United States Casualty Co. v. District of Columbia

• Decision Date: 09 October 1939
• Docket Number: No. 7255.,7255.
• Citation: 107 F.2d 652,71 App. DC 92
• Parties: UNITED STATES CASUALTY CO. v. DISTRICT OF COLUMBIA, to Use of NORTH AMERICAN CEMENT CORPORATION.
• Court: U.S. Court of Appeals — District of Columbia Circuit

71 App. DC 92, 107 F.2d 652 (1939)

UNITED STATES CASUALTY CO. v. DISTRICT OF COLUMBIA, to Use of NORTH AMERICAN CEMENT CORPORATION.

No. 7255.

United States Court of Appeals for the District of Columbia.

Decided October 9, 1939.

COPYRIGHT MATERIAL OMITTED

Morris Simon, Lawrence Koenigsberger, and Eugene Young, all of Washington, D. C., for appellant.

Dean Hill Stanley, of Washington, D. C., for appellee.

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

RUTLEDGE, Associate Justice.

The appeal is from a judgment holding appellant United States Casualty Company liable as surety to appellee North American Cement Corporation, use-plaintiff below, on the bond of the Lake Stone Company,¹ a contractor with the District of Columbia. The parties will be designated according to their respective positions in the trial court.

The bond was executed pursuant to Section 47, Title 20 of the District of Columbia Code (Supp. IV, 1938),² requiring contractors for public work in the District to furnish a penal bond and prescribing the time within which action may be instituted by the District and others to recover thereon. The material portion of the statute is set forth in the margin.³ The principal question is whether the action was begun in time; or, stated differently, whether final settlement of the contract occurred more than one year prior to October 9, 1935, when suit was instituted.

The controversy grows out of facts to some extent identical with those set forth in Continental Casualty Co. v. North American Cement Corp., 1937, 67 App.D. C. 234, 91 F.2d 307.

The contract between Lake Stone Company and the District was for repairs on the latter's concrete highways and alleys during the fiscal year ending June 30, 1934. It incorporated the provisions of the Standard Specifications for Pavements, etc., issued by the Department of Highways of the District, including Paragraph 72 which requires certification by the "engineer"⁴ upon completion of the work. The bond, in the penal sum of $93,300, was executed, as required by the statute, by Lake Stone with defendant Casualty Company as surety, conditioned upon performance of the work to the satisfaction and acceptance of the District Commissioners and the prompt payment of "all persons supplying it with labor and material in the prosecution of the work provided for in said contract".

The contract and the bond were executed on June 28, 1933, pursuant to bid previously awarded. Between the award and that date, plaintiff arranged, after negotiation with Lake Stone, to have its cement specified for the work. Because of plaintiff's policy of distributing only through building supply dealers and at its instance, the initial arrangement took the form of a contract by plaintiff to sell the cement to Potomac Builders Supply Company, a distributor which then or shortly afterward and before August 8, 1933, was operating under a creditors' committee. The contract specified prices for cement covering the requirements for the Lake Stone contract, and stated expressly that the material was "for resale to Lake Stone Company to be used in repairing concrete roadways in the District of Columbia". Deliveries began July 5, 1933, and continued to August 8 following, being made directly to Lake Stone, but billed during this period to Potomac Supply. Potomac Supply found the contract burdensome almost immediately and requested plaintiff to arrange for invoicing directly to Lake Stone. On August 8, pursuant to this request and with the consent of Lake Stone, plaintiff "change(d) this billing to the Lake Stone Company" and thereafter the cement was invoiced directly to it. It does not appear that there was any change in the prices or other terms of the contract, except to substitute Lake Stone for Potomac Supply as the purchaser. The circumstances strongly indicate that the arrangement providing for sale originally to Potomac Supply and "resale" by it to Lake Stone was in purpose and fact one for the accommodation of plaintiff.

