Aetna Casualty and Surety Company v. United States

• Citation: 365 F.2d 997
• Decision Date: 23 September 1966
• Docket Number: No. 18198.,18198.
• Parties: The AETNA CASUALTY AND SURETY COMPANY, Fireman's Fund Insurance Company, Hartford Accident and Indemnity Company, The Travelers Indemnity Company, United States Fidelity & Guaranty Company, Employers Reinsurance Corporation, Fidelity and Deposit Company of Maryland, General Insurance Company, and American Reinsurance Company, All Corporations, Appellants, v. The UNITED STATES of America for Use and Benefit of R. J. STUDER & SONS, H. C. Studer, and E. I. Studer Company, a Joint Venture, Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

365 F.2d 997 (1966)

The AETNA CASUALTY AND SURETY COMPANY, Fireman's Fund Insurance Company, Hartford Accident and Indemnity Company, The Travelers Indemnity Company, United States Fidelity & Guaranty Company, Employers Reinsurance Corporation, Fidelity and Deposit Company of Maryland, General Insurance Company, and American Reinsurance Company, All Corporations, Appellants, v. The UNITED STATES of America for Use and Benefit of R. J. STUDER & SONS, H. C. Studer, and E. I. Studer Company, a Joint Venture, Appellees.

No. 18198.

United States Court of Appeals Eighth Circuit.

September 23, 1966.

W. A. McCullen and Joseph M. Butler, Rapid City, S. D., for appellants, Bangs, McCullen, Butler & Foye, Rapid City, S. D., on the brief.

B. E. Longo, Billings, Mont., and George Beal, Rapid City, S. D., for appellees, Cooke, Moulton, Bellingham, Longo & Mather, Billings, Mont., and Bottum & Beal, Rapid City, S. D., on the brief.

Before JOHNSEN and BLACKMUN, Circuit Judges, and YOUNG, District Judge.

GORDON E. YOUNG, District Judge.

This is a Miller Act case.

Peter Kiewit Sons' Company, a corporation, hereinafter called Kiewit, was the prime contractor for the construction of a Minuteman Missile Facility surrounding Ellsworth Air Force Base located near Rapid City, South Dakota. Kiewit's contract with the United States Government was for a consideration in excess of $56,000,000, and as described by the trial court in its findings, was a new, vast, and complicated undertaking extending over seven counties in western South Dakota with a perimeter of around four hundred miles.

In accordance with the requirements of the Miller Act (40 U.S.C. § 270a et seq.), Kiewit posted a bond which the appellants, who are bonding companies, signed as sureties. They are appellants here.

Kiewit subcontracted a portion of the work to Summit Construction Company, which, in turn, subcontracted a portion of its work to a joint venture consisting of R. J. Studer Sons, a Montana corporation, H. C. Studer, and E. I. Studer Company. The joint venture is the appellee.

During the course of performance Summit abandoned its work under its contract with Kiewit, resulting in the termination of Studer's contract with Summit. This action was instituted by Studer under the Miller Act for unpaid labor and materials against both Kiewit and the sureties. Kiewit was later dismissed as defendant, leaving the action only against the sureties.

The case was tried to the district judge without a jury.

The lower court found the issues in favor of Studer and entered judgment in its favor. Some of the items of cost claimed by Studer and allowed by the trial court are not questioned on this appeal. The issues raised by appellants on this appeal are as follows:

Foreign Corporation Issue. It is conceded that one of the members of the Studers\' joint venture was a Montana corporation not qualified to do business in South Dakota. Appellants contend that under a certain statute of South Dakota the contract sued on by Studer is void and that Studer has no standing to bring this action.

Additional Excavation Issue. The parties are in dispute as to whether certain additional "scraper" excavation should be paid for at the rate of 40 cents per cubic yard as contended by appellants or $1.75 as contended by appellees.

Labor Payments Issue. The trial court allowed Studer reimbursement for all wages and subsistence payments actually paid by Studer during the course of its performance, which, in the case of the wages, was in excess of those rates which Studer had used in submitting its bid.

Interest Issue. Appellants question the trial court\'s allowance of pre-judgment interest from July 14, 1962, the date on which Summit terminated Studer\'s subcontract and which was the last date on which Studer performed any work.

We will discuss those issues in that order.

Foreign Corporation Issue

Section 11.2103 of the South Dakota Code of 1939 reads as follows:

"Every contract made by or on behalf of any foreign corporation, subject to the provisions of this title affecting the personal liability thereof or relating to property within this state, before it shall have complied with the provisions of this title shall be wholly void on its behalf and on behalf of its assigns but it shall be enforceable against it or them."

