United States, James E. Simon Co. v. Ardelt-Horn Const. Co.

• Decision Date: 04 August 1970
• Docket Number: Civ. 1527 L.
• Citation: 316 F. Supp. 254
• Parties: UNITED STATES of America for the Use and Benefit of JAMES E. SIMON CO., Inc., and James E. Simon Co., Inc., Plaintiffs, v. ARDELT-HORN CONSTRUCTION CO. and St. Paul Fire & Marine Insurance Company, Defendants.
• Court: U.S. District Court — District of Nebraska

316 F. Supp. 254

UNITED STATES of America for the Use and Benefit of JAMES E. SIMON CO., Inc., and James E. Simon Co., Inc., Plaintiffs, v. ARDELT-HORN CONSTRUCTION CO. and St. Paul Fire & Marine Insurance Company, Defendants.

Civ. 1527 L.

United States District Court, D. Nebraska.

August 4, 1970.

Richard W. Smith and Allen L. Overcash, of Woods, Aitken & Aitken, Lincoln, Neb., for plaintiffs.

John J. Higgins, Jr. of Eisenstatt, Morrison, Higgins, Miller, Kinnamon & Morrison, Omaha, Neb., and Roland E. Gebert, Littleton, Colo., for defendant, Ardelt-Horn Construction Co.

Edwin Cassem, of Cassem, Tierney & Henatsch, Omaha, Neb., and Martin J. Andrew, Denver, Colo., for defendant St. Paul Fire & Marine Insurance Co.

MEMORANDUM

URBOM, District Judge.

James E. Simon Co., Inc., individually and as use plaintiff, brings this action for recovery of unpaid amounts claimed to be due it as a subcontractor which furnished labor and materials for a project on which the defendant Ardelt-Horn Construction Co. was the general contractor and the United States of America was the owner. The defendant St. Paul Fire & Marine Insurance Company was the surety on a payment bond and on a performance bond required by the Miller Act, 40 U.S.C. § 270a. Three claims are asserted: (1) against the general contractor by the subcontractor individually, (2) against the general contractor and the surety on the payment bond by the subcontractor as use plaintiff, and (3) against the general contractor and the surety on the performance bond by the subcontractor as use plaintiff.

The general contractor has filed a motion to dismiss the complaint and the surety has filed a motion to dismiss the second and third claims and to strike the second claim.

I. FIRST CLAIM FOR RELIEF

The complaint alleges that the general contractor entered into a contract with the United States for the construction of certain bituminous pavement and railroad track at the Cornhusker Army Ammo Plant near Grand Island, Nebraska, and that the general contractor thereafter made written and oral subcontracts with the subcontractor for the performing of certain labor and the furnishing of certain material for such project; that the subcontractor performed requirements of the subcontracts; and that the general contractor has not paid the subcontractor.

The subcontractor, James E. Simon Co., Inc., is alleged to be a corporation organized under the laws of Nebraska with its principal place of business in North Platte, Nebraska. The general contractor, Ardelt-Horn Construction Co., is alleged to be a corporation organized under the laws of Colorado with its principal place of business in Colorado. The amount prayed for far exceeds the $10,000.00 diversity jurisdiction requirement.

Contention is made that the Miller Act provides a subcontractor's exclusive remedy. Tit. 40 § 270b states:

"(a) Every person who has furnished labor or material in the prosecution of the work provided for in such contract, in respect of which a payment bond is furnished under section 270a of this title and who has not been paid in full therefor before the expiration of a period of ninety days after the day on which the last of the labor was done or performed by him or material was furnished or supplied by him for which such claim is made, shall have the right to sue on such payment bond for the amount, or the balance thereof, unpaid at the time of institution of such suit and to prosecute said action to final execution and judgment for the sum or sums justly due him * * *.

"(b) Every suit instituted under this section shall be brought in the name of the United States for the use of the person suing, in the United States District Court for any district in which the contract was to be performed and executed and not elsewhere, irrespective of the amount in controversy in such suit, but no such suit shall be commenced after the expiration of one year after the day on which the last of the labor was performed or material was supplied by him. The United States shall not be liable for the payment of any costs or expenses of any such suit."

