Sternberg Co. v. State Nat. Bank of Texarkana

• Decision Date: 23 March 1934
• Docket Number: No. 7154.,7154.
• Citation: 69 F.2d 759
• Parties: STERNBERG CO., Inc., v. STATE NAT. BANK OF TEXARKANA, ARK.
• Court: U.S. Court of Appeals — Fifth Circuit

69 F.2d 759 (1934)

STERNBERG CO., Inc., v. STATE NAT. BANK OF TEXARKANA, ARK.

No. 7154.

Circuit Court of Appeals, Fifth Circuit.

March 23, 1934.

Harry P. Gamble, of New Orleans, La., for appellant and cross-appellee.

Kenneth C. Barranger, of New Orleans, La., for appellee and cross-appellant.

Before BRYAN, FOSTER, and HUTCHESON, Circuit Judges.

HUTCHESON, Circuit Judge.

Appellee is the assignee of $7,759.61 of claims against a subcontractor. On these claims, made up of $6,533.33 rental of a dredge, and $1,062.28 salary, it intervened in a suit against the original contractor and his surety on a public works bond. Section 270, title 40, USCA.¹ It had judgment for 52 per cent. of its claim. The contractor appeals because appellee got too much; appellee cross-appeals, because it got too little.

The contractor attacks as unfounded all of the rental and part of the salary claim. Its point against the rental claim is that it was neither intended nor agreed that the work should be looked to for its payment. It insists that there was a definite agreement as to it that it should be paid by crediting the amount on notes the claimant had given the subcontractor. The salary claim is contested only as to $249.67. It is claimed that this much of the salary accrued after the job had ended, and that while a just demand against the subcontractor generally, it is not within the bond. We overrule these contentions. The case was tried by the District Judge on waiver of jury. The points appellant makes here were advanced below. There, on evidence amply sustaining the findings, they were decided adversely.

Appellee, complaining of the judgment limiting its recovery to 52 per cent., insists that, as the general contractor, appellant was liable without limit for debts incurred on the work. It argues in the alternative that its pro rata of the bond should have been figured on the basis of the claims filed in the suit and without taking account of claims appellant compromised and took up before suit.

Appellee's first contention is directly in the face of the statute and all of the decisions under it. We reject it. The contractor, though liable over to the surety on the bond, stands to creditors of the subcontractor just as the surety does, liable only on the bond and for its amount. The claims appellee holds against the subcontractor are not personal claims against appellant, the general contractor. They are claims against it just as they are against the surety, only by virtue and to the extent of the liability imposed by statute. This extends to and protects claimants and their assignees, but only in the amount and as provided in the act. Arnold v. United States, 263 U. S. 427, 44 S. Ct. 144, 68 L. Ed. 371; Miller v. American Bonding Co., 257 U. S. 304, 42 S. Ct. 98, 66 L. Ed. 250; Illinois Surety Co. v. United States, 240 U. S. 214, 36 S. Ct. 321, 60 L. Ed. 609; Strong v. American Fence Con. Co., 245 N. Y. 48, 156 N. E. 92, 94. Its other contention, though not so easily disposed of, is, we think, equally without merit. Its disposition involves two inquiries: (1) In a suit on the bond, where the claims exceed the penalty, may claims against the subcontractor, compromised and taken up by the general contractor more than six months after final settlement under the contract, but before the filing of suit, be taken into account in determining the pro rata distribution of those filing? (2) If this may be done, are they to be taken into account at their full amount, or only at the amount paid in settlement, when that amount is more than the proportion which their claims bear to the whole amount of unpaid claims? The claims compromised aggregated $6,684.25; they were compromised for $5,700, or 84 per cent.

The District Judge thought they were to be taken at their full amount just as though they had been filed. He treated their presentation to and adjustment by the contractor as having the effect of filing them.

Appellee urges upon our attention that the suit is on a statutory bond. United States, to Use of Zambetti, v. American Fence Con. Co. (D. C.) 15 F.(2d) 449; United States v. Stewart (C. C. A.) 288 F. 187; United States v. Montgomery Heating & Ventilating Co. (C. C. A.) 255 F. 683. It presses upon us the statutory nature of the suit, the precise provisions in the act as to its prosecution and disposition, the exacting, the jurisdictional nature of its requirements, and the necessity for compliance with them to obtain the benefit of its provisions. United States v. McCord, 233 U. S. 157, 34 S. Ct. 550, 58 L. Ed. 893; Illinois Surety Co. v. U. S., supra; United States for Use of Spencer v. Massachusetts Bonding & Ins. Co. (C. C. A.) 18 F.(2d) 203; Antrim Lbr. Co. v. Hannan (C. C. A.) 18 F.(2d) 548; Mandel v. United States (C. C. A.) 4 F.(2d) 629. It urges that it is settled law that claimants, creditors of a subcontractor, may recover on the bond if they file their claims though the subcontractor may have been fully paid, and though there are other claimants who have not filed within the time. Mankin v. United States, 215 U. S. 533, 30 S. Ct. 174, 54 L. Ed. 315; Illinois Surety Co. v. John Davis Co., 244 U. S. 376, 37 S. Ct. 614, 61 L. Ed. 1206; and authorities supra. It calls to our attention the provisions of the statute and the decisions under it, that only those filing claims within the time limit may recover, and to its precise provisions that if the recovery on the bond should be inadequate to pay the amount found due to all creditors who have intervened judgment shall be given to each of said creditors pro rata. It urges, too, that to permit a contractor to buy up claims for the purpose of using them in a suit on the bond would encourage trafficking in them with resultant oppression and overreaching of those for whose benefit the bond was required. Finally, it cites as authority for its position United States v. National Surety Co. (D. C.) 298 F. 536, in which the holding was that claims of materialmen and laborers acquired for the contractor's account could not be recovered on in a suit against his surety on a public works bond. None of these considerations are sufficient in our opinion for the judgment appellee seeks. It is true enough that the suit is at law on the bond, that it is a statutory one, and that the statutory provisions must be complied with. It is true also that this is a remedial statute, and that its provisions have been uniformly construed to effect the end desired, an equitable distribution among furnishers of labor and material for public work of the amount provided by the bond liability of contractor and surety. It is further true, however, that the liability of surety and contractor is measured by the bond, and is satisfied by an equitable distribution of its amount. It is not disputed that the claims the contractor compromised and acquired here are valid claims. It may not be questioned that if, instead of acquiring them by compromise the contractor had required the claimants to bring, or intervene in, a suit, they would have been taken into account in determining the pro rata in the accounting. We think the same thing has in effect occurred. Here is no case of a contractor trafficking in accounts, and speculating on the necessities of the creditors by buying up claims...