United States v. Fire Association of Philadelphia

• Decision Date: 31 October 1958
• Docket Number: Docket 25025.,No. 14,14
• Citation: 260 F.2d 541
• Parties: UNITED STATES of America for the USE AND BENEFIT OF J. P. BYRNE & CO., Inc., Plaintiff-Appellee, v. FIRE ASSOCIATION OF PHILADELPHIA, Defendant-Appellant.
• Court: U.S. Court of Appeals — Second Circuit

260 F.2d 541 (1958)

UNITED STATES of America for the USE AND BENEFIT OF J. P. BYRNE & CO., Inc., Plaintiff-Appellee, v. FIRE ASSOCIATION OF PHILADELPHIA, Defendant-Appellant.

No. 14, Docket 25025.

United States Court of Appeals Second Circuit.

Argued October 8, 1958.

Decided October 31, 1958.

Mark N. Turner, of Brown, Kelly, Turner & Symons, Buffalo, N. Y. (Richard Marlink, Philadelphia, Pa., Raymond C. Vaughan and Thomas J. Kelly, Buffalo, N. Y., on the brief), for defendant-appellant.

John J. Costello, of Byrne & Costello, Syracuse, N. Y., for plaintiff-appellee.

Before CLARK, Chief Judge, and MEDINA and LUMBARD, Circuit Judges.

CLARK, Chief Judge.

Fire Association of Philadelphia appeals from a judgment in favor of the use plaintiff, J. P. Byrne & Co., Inc., for $16,372.25 for tires sold by Byrne to Dutcher Construction Corporation, a codefendant below, between February 26, 1956, and April 11, 1956. Appellant is surety upon a payment bond filed by Dutcher, a prime contractor with the United States, in compliance with the Miller Act, 40 U.S.C. §§ 270a-270d. The action was tried before Judge Brennan in the district court, originally sitting with a jury. But as the trial raised no material issue of fact, upon the motions of both parties for a directed verdict, he discharged the jury and thereafter gave the judgment under appeal, writing a reasoned opinion supporting his result.

The relevant facts are as follows: Dutcher Construction Corporation held a prime contract for excavation work on Grass River Lock, a part of the St. Lawrence Seaway project. Dutcher was engaged in the performance of this contract from April 1955 until April 11, 1956, when, the work still uncompleted, the contract was terminated by agreement of the parties because of Dutcher's financial difficulties. In the performance of this work Dutcher employed numerous heavy earth moving vehicles to transport the excavated material out of the excavation area, and some smaller trucks for over-the-road transportation. The district court found that during the last weeks of this contract and for a short period after its termination some of this equipment was used on other jobs not covered by Fire Association's bond.

The bulk of the sum in dispute here is for the sale of new and recapped tires for the heavy earth movers.¹ A small additional sum, $276.46, relates to new tires for the over-the-road trucks, and will be separately discussed below. Turning now to the major items, it appears that individual tires for the earth moving equipment range in price up to $1,890.32 new, and $864.75 recapped. Conditions at the excavation site subjected these tires to unusual wear, as a substantial portion of the work was in glacial till — an abrasive, heavy gravel substance — and the earth movers were required to climb a steeply inclined road often in poor repair. Moreover, all of the vehicles were operated an average of more than one hundred hours a week even during the winter months of 1955-1956 when frequent sub-zero temperatures worsened the situation. An officer of Dutcher testified that from the inception of the contract the repair and replacement of tires was expected to be a constantly recurring item. Appellant's own experts estimated the average life of the heavy equipment tires under these conditions to be only 1,800 hours.

On this appeal appellant asserts that these tires are additions to Dutcher's capital equipment rather than "materials furnished in the prosecution" of the bonded contract; that even if the tires are held to be materials, not capital equipment, plaintiff must show that they were in fact substantially consumed by the work; and that it is not liable as surety for tires which were diverted by the contractor for use on non-bonded jobs. Although none of these contentions are completely foreclosed by existing case law, in our view they each run counter to the expressed Congressional policy embodied in the Miller Act.

As is typically the case in actions under the Miller Act, the surety's liability here depends upon and is to be measured by the provisions of § 2(a) of the Act, 40 U.S.C. § 270b(a). United States, for the Benefit of Sherman, v. Carter, 353 U.S. 210, 216, 77 S.Ct. 793, 1 L. Ed.2d 776. Both the bond and the statute obligate the surety for the payment of persons furnishing "material in the prosecution of the work provided for in the contract." The courts have refrained from attempting an all-inclusive definition of material furnished in the prosecution of the work. Massachusetts Bonding & Insurance Co. v. United States, 5 Cir., 88 F.2d 388; United States, to Use of Galliher & Huguely, Inc., v. James Baird Co., 64 App.D.C. 12, 73 F.2d 652; United States, for Use of Baltimore Cooperage Co., v. McCay, D.C.Md., 28 F. 2d 777. We make no attempt to do so here, for the facts and circumstances of each case are the sole determinants of the definition. Any inquiry must begin, however, with the repeatedly noted principle that the Miller Act should be liberally construed to effect Congress' remedial purpose. United States, for the Benefit of Sherman, v. Carter, supra, 353 U.S. 210, 77 S.Ct. 793, 1 L.Ed.2d 776; Clifford F. MacEvoy Co. v. United States, for Use and Benefit of Calvin Tomkins Co., 322 U.S. 102, 64 S.Ct. 890, 88 L.Ed. 1163.²

Shaped by this rule, perhaps the most important factor in distinguishing materials from capital equipment has been substantial consumption. A prime inquiry of the early decisions was whether the items involved were "normally intended for specific use and exhaustion upon the given piece of work, or are merely facilities for doing that work and any other work to which they may be applied." United States, for Use of Baltimore Cooperage Co., v. McCay, supra, D.C.Md., 28 F.2d 777, 780; United States, to Use of Galliher & Huguely, Inc., v. James Baird Co., supra, 64 App. D.C. 12, 73 F.2d 652. A more recent view, which we here adopt, focuses on the degree of expected consumption of the items on the particular job for which they were furnished. Massachusetts Bonding & Insurance Co. v. United States, supra, 5 Cir., 88 F.2d 388. See Brogan v. National Surety Co., 246 U.S. 257, 38 S.Ct. 250, 62 L.Ed. 703, reversing National Surety Co. v. United States, for Use of Pittsburgh & Buffalo Co., 6 Cir., 228 F. 577, L.R.A.1917A, 336. Under this standard the tires here involved are clearly materials, not capital equipment. At the time of their delivery, the facts unequivocally show that both the use plaintiff and the construction company reasonably expected them to have been substantially used up in the work under the contract. Although many of these items may not in fact have been consumed prior to the unexpected work stoppage, there is not the slightest taint in this case of an attempt by the contractor, within the constructive knowledge of its suppliers, to build up its permanent capital investment at the surety's expense. Cf. United States v. Hercules Co., D.C.S.D.Miss., 52 F.2d 454.

Recognizing that substantial consumption is, as discussed above, a significant factor in the very definition of materials furnished in the prosecution of the bonded work, we see no further merit in appellant's assertion that the surety's liability must be predicated on a showing that the materials supplied were in fact substantially consumed by the work. Appellant's position finds no support in the authorities apart from a single dictum by a district judge. United States, for Benefit and Use of Westinghouse Electric Supply Co., v. Robbins, D.C.Mass., 125 F. Supp. 25. At least as applied to materials purchased to replenish inventory expended in the performance of the...