Illinois Surety Company v. United States Peeler

• Decision Date: 21 February 1916
• Docket Number: No. 176,176
• Citation: 240 U.S. 214,36 S.Ct. 321,60 L.Ed. 609
• Parties: ILLINOIS SURETY COMPANY, Plff. in Err., v. UNITED STATES to the use of J. A. PEELER, L. M. Peeler, and P. A. Peeler, Partners, Trading under the Firm Name of Faith Granite Company, et al
• Court: U.S. Supreme Court

240 U.S. 214

36 S.Ct. 321

60 L.Ed. 609

ILLINOIS SURETY COMPANY, Plff. in Err.,

v UNITED STATES to the use of J. A. PEELER, L. M. Peeler, and P. A. Peeler, Partners, Trading under the Firm Name of Faith Granite Company, et al.

No. 176.

Argued January 14, 1916.

Decided February 21, 1916.

Mr. Bynum E. Hinton for plaintiff in error.

Messrs. Benjamin E. Pierce, D. W. Robinson, and John L. Rendleman for defendants in error.

Messrs. George P. Miller, Edwin S. Mack, and Arthur W. Fairchild, as amici curiae.

Mr. Justice Hughes delivered the opinion of the court:

This action was brought by subcontractors under the act of August 13, 1894 (28 Stat. at L. 278, chap. 280), as amended by the act of February 24, 1905 (33 Stat. at L. 811, chap. 778, Comp. Stat. 1913, § 6923), in the name of the United States, to recover upon a contractor's bond. The contract was for the construction of a postoffice building in Aiken, South Carolina (35 Stat. at L. 526, 528, chap. 228), and the Illinois Surety Company (plaintiff in error) was the surety. The summons and complaint were filed on March 4, 1913. Motion to dismiss was made on September 22, 1913, upon the ground that the complaint did not allege that there had been a completion and final settlement of the contract between the contractor and the United States; or that there had been such completion and settlement more than six months, and within one year, prior to the commencement of the action. Another ground for the motion was that the remedy under the statute was in equity. The motion was denied, the court permitting the complaint to be amended so as to allege that the contract was completed in July, 1912; that final settlement was made by the Treasury Department on August 21, 1912; and that no suit had been brought by the United States against the contractor and his surety within the six months' period. The defendant, reserving its objection to the order denying the motion and allowing the amendment, answered. Jury trial was waived by written stipulation and the case was heard by the district judge, who found, in substance, the facts to be as follows:

That the building was completed, and on August 21, 1912, the Treasury Department 'stated and determined the final balance' to be paid the contractor under the contract at the sum of $3,999.01; that this 'adjustment and determination' was communicated to the contractor; that on August 26, 1912, a voucher of that date was prepared by the Department, showing the balance, as above stated, to which the contractor appended his signature, certifying the amount to be correct, and that on that day there was a definite acceptance by the contractor of the adjustment; that on September 11, 1912, a check for the above-mentioned sum was made out by the disbursing clerk of the Department, payable to the order of the contractor, who thereafter collected it; that upon the request of the relator (the Faith Granite Company) the Secretary of the Treasury, on January 16, 1913, furnished to it a certified copy of the contract and bond, and that on the 6th day of March, 1913, . . . the present action was instituted by the filing. . . . and by service of summons and complaint on defendant Surety Company.' It also appeared that no action had been instituted by the United States upon the bond within the six months allowed by the statute.

The district court gave judgment for amounts found to be due to those for whose benefit the action was brought, and to certain interveners, and this judgment was affirmed by the circuit court of appeals, 131 C. C. A. 476, 215 Fed. 334. The contentions presented are: (1) That the action was instituted prematurely; (2) that the amendment of the complaint was improperly allowed; (3) that there was no right of action at law; and (4) that the court erred in giving judgment for the Carolina Electrical Company, one of the subcontractors.

1. The statute provides: 'If no suit should be brought by the United States within six months from the completion and final settlement of said contract, then the person or persons supplying the contractor with labor and materials shall, upon application therefor, and furnishing affidavit . . . be furnished with a certified copy of said contract and bond, upon which he or they shall have a right of action, and shall be, and are hereby, authorized to bring suit in the name of the United States . . . against said contractor and his sureties, and to prosecute the same to final judgment and execution; Provided, That . . . it shall not be commenced until after the complete performance of said contract and final settlement thereof, and shall be commenced within one year after the performance and final settlement of said contract, and not later.' In United States ex rel. Texas Portland Cement Co. v. McCord,¹ 233 U. S. 157, 58 L. ed. 893, 34 Sup. Ct. Rep. 550, we said that this act created a new right of action upon terms named; and hence that an action brought by creditors before six months had expried from the time of the 'completion and final settlement of the contract' could not be sustained. In the present case, the plaintiff in error insists that there was no final settlement within the meaning of the statute prior to the issue of the check for payment to the contractor on September 11, 1912, and that in this view the action was brought too soon.

