontana requested that Glassman agree to make payments on the Elmore subcontract by means of checks payable jointly to Elmore and Clark-Fontana. Glassman and Elmore signed a written agreement to that effect on January 14, 1965; pursuant to the terms of the instrument, entitled "Joint Check Assignment," Glassman issued nine checks between March 15 and July 15, 1965, for a total amount of $30,300. On the reverse side of each check the following legend was stamped in capital letters:

"THE UNDERSIGNED ENDORSER(S), IN CONSIDERATION OF THE ISSUANCE OF THIS CHECK, DO HEREBY WAIVE AND RELEASE TO THE EXTENT OF THE FULL FACE VALUE HEREOF ANY RIGHT ANY OF THEM MAY HAVE TO CLAIM A MECHANIC'S OR MATERIALMEN'S LIEN OR TO ASSERT ANY CLAIM UNDER ANY BOND GIVEN BY THE PAYER HEREOF AS PRINCIPAL, FOR ANY WORK DONE FOR OR MATERIALS FURNISHED TO THE PAYER HEREOF OR ANY OTHER PAYEE OR PAYEES NAMED HEREIN IN OR ABOUT THE CONSTRUCTION, REPAIR OR IMPROVEMENT OF THE JOB DESIGNATED ON THE REVERSE SIDE HEREOF." On all but two of the checks there was also stamped, "NOTE: TWO ENDORSEMENTS REQUIRED."

The district court found that the procedure was for Glassman to deliver the checks to the president of Elmore, Eubank, who endorsed the checks and took them to Clark-Fontana. After endorsement by both parties, seven of the checks were deposited in Elmore's account and two were deposited in Clark-Fontana's account. Because Elmore was having trouble meeting its payroll, Clark-Fontana allowed Elmore to retain most of the proceeds from the checks, and on the two occasions when the checks were deposited to Clark-Fontana's account, Clark-Fontana gave its own check to Elmore. On July 15, the date of the last check, the total cost of the paint that Clark-Fontana had delivered was $17,068.71, while it had deducted from the checks a total of only $7,817.16. The district court found that if Clark-Fontana had deducted the amount currently due from each check, its bill to Elmore would have been fully paid as of July 15.

Elmore's difficulty in meeting its payroll increased as the work progressed; when Glassman refused to make further advances beyond the terms of the subcontract, Elmore signed, at Glassman's request, a letter of default dated July 22, 1965. The understanding between Glassman and Elmore was that the president of Elmore would continue to stay on the job and supervise the men, but Glassman would meet the payroll. In addition, Glassman was to pay Elmore any profit remaining at the end of the job. This arrangement, of which Clark-Fontana had no knowledge, continued until a voluntary petition in bankruptcy was filed by Elmore on August 9.

To recover its unpaid balance, Clark-Fontana filed suit under the Miller Act against Elmore, Glassman and Glassman's surety, Home Indemnity Company. The defendants have now conceded liability for the cost of paint delivered after July 15, the date of the last joint check, but liability for paint delivered before that date is denied, primarily on the ground that Clark-Fontana expressly waived its right to claim under the Miller Act the $9,251.55 difference between the cost of the paint it delivered and the amount it deducted from the joint checks. Alternatively, the defendants argue that the same result can be reached on the basis of estoppel or payment.

Unquestionably, the Miller Act is highly remedial in nature and is "entitled to a liberal construction and application in order properly to effectuate the Congressional intent to protect those whose labor and materials go into public projects." Clifford F. MacEvoy Co. v. United States, for Use and Benefit of Calvin Tomkins Co., 322 U.S. 102, 107, 64 S.Ct. 890, 893, 88 L.Ed. 1163 (1944). We are not unmindful that the Act places a sometimes heavy burden of care on general contractors and their sureties, and we do not hold that protection of laborers and materialmen may never be accomplished by other means so as to avoid the general contractor's statutory obligation. But where that result is attempted by means of express waiver, we think that congressional purpose requires that waiver be...