FH McGraw & Co. v. Milcor Steel Co.

• Decision Date: 14 May 1945
• Docket Number: No. 147.,147.
• Citation: 149 F.2d 301
• Court: U.S. Court of Appeals — Second Circuit
• Parties: F. H. McGRAW & CO., Inc., v. MILCOR STEEL CO. et al. (ÆTNA CASUALTY & SURETY CO., Third Party Defendant-Appellant).

149 F.2d 301 (1945)

F. H. McGRAW & CO., Inc., v. MILCOR STEEL CO. et al. (ÆTNA CASUALTY & SURETY CO., Third Party Defendant-Appellant).

No. 147.

Circuit Court of Appeals, Second Circuit.

February 28, 1945.

Rehearing Denied May 14, 1945.

Joseph Lotterman, of New York City (Watrous, Gumbart & Corbin, of New Haven, Conn., on the brief), for appellant F. H. McGraw & Co., Inc.

Louis A. Tepper, of New York City (Parmelee & Thompson, of New Haven, Conn., on the brief), for appellant Aetna Casualty & Surety Co.

Walter G. Schelker, Jr., of New York City (David M. Richman, of New Haven, Conn., on the brief), for appellee Milcor Steel Co.

Charles Howard Levitt, of New York City (Seth V. Elting and David T. Smith, both of New York City, and David M. Richman, of New Haven, Conn., on the brief), for appellee John T. D. Blackburn, Inc.

Before HUTCHESON, SIMONS, and CLARK, Circuit Judges.

CLARK, Circuit Judge.

This is an action of interpleader brought under 28 U.S.C.A. § 41(26), and Federal Rules of Civil Procedure, rule 22, 28 U.S. C.A. following section 723c, by F. H. McGraw & Company, Inc., general contractors with the State of Connecticut for construction of the Continued Treatment Units at the Fairfield State Hospital, Newtown, Connecticut. The original defendants were Sherman Plastering Company, Inc., a subcontractor, and various materialmen and others to whom Sherman was or might be indebted on the job. Eventually none of the defendants pressed claims except two, Milcor Steel Co. and John T. D. Blackburn, Inc., of whom the former claims a balance due for supplies to Sherman on this job of $6,372.51, and the latter $9,009.64. These defendants brought in as third party defendant the Aetna Casualty & Surety Company, the surety on the bond which McGraw had given to the State as required by Conn.Gen.Stat.,Supp.1937, § 540d(r), Supp.1939, § 786e(r); and this defendant joins with the plaintiff in appealing from the judgment given below for the two materialmen for the amounts claimed, together with interest and costs.

McGraw's contract with Sherman was made on September 1, 1938, and by January 10, 1940, when it was completed, McGraw had paid Sherman $77,195.76, leaving a balance due of not more than $5,382.90, which it deposited with the court at the commencement of its action. Under the statute, however, it and its surety are responsible for the claims of the materialmen if properly presented and unpaid. The defenses presented by McGraw and its surety to these claims offer the two interesting questions on this appeal: first whether both claims are barred by failure to give a statement of claim to the proper state agency within sixty days pursuant to an earlier statute, now appearing as Conn. Gen.Stat.,Cum.Supp.1935, § 1594c, and second whether the Blackburn claim had not been satisfied by payments made by Sherman. The District Court held that the earlier statute requiring the filing of a statement of claim was repealed by the 1937 statute, and, in advance of trial, struck out appellants' defenses based on failure of the claimants to file the statement of claim contemplated by the earlier statute. Then at trial the court found that Blackburn had not been paid because it had acted within its legal rights in allotting the Sherman payments to material furnished Sherman on another job.

First. Effect of defendants' failure to file statutory statements of claim. Conn.Gen. Stat.,Cum.Supp.1935, § 1594c, on which appellants' affirmative defense was based, reads: "Bonds for protection of employees and material men on public structures. * * * Any person, firm or corporation having any claim for materials and labor used or employed in the execution of such contract shall file, with the officers or agents contracting for any such construction, alteration, removal or repair, a statement of such claim within sixty days after he shall have ceased to furnish such materials or labor." This requirement was originally adopted as to public contracts in 1917, cf. Conn.Gen.Stat.1930, § 5109; and it was amended to its present form in 1933 (Pub. Acts, c. 178, Supp.1933, § 1113b) to include contracts made by the Highway Commissioner for the construction or repair of highways, cf. Cum.Supp.1935, § 529c. It followed the analogy of a similar statement to a property owner long required for the perfection of mechanics' liens against private property. Gen.Stat.1930, § 5107. The District Court, as a first ground of decision, construed this provision as for the protection of the State only, and hence not a prerequisite to a suit by a materialman against the contractor or the latter's surety. This conclusion appears foreclosed, however, by New Britain Lumber Co. v. American Surety Co. of New York, 113 Conn. 1, 154 A. 147, which held squarely that a complaint seeking recovery against the surety upon a bond given to a town under this statute must be dismissed for lack of allegation by the materialman that it had filed its claim within the sixty-day period.