This language does not convey a declaration of exclusion of other remedies against the general contractor. While it may be that any suit on a bond furnished in accordance with the Miller Act must meet all the requirements of § 270b, no case has been found by this court that holds that an action against the general contractor because of breach of a subcontract or due under a subcontract would not lie. The general contractor in its brief asserts that the subcontractor has the option of suing the contractor for breach of contract or of making claim under provisions of the Miller Act, but cannot do both. Cited to support that proposition are Gichner v. Insurance Companies of North America, 180 A.2d 842 (M.C.App.1962); United States for use and on behalf of B. Katchen Iron Works, Inc. v. Standard Accident Insurance Co., 158 F.Supp. 616 (U.S.D.C. N.J. 1958), aff'd 257 F.2d 78 (C.A. 3rd Cir. 1958); United States for use and benefit of Noland Company v. Skinner & Ruddock, 164 F.Supp. 616 (U.S.D.C. E.D. S.C. 1958); and United States for use of Susi Contracting Company v. Zara Contracting Co., Inc., 146 F.2d 606 (C.A. 2d Cir. 1944), which hold only that when an action is filed on a payment bond furnished under the Miller Act, the requirements of the Miller Act regarding the time and manner of filing a claim must be followed, and Schwasnick v. Blandin, 65 F.2d 354 (C.A. 2nd Cir. 1933); Knotts v. Clark Const. Co., 249 F. 181 (C.A. 7th Cir. 1918); St. Paul-Mercury Indemnity Company v. United States, 238 F.2d 917 (C.A. 10th Cir. 1956); Southern Painting Company of Tennessee v. United States for the use of Silver, 222 F.2d 431 (C.A. 10th Cir. 1955); and Continental Casualty Company v. Schaefer, 173 F.2d 5 (C.A. 9th Cir. 1949), which permit, but none requires, the subcontractor to waive the breach of contract and sue in quantum meruit. None of these cases suggests that either suit for breach of contract or suit in quantum meruit results in loss of rights on a surety bond.

The plaintiff is entitled to pursue his cause of action against the general contractor on the subcontract or because of breach of the subcontract at the same time that he relies upon his remedies on the payment bond.

Jurisdiction is conferred by 28 U.S.C. § 1332 and the first claim for relief states facts upon which relief may be granted.

The motion of the defendant Ardelt-Horn Construction Co. to dismiss, including the assertion of lack of jurisdiction, as it relates to the first claim, will be denied.

II. SECOND CLAIM FOR RELIEF

This claim seeks to recover on the payment bond furnished by the general contractor, which was provided by the general contractor to assure payment for those who furnished labor and material for the project. The only point made in the motions to dismiss and to strike is that exactly the same claim is asserted in another action now pending in this court, Civ. 1461 L. In that action a different subcontractor, as use plaintiff, sued the general contractor and the surety. James E. Simon Co., Inc. thereafter was interpleaded and filed its claim in interpleader against the surety and its cross-claim against the general contractor. In that claim in interpleader and cross-claim James E. Simon Co., Inc. alleges the same facts that it alleges in the second claim for relief in the present action and asks for the same relief.

The only reason assigned by James E. Simon Co., Inc. for the filing of the second claim for relief in this action was by way of oral argument when its counsel suggested that he wanted to be certain that "all the i's were dotted and t's were crossed" and that since the Miller Act speaks of "suit instituted," he wished to preclude any argument that appearance as an interpleaded defendant in Civ. 1461 L was not the institution of a suit. The surety in its brief has stated that it will not assert and does waive any defense to the effect that James E. Simon Co., Inc., has not "instituted" suit by appearing as an interpleaded defendant in Civ. 1461 L.

Under the circumstances, this court sees no valid reason for permitting two actions to proceed simultaneously in the same court on the same claim. The motion of Ardelt-Horn Construction Co. to dismiss the complaint and the motion of St. Paul Fire & Marine Insurance Company to dismiss and to strike will be sustained insofar as they relate to the second claim for relief, but the dismissal will be without prejudice.

III. THIRD CLAIM FOR RELIEF

The issue presented is whether a subcontractor who has furnished labor and material is entitled to recover on a bond assuring the performance of a prime contractor where the surety has also provided a bond for the payment of suppliers of labor and material, as required by the Miller Act. Only two cases have been found which directly answer the question. United States for Use of Edward Hines Lumber Co. v. Kalady Construction Company, 227 F.Supp. 1017 (U.S.D.C. N.D. Ill. E.D. 1964) answers in the affirmative, and Sun Insurance Co. of New York v. Diversified Engineers, Inc., 240 F.Supp. 606 (U.S.D.C. Mont. 1965) answers in the negative.

The obligations of the surety and the principal, the general contractor, and the rights of the subcontractor must be determined by the contractual provisions of the performance bond and, because the bond refers to it, the contract between the general contractor and the United States. Hereinafter, reference to "the contract" means only the agreement between the general contractor and the United States. As the Miller Act was the mandatory authority for issuance of the performance bond as well as the payment bond, the Act and its legislative history may assist in learning the intent of the contracting parties to the performance bond.

The pivotal issue is whether the United States, the general contractor, and the surety intended that a supplier of labor and...