Hardaway v. National Surety Company

• Decision Date: 04 January 1909
• Docket Number: No. 44,44
• Citation: 53 L.Ed. 321,211 U.S. 552,29 S.Ct. 202
• Parties: B. H. HARDAWAY and R. P. Prowell, Doing Business as Hardaway & Prowell, Appts., v. NATIONAL SURETY COMPANY
• Court: U.S. Supreme Court

211 U.S. 552

29 S.Ct. 202

53 L.Ed. 321

B. H. HARDAWAY and R. P. Prowell, Doing Business as Hardaway & Prowell, Appts.,

v NATIONAL SURETY COMPANY.

No. 44.

Argued December 8, 1908.

Decided January 4, 1909.

Messrs. Temple Bodley, John Brice Baskin, J. Manly Foster, and W. B. Oliver for appellants.

Messrs. William W. Watts, Henry Fitts, and William J. Griffin for appellee.

Mr. Justice Day delivered the opinion of the court:

This is an appeal from a decree of the circuit court of appeals for the sixth circuit, affirming a decree of the circuit court of the United States for the western district of Kentucky, whereby the appellants Hardaway and Prowell were denied the right to recover against the appellee, the National Surety Company, as surety for the faithful performance of a certain contract entered into on September 28, 1899, between the United States and a firm of contractors composed of James E. Willard, Charles L. Cornwell, and Joseph Coyne, doing business as Willard & Cornwell. The contract was for the construction of a lock and dam No. 4, in the Black Warrior river, near Tuscaloosa, Alabama. Bond was given in accordance with the requirements of the act of Congress approved August 13, 1894 (28 Stat. at L. 278, chap. 280, U. S. Comp. Stat. 1901, p. 2523), in order to secure the faithful performance of the contract.

The contract has been kept so far as the United States is concerned, and the surety is relieved from obligation in that respect. The contention in this case involves the construction and application of that condition of the bond which requires the contractors to 'promptly make full payments to all persons supplying them labor or materials in the prosecution of the work, provided for in said contract.'

The question for consideration here is, under the circumstances of the case, can Hardaway and Prowell recover upon the bond on their claim as for labor done and material furnished within the terms thereof? The record discloses that the original contractors carried on the work until February 5, 1901, when they made an agreement between themselves and Coyne, by which agreement Coyne was to pay the debts of the firm, to make all future purchases in his own name, and to receive all profits from the contract. After February 5, 1901, Coyne carried on the work. The government made the checks payable to Willard and Cornwell as before, in accordance with the terms of the contract. On June 2, 1903, Coyne, having become financially unable to complete the contract, made a contract in writing with Hardaway and Prowell, which we shall hereinafter set out in full, concerning the work.

Owing to freshets and washouts, as is contended by appellants, it became necessary to do over much of the work, and after its completion appellants made a claim for $32,757.34 interest included to March 1, 1906, and included therein $7,556, being 15 per cent of the cost expended on the contract with Coyne.

On October 24, 1904, the National Surety Company, appellee, filed a bill in the United States court at Louisville, averring the insolvency of the contractors, and that there would be a loss for labor and material which it would be compelled to pay as surety on the bond, asking for an injunction and the appointment of a receiver. On November 8, 1904, an order was made, referring the case to a special master, and providing that parties having claims for labor and materials might prove the same, with the right to contest them, and to take the proofs thereof as in equity cases. The order provided that appellee, the surety company, should pay into court, in satisfaction of the claims and costs of action, such a sum as might be required after the government payments were exhausted.

The claim of Hardaway and Prowell was filed. A special master allowed the claim. Upon error, the circuit court disallowed the same, and, upon appeal to the circuit court of appeals for the sixth circuit, the decree was affirmed. 80 C. C. A. 283, 150 Fed. 465. The case then came here.

The case turns upon the construction of the contract between Coyne and Hardaway and Prowell. The contract reads as follows:

State of Alabama, Tuscaloosa county:

This contract, made this 2d 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, 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,...