Royal Indemnity Co. v. Woodbury Granite Co.

• Decision Date: 27 December 1938
• Docket Number: No. 7122.,7122.
• Citation: 69 App. DC 364,101 F.2d 689
• Parties: ROYAL INDEMNITY CO. v. WOODBURY GRANITE CO.
• Court: U.S. Court of Appeals — District of Columbia Circuit

69 App. DC 364, 101 F.2d 689 (1938)

ROYAL INDEMNITY CO. v. WOODBURY GRANITE CO.^*

No. 7122.

United States Court of Appeals for the District of Columbia.

Argued November 14, 1938.

Decided December 27, 1938.

P. J. J. Nicolaides, of Washington, D. C., for appellant.

Woodson P. Houghton, Kahl K. Spriggs, Joseph Fairbanks, Edward Stafford, Louis M. Denit, Thomas S. Jackson, and J. Richard Earle, all of Washington, D. C., for appellees.

Before GRONER, Chief Justice, and MILLER and EDGERTON, Associate Justices.

GRONER, C. J.

This appeal was taken from three judgments entered against appellant in the court below in favor of Woodbury Granite Company, Inc., American Blower Corporation, and Cities Service Oil Company. The judgment of the Oil Company was later settled, and we heard the appeal only as to the former two. The action was brought under the Heard Act¹ — B-W Construction Company, a corporation, entered into a contract with the United States on April 23, 1932, to furnish labor and materials for the remodeling and enlargement of the Post Office in Washington City. Royal Indemnity Company (appellant) on April 27, 1932, executed the bond required by the statute. The work having been done and the contract settled, the use plaintiff, Hudson Supply and Equipment Company, a subcontractor, within the statutory period brought action against the surety to recover for materials furnished, and Woodbury Granite Company and American Blower Corporation intervened.

Woodbury's declaration was filed March 30, 1937, together with an affidavit of merit under the 73rd Rule of the trial court. The affidavit averred that Woodbury entered into a written subcontract with B-W Construction Company whereby it agreed to furnish all of the granite called for by the specifications in the contract between the United States and B-W Company at the rate of $2.50 per cubic foot; that it furnished the granite in accordance with the contract; and that there became due it from B-W Company the sum of $87,368.43, on account of which there had been paid $78,500, leaving a balance due of $8,868.43; and that all of the materials furnished were necessary for and were actually used in the performance of the work required by the contract. On May 11, 1937, appellant filed its pleas and an affidavit of defense under the rule. In the latter it declared, in substance, that the amounts charged for the materials were not the fair and reasonable value, but that the fair and reasonable value did not exceed $50,000 and hence denied it was indebted to Woodbury in any sum. Woodbury on June 11 filed a motion for judgment under the rule for lack of a sufficient affidavit of defense. The motion came on for hearing October 26, 1937, at which time appellant asked leave to file a substituted affidavit in which it sought to incorporate the further ground that at or about the time when Woodbury furnished the materials, it agreed to sell to other contractors material of the same general character for an amount much less than was provided in the contract with B-W Company. The trial court granted the motion for judgment and overruled the motion for leave to file the substituted affidavit. The appeal is from the judgment.

The errors alleged are: first, refusing to allow the substituted affidavit of defense and holding the affidavit filed not sufficient within the meaning of the 73rd Rule; and, second, entering summary judgment while interventions on behalf of other materialmen were pending.

First. For the reasons we shall now state, we think it unnecessary to pass on the question whether the trial court abused its discretion in refusing to accept the supplemental affidavit. For whatever it may be worth, the supplemental affidavit is in the record and in reaching our decision we have treated it as though it had been received and made part of the case. Giving it full effect, we are of opinion it adds nothing of merit or strength to the original affidavit and wholly fails to meet or satisfy the requirements of the rule.

Rule 73 of the trial court provides that if the plaintiff shall file, at the time of bringing his action, an affidavit setting out distinctly his cause of action and the sum he claims to be due and shall serve a copy on the defendant together with a copy of the declaration, he shall be entitled to judgment for the amount claimed unless the defendant shall file along with his plea, if in bar, an affidavit of defense denying the right of the plaintiff as to the whole or some specified part of his claim, and specifically stating also, in precise and distinct terms, the grounds of his defense, which must be such as would, if true, be sufficient to defeat the plaintiff's claim. The Supreme Court in Fidelity & Deposit Company v. United States, 187 U.S. 315, 23 S.Ct. 120, 47 L.Ed. 194, sustained the validity and approved the purpose of this rule in a case which, like this, involved a contract of suretyship. We have approved and sustained it in a number of cases, and for more than fifty years it has been a well recognized rule of procedure in the District of Columbia. Central Tire & Accessory Co. v. Koperlik, 61 App.D.C. 142, 58 F.2d 694. The question in this aspect of the case is, therefore, whether the affidavit of the surety was sufficient under the rule.

