Fanderlik-Locke Co. v. United States

• Decision Date: 31 December 1960
• Docket Number: No. 6144.,6144.
• Citation: 285 F.2d 939
• Parties: FANDERLIK-LOCKE CO., a corporation, and Great American Indemnity Company, a corporation, Appellants, v. UNITED STATES of America, for the Use of M. B. MORGAN, doing business as M. B. Morgan, Painting Contractor; and New Amsterdam Casualty Company, Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

285 F.2d 939 (1960)

FANDERLIK-LOCKE CO., a corporation, and Great American Indemnity Company, a corporation, Appellants, v. UNITED STATES of America, for the Use of M. B. MORGAN, doing business as M. B. Morgan, Painting Contractor; and New Amsterdam Casualty Company, Appellees.

No. 6144.

United States Court of Appeals Tenth Circuit.

November 30, 1960.

Rehearing Denied December 31, 1960.

David R. Gallagher, of McAtee, Toulouse, Marchiondo, Ruud & Gallagher, Albuquerque, N. M., for appellants.

W. A. Sloan, of Rodey, Dickason, Sloan, Akin & Robb, and John P. Eastham, Albuquerque, N. M., for appellees.

Before BRATTON, HUXMAN and PICKETT, Circuit Judges.

PICKETT, Circuit Judge.

This is a Miller Act case, 40 U.S.C.A. § 270a, et seq., in which a subcontractor¹ seeks to recover, from a prime contractor and its bondsman, the value of labor performed and materials installed in addition to that provided for in the subcontract. It was alleged that, during the performance of the subcontract, required labor and materials were furnished, together with extras and additional work, at the request of the prime contractor, to the aggregate amount of $183,259.20; that the subcontractor had received $53,371; and that the balance due was $129,888.20. The court found that there was due and owing to the subcontractor the sum of $110,713.60, for the performance of the subcontract and for additions and extras furnished at the request of the prime contractor. Judgment was entered accordingly, together with interest. Upon consideration of an appeal, we reversed the judgment upon the ground that the subcontractor had not exhausted its administrative remedies as required by the "disputes clause" in the prime contract. We have reconsidered this question on rehearing, and the former opinion is hereby withdrawn.

Fanderlik entered into a contract with the United States wherein it agreed to construct 175 dwelling units at Clovis Air Force Base in Curry County, New Mexico. As required by the Miller Act, Fanderlik delivered to the United States a payment bond, executed by Grand American Indemnity Company, which guaranteed the payment of all sums due to persons supplying labor and materials in the performance of the requirements of the contract. Thereafter, for a consideration of $63,630, a subcontract was awarded to the plaintiff, M. B. Morgan, d/b/a M. B. Morgan, Painting Contractor, wherein Morgan agreed to furnish all labor, materials and equipment necessary to complete the painting requirements of the prime contract. During the performance of the subcontract, there were failures of paint which had been applied to both interior and exterior surfaces and all of the surfaces upon which the paint failed were repainted by Morgan upon the demand of Fanderlik and the architects supervising the job. There was also considerable repainting required because of storm damage and for other reasons. Morgan submitted claims to Fanderlik for this additional work.

The prime contract was the standard form of government construction contract in general use at the time of its execution. Section 6 of the general provisions thereof, states:

"Except as otherwise provided in this contract, any dispute concerning a question of fact arising under this contract which is not disposed of by agreement shall be decided by the Contracting Officer, who shall reduce his decision to writing and mail or otherwise furnish a copy thereof to the Contractor. Within 30 days from the date of receipt of such copy, the Contractor may appeal by mailing or otherwise furnishing to the Contracting Officer a written appeal addressed to the head of the department, and the decision of the head of the department or his duly authorized representatives for the hearings of such appeals shall, unless determined by a court of competent jurisdiction to have been fraudulent, arbitrary, capricious, or so grossly erroneous as necessarily to imply bad faith, be final and conclusive: Provided, That, if no such appeal to the head of the department is taken, the decision of the Contracting Officer shall be final and conclusive * * *."

Upon receipt of Morgan's claims, the prime contractor, following the procedure of Section 6, submitted corresponding claims to the Contracting Officer at Clovis Air Force Base. They were all denied by the Contracting Officer, and, at the time of the trial, an appeal was pending before the Board of Contract Appeals of the Air Force. The Fanderlik claims to the Contracting Officer included those upon which recovery is sought in this action.

