Hardaway & Prowell v. National Sur. Co.

• Decision Date: 19 January 1907
• Docket Number: 1,584.
• Citation: 150 F. 465
• Parties: HARDAWAY & PROWELL v. NATIONAL SURETY CO.
• Court: U.S. Court of Appeals — Sixth Circuit

150 F. 465

HARDAWAY & PROWELL v. NATIONAL SURETY CO.

No. 1,584.

United States Court of Appeals, Sixth Circuit.

January 19, 1907

On Rehearing, March 9, 1907.

John B Baskin, for appellant.

Henry Fitts, for appellee.

Before LURTON, SEVERENS, and RICHARDS, Circuit Judges.

LURTON Circuit Judge.

This appeal involves only the liability of the National Surety Company, as surety upon a government contractor's bond made in pursuance of the act of Congress of August 13, 1894 (28 Stat. 278, c. 280, Sec. 1 (U.S. Comp. St. 1901, p 2523)), to the appellants, Hardaway & Prowell, who claim to have supplied the contractors and principal obligors in the bond with labor and material. The only facts necessary to be stated are these: The firm of Willard & Cornwell, composed of James E. Willard, Charles L. Cornwell, and Joseph Coyne contracted on October 5, 1899, with the government for the construction of lock and dam No. 4, Black Warrior river, Ala. This contract involved the supplying of a large amount of materials and labor, and the contractors were required to execute a bond in the penal sum of $50,000, conditioned, first, that the contractors would perform their contract according to its true intent and meaning; and, second, that 'they would make full payments to all persons supplying them labor or materials in the prosecution of the work provided for in said contract. ' They executed this bond with the National Surety Company as surety. The contractors prosecuted the work as a firm for a year or more, and then, for reasons not necessary to be stated, Willard and Cornwell assigned their interests in the contract to their associate, Joseph Coyne, who agreed to assume all debts of the firm and prosecute the work at his own risk and for his own benefit. As between the partners, we see no valid objection to this agreement. It could not affect the United States, and was never intended to substitute Coyne for Willard, Cornwell and Coyne, and was effective only as an assumption by one of the firm of the debts of the firm in consideration of the receipt of the benefits to be derived from the execution of the agreement. Burck v. Taylor, 152 U.S. 634, 14 Sup.Ct. 696, 38 L.Ed. 578, and Prairie Bank v. U.S., 164 U.S. 227, 17 Sup.Ct. 142, 41 L.Ed. 412. Coyne went on with the contract, but at last found himself unable to complete the work. In this situation he entered into a contract for the completion of the work with the appellants, Hardaway & Prowell. As the legal right of Hardaway & Prowell to look to the bond originally given by Willard & Cornwell with the appellee, the National Surety Company, as surety, for their protection, depends upon the true intent and meaning of this contract. It is here set out in full:

'State of Alabama, Tuscaloosa County:

'This contract made this the 2nd day of June, 1903, by and between B. H. Hardaway and R. P. Prowell, hereinafter called Hardaway & Prowell, as parties of the first part, and Joseph Coyne, as party of the second part, witnesseth:

'That, whereas, Willard & Cornwell, a firm composed of J. E. Willard, C. R. Cornwell and the said Joseph Coyne, did, heretofore, on to wit, the . . . day of . . . , 1899, enter into a contract with the United States for the construction of Lock No. 4 in the Black Warrior River above Tuscaloosa, Alabama, and whereas, shortly after the beginning of the work upon said lock the said Joseph Coyne, by an arrangement between him and his copartners, undertook to complete and finish said lock according to the specifications of the contract of said firm with the United States, and in consideration of such an undertaking acquired the beneficial interest of said firm in said contract and was to receive all amounts paid by the United States in consideration of such contract, and, whereas, said lock is still uncompleted, and the said Joseph Coyne cannot, on account of his inability to procure the necessary financial

aid and on account of the disorganization of his labor forces and for various and sundry other reasons, complete and finish the said work in accordance with the said contract, and whereas said contract is a valued asset to the said Joseph Coyne, if the said work can be prosecuted to its completion under the terms of said contract, there being held in reserve by the government under the terms of said contract about $8,300.00, which has already been earned by said Coyne, and whereas by reason of his said inability to finish said work the said contract is about to be forfeited, and the said Coyne is in imminent danger of losing, not only what profits may be made upon the completion of the work, but the entire reserve fund also retained by the government, and whereas the said Joseph Coyne for the purpose of preventing the forfeiture of said contract, has made overtures to the said Hardaway & Prowell to take up said work and complete it, and the said Hardaway & Prowell have agreed to do so upon the terms and stipulations hereinafter set forth. Now, therefore:

