Elmer v. United States Fidelity & Guaranty Co.

• Decision Date: 12 June 1959
• Docket Number: Civ. No. 2800.
• Citation: 174 F. Supp. 437
• Parties: E. E. ELMER, d/b/a Mississippi Testing Laboratories v. UNITED STATES FIDELITY & GUARANTY CO.
• Court: U.S. District Court — Southern District of Mississippi

174 F. Supp. 437

E. E. ELMER, d/b/a Mississippi Testing Laboratories v. UNITED STATES FIDELITY & GUARANTY CO.

Civ. No. 2800.

United States District Court S. D. Mississippi, Jackson Division.

June 12, 1959.

Vardaman S. Dunn, Jackson, Miss., for plaintiff.

J. A. Covington, Jr., Meridian, Miss., for defendant.

BENJAMIN C. DAWKINS, Sr., District Judge.

All facts in this case were stipulated.¹

It appears from the stipulations (No. 3) that Tyler-Hyde Construction Company (called Tyler-Hyde) was the prime contractor with United States for furnishing the materials and doing the work covered by that contract, to secure which the bond of defendant, United States Fidelity & Guaranty Company, now sued upon, was given.

"* * * Tyler-Hyde sub-contracted a large portion of the prime contract to T. F. Scholes, Inc. (called Scholes) including all grading and asphalt paving * * * except concrete paving which * * * was contracted by Tyler-Hyde to a Company other than * * * Scholes"; and Scholes "sub-let the asphalt paving * * * to Acme Asphalt Paving Company (called Acme)." It is also stated in the same stipulation that Acme "was engaged in the production and laying of asphalt paving for * * * Key Field, under the contract between the United States and Tyler-Hyde", in which the bond sued upon was given. Although the last quoted statement appears first in stipulation No. 3, I think it must be assumed that all work done by Acme and Laboratories was under the subcontract from Scholes to Acme.

Mississippi Testing Labatores (called Laboratories,) was contacted by Acme "and notified that Acme * * * desired to contract * * * with Laboratories to supervise the asphalt plant supplying the Key Field project and to maintain gradation control * * * to meet the contract specifications"; that a representative of Laboratories (Carl John Olander) "* * * with affiant's authority (name of affiant not given) found, on investigation, the plant of Acme near the Key Field project, shut down because of difficulty with the mixture of materials and inability to meet specifications". That on this occasion "about February 7, 1958" an "oral contract was made with Acme", undoubtedly with Laboratories, for the latter "to furnish * * * all necessary supervision and testing work necessary to put the asphaltic materials together in correct proportions and to maintain gradation control, so as to meet the contract specifications and requirements for asphalt mix for use in paving on the Key Field project." Prices to be paid Laboratories for this service, were $5 per hour and 7¢ per mile (presumably for use of automobile) for "a Chief Inspector, and $3.50 per hour and 7¢ per mile with a 10-hour minimum guarantee for an inspector to be left on the job during the paving operation * * *" and "* * Laboratories was given * * * work order to commence work under the contract of February 8, 1958." Work was begun accordingly, and correct statement of hours and mileage kept, for the months of February, March, April and May, as agreed, which were filed in the record of this case, attached to affidavit of Carl John Olander.

The work performed by Laboratories was finished in May 1958, for which it demanded, under its contract with Acme $1,966.61, no part of which has been paid, and to recover which this suit was filed.

The manner in which the contract was carried out, and the persons performing it are set forth in Paragraph 8 of the stipulations. (Footnote No. 1). Reference is also made to the last three stipulations, 9, 10, and 11, to illustrate the circumstance surrounding performance of the work by Plaintiff.

The legal question to be answered is: Do the facts, especially the contractual relations of plaintiff with the subject matter of the contract between the United States and prime contractor, Tyler-Hyde, above set forth meet the requirements of the Miller Act,² as interpreted by the Supreme Court in MacEvoy Co. v. United States for Use and Benefit of Calvin Tomkins Co., 1944, 322 U.S. 102, 64 S.Ct. 890, 892, 88 L.Ed. 1163, or is it afflicted with the same infirmities found in that case?

We should not forget it is the Bond Company's liability which is involved. Regardless of what may be thought of the logic of the case, it remains the law, except for variations in two or three decisions in lower courts. True, plaintiff's work was performed on the scene and to the knowledge of all concerned, but does this, of itself increase the liability, under the limitations of the Miller Act, as interpreted in the MacEvoy case?

Here, the prime contractor was Tyler-Hyde, the sub-contractor was Scholes; Scholes, in turn, sub-contracted the asphalt paving to Acme, and the latter, contracted with Laboratories to perform work as stated in the stipulations.

In the MacEvoy case, supra, 1944, the United States contracted with MacEvoy to furnish materials and perform the work necessary to construct a housing project, on a cost plus basis, also under the Miller Act; MacEvoy purchased materials used in the work from Miller & Company, and Miller in turn purchased them from Tomkins, but failed to pay a balance due of $12,033.49.

Justice Murphy as the organ of the Court, stated there was no allegation that Miller, who occupied the position of Acme, or at least no better than Scholes, "agreed to perform or did perform any part of the work on the construction project." Nor was it disputed that "MacEvoy paid Miller in full for the material", which evidently was done here as to both Scholes and Acme. Tomkins gave the required notice and demand for payment to MacEvoy and its surety, without results, and then filed suit, which the District Court dismissed as not stating a cause of action under the facts alleged in that case. The Court of Appeals reversed 3 Cir., 137 F.2d 565, but the Supreme Court reinstated the judgment of the trial court. In doing so, it was said:

"Specifically the issue is whether under the Miller Act a person supplying materials to a materialman of a Government contractor and to whom an unpaid balance is due from the materialman can recover on the payment bond executed by the contractor. We hold that he cannot." 322 U.S. 102, 64 S.Ct. 892.

The court then pointed out that under the Heard Act,³ which preceded the Miller Act, it had been held payment bonds were given for the benefit of "all persons" (emphasis added) supplying him (the contractor) with labor or materials in the prosecution of such work, the courts "consistently applied a liberal construction to that statute," holding it was clearly "the intention of Congress to protect those whose labor and material has contributed to the prosecution of the work", citing several cases; and that this included not only "`all persons supplying * * * labor and materials' * * * directly to the prime contractor, but also covered those who contributed labor and materials to sub-contractors." This was followed by a statement that, while the Miller Act "repealed the Heard Act", it "reinstated its basic provisions and was designed primarily to eliminate certain procedural limitations on its beneficiaries. There was no expressed purpose * * * to restrict in any way the coverage of the Heard Act; the intent rather was to remove procedural difficulties * * * and thereby make it easier for unpaid creditors to realize the benefits of the bond."

In spite of such comment, Justice Murphy proceeded: "A proviso then states:

"`Provided, however, That any person having direct contractual relationship with a subcontractor but no contractual relationship express or implied with the contractor furnishing said payment bond shall have a right of action upon said payment bond upon giving written notice to said contractor within ninety days from the date on which such person did or performed the last of the labor or furnished or supplied the last of the material for which such claim is made * * *'" (Emphasis added.)

Justice Murphy again repeated the Miller Act was "entitled to a liberal construction * * * to protect those whose labor and materials go into public projects", yet added: "But such a salutory policy does not justify ignoring plain words of limitation and imposing wholesale liability on payment bonds. Ostensibly the payment bond is for the protection of `all persons supplying labor and material in the prosecution of the work' and `every person who has furnished labor or material in the prosecution of the work' is given the right to sue on such payment bond. Whether this statutory language is broad enough to include persons supplying material to...