The subcontract provided that the subcontractor should furnish material and perform labor in accordance with the general conditions of the contract between the owner and the contractor and "in accordance with the Drawings and the Specifications attached hereto which form a part of a Contract between the Contractor and the Owner * * * and hereby become a part of this Contract." The parties to the subcontract agreed "to be bound by the terms of this Agreement, the A.I.A. General Conditions attached, the drawings and specifications attached as far as apprehensible to this subcontract * * *." It was further provided that the subcontractor should be bound to the contractor "by the terms of the Agreement, General Conditions, Drawings and Specifications, and to assume toward him all the obligations and responsibilities that he, by those documents, assumes toward the Owner."

It is contended that by these references, Section 6 of the general provisions of the prime contract was incorporated in the subcontract, and that a suit under the Miller Act cannot be maintained by the subcontractor until there is a final determination of the claims submitted under Section 6. While we express no opinion as to the right of the parties to enter into an agreement which might circumvent the Miller Act, we hold that it was not the intention of the parties to the subcontract that the subcontractor was required to comply with the provisions of Section 6 before it could maintain an action under the Miller Act.

The purpose of the Miller Act is to provide security for those who furnish labor and material in the performance of government contracts, and a liberal construction should be given the Act to accomplish this purpose. United States for Benefit of Sherman v. Carter, 353 U.S. 210, 77 S.Ct. 793, 1 L.Ed. 2d 776; St. Paul-Mercury Indem. Co. v. United States, 10 Cir., 238 F.2d 917; Fourt v. United States, 10 Cir., 235 F.2d 433; Commercial Standard Ins. Co. v. United States, 10 Cir., 213 F.2d 106. The benefits of the Act are not intended for the prime contractor who is required by the Act to furnish a bond to effectuate its provisions. If a prime contractor is dissatisfied with the administrative disposition of a claim submitted under the "disputes clause" of the prime contract, it may seek a remedy in the Court of Claims. The liability of the United States is to the prime contractor, and the "disputes clause" provides only for administrative consideration of claims made by the prime contractor.

There is no procedure by which the claim of a subcontractor can be presented against the United States except as it may become a claim of the prime contractor, since there is no contract, express or implied, between the subcontractor and the government. United States v. Blair, 321 U.S. 730, 737, 64 S.Ct. 820, 88 L.Ed. 1039. The subcontractor has no standing before the Contracting Officer or the Board of Contract Appeals, and no provision is made for the hearing of disputes between a prime contractor and a subcontractor. The remedy for one seeking to recover for labor and materials furnished on a government contract is under the Miller Act, and ordinarily the fact that a prime contractor has a claim for the same amounts pending under the "disputes clause" of the prime contract, does not affect Miller Act cases.² It appears that, as in this case, when a subcontractor's claim was being litigated, the administrative proceeding pertaining to the corresponding claim made by the prime contractor would, in many instances, be delayed until there was a determination of the prime contractor's liability. If the subcontractor failed to sustain his claim in a Miller Act case, there would be no basis for the prime contractor's claim then pending before the Contracting Officer or the Board of Contract Appeals.

Actions under the Miller Act shall be in the name of the United States, for the use of the person suing, in the United States District Court for any district in which the contract was to be performed and executed, regardless of the amount in controversy. 40 U.S.C.A. § 270b(b). The books are replete with cases brought under this Act. Without exception they have been tried in the United States District Court as any other action for money, and many of them have been tried to a jury. See e. g., Nolan Bros. v. United States, 10 Cir., 266 F.2d 143; Indemnity Ins. Co. of North America v. Browning-Ferris Mach. Co., 5 Cir., 227 F.2d 804; Dow v. United States, 10 Cir., 154 F.2d 707. If Morgan is limited to the presentation of his claims as provided for in the "disputes clause" of the prime contract, he has surrendered his right to the benefits of the Miller Act provisions. The findings of the administrative authorities as to the amount he is entitled to recover would be conclusive, unless the court determined them to be "fraudulent, arbitrary, capricious, or so grossly erroneous as necessarily to imply bad faith." See 41 U.S.C.A. § 321. An agreement should not be construed to bring about such a result unless it be "manifest by plain language" of the contract. United States v. Moorman, 338 U.S. 457, 462, 70 S.Ct. 288, 94 L.Ed. 256; Mercantile Trust Co. v. Hensey, 205 U.S. 298, 309, 27 S.Ct. 535, 51 L.Ed. 811. The language of the subcontract manifests no such intention.³ The subcontract references are to the "general conditions" of the prime contract not the "general provisions," and...