Woodbury's declaration and claim was filed March 30, 1937. It included in an itemized statement the dates of shipment and contract prices of the granite. The shipments began August 15, 1932, and continued to February 16, 1933. The affidavit of merit filed with the declaration shows that the contract was made in writing May 1, 1932, approximately a week after the date of the main contract; that the materials furnished were necessary for and were actually used in the performance of the work required to be done under the contract; that the contract with the United States was fully completed and performed more than six months before the filing of the suit and within one year of the final settlement; that no suit has been brought by the United States and that the amount claimed is justly due and owing. Under the rule Woodbury was entitled to a summary judgment unless the surety should file with its plea an affidavit of defense "which must be such as would, if true, be sufficient to defeat the plaintiff's claim in whole or in part". Assuming, as we do, the truth of the averments of the affidavits, we think it perfectly clear that they neither singly nor together meet the requirements of the rule. The price charged for the materials was in accordance with the written contract between the general contractor and the claimant. It is not claimed or suggested that the contract was collusive or dishonest or that the parties — the general contractor on the one hand and the materialman on the other — were not dealing at arm's length when it was made. Nor is it suggested in the supplemental affidavit that at the time the contract was made the price agreed to be paid was unreasonable or above the current market price. The first affidavit of defense is a mere conclusion unsupported by any facts. The substituted affidavit has relation only to facts said to exist at the time the materials were supplied. That time was, as we have seen, a period from four to nine months after the making of the contract, and the offer wholly fails to charge — even if that would avail anything — that the market price was the same at both times or that the price asked by Woodbury of others at the later date had even a remote relationship to the market price at the earlier date. In this view, the grounds of defense were obviously insufficient under the rule.

While we are not prepared to say that in every Heard Act case involving a claim under a subcontract the surety is bound by the contract price, we think it may be stated with complete assurance that the surety is so bound except in a case of collusion, fraud, or such overreaching as will shock the conscience. Or, stated otherwise, that the surety is liable in those cases in which the principal would be liable, and this much we said in Fidelity & Deposit Co. v. Smoot, 20 App.D.C. 376. In that case, which involved a bond given to secure performance of a District of Columbia public contract, under a statute in all material respects like the Heard Act, we said: "We perceive no reasonable ground whatever, for excepting the surety from the operation of a rule plainly applicable to his principal. * * * Having voluntarily entered into the obligation, he takes it with its burdens, one of which is that he is charged with the knowledge of his principal." The case went to the Supreme Court and was affirmed in Fidelity & Deposit Co. v. U. S., Use of Smoot, 187 U. S. 315, 23 S.Ct. 120, 47 L.Ed. 194.

Appellant relies upon Puget Sound Bridge & Dredging Co. v. Jahn & Bressi, 148 Wash. 37, 268 P. 169; Panama Commercial Co. v. Tingey, 26 Cal.App. 576, 147 P. 585; Utah Construction Co. v. United States, 9 Cir., 15 F.2d 21; and Massachusetts Bonding Co. v. United States, 5 Cir., 88 F.2d 388. The Washington case and the California case appear to rule that the surety is liable to a subcontractor only for the reasonable value of the work performed under the contract, and the conclusion seems to rest on the assumed ground that there is no privity between the materialman and the surety. But this is contrary to the rule under the Federal Act. United States, for Use of Hill v. American Surety Co., 200 U.S. 197, 26 S.Ct. 168, 50 L.Ed. 437. The Washington case rests solely on local authorities, and the California case cites no precedents at all. The two Federal cases cited do not decide the question involved here, and are not in point, and therefore need not be examined in detail. On the other hand, in Burton v. Seifert & Co., 108 Va. 338, 61 S.E. 933, the Court of Appeals of Virginia rejected the contention — in a case brought under the Heard Act — that the surety was liable only for the fair value of the materials...