United States v. Continental Casualty Co.
| Decision Date | 07 October 1939 |
| Docket Number | No. 944.,944. |
| Citation | 29 F. Supp. 598 |
| Parties | UNITED STATES v. CONTINENTAL CASUALTY CO. |
| Court | U.S. District Court — Eastern District of Louisiana |
Rene A. Viosca, U. S. Atty., and Robert Weinstein, Asst. U. S. Atty., both of New Orleans, La.
Purnell M. Milner, of New Orleans, La., for defendant.
This case was tried by the Court without the intervention of a jury; accordingly in compliance with Rule 52 of the Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c, the Court makes the following findings of fact:
The plaintiff at all times mentioned herein was and now is a corporation sovereign and body politic.
The defendant, the Continental Casualty Company, is a corporation organized and existing under the laws of the State of Indiana and at all times mentioned herein was authorized to do and was doing business in the State of Louisiana at New Orleans within the jurisdiction of this Court.
On November 17, 1932, the Grasser Contracting Company, a Louisiana corporation, as principal, with the Continental Casualty Company as surety thereon, entered into a contract with the United States of America represented by J. N. Hodges, Lieutenant Colonel, Corps of Engineers, United States Army, as contracting officer for furnishing all labor and materials and performing all work required for the construction of the Picayuneville-Waterloo Levee, Relief Levee Items R-805-A, R-805-B, R-805-C, R-805-D and R-805-E, all situated in the Atchafalaya Front Levee District; Dicharry Levee, Relief Levee Item L-891; and Upper Darrow Levee, Relief Levee Item L-894, both situated in the Pontchartrain Levee District.
Pursuant to the provisions of the Heard Act, Title 40, Section 270, U.S.C., 40 U.S. C.A. § 270, Grasser Contracting Company, as principal, and Continental Casualty Company, as surety, executed standard Government form of performance bond on November 21, 1932, by the terms of which said principal and surety became bound to the United States of America in the penal sum of $155,400 for the faithful performance of all the undertakings, covenants, terms, conditions and agreements of the aforesaid contract of November 17, 1932, entered into between the Grasser Contracting Company and the United States of America.
Under date of November 26, 1932, the Government notified the contractor to proceed with the work covered by the aforesaid contract and on November 29, 1932, receipt of this notice was acknowledged. The time fixed for completion of Items R-805-A, R-805-B, R-805-C, R-805-D and R-805-E, and Dicharry Levee, Relief Levee Item L-891 under this contract was within three hundred calendar days from the date of the receipt of notice to proceed with the work, thus fixing September 25, 1933, as the date for the completion of these items; the time fixed for the completion of the Upper Darrow Levee, Relief Levee Item L-894, was within ninety days from the date of receipt of notice to proceed with the work, thus fixing February 27, 1933, as the date for the completion of this item.
The contract and specifications provided that for each item of work liquidated damages for delay should be at the rate of $20 per day for each and every calendar day of delay beyond the time fixed for the completion.
The contractor completed all items under its contract except Relief Levee Items R-805-A and R-805-B of the Picayuneville-Waterloo Levee and Relief Levee Item L-891 of the Dicharry Levee.
The contractor did not prosecute the contract work involved in Relief Levee Items R-805-A and R-805-B of the Picayuneville-Waterloo Levee and Relief Levee Item L-891 of the Dicharry Levee in a diligent and satisfactory manner though the contracting officer gave repeated suggestions and instructions to the contractor in an effort to facilitate the completion of the work within the time stipulated in the contract. The correspondence on file shows that the defendant was conversant with the progress of the work, that as early as August 17, 1933, it anticipated that it would suffer a loss under the present bond but at no time did it protest or suggest to the contracting officer that its rights were in any manner being jeopardized.
On March 16, 1934, the contractor filed a petition in bankruptcy in the Eastern District of Louisiana, New Orleans Division, to be adjudged a voluntary bankrupt, and under the terms and conditions of the contract this operated as a default by the contractor.
On March 17, 1934, the contracting officer officially placed the contractor in default and terminated its right to proceed with the work under the provisions of Article 9 of the contract. On the same day the contracting officer advised the defendant of the action taken, requesting that it state whether or not it, as surety, desired to complete the work in accordance with the terms of the contract. In response to this inquiry the defendant in a telegram dated March 22, 1934 replied, "* * * this company as surety desires to complete the work in accordance with the terms of the contract and will proceed at the earliest possible time provided all necessary legal steps have been taken by the Government to cancel and annul the Grasser Contract * * *". In a letter of even date confirming this telegram it was stated, "Anticipating that all proper legal steps have or will be taken by the Government, we are proceeding to perfect our plans for the completion of the work so as to do it as expeditiously as possible." On March 26, 1934, the contracting officer acknowledged receipt of these communications and enclosed a letter copy of his notice to the contractor dated March 17, 1934, stating that since on the aforementioned date the contractor was officially placed in default and its right to proceed with the work remaining to be done under the contract was terminated, his office was of the opinion that this constituted the only action necessary in the premises. On March 28, 1934, the defendant wrote the contracting officer and in commenting on the letter of March 17th said, "From the information we have here this letter would seem to be a sufficient termination of the contract." However, the defendant pointed out that this letter was served on the contractor after a voluntary petition had been filed in bankruptcy and suggested that it might be necessary for their mutual protection that this notice should also be served upon the receiver or trustee in bankruptcy or if neither had been appointed, then upon the bankruptcy court. After alluding to the fact that they were sending a copy of this letter to Mr. Milner, their local attorney, the letter states "* * * as we view it, it is very essential for the protection of the Government as well as this company, that the contract be properly annulled". The record in this case does not disclose whether or not the defendant ever received any advice from Mr. Milner to the effect that the contract either had or had not been properly annulled though Mr. Milner did testify that the contract was not cancelled and that he recognized the vast distinction in law between a termination of the contract and a termination of the right to proceed under the...
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