The District Court further held that section 1594c was repealed by Conn.Gen. Stat.,Supp.1939, § 786e(r), which was enacted in 1937, Supp.1937, § 540d(r), as part of a general reorganization of the executive department of the State, upon recommendation of a legislative commission. At this time there was created a Department of Public Works under the supervision of a commissioner who was to have exclusive charge over "planning, construction, erection, remodeling, alteration, repair or enlargement of any real asset involving an expenditure in excess of one thousand dollars." Supp.1939, § 786e(h); Connecticut Rural Roads Improvement Ass'n v. Hurley, 124 Conn. 20, 197 A. 90 (holding that the statute, as intended by the commission, did not deprive the Highway Commissioner of jurisdiction over highway contracts); Rep.Conn.Commission Concerning the Reorganization of State Depts., 1937, 533-557. The extensive provisions covering the new department also included this statutory requirement that a contractor with the Department must furnish a bond conditioned upon the payment of all materials and labor, on which any party furnishing them may bring suit in the name of the State; but it nowhere contains a requirement of a sixty-day statement of claim by the materialman. Appellants contend nevertheless that section 1594c was not repealed, since it may be applied with the later statute. But we think the District Court was correct in holding otherwise. The extensive nature of the all-inclusive plan of reorganization suggests a complete overhauling of the system of making public contracts, as, indeed, is suggested in Connecticut Rural Roads Improvement Ass'n v. Hurley, supra, 124 Conn. 20, 35, 197 A. 90, 97. In accordance with the new scheme the bond required differed substantially from that provided by the earlier section.

First, the 1937 statute nowhere provides for a bond to indemnify the State; and it would, therefore, be anomalous to hold that direct liability of the State, which was the prerequisite condition for recovery by a materialman under the earlier form of bonds, still obtained. The bond under section 786e(r), Supp.1939, gives materialmen a direct right of action in the name of the State and liability of the State becomes unnecessary to the scheme. This, moreover, is in harmony with the broader coverage of the bond provided by the later statute. Under section 1594c, Cum.Supp.1935, the required condition was the "payment for all materials and labor used or employed in the execution of such contract"; but under the later section the bond covered all such material or labor, whether or not it "enters into and becomes a component part of the real asset."

And there are further differences. The bond required by the earlier statute was mandatory if the subject matter of the principal contract exceeded $500, but that of the later statute is required only where such subject matter exceeds $1,000. The earlier statute required only one bond to secure performance and payment of the materialmen and contains no specifications as to the amount of the bond. But the later enactment calls for two bonds — one for performance and the other for the protection of materialmen — and provides that their amount shall be "not less than fifty per cent nor more than one hundred per cent of the contract price." It is hardly to be thought that the Legislature intended these entirely different bonds to be required of the contractor simultaneously, and far more reasonable to construe the later statute as a substitute for, rather than a supplement to, the earlier enactment. Wentworth v. L. & L. Dining Co., Inc., 116 Conn. 364, 165 A. 203. Certainly materialmen scanning the 1937 enactment would not have thought of looking back to section 1594c for conditions requiring speedy performance to ensure recovery on the bond. The earlier statute would, however, have an undoubted sphere of operation with reference to public contracts not within the control of the Department of Public Works.

Appellants rely further on the fact that subsequent to the District Court's construction of the statutes in question the Connecticut Legislature repealed both section 1594c and section 786e(r), and enacted sections 694f and 695f, Gen.Stat.,Supp. 1941, which required a sixty-day notice of a claim to be given to the prime contractor in certain cases. These sections, it is claimed, amount to a substantial re-enactment of section 1594c, which would not have been necessary were it not for the District Court's opinion, and indicates, so they say, that the Legislature had never intended to write that section off the books. These new sections do not, however, amount to a substantial re-enactment of the earlier statute. The sixty-day notice must be given the main contractor and not the State, as required by the earlier statute. Moreover, the entire scheme of protection differs from that of the earlier enactment and is similar to that afforded on federal...