United States v. Blount Brothers Construction Co.

• Decision Date: 25 November 1958
• Docket Number: Civ. No. 10811.
• Citation: 168 F. Supp. 407
• Parties: UNITED STATES of America, for the use and benefit of NEWPORT NEWS SHIPBUILDING AND DRY DOCK COMPANY, a Virginia corporation, v. BLOUNT BROTHERS CONSTRUCTION COMPANY (a partnership composed of W. M. Blount, W. H. Blount and C. B. Blount) and United States Fidelity and Guaranty Company (a Maryland corporation).
• Court: U.S. District Court — District of Maryland

168 F. Supp. 407

UNITED STATES of America, for the use and benefit of NEWPORT NEWS SHIPBUILDING AND DRY DOCK COMPANY, a Virginia corporation, v. BLOUNT BROTHERS CONSTRUCTION COMPANY (a partnership composed of W. M. Blount, W. H. Blount and C. B. Blount) and United States Fidelity and Guaranty Company (a Maryland corporation).

Civ. No. 10811.

United States District Court D. Maryland.

November 25, 1958.

Ambler H. Moss, Semmes, Bowen & Semmes, Baltimore, Md., and J. Warren Stephens, Ferguson, Yates & Stephens, Newport News, Va., for plaintiff.

William L. Marbury, John Martin Jones, Jr., Piper & Marbury, Baltimore, Md., and James C. Blair, White, Bradley, Arant, All & Rose, Birmingham, Ala., for defendants.

THOMSEN, Chief Judge.

Defendant's motion to dismiss the amended complaint presents the question whether the protection of a Miller Act¹ payment bond extends to a person who furnishes or contracts to furnish labor and materials to a sub-subcontractor.

The amended complaint alleges that defendant Blount Brothers Construction Company (Blount) contracted with the Department of the Navy to construct a water tunnel at Carderock, Maryland; that Blount subcontracted virtually all of the work except the actual erection and installation of the tunnel to Green Fuel Economizer Company, Inc. (Green Fuel); that Green Fuel in turn subcontracted the fabrication and machining of all of the tunnel sections except the test sections to General Metals, Inc. (General Metals); that General Metals entered into a contract with Newport News Shipbuilding and Drydock Company (Newport News), the use-plaintiff, under which Newport News fabricated and machined tunnel section flanges and made dimensional check of contraction sections "in order to determine that it was not able to machine contraction sections as required by the plans, specifications and drawings"; that in the performance of its contract with General Metals Newport News supplied and furnished material and performed labor for General Metals for the construction of a part of the tunnel; that the completed work is being held by Newport News in storage at its plant in Newport News, Virginia, awaiting shipping orders and the balance due from General Metals.

The complaint also alleges that the contract between General Metals, the sub-subcontractor, and Newport News, the use-plaintiff, was made with the knowledge and acquiescence of the prime contractor, Blount; but counsel for Newport News conceded at the oral argument that Blount did not assume any obligation to Newport News except such obligation as may be required by the Miller Act and assumed under the bond.

The complaint alleges that the total price for the materials, design and labor furnished by Newport News to General Metals was $63,249.67, of which General Metals has paid only $33,800.00, leaving a balance due of $29,449.67, for which repeated demands have been made on General Metals; that Blount and United States Fidelity and Guaranty Company (Surety) executed a payment bond pursuant to the Miller Act; and that Newport News gave Blount written notice of non-payment of its claim within ninety days from the date upon which the last of the labor was performed and the last of the material was furnished and supplied.

It appears, therefore, that Blount was the prime contractor; that Green Fuel was a subcontractor, who dealt directly with the prime contractor; that General Metals was a sub-subcontractor, i. e. a subcontractor of a subcontractor, who did not deal directly with the prime contractor; and that Newport News was a sub-sub-subcontractor, who dealt with the sub-subcontractor, General Metals, and not with either the prime contractor or any subcontractor.

For the reasons stated below, I have concluded that the right to bring suit on a payment bond under the Miller Act is limited to (1) those materialmen, laborers and subcontractors who deal directly with the prime contractor and (2) those materialmen, laborers and sub-subcontractors who, lacking express or implied contractual relationship with the prime contractor, have direct contractual relationship with a subcontractor. In the instant case the use-plaintiff, Newport News, did not deal directly with the prime contractor nor with a subcontractor but with a sub-subcontractor, General Metals. It is therefore not entitled to recover under the bond.

Section 1(a) (2) of the Miller Act, 40 U.S.C.A. § 270a(a) (2), requires the prime contractor to furnish to the United States a payment bond with a surety "for the protection of all persons supplying labor and material in the prosecution of the work provided for in said contract for the use of each such person." Sec. 2(a), 40 U.S.C.A. § 270b(a), provides: "Every person who has furnished labor or material in the prosecution of the work provided for in such contract" and who has not been paid in full therefor within ninety days after the last labor was performed or material supplied may bring suit on the payment bond for the unpaid balance: "Provided, however, That any person having direct contractual relationship with a subcontractor but no contractual relationship express or implied with the contractor furnishing said payment bond shall have a right of action upon the said payment bond upon giving written notice to said contractor within ninety days from the date on which such person did or performed the last of the labor or furnished or supplied the last of the material for which such claim is made, stating with substantial accuracy the amount claimed and the name of the party to whom the material was furnished or supplied or for whom the labor was done or performed."

The Heard Act,² which was the predecessor of the Miller Act, required government contractors to execute penal bonds for the benefit of "all persons supplying him or them with labor and materials in the prosecution of the work provided for in such contract." Construing the Heard Act, the Supreme Court held that the quoted phrase included not only those furnishing labor and materials directly to the prime contractor but also covered those who contributed labor and materials to subcontractors. United States for use and Benefit of Hill v. American Surety Co., 200 U.S. 197, 204, 26 S.Ct. 168, 50 L.Ed. 437; Mankin v. United States, 215 U.S. 533, 539, 30 S.Ct. 174, 54 L.Ed. 315; Illinois Surety Co. v. John Davis Co., 244 U.S. 376, 380, 37 S.Ct. 614, 61 L.Ed. 1206.

However, as the Supreme Court pointed out in MacEvoy Co. v. United States, 322 U.S. 102, 107, 64 S.Ct. 890, 893, 88 L.Ed. 1163, the Heard Act contained no provision similar to the proviso in sec. 2(a) of the Miller Act. The MacEvoy case presented the issue whether under the Miller Act a person supplying materials to a materialman, who in turn supplied them to the prime contractor, could recover on the payment bond executed by the prime contractor. The Supreme Court held that he could not recover, for reasons which are most persuasive if not controlling in the instant case. The Supreme Court said:

"The proviso of Section 2(a), which had no counterpart in the Heard Act, makes clear that the right to bring suit on a payment bond is limited to (1) those materialmen, laborers and subcontractors who deal directly with the prime contractor and (2) those materialmen, laborers and sub-subcontractors who, lacking express or implied contractual relationship with the prime contractor, have direct contractual relationship with a subcontractor and who give the statutory notice of their claims to the prime contractor. To allow those in more remote relationships to recover on the bond would be contrary to the clear language of the proviso and to the expressed will of the framers of the Act." 322 U.S. at pages 107, 108, 64 S.Ct. at page 894.

The Court referred to the House Report³, which said that...