Home Indemnity Company v. United States

• Decision Date: 09 April 1970
• Docket Number: Civ. A. No. 16313-3.
• Citation: 313 F. Supp. 212
• Parties: The HOME INDEMNITY COMPANY, Plaintiff, v. UNITED STATES of America, Defendant.
• Court: U.S. District Court — Western District of Missouri

313 F. Supp. 212

The HOME INDEMNITY COMPANY, Plaintiff, v. UNITED STATES of America, Defendant.

Civ. A. No. 16313-3.

United States District Court, W. D. Missouri, W. D.

April 9, 1970.

Richard B. McKelvey, of Tucker, Murphy, Wilson, Lane & Kelly, Kansas City, for plaintiff.

Charles E. French, Asst. U. S. Atty., Kansas City, Mo., for defendant.

ORDER GRANTING JUDGMENT FOR PLAINTIFF; JUDGMENT FOR PLAINTIFF

BECKER, Chief Judge.

This is an action brought by plaintiff under the Tucker Act, Section 1346, Title 28, United States Code, to recover from defendant a portion¹ of the monies due plaintiff as surety and subrogee of a defaulting Government contractor which were erroneously, plaintiff contends, paid by the Government to the defaulting contractor and the Internal Revenue Service.

The facts in this case are not in dispute. They have been stipulated and the case has been submitted by the parties on the stipulation and briefs. The stipulated facts are essentially as follows: that on or about June 5, 1963, A. T. Perry Pipe Line Construction, Inc. ("Perry" hereinafter) entered into a contract with the Government for the construction of improvements at Forbes Air Force Base, Topeka, Kansas; that on the same date, plaintiff, as surety, entered into a contractual agreement under the Miller Act, Section 270a et seq. of Title 40, United States Code, whereby plaintiff undertook to insure performance and payment by Perry, to all persons supplying labor and materials in the prosecution of the work under the construction contract; that Perry failed to perform all of the work of construction called for by the construction contract and failed to pay "all laborers and mechanics for labor performed and for material and equipment rental which was used on or rented in the performance of said contract"; that the "remaining work * * * to complete the contract was performed under the supervision of Mr. Floyd Carr, Supervisor of * * * Perry * * * on May 21, 1964, and May 22, 1964"; that "plaintiff's attorneys advised defendant by letter dated June 4, 1964 * * * that these remaining items were all corrected, and Mr. A. H. Stratton for defendant advised plaintiff by letter dated June 5, 1964, * * * that all noted discrepancies on the contract were completed, and approved for final payment"; that "plaintiff paid the cost of correcting these discrepancies, $100.00, on or about August 31, 1964"; that meantime on April 21, 1964, plaintiff's attorneys "wired and wrote Mr. A. H. Stratton, contracting officer, Forbes Air Force Base" asserting their right to the monies (on behalf of plaintiff) in the hands of the Government due the contractor; that "by letter dated April 24, 1964," Stratton acknowledged receipt of the wire, stating that "the balance of unpaid moneys as of April 17, 1964, remaining in the hands of defendant was $10,354.79"; that, notwithstanding the wire of April 21, 1964, "on or about June 22, 1964, the defendant, the contract being completed to defendant's satisfaction, paid out of the aforesaid balance of contract moneys $6,451.25 to said contractor, A. T. Perry Pipe Line Construction, Inc., and $3,903.54 to the Internal Revenue Service, which had a levy on the funds due the contractor under this contract, without first communicating with plaintiff or its attorneys prior to making said payments" and without their consent; that thereafter "plaintiff, pursuant to the terms and obligations of the aforesaid payment and performance bonds * * * paid out of its own funds the sum of $59,556.01 to persons who furnished labor, materials and rental equipment in the prosecution of the work provided for in the construction contract * * * which included the sum of $100.00 paid in the completion of said project" and informed defendant of such payments by letter dated June 18, 1965; that defendant by letter dated July 8, 1965, informed plaintiff of payment of the retained amounts to the defaulting contractor and the Internal Revenue Service; and that plaintiff demanded payment of the equivalent amount by letter dated July 21, 1965, which was refused by defendant's letter dated October 19, 1965.

Venue appears to be improper in this action. Under Section 1402 of Title 28, an action of this type is to be brought "only * * * in the judicial district where the plaintiff resides." Plaintiff was incorporated in New York and has its principal place of business there. It is the plain import of Section 1402 that "in actions other than tax recovery suits, corporate residence under § 1402 would apparently be limited to the district where the corporation is domiciled, i.e., its place of incorporation." 1 Moore's Federal Practice ¶ 0.144 11, p. 1640. Under the provisions of Section 1406(b), Title 28, U.S.C., however, venue may be waived by appearing and contesting the merits of the action or by otherwise not raising a seasonable objection thereto. And it has been held that moving to dismiss without objecting to venue constitutes a waiver of the objection. Id. ¶ 0.146 6, pp. 1912-13, n. 7. Defendant has raised no objection to venue; has answered and has challenged the merits of the action, including jurisdiction; and has thereby waived its objection in respect of venue.

On the merits, it is unquestionable that under the applicable law plaintiff is entitled to recover $10,000 (the maximum which can be recovered in this case under the Tucker Act) of the $10,354.79 paid by the Government to the defaulting contractor and the Internal Revenue Service. The Miller Act, Section 270a et seq., Title 40, U.S.C., requires every Government contractor (on contracts exceeding $2,000 in amount) to obtain a performance bond and a payment bond. The well settled law in respect of the surety on a payment bond under the Miller Act is that when the surety pays laborers and materialmen of a defaulting contractor, the same surety becomes subrogated to their rights to the monies due the defaulting contractor in the hands of the Government. Pearlman v. Reliance Insurance Company, 371 U.S. 132, 83 S.Ct. 232, 9 L.Ed.2d 190; Henningsen v. United States Fidelity & Guaranty Co. (C.A. 9) 143 F. 810, affirmed 208 U.S. 404, 28 S.Ct. 389, 52 L. Ed. 547; Continental Casualty Co. v. United States, 169 F.Supp. 945, 145 Ct. Cl. 99; In re Cummins Const. Corp. (D. Md.) 81 F.Supp. 193; New York Cas. Co. v. Zwerner (N.D.Ill.) 58 F.Supp. 473; United Pac. Ins. Co. v. United States, 362 F.2d 805, 176 Ct.Cl. 176; Maryland Casualty Co. v. Lincoln Bank & Trust Co. (W.D.Ky.) 18 F.Supp. 375; Hanover Insurance Co. v. United States (S.D.N.Y.) 279 F.Supp. 851; Maryland Casualty Co. v. United States, 100 Ct.Cl. 513; 17 Am.Jur.2d Contractors' Bonds § 107, pp. 283-4. It is equally well established that the right of subrogation relates back to the date of the suretyship agreement. Pearlman v. Reliance Insurance Company, supra; New York Cas. Co. v. Zwerner, supra; Henningsen v. United States Fidelity & Guaranty Co., supra; American Fidelity Co. v. National City Bank of Evansville, 105 U.S.App.D.C. 312, 266 F.2d 910; Glenn v. American Surety Co (CA. 6) 160 F.2d 977.

The Government contends, to the contrary, (1) that there is no jurisdiction of this cause under Section 1346 of Title 28, U.S.C., because there is no "express or implied" contract between the surety and the Government; (2) that the right of subrogation of a surety on a payment bond, unlike a performance bond, does not arise against the Government under the Miller Act; and (3) that the "relation back" theory is inapplicable because the subrogation does not arise until the payment of the moneys and the Government had previously paid the contractor and the IRS. All of the foregoing...