United States v. Globe Indemnity Co.

• Decision Date: 10 July 1933
• Docket Number: No. 5025.,5025.
• Citation: 66 F.2d 302
• Parties: UNITED STATES, to Use of STEACY-SCHMIDT MFG. CO., Inc., v. GLOBE INDEMNITY CO.
• Court: U.S. Court of Appeals — Third Circuit

66 F.2d 302 (1933)

UNITED STATES, to Use of STEACY-SCHMIDT MFG. CO., Inc., v. GLOBE INDEMNITY CO.

No. 5025.

Circuit Court of Appeals, Third Circuit.

July 10, 1933.

Russell C. Gourley and Samuel W. Cooper, both of Philadelphia, Pa., for appellant.

Frederic L. Ballard, Morris Cheston, and Ballard, Spahr, Andrews & Ingersoll, all of Philadelphia, Pa., for appellee.

Before BUFFINGTON, WOOLLEY, and THOMPSON, Circuit Judges.

THOMPSON, Circuit Judge.

This is an appeal from a judgment of the District Court for the Eastern District of Pennsylvania. The Sanitation Corporation entered into a contract with the United States to furnish the latter with two needle valves required by the Department of the Interior for a public irrigation project. In accordance with the provisions of the Hurd Act (40 USCA § 270), the Sanitation Corporation, as principal, and the Globe Indemnity Corporation, as surety, executed a bond with the condition that the Sanitation Corporation pay promptly all persons supplying it with labor and materials. The Steacy-Schmidt Manufacturing Company, Inc., supplied the valves and all labor and materials necessary in the prosecution and completion of the Sanitation Corporation's contract with the United States. An involuntary petition in bankruptcy was filed against the Sanitation Corporation. The greater part of the sum due the Steacy-Schmidt Manufacturing Company, Inc., was still unpaid. On October 17, 1928, the Steacy-Schmidt Manufacturing Company, Inc., brought suit on the bond to its own use, in the name of the United States as legal plaintiff. Jury trial was waived by written stipulation, and the case heard by the District Judge. This appeal is from the judgment in favor of one of the defendants, the Globe Indemnity Company.

The Hurd Act limits the subcontractor's right of action to one year. It provides: "Any person or persons entering into a formal contract with the United States for * * * the prosecution and completion of any public work * * * shall be required, before commencing such work, to execute the usual penal bond, with good and sufficient sureties, with the additional obligation that such contractor or contractors shall promptly make payments to all persons supplying him or them with labor and materials in the prosecution of the work provided for in such contract. * * * If no suit should be brought by the United States within six months from the completion and final settlement of said contract, then the person or persons supplying the contractor with labor and materials shall * * * be furnished with a certified copy of said contract and bond, upon which he or they shall have a right of action, and shall be, and are hereby, authorized to bring suit in the name of the United States in the district court of the United States in the district in which said contract was to be performed and executed, irrespective of the amount in controversy in such suit, and not elsewhere, for his or their use and benefit, against said contractor and his sureties, and to prosecute the same to final judgment and execution: Provided, That where suit is instituted by any of such creditors on the bond of the contractor it shall not be commenced until after the complete performance of said contract and final settlement thereof, and shall be commenced within one year after the performance and final settlement of said contract, and not later. * * *"

The plaintiff contends that final settlement did not take place until October 26, 1927, and that its right of action did not expire until October 26, 1928. The defendant contends that the date of final settlement was June 16, 1927, and that the right of action of the subcontractor expired June 16, 1928. It therefore is essential to determine the date of final settlement.

In Illinois Surety Co. v. U. S., Use of Peeler, 240 U. S. 214, 36 S. Ct. 321, 60 L. Ed. 609, the Supreme Court held that final settlement, within the meaning of the act, does not depend upon final payment, but upon the final administrative determination by the proper authority of the amount due. In the instant case the defendant assumes that the Department of the Interior was the proper authority to make final settlement. It relies upon a letter dated June 16, 1927, written by the First Assistant Secretary of the Department of the Interior to the Claims Division, General Accounting...