United States v. Harrison and Grimshaw Construction Co., 6916.

• Decision Date: 15 June 1962
• Docket Number: No. 6916.,6916.
• Citation: 305 F.2d 363
• Parties: UNITED STATES of America, for the Use and Benefit of MILES LUMBER COMPANY, a corporation, and Miles Lumber Company, a corporation, in its Individual Capacity, Appellants, v. HARRISON AND GRIMSHAW CONSTRUCTION COMPANY, a partnership or joint venture, consisting of the following individuals, partnerships, and corporations: Floyd Alfred Harrison, an individual; Joe Bob Harrison, an individual; Five Star Homes, Inc., an Oklahoma corporation; Lake View Developers, Inc., an Oklahoma corporation; Lorayne, Inc., an Oklahoma corporation; Harrison Builders Supply Company, an Oklahoma corporation; Merit Realty Company, an Oklahoma corporation; Premium Realty Company, an Oklahoma corporation; Floyd A. Harrison Realty Company, Inc., an Oklahoma corporation; Country Club Developers, Inc., an Oklahoma corporation; W. R. Grimshaw Company, an Oklahoma corporation; and W. R. Grimshaw Company, a partnership consisting of William Ray Grimshaw, William Ray Grimshaw, Jr., and Harry Douglas Grimshaw; Hardy Plywood and Door, Inc., a corporation; Texoma Distributors, Inc., a corporation; Marshall Wholesale Lumber Company, Inc., a corporation; Carl Morris, an individual doing business as Carl Morris Construction Company; Standard Accident Insurance Company, a corporation; National Surety Corporation, a corporation; Aetna Casualty & Surety Company, a corporation; New Amsterdam Casualty Company, a corporation; The Travelers Indemnity Company, a corporation; Paul W. Anderson; Nathan A. Burkham; W. G. (Bud) Killion; Marjorie Anderson; Florine Burkham; Betty Ann Killion; and Daniel E. Hardy, Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

305 F.2d 363 (1962)

UNITED STATES of America, for the Use and Benefit of MILES LUMBER COMPANY, a corporation, and Miles Lumber Company, a corporation, in its Individual Capacity, Appellants, v. HARRISON AND GRIMSHAW CONSTRUCTION COMPANY, a partnership or joint venture, consisting of the following individuals, partnerships, and corporations: Floyd Alfred Harrison, an individual; Joe Bob Harrison, an individual; Five Star Homes, Inc., an Oklahoma corporation; Lake View Developers, Inc., an Oklahoma corporation; Lorayne, Inc., an Oklahoma corporation; Harrison Builders Supply Company, an Oklahoma corporation; Merit Realty Company, an Oklahoma corporation; Premium Realty Company, an Oklahoma corporation; Floyd A. Harrison Realty Company, Inc., an Oklahoma corporation; Country Club Developers, Inc., an Oklahoma corporation; W. R. Grimshaw Company, an Oklahoma corporation; and W. R. Grimshaw Company, a partnership consisting of William Ray Grimshaw, William Ray Grimshaw, Jr., and Harry Douglas Grimshaw; Hardy Plywood and Door, Inc., a corporation; Texoma Distributors, Inc., a corporation; Marshall Wholesale Lumber Company, Inc., a corporation; Carl Morris, an individual doing business as Carl Morris Construction Company; Standard Accident Insurance Company, a corporation; National Surety Corporation, a corporation; Aetna Casualty & Surety Company, a corporation; New Amsterdam Casualty Company, a corporation; The Travelers Indemnity Company, a corporation; Paul W. Anderson; Nathan A. Burkham; W. G. (Bud) Killion; Marjorie Anderson; Florine Burkham; Betty Ann Killion; and Daniel E. Hardy, Appellees.

No. 6916.

United States Court of Appeals Tenth Circuit.

June 15, 1962.

Robert B. Langworthy, Kansas City, Mo. (Billy S. Sparks, Kansas City, Mo., Weary, Weary & Sangster, Junction City, Kan., and Linde, Thomson, VanDyke, Fairchild & Langworthy, Kansas City, Mo., were with him on the brief), for appellants.

Remington Rogers, Tulsa, Okl., and F. Philip Kirwan, Kansas City, Mo. (Rogers & Litchfield, Tulsa, Okl., Cantrell, Douglass, Thompson & Wilson, Oklahoma City, Okl., and Margolin & Kirwan, Kansas City, Mo., were with them on the brief), for appellees Harrison & Grimshaw Construction Company, Standard Accident Insurance Company, National Surety Corporation, Aetna Casualty & Surety Company, New Amsterdam Casualty Company, and The Travelers Indemnity Company.

Paul W. Anderson, Marshall, Tex., William Hergenreter, and Garlinghouse, Shaw & Hergenreter, Topeka, Kan., submitted a brief on behalf of appellees Paul W. Anderson and Marjorie Anderson.

No appearance for any other appellee.

Before PICKETT, LEWIS, and BREITENSTEIN, Circuit Judges.

BREITENSTEIN, Circuit Judge.

The issue is whether the provisions of the Miller Act, 40 U.S.C.A. §§ 270a and 270b, relating to bonds furnished to the United States by contractors engaged in the construction of federal public works, apply to a suit brought on a bond furnished by a contractor in connection with a military housing project under the Capehart Act.¹ If the Miller Act controls the notice given prior to suit was sufficient whereas if it does not, that notice was insufficient. The trial court denied the applicability of the Miller Act on the ground that a Capehart Act project was not a public work of the United States and dismissed the first of the 6 counts in the complaint. In so doing the court made the findings required for an interlocutory appeal under 28 U.S.C. § 1292(b) and we allowed the appeal.

