United States v. Cleveland Electric Co. of South Carolina

• Decision Date: 06 February 1967
• Docket Number: No. 10763.,10763.
• Citation: 373 F.2d 585
• Parties: UNITED STATES of America for the Use of the B's COMPANY, Appellee, v. CLEVELAND ELECTRIC COMPANY OF SOUTH CAROLINA, Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

373 F.2d 585 (1967)

UNITED STATES of America for the Use of the B's COMPANY, Appellee, v. CLEVELAND ELECTRIC COMPANY OF SOUTH CAROLINA, Appellant.

No. 10763.

United States Court of Appeals Fourth Circuit.

Argued January 10, 1967.

Decided February 6, 1967.

W. Ray Berry, Columbia, S. C. (Michael H. Quinn and Fulmer, Barnes, Berry & Austin, Columbia, S. C., on brief), for appellant.

D. A. Brockinton, Jr., Charleston, S. C. (Brockinton & Brockinton, Charleston, S. C., on brief), for appellee.

Before SOBELOFF, J. SPENCER BELL and WINTER, Circuit Judges.

J. SPENCER BELL, Circuit Judge:

This is an appeal from a judgment by the court without a jury. The B's Company, a use plaintiff, brought suit under the provisions of the Miller Act (40 U.S.C. §§ 270a-270b (1964)) against the Cleveland Electric Company of South Carolina, a prime contractor, and its bondsman for monies due it as a subcontractor for labor and materials furnished on a contract with the Navy's Polaris Missile Assembly Base at Charleston, South Carolina. The trial court denied a setoff claimed by the prime contractor, and from that portion of the decision it appeals.

Among other things, the contract required that a building be erected and that after its completion it be covered with earth. The subcontractor's contract required it to furnish the labor, material, and equipment necessary to perform the earth work including the obligation to place earth fill over the building. During the performance of the contract earth was removed and stored at the site to be used for covering the building. This material was inspected and accepted by the Navy's resident officer in charge of construction. The building was completed and covered by the inspected material under Government surveillance. Performance of that portion of the contract involved in the use plaintiff's subcontract was completed, inspected, and accepted by the Navy on November 22, 1963, and in the following January the subcontractor left the job site.

On March 5, 1964, the Navy's resident officer in charge of construction notified the prime contractor that the roof of the building leaked and ordered it to remove a part of the earth from the building, and cure the defect in the roof. All parties agreed that the defect existed, that it was a latent defect, and that it was the duty of the contractors to repair the defect promptly. This plaintiff did not have the roofing contract and was not involved in any way in that order. While the earth was removed to repair the leak, a new resident officer in charge of construction for the Navy decided that the earthen cover which this plaintiff had placed on the building did not meet contract specifications because it contained too high a percentage of organic materials, and on March 23, 1964, he ordered the prime contractor to remove all of the earth cover and replace it with other material. The prime contractor demanded of the subcontractor that it perform. The subcontractor refused on the ground that the material used to cover the building had been inspected and approved by the then officer in charge for the Navy and informed the prime contractor that neither contractor was obligated to perform since the job had been completed and accepted and this particular material had been inspected and passed by the then officer in charge, thus negativing any contention by the Navy that the alleged organic content of the material constituted a latent defect.¹ The prime contractor notified the subcontractor that it would perform and would back charge it with all costs. After protesting the order of the resident officer in charge of construction on the ground suggested by the subcontractor, the prime contractor performed without undertaking to exhaust his administrative remedies under the disputes clause of his contract and then filed a claim for an equitable adjustment under the changes article of the contract on the theory that the Navy had changed the specifications for the cover material. The claim was disallowed by the resident officer in charge of construction but upon appeal to the Chief of the Bureau of Yards and Docks, who is known as the contracting officer under the general provisions of the contract, the claim was allowed in the amount of $63,214.00.

The prime contractor back charged the subcontractor with the expense, including an attorney fee for prosecuting the claim, plus a sum equal to interest on the amount allowed for the period during which the money was withheld while the claim was being prosecuted. The district court found that the subcontractor was justified in refusing to return to the site and comply with the Navy's order and it, therefore, denied the setoff. We conclude that the trial court's findings of fact are not clearly in error and that its legal conclusions are correct.

The basic error of the prime contractor in this appeal is his contention that the subcontractor is bound in every way and exactly as the prime contractor is bound by the terms of the prime contract. It is true that the terms of the subcontract stated that the subcontractor was bound by the terms of the prime contract and that it assumed the prime contractor's obligations to the Government insofar as applicable to the work performed by the subcontractor, but this identical language has been held, and we think properly, not to require the subcontractor to pursue the administrative remedies given the prime contractor in the disputes article. Central Steel Erection Co. v. Will, 304 F.2d 548 (9 Cir. 1962); Fanderlik-Locke Co. v. United States ex rel. Morgan, 285 F.2d 939 (10 Cir. 1960), cert. denied, 365 U.S. 860, 81 S.Ct. 826, 5 L.Ed.2d 823 (1961). The Government does not recognize or deal with the subcontractor and owes no obligation to him for the work he performs. United States v. Blair, 321 U.S. 730, 64 S.Ct. 820, 88 L. Ed. 1039 (1944); United...