It was evidently the purpose of the act of 1905 to remedy the defect in the act of 1894 by assuring to the United States adequate opportunity to enforce its demand against the contractor's surety, and priority with respect to such demand. Mankin v. United States, 215 U. S. 533, 538, 54 L. ed. 315, 317, 30 Sup. Ct. Rep. 174; United States ex rel. Brown-Ketcham Iron Works v. Robinson, 130 C. C. A. 432, 214 Fed. 38, 39, 40. Accordingly it was provided that if the United States sued upon the bond, the described creditors should be allowed to intervene, and be made parties to the action, but subject 'to the priority of the claim and judgment of the United States.' And it was only in case the United States did not sue within the specified period that the creditors could bring their action. With this object in view,—to protect the priority of the United States, and at the same time to give a remedy to materialmen and laborers on the contractor's bond and a reasonable time to prosecute it (United States use of Alexander Bryant Co. v. New York Steam Fitting Co. 235 U. S. 327, 337, 59 L. ed. 253, 257, 35 Sup. Ct. Rep. 108),—it was natural that the time allowed exclusively for action by the government should begin to run when the contract had been completed, and the government, in its final adjustment and settlement according to established administrative methods, had determined what amount, if any, was due. Then the government would have ascertained the amount of its claim, if it had one, and could bring suit if it desired. As such determinations are regularly made in the course of administration, nothing would seem to be gained by postponing the date, from which to reckon the six months, to the time of payment. Indeed, if an amount were found to be due from the contractor, and he was insolvent, there might be no payment, and, if payment were essential, there would be no date from which the time for the bringing of the creditors' action could be computed.

The pivotal words are not 'final payment,' but 'final settlement,' and in view of the significance of the latter term in administrative practice, it is hardly likely that it would have been used had it been intended to denote payment. See United States v. Illinois Surety Co. 195 Fed. 306, 309; United States use of Chief All Over v. Bailey, 207 Fed. 782, 784; United States ex rel. Brown-Ketcham Iron Works v. Robinson (C. C. A. 2d C.) supra; United States use of Starrett-Fields Co. v. Massachusetts Bonding & Ins. Co. 215 Fed. 241, 244; United States use of John Davis Co. v. Illinois Surety Co. (C. C. A. 7th C.) 226 Fed. 653, 662. The word 'settlement,' in connection with public transactions and accounts, has been used from the beginning to describe administrative determination of the amount due. By the act of September 2, 1789, chap. 12 (1 Stat. at L. 65, Comp. Stat. 1913, § 235), establishing the Treasury Department, the Comptroller was charged with the duty of examining 'all accounts settled by the auditor.' (§ 3.) And it was made the duty of the auditor to receive 'all public accounts and after examination to certify the balance,' subject to the provision that any person whose account should be so audited might appeal to the Comptroller 'against such settlement.' The act of March 3, 1809, chap. 28, § 2 (2 Stat. at L. 536, Comp. Stat. 1913, § 406), gave authority to the Comptroller to direct the auditor forthwith 'to audit and settle any particular account' which he was authorized to audit and settle, and 'to report such settlement' for his revision and final decision. (See Rev. Stat. § 271.) By the act of March 3, 1817, chap. 45, § 2) 3 Stat. at L. 366, Comp. Stat. 1913, § 368), it was provided that 'all claims and demands whatever, by the United States or against them, and all accounts whatever, in which the United States are concerned, either as debtors or as creditors, shall be settled and adjusted in the Treasury Department.' This provision was carried into § 236 of the Revised Statutes (Comp. Stat. 1913, § 368). The words 'settled and adjusted' were taken to mean the determination in the Treasury Department for administrative purposes of the state of the account and the amount due. See 2 Ops. Atty. Gen. 518, 625, 629, 630. Referring to this provision, it was said by Mr. Chief Justice Waite, in delivering the opinion of the court in Cooke v. United States, 91 U. S. 389, 399, 23 L. ed. 237, 243: 'Thus it is seen that all claims against the United States are to be settled and adjusted 'in the Treasury Department;' and that is located 'at the seat of government.' The assistant treasurer in New York...