Illinois Sur. Co. v. United States

• Decision Date: 06 May 1914
• Docket Number: 1242.
• Citation: 215 F. 334
• Court: U.S. Court of Appeals — Fourth Circuit
• Parties: ILLINOIS SURETY CO. v. UNITED STATES, to Use of PEELER, et al.

215 F. 334

ILLINOIS SURETY CO. v. UNITED STATES, to Use of PEELER, et al.

No. 1242.

United States Court of Appeals, Fourth Circuit.

May 6, 1914

W. H Townsend, of Columbia, S.C., for plaintiff in error and cross-defendant in error.

Benjamin E. Pierce, of Augusta, Ga., and D. W. Robinson, of Columbia S.C. (J. L. Rendleman, of Salisbury, N.C., Pierce Bros., of Augusta, Ga., and Croft & Croft, of Aiken, S.C., on the brief), for defendants in error and cross-plaintiffs in error.

Before KNAPP and WOODS, Circuit Judges, and DAYTON, District Judge.

KNAPP Circuit Judge.

This suit was commenced on March 4, 1913, under the act of Congress of August 13, 1894, as amended February 24, 1905 which gives to subcontractors under certain conditions a right of action upon the bond of a contractor for the erection of a public building. For convenient reference the material parts of this statute are reproduced in the margin. ^[1] The defendant contractor and his surety, the plaintiff in error, filed separate answers to the complaint on April 4, 1913. Notice was published as provided by the act, and two other subcontractors intervened, one on April 26th and the other on June 27, 1913. On the 22d of September, 1913, the defendants filed notices of motion, in the nature of a demurrer, to dismiss the complaint, and also the petitions of intervention, on specified grounds which were in effect that neither the complaint nor the petitions stated a cause of action. It was also alleged that the court had no jurisdiction because the right of action is equitable in its nature and the issues cannot be determined in a suit at law. Upon the hearing of these motions the plaintiffs and interveners asked for and received leave to amend. Amended pleas were thereupon filed, to which answers were duly interposed by the defendants. The contractor set up a special defense, which was sustained, that he had been adjudicated a bankrupt and received his discharge. The case was tried by the District Judge; all parties having stipulated in writing to waive a trial by jury and resulted in a judgment against the plaintiff in error and in favor of the several subcontractors mentioned, both plaintiffs and interveners. To reverse this judgment the surety company prosecutes this writ of error. The cross-writ alleges error because interest was allowed only from the date of the order directing the judgment.

Apart from some minor issues which will be later considered, the two principal contentions are: First, that the action was prematurely brought and must fail for that reason; and, second, that the trial court erred in allowing the complaint and petitions to be amended. If the first of these contentions is well founded, the case is at an end, as the Supreme Court has recently held in United States v. McCord et al., 233 U.S. 157, 34 Sup.Ct. 550, 58 L.Ed. 893, decided April 6, 1914. The point was directly involved, and the decision unequivocal. Among other things, the court says:

'By this statute a right of action upon the bond is created in favor of certain creditors of the contractor. The cause of action did not exist before, and is the creature of the statute. The act does not place a limitation upon a cause of action theretofore existing, but creates a new one upon the terms named in the statute. The right of action given to creditors is specifically conditioned upon the fact that no suit shall be brought by the United States within the six months named, for it is only in that event that the creditors shall have a right of action and may bring a suit in the manner provided. The statute thus creates a new liability and gives a special remedy for it, and upon well-settled principles the limitations upon such liability become a part of the right conferred, and compliance with them is made essential to the assertion and benefit of the liability itself. * * * The right to intervene is given in the statute when the action is brought by the United States, and the creditors may have their rights adjudicated in such action. And in the case of an action begun by a creditor in accordance with the statute, the right to file a claim is given to creditors. These rights to intervene and to file a claim, conferred by the statute, presuppose an action duly brought under its terms. In this case the cause of action had not accrued to the creditors who undertook to bring the suit originally. The intervention could not cure this vice in the original suit. * * * No service was made or attempted to be had upon it, as required by the statute when original actions are begun by creditors. As we read the certificate, the intervention was what it purported to be-- an appearance in the original suit, already brought, and in our view must abide the fate of that suit.'

In the case at bar the facts relating to the commencement of the action are these: The work required of the contractor appears to have been practically completed some time in June, 1912. The supervising architect so reported in a communication to the secretary of the treasury, under date of August 21, 1913, which contains ' a condensed statement of the account,' including contract price, additions, and deductions made from time to time, payments on account, and charges of actual damages for delay, and recommends that authority be given 'for the issue and payment of a voucher' in favor of the contractor for $3,399.01, the balance found due to him. On the same date this statement and recommendation were approved by the assistant secretary of the treasury. Under date of August 23, the contractor was notified of the amount so stated and determined to be due him, and that authority had been given for a voucher in his favor for the ascertained balance, and he acknowledged the same two days later by letter to the supervising architect. The voucher was issued on August 26th, and he signed his approval thereof on or about that date. The check in payment was drawn on the 11th of September, and paid on the following day. This check, as will be seen, was issued and paid less than six months before the suit was commenced, and if that be the date of the 'completion and final settlement' of the contract, within the meaning of the statute, the action was prematurely brought and cannot be maintained.

But we are clearly of opinion that the final settlement in this case was effected on or before the 26th of August, when the contractor signed the voucher which bears that date, and in which he certified 'that the above bill is correct and just and that payment therefor has not been received. ' Surely, nothing then remained to be settled. Indeed, there is no indication in the record that anything had been in dispute between the contractor and the...