'(1) The said Hardaway & Prowell do hereby undertake and agree with the said Joseph Coyne to superintend the completion of the said lock and dam No. 4 and to furnish the necessary finances for the completion thereof and to put in charge of said work a competent superintendent and to properly organize the work for an energetic prosecution thereof to completion for which services they are to receive an agreed compensation of 15 per cent. upon the total cost of completing said contract, which total cost shall be construed to include all amounts necessarily expended and expenses incurred by Hardaway & Prowell in the completion of said work and all amounts necessarily paid and expenses incurred by them to effect a settlement with and an acceptance of said lock and dam by the United States.

'(2) The said Joseph Coyne agrees to the above compensation for Hardaway & Prowell and further agrees to turn over to them entire charge of the completion of said work, and not to interfere with them in any way in the prosecution of said work to completion, and further agrees to turn over to the said Hardaway & Prowell the entire outfit of machinery, tools, etc., which he now has at said lock and dam and the quarries where he is getting stone, and to give the use of the same to them for the completion of said work free of any charge.

'(3) The said Joseph Coyne further agrees to have all checks for each estimate upon said work forwarded by the government to the said Hardaway & Prowell and to properly endorse such checks so that they may be collected by Hardaway & Prowell.

'(4) It is further agreed by all parties hereto that out of the proceeds of the checks referred to in the next foregoing paragraph the obligations shall be paid preferentially in the following order:

'(1) The compensation of the said Hardaway & Prowell as herein agreed for their services.

'(2) All moneys advanced by Hardaway & Prowell and used in the prosecution of said work.

'(3) All debts necessarily incurred by the said Hardaway & Prowell for the prosecution of said work other than debts for labor and material.

'(4) All debts incurred by said Hardaway & Prowell for labor and material or moneys advanced by them in payment for labor or material debts.

'(5) The said Joseph Coyne, for the completion of said work and for the securing to the said Hardaway & Prowell all amounts, that they shall have to pay on whatever account for the completion of said lock and dam and for a settlement with the United States and acceptance of said lock and dam by the proper authorities of the government, does hereby assign and set over to the said Hardaway & Prowell all his interest in the amount, aggregating as aforesaid about $8,300.00, retained and now held in reserve by the government under the said contract for the building of said lock and dam, which shall be applied by the said Hardaway & Prowell in the following order:

'(1) To the payment of all debts for labor and material incurred in the building of said lock and dam.

'(2) Any balance that may be due to said Hardaway & Prowell for their compensation under this contract.

'(3) All other necessary debts incurred in the prosecution of the said work by Hardaway & Prowell and all amounts including expenses which they shall

have to pay in order to effect a settlement with the government and acceptance by it of said lock and dam.

'(4) Any balance to be paid to the said Joseph Coyne.

'(6) It is understood and agreed by all parties hereto that if the said Joseph Coyne should at any time fail or be unable to turn over to the said Hardaway & Prowell the checks for estimates on said work properly endorsed so that Hardaway & Prowell can collect them or should fail to secure the collection of them by the said Hardaway & Prowell then the said Hardaway & Prowell shall in that event have the option of annulling said contract and stopping work without notice to the said Joseph Coyne, or to any other parties whomsoever, but in said event the said Hardaway & Prowell shall have a claim against the said Joseph Coyne for all moneys furnished by them and expenses incurred by them upon any account whatsoever in the prosecution of said work, and which shall not have been repaid to them, and for all compensation earned under this contract and not paid to them, and such claim shall be due and payable at once upon their termination of the contract.

'In witness whereof the said parties of the first and second parts have hereunder set their hands and seals in duplicate, this the day and year first above written.

'B. H. Hardaway. 'R. P. Prowell. 'Joseph Coyne.

'Attest: C. B. Verner.'

Storms freshets, and overflows, as claimed by the appellants, added to the cost of completing the unfinished lock and dam,...