Socony-Vacuum Oil Co. v. Continental Casualty Co., 156
Decision Date | 07 February 1955 |
Docket Number | Docket 23179.,No. 156,156 |
Citation | 219 F.2d 645 |
Parties | SOCONY-VACUUM OIL COMPANY, Incorporated, Plaintiff-Appellant, v. CONTINENTAL CASUALTY COMPANY, Defendant-Appellee. |
Court | U.S. Court of Appeals — Second Circuit |
Edmunds, Austin & Wick, Burlington, Vt., for plaintiff-appellant.
Fletcher B. Joslin, Theriault & Joslin, Montpelier, Vt. (Andrew Eckel, New York City, Donald B. Knight, Brooklyn, N. Y., of counsel), for defendant-appellee.
Before CLARK, Chief Judge, and FRANK and HINCKS, Circuit Judges.
The Bennett-Stewart Co., Inc. (hereinafter referred to as the prime contractor) was awarded a contract by the United States Government to construct a radar station at St. Albans, Vermont, and gave the "performance bond" and the "payment bond" required by the Miller Act, 40 U.S.C.A. §§ 270a, 270b.1 The prime contractor entered into a subcontract with R. F. Carpenter, Inc. (hereinafter referred to as the subcontractor) for road and parking area construction work around the radar station. Obviously having in mind its liabilities under the Miller Act to the subcontractor's materialmen, the prime contractor required the subcontractor to furnish a surety bond. The subcontractor, accordingly, provided a surety bond whereby it, as principal, and the defendant surety company, as surety, obligated themselves to the prime contractor in the penal sum of $162,000. This bond, which was made a part of the complaint, was conditioned as follows:
The plaintiff herein was a materialman of the subcontractor which, having failed within the time limitations of the proviso in Section 2 of the Miller Act, 40 U.S. C.A. § 270b(a), to perfect its rights against the surety on the prime contractor's payment bond, brought this action in the United States District Court for the District of Vermont to recover for material furnished by it to the subcontractor for use in the performance of the subcontract and hence a part of the material provided in the prosecution of the main contract. The basis of jurisdiction is diversity of citizenship and no jurisdictional problem is presented.
In the court below the defendant moved to dismiss on the ground that the plaintiff had no right in the bond because the bond was for the benefit of the prime contractor only and not third parties, and that the plaintiff by failing to pursue its rights against the prime contractor under the Miller Act had injured the defendant. This motion was granted, 122 F.Supp. 621, on the ground that the bond was given only for the benefit of the prime contractor, and not for the protection of the plaintiff as a materialman. From the ensuing judgment this appeal is prosecuted.
The record shows that the defendant Casualty Company was an Illinois corporation, that its principal — the subcontractor — was a Vermont corporation, and that the prime contractor was a Massachusetts corporation, and that the subcontract was one to be performed in Vermont. There is nothing in the record to show that the parties to the bond contemplated or agreed that it was to be interpreted or governed by the law of any particular state. Accordingly, we think the problem presented should be determined by the law of Vermont. Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188.
However, there seems to be neither statute nor judicial precedent in Vermont bearing on the problem. And the problem presented has been variously decided in various jurisdictions. Confronted with this dilemma our task is not to surmise which line of judicial precedent a Vermont court would follow if presented with the case, but rather, by looking to the same sources which a Vermont court would presumably consult and by weighing the comparative reasoning of learned authors and conflicting judicial decisions for their intrinsic soundness, to define the pertinent law which when thus ascertained is presumably the law of Vermont even though as yet unannounced by a Vermont Court. See Moore, Commentary on the United States Judicial Code, pp. 338-340.
Professor Corbin in his work on law of contracts, 4 Corbin on Contracts, Sections 798-804, has this to say: See also Corbin, "Contractor's Surety Bonds," 38 Yale Law Journal 1. This doctrine, we think, has the support of the great weight of authority. A long line of cases cited to such doctrine in 77 A.L.R. 53 amplifies the cases which Professor Corbin particularly cites.
It is true that in the bond here sued on the only expressly promissory words are those whereby the surety acknowledges itself bound to the prime contractor, as obligee, in the penal sum of $162,000. But since the bond is stated to be on condition that the principal — here the subcontractor — "shall pay all labor and material obligations," the words of the condition are the full equivalent of words of direct promise.2
We are unable to recognize either the validity or the relevance of the conclusion of the trial judge that the bond was given only for the benefit of the prime contractor and not for the protection of materialmen. Doubtless the prime contractor in requiring a bond of its subcontractor sought protection against his own liability to materialmen of the subcontractor. But this he obtained through a bond requiring the payment of the materialmen. Obviously it was contemplated that performance under the bond would benefit not only the prime contractor who would thereby be exonerated from liability to the materialmen thus paid but also the materialmen of the subcontractor who were thereby to be paid.
But this aside, we think it was wholly irrelevant for the trial judge to speculate as to the motives of the parties of the bond. The scope of the bond, like any written contract, must be determined not by the unexpressed motive of the parties but rather by the ordinary meaning of the words which they used. By this simple test, the defendant here was plainly obligated to pay "material obligations" such as that sued on here.
The situation is affected not at all by the fact that the plaintiff failed to perfect its rights under the Miller Act against the prime contractor and its surety. The bond now sought to reach was not one required under that Act and the rights to which it gave rise are not qualified by the Act or conditioned upon the timely pursuit of...
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