Maiatico Const. Co. v. United States

• Citation: 79 F.2d 418,65 App. DC 62
• Decision Date: 29 July 1935
• Docket Number: No. 6311.,6311.
• Parties: MAIATICO CONST. CO., Inc., v. UNITED STATES, to Use of PHELPS et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

65 App. DC 62, 79 F.2d 418 (1935)

MAIATICO CONST. CO., Inc., v. UNITED STATES, to Use of PHELPS et al.^*

No. 6311.

United States Court of Appeals for the District of Columbia.

Argued April 1, 1935.

Decided July 29, 1935.

George P. Lemm and Harold Brody, both of Washington, D. C., for appellant.

Bates Warren, Charles W. Clagett, William C. Sullivan, Fred J. Rice, Foster Wood, Vivian O. Hill, and Paul Sleman, all of Washington, D. C., for appellees.

Before MARTIN, Chief Justice, and ROBB, VAN ORSDEL, HITZ, and GRONER, Associate Justices.

GRONER, Associate Justice.

In November, 1930, appellant entered into contracts with the United States for the erection of three dormitory buildings at Howard University. Consolidated Indemnity & Insurance Company executed the usual statutory bonds. The contracts were signed on behalf of the United States by the Assistant Secretary of Interior, and were on the government standard contract forms and obligated the contractor to furnish all labor and materials and perform all work required in the construction of the buildings. Article 16 of the contract is as follows:

"Payments to contractors. — (a) Unless otherwise provided in the specifications, partial payments will be made as the work progresses at the end of each calendar month, or as soon thereafter as practicable, on estimates made and approved by the contracting officer. * * *

"(b) In making such partial payments there shall be retained 10 percent on the estimated amount until final completion and acceptance of all work covered by the contract; * * * That on completion and acceptance of each separate building, vessel, public work, or other division of the contract, on which the price is stated separately in the contract, payment may be made in full, including retained percentages thereon, less authorized deductions.

"(c) All material and work covered by partial payments made shall thereupon become the sole property of the Government * * *."

After the buildings were completed and accepted, this action was commenced against appellant and its surety by appellees — as plaintiff and interveners — claiming they had supplied labor and materials which entered into the construction of the buildings and for which they had not been fully paid.

The action was brought under the Heard Act (40 USCA § 270). Appellant put in issue the allegation that the contracts were contracts for public buildings or public works within the meaning of that act, and by stipulation that issue was submitted to the lower court, which found that the contracts and the work were contracts for public works and that the surety was liable under the bonds executed in accordance with the act.

We granted a special appeal, and the single question for decision is whether an action in the name of the United States can be brought on the bonds given to the United States to secure the performance of contracts for the construction of dormitories on land owned by Howard University. And this involves, in the view we take of the case, the question: Were the contracts, contracts for public buildings and public works within the meaning and contemplation of the Heard Act.

The statute (Act of August 15, 1894, as amended by Act of February 24, 1905, 40 USCA § 270) requires any person entering into a contract with the United States for the construction of any public building or the prosecution and completion of any public work to execute a bond conditioned that the contractor shall promptly make payment to all persons supplying him with labor and materials in the prosecution of the work. It gives to all such persons the right of intervention in a suit upon the bond. In short, besides securing the United States, the act as the title declares, is intended to protect persons furnishing materials or labor for the construction of "public buildings or works."