Lake Stone continued performance, receiving cement from plaintiff, until March 27, 1934, when it declared itself in default, being unable to complete the contract with the District. The same day it requested and authorized the Commissioners to mail checks payable to itself to "Lake Stone Company, % U. S. Casualty Company, 227 St. Paul St., Baltimore, Md." It also empowered an officer of defendant to endorse such checks. On April 12, following, defendant proposed to complete the contract for its principal through another contractor. Four days later the District Commissioners declared Lake Stone in default and accepted defendant's proposal. By agreement with defendant and Lake Stone, the District retained $5,088.61 on account of work performed in March, 1934, prior to default, as security for completion of the contract and pending determination of the cost of doing so. Lake Stone and defendant expressly agreed that the arrangement for completion of the work by defendant should not release their liabilities as principal and indemnitor under the bond or otherwise. Pursuant to these arrangements the work was completed June 30, 1934.

The procedure of the District for determining the amounts due contractors and making payments, both as the work progresses and finally, involves a lengthy series of steps through four governmental departments, namely, the Highway Department, which has charge of street construction and repairs, the Auditor's office, the Disbursing Officer, all of the District, and the General Accounting Office (Comptroller General's Office). It is necessary to set forth the procedure in some detail.

In the Highway Department, the District inspector on the job sends in a daily report as to work done and materials used to the cost accounting office of the Engineer Division. From these reports monthly vouchers are compiled (which, in repair jobs, take the place of "measurement sheets" on new construction). The voucher also includes the totals of deliveries and payments (and other credits readily ascertainable) made for previous months. It constitutes, therefore, a convenient summary of the work done as well as of charges and credits to date, for use of the District officials in following the course of the job, and, in this case, the initial step toward a payment on account. The monthly voucher is "subject to correction in the final payment,"⁵ and constitutes therefore only a tentative determination concerning the items contained in it. This is, ordinarily, a sufficient basis for monthly payments. From the cost accounting office the voucher goes to the Computing Engineer (Engineer Division), who, with a copy of the contract before him, checks all multiplication and determines whether the contract has been violated in any major respect (in this instance, including determination that the contractor had used the proper mix of cement under the specifications). The voucher then goes back to the cost accountant, who enters the amount in his cost account book against the proper appropriation, and forwards the voucher to the Engineer of Streets, who inspects it, and if satisfied, signs and sends it to the Director of Highways, who handles it likewise. If either is not satisfied, the voucher is returned, usually to the official from whom it was received; more rarely to another, such as the Corporation Counsel.

Approval by the Director of Highways results in sending the voucher to the office of the District Auditor. There it first is subjected to a preliminary audit, which includes checking the unit prices stipulated in the contract, the appropriation charged, and the voucher against the contract to see that the contract has been carried out. From the preliminary auditor the voucher goes to the Chief of the Audit Section, who is required, before approving it, to satisfy himself that the contractor has performed the contract as provided by its terms. If he is satisfied and approves the voucher, a check is drawn, the amount is posted against the account, and the check is signed by the Auditor and forwarded to the Disbursing Officer. The latter delivers the check to the contractor, who usually signs the voucher before the check is drawn. It does not appear at exactly what stage the contractor's signature is secured as a general practice. Finally, the original voucher goes to the bookkeeper, who includes it in his accounts, which are transmitted to the General Accounting Office, a duplicate being filed with the District Auditor.

To summarize, in the Highway Department the cost accountant compiles the monthly voucher from the inspector's daily reports. Then the voucher travels, in turn, to the Computing Engineer, back to the cost accountant, then to the Engineer of Streets, then to the Director of Highways. If approved by the latter, it goes to the District Auditor's office, first, to the preliminary auditor, then to the Chief of the Audit Section. If he approves it, the check is drawn, signed by the Auditor, sent to the Disbursing Officer, and by him delivered to the contractor. The voucher then goes to the bookkeeper and finally to the General Accounting Office. The procedure is elaborate, but little, if any, of it is perfunctory. Somewhere within it is the point of "final settlement" which we must ascertain and apply to the presented facts, unless departure from the routine in particular cases makes it inapplicable.

The normal procedure, of course, was not followed fully in this case, because its circumstances were abnormal. The procedure is not ironclad, and unusual occurrences create variations. The first of such occurrences here was the default of the contractor in March, 1934. Customary practice was followed in making up the monthly voucher on March 31 for work done before default in March. It was checked by the Computing Engineer on April 2. There normal practice ended until March 1, 1935, as will appear hereafter. The default stopped...