Kosmos Portland Cement Co. v. DAY Const. Co., 6758.

• Decision Date: 04 February 1939
• Docket Number: No. 6758.,6758.
• Citation: 101 F.2d 893
• Parties: KOSMOS PORTLAND CEMENT CO., Inc., v. D. A. Y. CONST. CO. et al.
• Court: U.S. Court of Appeals — Seventh Circuit

101 F.2d 893 (1939)

KOSMOS PORTLAND CEMENT CO., Inc., v. D. A. Y. CONST. CO. et al.

No. 6758.

Circuit Court of Appeals, Seventh Circuit.

February 4, 1939.

Hubert T. Willis and Crawford, Middleton, Milner & Seelbach, all of Louisville, Ky., and Walter Myers and Walter Myers, Jr., both of Indianapolis, Ind., for appellant.

Omer Stokes Jackson, Joseph W. Hutchinson, Caleb J. Lindsey, and Urban C. Stover, all of Indianapolis, Ind., for appellee State Highway Commission.

Floyd R. Mannon and Alan W. Boyd, both of Indianapolis, Ind., for appellee Western Casualty & Surety Co.

Before SPARKS, TREANOR, and KERNER, Circuit Judges.

KERNER, Circuit Judge.

Appellant appeals from a decree dismissing its bill for want of equity brought to set aside the acceptance of work done under a construction contract for the State Highway Commission of Indiana by D. A. Y. Construction Company. The case was tried by the court who made special findings of fact and pronounced its conclusions of law thereon in favor of appellees. The only error assigned is that the court erred in its conclusions on the facts found.

The pertinent facts are that the defendant D. A. Y. Construction Company (hereafter referred to as "Construction Company") was engaged in the business of constructing roads and that Leon L. Deer was its Secretary; that the State Highway Commission of Indiana (hereafter referred to as "Commission") was charged with the building of state roads and that Earl Crawford, T. A. Dicus and Howard Atcheson were members of the Commission.

On September 12, 1935, the Commission awarded to the Construction Company a contract for construction work on U. S. Highway No. 52. The contract contained a provision that before any final estimate is paid to the contractor, he shall furnish receipts for all debts incurred in the prosecution of such work or satisfactory evidence that the same have been paid. It also provided that when, in the opinion of the engineer, the contractor shall have completed the work in an acceptable manner in accordance with the terms of the contract, the engineer was to prepare a final estimate for the work done and furnish the contractor with a copy; that before final acceptance was made, the contractor shall furnish receipts for all debts incurred in the prosecution of such work or give satisfactory evidence to the Chairman that they have been paid, and the Chairman would certify to the State Auditor the balance due, the certificate to be deemed an acceptance of the work by the state.

For the faithful performance of this contract, the Western Casualty & Surety Company (hereafter referred to as "Surety Company"), pursuant to the statutes of the State of Indiana,¹ executed a bond guaranteeing the performance by the Construction Company of all the terms and conditions of the contract including the payment of all lawful claims of subcontractors or materialmen for materials furnished.

During the performance of the contract, appellant shipped to the Construction Company cement which was used in the construction of the highway, the last shipment being made on October 29, 1935, and the last work was performed on December 18, 1935. Final inspection was made by the Commission and the work satisfactorily completed on December 31, 1935 and a final estimate prepared.

On February 10, 1936, Construction Company filed with the Commission an affidavit sworn to by Leon L. Deer, setting forth that all lawful claims of subcontractors and materialmen for materials furnished in completing the contract have been paid and that there were no claims which could be filed against said work. The affidavit was filed for the purpose of inducing the Chairman of the Commission to certify to the State Auditor the balance due and to enable the Construction Company to obtain said balance. The affidavit was false for the reason that at that time the Construction Company owed appellant $19,500. On February 11, 1936, the Chairman of the Commission certified to the Auditor of the State of Indiana that the final balance due Construction Company was $11,239.79, and that amount was paid. However, neither the Commission nor the Chairman had any knowledge that there was any balance due appellant for materials delivered to the Construction Company.

Appellant knew that all work in the performance of the contract had been completed in December, 1935, and knew not later than December 9, 1936 that the work had been accepted. About December 9, 1936, at its office in Louisville, Kentucky, Deer was requested by appellant to telephone to the Commission at Indianapolis, Indiana, and ascertain the date of the acceptance of the highway by the Commission, and an employee of the Commission advised Deer that the final certificate had been issued on February 11, 1936. Deer thereupon advised appellant that the highway had been accepted on February 14, 1936.

During 1936 and until February 11, 1937, Construction Company continued to purchase cement from appellant for use on other projects and was paid therefor, and during this period, Construction Company represented to appellant that it was taking steps by means of which it hoped to be able to obtain money with which to pay appellant.

Appellant never filed any claim with the Commission for the materials furnished the Construction Company, and no statement of the indebtedness due appellant from the Construction Company for the materials furnished was given to the Surety Company until February 13, 1937, when a letter dated February 10, 1937, containing such statement, was received by the Surety Company at Fort Scott, Kansas, on February 15, 1937.

Neither the appellant nor the Surety Company procured or...