Miles Lumber Company (Miles) claims $27,059.66 for lumber furnished to subcontractors on a military housing project at Fort Riley, Kansas, and sues on the prime contractor's payment bond to recover that amount.

The Capehart Act amends Title VIII, "Armed Services Housing Mortgage Insurance," of the National Housing Act.² The purpose of the amendments was to provide "the most practicable means of coping with the very serious housing problem * * * facing our military services." While conceding the advantages of the use of appropriated funds, Congress "recognized that budgetary considerations would not permit the expenditure in 1 or 2 fiscal years of the sums needed," and accordingly provided for "the utilization of private mortgage capital to be repaid from quarters allowances of eligible service personnel."³

The statutory plan calls for construction by private entities with private funds advanced on the security of mortgages covering the housing to be constructed. The Federal Housing Administration insures the payment of the mortgages. Eligibility for such insurance requires that the mortgaged property be held by a mortgagor approved by the Commissioner of the Housing Administration who may regulate the capital structure and methods of operation and may acquire, for not more than $100, stock or interest in the mortgagor.⁴

Each housing unit is placed under the control of the Secretary of Defense "as soon as the unit is available for occupancy as determined by the Commissioner" and when the housing project is completed, the capital stock of the mortgagor, except that held by the Commissioner, is transferred to the Secretary of Defense,⁵ who uses appropriations for quarters allowances to pay the mortgage.⁶

In the situation here presented the mortgagor-builder was Fort Riley C-1 Housing, Inc., a Kansas corporation, and the mortgagee-lender was the First National Bank and Trust Company of Tulsa, Oklahoma. The prime contractor was Harrison and Grimshaw Construction Company. A contract was made with the Department of the Army but that contract appears nowhere in the record and we are not advised of its terms.

A payment bond, executed in the amount of $3,542,050 by the prime contractor and four corporate sureties, was accepted by the United States. The bond named as obligees the mortgagor-builder and the mortgagee-lender. Its condition is prompt payment to claimants for labor and material furnished. A prerequisite to suit on the bond is notice to any two of the following, "the principal, any one of the Obligees, or the Sureties above named" before the expiration of 90 days after the performance of the last work or the supplying of the last material or before the expiration of the time for filing a lien under state law. The bond provides that "either the giving of notice, or the filing of lien, in accordance with the pertinent lien law of the place where the project is located is a sufficient notice." Miles did not give the notice required by the bond.

The Miller Act provides that in order for a supplier of labor and material to a subcontractor to recover in a suit on a payment bond given by a prime contractor that supplier shall give notice of nonpayment to the prime contractor before the expiration of 90 days from the date on which the last labor was performed on, or materials furnished to, the project by him. Miles satisfied this requirement.

If a Capehart Act military housing project is not "a public building or public work of the United States"⁷ the Miller Act does not apply. There is no statutory definition of that phrase. In Title Guaranty & Trust Company of Scranton, Pennsylvania v. Crane Company, 219 U.S. 24, 33, 31 S.Ct. 140, 55 L.Ed. 72, the Supreme Court said that a work is public "if it belongs to the representative of the public."⁸ United States v. Ansonia Brass and Copper Company, 218 U.S. 452, 31 S.Ct. 49, 54 L.Ed. 1107, involved the relative rights of the United States and lien claimants on three vessels. As to two vessels, the construction contracts for which contained no provision for the passing of title to the United States on partial payments, the court upheld liens under state law for labor performed and materials furnished. The contract for the third vessel provided for passage of title to the United States on partial payment and the private liens were rejected. A claim that suppliers of materials to a contractor engaged in building mail truck bodies for the United States could recover under the Heard Act,⁹ predecessor of the Miller Act, was rejected in United States for Use of Mengel Body Co., Inc., v. Metropolitan Body Co., 2 Cir., 79 F.2d 177, 178, the court saying that the "mail truck bodies were at the risk of the builder and were its property during all the time they were being built."

The authorities cited by Miles to sustain its claim that the Capehart Act project was a public work are not convincing. United States to Use of Noland Co., Inc., v. Irwin, 316 U.S. 23, 30, 62 S.Ct. 899, 86 L.Ed. 1241, held that a library built with federal funds under the authorization contained in the National Industrial Recovery Act was a public work within the meaning of the Miller Act but that holding was based on language appearing in the National Industrial Recovery Act. Lasley Const. Co. v. United States, 5 Cir., 285 F.2d 98; United States v. Ft. George G. Meade Defense Housing Corporation No. 1, D.C. Md., 186 F.Supp. 639; and Autrey & Goad Const. Co. v. Williams & Dunlap, D.C.W.D.La., 185 F.Supp. 802, all involved federal court jurisdiction and we see no jurisdictional problem here as the bond in suit was executed under a law of the United States.¹⁰ United States v. Phoenix Assurance Company of New York, D.C.N.D.Calif., 163 F.Supp. 713, is distinguishable from the instant case on its facts. In United States, etc. v. Progressive Contractors, Inc., D.C.N. D., 196 F.Supp. 171, the court held that the notice provisions of the Miller Act control over the notice provisions of a Capehart Act bond but the decision makes no analysis of the problem and relies on cases of doubtful pertinence.

We are confronted here with a situation in which the project is built by a private entity with private funds at private risk. The property is encumbered by a mortgage given by a private mortgagor to a private mortgagee. Those furnishing labor and materials during project construction may assert liens under state law against the property.¹¹ The eventuality that title will vest...