The statute was passed in recognition of the inability of contractors on public works of the United States to take liens upon the property, and the Supreme Court has held that the statute should be liberally construed. Hundreds of cases interpreting one or another of its provisions may be found in the reports. A large number of these deal with the question: What are labor and materials within the statute? Others with questions affecting the final settlement of the liability of the surety, the rights of subcontractors and persons furnishing them labor and materials, priorities between claimants, the surety's rights of subrogation, jurisdiction and the nature of proceedings to recover on the bond. But there is a singular lack of authority defining the phrase "public works." Attorney General Griggs in the early stages of the law, was of opinion that the act had no relation to contracts for the construction of movable articles and was confined to permanent structures like buildings upon land to which the United States had acquired complete title, etc. (23 Op. Attys. Gen. 174), but in Title Guaranty & Trust Co. v. Crane Co., 219 U. S. 24, 31 S. Ct. 140, 142, 55 L. Ed. 72, it was held that a vessel being built for the United States, the title to which by the contract passed to the government as fast as paid for, was a public work within the provisions of the act. On the other hand, that without such contract provision, the vessel while in the course of construction was not a public work of the United States and was subject to the lien given by the state law to creditors furnishing labor and materials in the construction; the point of difference obviously centering on the question of title.

But none of the questions decided by the Supreme Court in the Crane Case are particularly helpful in this, except that Mr. Justice Holmes, who wrote the opinion, defines "public works," as used in the Heard Act, in these words: "If it the work belongs to the representative of the public, it is public."

Read literally, this definition would confine the provisions of the act to those contracts involving public works of which the ownership is in the federal government, and this, we think, is the true test. In the title and in the body of the act the words used limit its provisions to contracts for the construction of public buildings or the prosecution and completion of public works, and these terms, we think, mean buildings or works of the United States.

Howard University is a private corporation. It was incorporated under an act passed March 2, 1867 (14 Stat. 438), and its charter gives it all the rights and powers usually vested in private corporations, including the right to purchase and sell real estate, and the right to contract and to sue and to be sued. The university has an attendance of about two thousand students who pay tuition and certain fixed charges for living expenses. Its buildings are erected on land of which the title is in Howard University. The first federal appropriation for its aid was March 3, 1879 — some twelve years after its organization. Thereafter the United States have annually contributed to the construction, maintenance, and development of the institution. The amount of the appropriations has increased from $10,000 in 1882 to $675,000 in 1932. By Act of March 3, 1891 (26 Stat. 973), the officers of the university were required to report to the Secretary of the Interior how the appropriation for salaries was expended; and so also by Act of August 5, 1892 (27 Stat. 372). By Act of June 11, 1896 (29 Stat. 437), the Secretary of the Interior was given authority to supervise the expenditure of money under the appropriation for that year, and the right of the Secretary to visit and inspect the university was provided. The appropriation for salaries represented only a part of the total of the salaries paid, the balance being provided by donations and from other sources. In a report of the House Committee on Education filed February 8, 1928, to accompany H. R. 279, it is stated that: "Since the establishment of the Budget system, however, and the consolidation of all jurisdiction over appropriations in one committee of the House, items recommended by the Budget and approved by the Committee on Appropriations have frequently been stricken out in the House on the point of order that such appropriations are not authorized by existing law." To avoid this, the bill proposed to amend the charter of the university to make it permissible for Congress each year "without the upsets of points of order" to make such appropriations as Congress might desire. The act was approved December 13, 1928 (45 Stat. 1021), having been previously authorized and approved by the authorities of the university. It amended section 8 of the act of incorporation as follows: "Annual appropriations are hereby authorized to aid in the construction, development, improvement, and maintenance of the university, no part of which shall be used for religious instruction. The university shall at all times be open to inspection by the Bureau of Education and shall be inspected by the said bureau at least once each year. An annual report making a full exhibit of the affairs of the university shall be presented to Congress each year in the report of the Bureau of Education."

This amendment of the charter of the university goes no farther than its terms. If it successfully legalizes the appropriation out of the Treasury of money of the government in aid of a private institution, it does not, nor does it purport to, change the fundamental character of the institution or make it any the less private; for Congress has passed no law giving the Secretary of the Interior or any other officer of the government control of the university, and we think it is obvious it could not do so without the consent and approval of the corporate authorities of that institution. Hence, in the view we take, the generosity of the government is not enough in itself to change a private into a public institution. This thought is admirably expressed by Justice Story in Allen v. McKean...