Eberhart v. United States

• Decision Date: 13 March 1913
• Docket Number: 3,770,3,829.
• Parties: EBERHART et al. v. UNITED STATES, for Use of FIRST NAT. BANK OF BELLE FOURCHE, S.D. UNITED STATES v. EBERHART et al.
• Court: U.S. Court of Appeals — Eighth Circuit

204 F. 884

EBERHART et al. v. UNITED STATES, for Use of FIRST NAT. BANK OF BELLE FOURCHE, S.D.

UNITED STATES v. EBERHART et al.

Nos. 3,770, 3,829.

United States Court of Appeals, Eighth Circuit.

March 13, 1913

Supplemental Opinion, May 1, 1913.

The contract for the faithful performance of which this bond was executed contained, among other provisions, the following Eighth: 'Engineer.-- Where the word 'engineer' is used in the general conditions or detailed specifications, or in the contract, it shall be and is mutually understood to refer to the Chief Engineer of the Reclamation Service, or any of his authorized assistants or inspectors, limited by the particular duties intrusted to them. * * * Upon all questions concerning the execution of the work and the classification of the material, in accordance with the specifications, the decision of the engineer shall be binding on both parties. All materials furnished and all work done shall be subject to rigid inspection, and if not in accordance with the specifications, in the opinion of the engineer, shall be made to conform thereto. Unsatisfactory material will be rejected and shall be immediately removed from the premises, at the cost of the contractor, if so ordered by the engineer.'

Paragraph 21 provides: 'Suspension of Contract.-- Should the contractor fail to begin the work within the time required or fail to begin the delivery of material as provided in the contract, * * * then and in either case the Secretary of the Interior shall have the power to suspend the operation of the contract, and he may take possession of all machinery, tools appliances, and animals employed on any of the works to be constructed under the contract and of all materials belonging to the contractor delivered on the ground, and may use the same to complete the work, or he may employ other parties to carry the contract to completion, substitute other machinery or materials, purchase the material contracted for in such manner as he may deem proper, or hire such force and buy such machinery, tools, appliances, materials, and animals at the contractor's expense as may be necessary for the proper conduct of the work and for finishing it in the time agreed upon. Any excess of cost arising therefrom over and above the contract price will be charged against the contractor and his sureties, who shall be liable therefor.'

Paragraph 24: Changes.-- By this paragraph the Secretary of the Interior reserved the right to make changes in the specification of work or material as may be deemed advisable without notice to the sureties on the bond. This right to make material changes in the quantities listed in the proposal is made an essential part of the contract. It then provides: 'Should any change be made in a particular piece of work after it has been commenced, so that the contractor is put to extra expense, the engineer shall make reasonable allowance therefor, which action shall be binding on both parties.'

Paragraph 25 provides: 'Structural Difficulties.-- Should structural difficulties prevent the execution of the work as described in the plans and specifications, necessary deviations therefrom may be permitted by the engineer, but must be without additional cost to the United States.'

The contractor having been adjudicated a bankrupt in February 1906, after he had performed a part of the contract, the receivers of the estate continued the work by authority of the bankruptcy court until March 8, 1906, when the United States took charge of it under the provisions of paragraph 21 of the contract, and completed it by November 30, 1908. On June 16, 1908, a final statement of the account was made by the United States, and demand for payment made of the contractor; on December 26, 1908, demand for the penalty of the bond was made on the sureties.

Action by the United States against the same defendants. Judgment for defendants, and the United States brings error. Affirmed.