Since it is conceded that at least one of the two corporations which were parties to the joint venture was a foreign corporation, appellants contend that this South Dakota statute forbids the enforcement of the contract on behalf of the joint venture.

The district court rejected that contention, holding that the State of South Dakota could not by statute "condition the rights granted under the Miller Act." We think the district court was correct in so holding. In 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, the Court said, "The Miller Act, like the Heard Act, is highly remedial in nature. It 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."

And, in United States for Benefit and on Behalf of Sherman v. Carter, 353 U.S. 210, 216, 77 S.Ct. 793, 797, 1 L.Ed.2d 776, Mister Justice Burton, speaking for the Court, said:

"The Miller Act represents a congressional effort to protect persons supplying labor and material for the construction of federal public buildings in lieu of the protection they might receive under state statutes with respect to the construction of non federal buildings. The essence of its policy is to provide a surety who, by force of the Act, must make good the obligation of a defaulting contractor to his suppliers of labor and material."

In the case of Hoeppner Construction Co. v. United States for use of Mangum, 287 F.2d 108 (10th Cir. 1960), the plaintiff's subcontractor in a Miller Act case was a partnership which had not complied with the State of Colorado's filing requirements, which filing was a condition precedent to the bringing of any action on a contract according to Colorado statute.

The court rejected this as a defense urged by the surety, saying, at page 110:

"But the right to maintain this action does not have its source in the law of Colorado. The right to institute and maintain the action in the United States District Court is expressly granted by the Miller Act. 40 U.S.C.A. § 270b. And the statutes of Colorado requiring the filing of the affidavit and withholding the right to prosecute an action for the collection of a debt until the affidavit has been filed do not condition or otherwise proscribe in any manner the right of the United States to institute and maintain in the United States Court for the use and benefit of a subcontractor an action against the prime contractor and the surety on the payment bond to recover a balance due for materials furnished and labor performed in pursuance of the subcontract."

United States of America for Use and Benefit of Bernadat v. Golden West Construction Company, 194 F.Supp. 371 (D.Utah 1961), a Miller Act case, involved a Utah statute similar to the one in effect in South Dakota. The district court rejected a similar defense urged by the United States, saying, at page 375: "Matters in defense of a Miller Act action seem within the protection of the doctrine that the right to bring such action may not be qualified by State law."

The same defense was raised by the surety in United States for Use of James F. O'Neil Company v. Malan Construction Corporation, 168 F.Supp. 255 (E.D.Tenn. 1958). The district judge in his opinion points out that under the Miller Act there is jurisdiction in the United States District Court and nowhere else. The plaintiff could not have brought the action in state court. He said:

"The evils sought to be corrected by the decision in Erie v. Tompkins could not arise here since the suit could be brought in the federal court and nowhere else. The right created is distinctly a Federal right and, * * * any limitations imposed by the Tennessee courts with respect to the trial of the cases brought by foreign corporations illegally doing business in the state would be irrelevant."

Taking into consideration the remedial nature of the Act and the mandate of the Supreme Court to give it liberal construction and application, we think these cases reach the correct results.

Those state statutes which restrict the rights of noncomplying foreign corporations, although they may be enforced by the federal courts in diversity cases, should not and will not be enforced by the federal courts in Miller Act cases.

The Claim for Additional Excavation

Under date of August 1, 1961, Kiewit, as prime contractor, entered into a contract with the United States Corps of Engineers. Shortly thereafter Kiewit negotiated with Summit, Studer and other subcontractors concerning earthwork. Summit secured such a subcontract, but Studer did not.

On August 22, Studer commenced negotiations with Summit with a view to Studer's subcontracting part of the work which had been allowed to Summit. The latter furnished a list of required items of work to Studer and requested Studer to submit prices for such items. This was done, and appears in the record as Plaintiffs' Exhibit 38. One of the items on this list deals with this issue. It is Item 10-"Exc. at Silo -12' to -32', 220,000 (c.y.) at $1.75, $385,000.00."

These prices were satisfactory to Summit, and on August 23 the parties signed a letter contract wherein Studer agreed to perform the work listed on Plaintiffs' Exhibit 38 for the sum of $1,018,850. This letter appears in the record as Defendants' Exhibit 5. Although the items and quantities listed in Exhibit 38 appear in this letter, the unit prices — that is, the prices per yard — were omitted.

The parties obviously viewed the letter as preliminary in nature, for it contained...