United States v. Fryd Construction Corporation

• Decision Date: 13 April 1970
• Docket Number: No. 27437.,27437.
• Citation: 423 F.2d 980
• Parties: UNITED STATES of America for the Use and Benefit of T/N PLUMBING & HEATING CO., Plaintiff-Appellant, v. FRYD CONSTRUCTION CORPORATION, et al., Defendants-Appellees, American Fire & Casualty Company and United States of America, Intervenors-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

423 F.2d 980 (1970)

UNITED STATES of America for the Use and Benefit of T/N PLUMBING & HEATING CO., Plaintiff-Appellant, v. FRYD CONSTRUCTION CORPORATION, et al., Defendants-Appellees, American Fire & Casualty Company and United States of America, Intervenors-Appellees.

No. 27437.

United States Court of Appeals, Fifth Circuit.

February 19, 1970.

Rehearing Denied and Rehearing Denied April 13, 1970.

Hugh S. Glickstein, Hollywood, Fla., for appellant.

Eugene C. Heiman, Miami, Fla., for Fryd Const. Corp R. Earl Welbaum, Miami, Fla., for American Fire and Cas. Co.

William A. Meadows, Jr., U. S. Atty., Miami, Fla., Johnnie M. Walters, Asst. Atty. Gen., Lee A. Jackson, John S. Stephan, Gilbert E. Andrews, Paul M. Ginsburg, Attys., Dept. of Justice, Tax Div., Washington, D. C., for the United States.

Before WISDOM, GEWIN and AINSWORTH, Circuit Judges.

Rehearing Denied and Rehearing En Banc Denied April 13, 1970.

AINSWORTH, Circuit Judge:

In this Miller Act (40 U.S.C. §§ 270a-270d) matter, suit was brought by use plaintiff T/N Plumbing & Heating Company, a subcontractor, against Fryd Construction Corporation and its surety, Travelers Indemnity Company, for the sum of $111,216.17, plus interest and attorney's fees, alleged to be due for material and services furnished in connection with the performance of certain drainage work on a Government construction job at Patrick Air Force Base, Florida, in which Fryd was the general contractor with the Government-owner. The contract was executed on November 30, 1962 on Standard Form 23A.

According to the allegations of the complaint, on December 6, 1962, Fryd entered into a subcontract with T/N to perform drainage work in connection with the Patrick Air Force Base job for the price of $66,140. Use plaintiff T/N further alleged that "As a direct and proximate result of the existence of * * * undisclosed interferences and obstructions" and "at Fryd's special instance and request" it furnished labor and material in prosecution of the work of the fair and reasonable value of $202,879.56 instead of the original agreed figure of $66,140, and that the net sum of $111,216.17 remains due and unpaid. American Fire & Casualty Company, surety on T/N's contract, intervened, claiming right of subrogation and written assignment and indemnification against T/N for sums which it expended on behalf on T/N, pursuant to the obligation under its bond. The United States intervened, asserting a claim for unpaid withholding taxes against T/N.

Fryd and Travelers defend the suit on the ground that the Miller Act is not applicable in this case, that the subcontract was expressly conditioned upon the general contract, that the subcontract required T/N to perform the prime contractor's obligations to the United States, and that the conditions of the general contract control the rights and obligations of T/N. According to the defense, Fryd and Travelers assert as to the disputed additional sum claimed by T/N, that the parties agreed to convert the dispute into one arising under the contract and, therefore, that the claim of T/N is limited to the specific equitable adjustments provided for in the general contract, especially Clause 6 relating to "disputes." The prime contractor contends that the subcontract incorporates, by reference, specific provisions of the general contract and cites the following provisions of the subcontract in support of this contention:

"14. This contract includes all of specifications, general conditions, and/or special conditions."

Further, from pertinent parts of paragraph 2:

"The following recitals are hereby declared to be true:

"(a) WHEREAS, the contractor and the owner have entered into a contract for the doing of the work therein described, with the terms of which contract the subcontractor acknowledges himself to be familiar; and

"(b) WHEREAS, the said general contract, and the plans, specifications and drawings described specifically the scope of the work which is required of and from the subcontractor to whom this subcontract is to be awarded; * * *."

Additionally, the prime contractor points to these provisions of the subcontract:

"3) The subcontractor hereby agrees to do all the work and furnish all the materials required by the terms of the plans, specifications and drawings, and by the terms of the general contract, of and from the drainage structures subcontractor; and the subcontractor covenants and agrees with the contractor that the subcontractor will cause the said work to be done in such manner as will conform to and will comply with the relevant portions of the general or prime contract; and, in general, the parties understand and agree that the subcontractor shall do the subcontractor\'s portion of the work in such manner that if it were being done by the contractor, it would comply with the relevant portions of the general or prime contract."¹

Thus the prime contractor argues that there has been incorporated, by reference, into the subcontract the provisions of the general contract, included among which is the following paragraph:

"6. DISPUTES

"(a) Except as otherwise provided in this contract, any dispute concerning a question of fact arising under this contract which is not disposed of by agreement shall be decided by the Contracting Officer, who shall reduce his decision to writing and mail or otherwise furnish a copy thereof to the Contractor. The decision of the Contracting Officer shall be final and conclusive unless, within 30 days from the date of receipt of such copy, the Contractor mails or otherwise furnishes to the Contracting Officer a written appeal addressed to the head of the agency involved. The decision of the head of the agency or his duly authorized representative for the determination of such appeals shall be final and conclusive. This provision shall not be pleaded in any suit involving a question of fact arising under this contract as limiting judicial review of any such decision to cases where fraud by such official or his representative or board is alleged. Provided, however, that any such decision shall be final and conclusive unless the same is fraudulent or capricious or arbitrary or so grossly erroneous as necessarily to imply bad faith or is not supported by substantial evidence. In connection with any appeal proceeding under this clause, the Contractor shall be afforded an opportunity to be heard and to offer evidence in support of his appeal. Pending final decision of a dispute hereunder, the Contractor shall proceed diligently with the performance of the contract and in accordance with the Contracting Officer\'s decision."

From this the prime contractor concludes that the subcontractor has waived its right to sue under the Miller Act and has only those rights set forth in the specific equitable adjustments herein quoted and as provided for in the general contract.

Fryd argues that the provisions of the subcontract between it and T/N evidence this intention. Fryd refers to the following provisions of the subcontract in support of this contention:

"8) While the subcontractor is not in default in the performance of the terms of this contract, the contractor will pay the subcontractor the contract price in the following fashion; to wit:

"(a) Progress payments shall be made on the basis of requisitions made by the subcontractor on the as disbursed by Owner days of each month (sic); and each requisition shall include an amount which is the fair cost or value and is also the fair proportion of the total work, included in the period covered by such requisition; and in general, the subcontractor shall never be entitled to include in any requisition any requirement for the payment of money which the contractor himself would not have been entitled to receive, for such work, under the terms of the general or prime contract; * * *."

Reference is further made by Fryd to the following provision of the subcontract:

"9) It is further understood and agreed by and between the parties as follows:

* * * * * *

"(d) * * * it is understood and agreed by and between the parties that the subcontractor shall never be entitled to receive any payment under this contract from the contractor unless and until the contractor has received from the owner a payment which includes, correspondingly, payment for the work

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