On April 26, 1905, the United States entered into a contract with the Widell-Finley Company, a corporation created by and existing under the laws of the state of Minnesota, for the construction by the Widell-Finley Company of a dam and canal in the state of South Dakota according to plans and specifications furnished. The defendant in the court below, Adolph O. Eberhart, and his codefendants, became sureties for the contractor in the sum of $21,500, conditioned, as required by law, that 'it shall in all things well and truly observe, perform,' etc., 'the covenants, conditions and agreements,' etc., 'mentioned in certain articles of agreement bearing date the 26th day of April, 1905, * * * concerning the construction and completion of the work provided in schedule 2, main supply canal, Belle Fourche project, South Dakota,' etc., 'and shall promptly make payment to all persons supplying labor and materials for the prosecution of the work provided for.' On April 26, 1910, the government instituted suit in the Circuit Court of the United States for the District of Minnesota, where the defendants all resided. This suit is No. 3,829 in this court. On March 18, 1911, the First National Bank of Belle Fourche instituted its suit in the same court, as assignee of the laborers whose time checks it had purchased. Although the two suits were separately instituted, and at different times, they were by direction of the court tried together to a jury. The jury returned a verdict in No. 3,770 in favor of the First National Bank for the full amount claimed, with interest thereon, amounting in the aggregate to the sum of $23,693.44, and in the action by the government, No. 3,829, returned a verdict for the defendants.

Charles C. Houpt, U.S. Atty., of St. Paul, Minn., and S.S. Ashbaugh, Sp. Asst. Atty. Department of Justice, of Washington, D.C., for plaintiff in error in No. 3,829.

H. L. Schmitt, of Mankato, Minn. (John W. Schmitt and Lorin Cray, both of Mankato, Minn., on the brief), for plaintiffs in error in No. 3,770, and defendants in error in No. 3,829.

Rollo F. Hunt, of Devils Lake, N.D., C.E. Phillips, of Mandato, Minn., and James A. George, of Deadwood, S.D., for defendant in error in No. 3,770.

Before SANBORN, Circuit Judge, and W. H. MUNGER and TRIEBER, District judges.

TRIEBER District Judge (after stating the facts as above).

We will first deal with the action of the First National Bank, No. 3,770. By an act of Congress approved August 13, 1894 (28 Stat. 278, c. 280 (U.S. Comp. St. 1901, p. 2523)), every person entering into a formal contract with the United States for the construction of any public buildings, or the prosecution and completion of any public work, was required, before commencing such work, to execute the usual penal bond, with the additional obligations that such contractor or contractors shall promptly make payments to all persons supplying him or them labor and materials in the prosecution of the work provided for in such contract. And such person to whom the contractor was indebted for labor and materials was given a right of action in the name of the United States for his use and benefit against the contractor and his sureties, provided that the United States was to be involved in no expense thereby.

By Act Feb. 24, 1905, c. 778, 33 Stat. 811 (U.S. Comp. St. Supp. 1911, p. 1071), the act of 1894 was amended so as to read as follows:

'That hereafter any person or persons entering into a formal contract with the United States for the construction of any public building, or the prosecution and completion of any public work, or for repairs upon any public building or public work, shall be required, before commencing such work, to execute the usual penal bond, with good and sufficient sureties, with the additional obligation that such contractor or contractors shall promptly make payments to all persons supplying him or them with labor and materials in the prosecution of the work provided for in such contract; and any person, company, or corporation who has furnished labor or materials used in the construction or repair of any public building or public work, and payment for which has not been made, shall have the right to intervene and be made a party to any action instituted by the United States on the bond of the contractor, and to have their rights and claims adjudicated in such action and judgment rendered thereon, subject, however, to the priority of the claim and judgment of the United States. If the full amount of the liability of the surety on said bond is insufficient to pay the full amount of said claims and demands, then, after paying the full amount due the United States, the remainder shall be distributed pro rata among said interveners. If no suit should be brought by the United States within six months from the completion and final settlement of said contract, then the person or persons supplying the contractor with labor and materials shall, upon application therefor, and furnishing affidavit to the department under the direction of which said work has been prosecuted that labor or materials for the prosecution of such work has been supplied by him or them, and payment for which has not been made, be furnished with a certified copy of said contract and bond, upon which he or they shall have a right of action, and shall be, and are hereby, authorized to bring suit in the name of the United States in the Circuit Court of the United States in the district in which said contract was to be performed and executed, irrespective of the amount in controversy in such suit, and not elsewhere, for his or their use and benefit, against said contractor and his sureties, and to prosecute the same to final judgment and execution: Provided, that where suit is instituted by any of such creditors on the bond

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