United States v. Hesselden Construction Co., 9830

• Decision Date: 30 December 1968
• Docket Number: 9831.,No. 9830,9830
• Citation: 404 F.2d 774
• Parties: The UNITED STATES of America for the Use of STATE ELECTRIC SUPPLY CO., Inc., a corp., Appellant, v. HESSELDEN CONSTRUCTION CO., a corp., and the Travelers Indemnity Co., a corp., National Union Fire Insurance Company of Pittsburgh, Pa., a corp., B. R. Fulkerson, Jimmie Duane Fulkerson, Individually, Grace V. Fulkerson, a/k/a Mrs. B. R. Fulkerson and Mrs. J. D. Fulkerson, Appellees. HESSELDEN CONSTRUCTION CO., a corp., and the Travelers Indemnity Co., a corp., Appellants, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., a corp., B. R. Fulkerson, Jimmie Duane Fulkerson, Individually, Grace V. Fulkerson, a/k/a Mrs. B. R. Fulkerson and Mrs. J. D. Fulkerson, Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

404 F.2d 774 (1968)

The UNITED STATES of America for the Use of STATE ELECTRIC SUPPLY CO., Inc., a corp., Appellant, v. HESSELDEN CONSTRUCTION CO., a corp., and the Travelers Indemnity Co., a corp., National Union Fire Insurance Company of Pittsburgh, Pa., a corp., B. R. Fulkerson, Jimmie Duane Fulkerson, Individually, Grace V. Fulkerson, a/k/a Mrs. B. R. Fulkerson and Mrs. J. D. Fulkerson, Appellees.

HESSELDEN CONSTRUCTION CO., a corp., and the Travelers Indemnity Co., a corp., Appellants, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., a corp., B. R. Fulkerson, Jimmie Duane Fulkerson, Individually, Grace V. Fulkerson, a/k/a Mrs. B. R. Fulkerson and Mrs. J. D. Fulkerson, Appellees.

Nos. 9830, 9831.

United States Court of Appeals Tenth Circuit.

December 30, 1968.

David F. Boyd, Jr., Albuquerque, N. M. (Scott H. Mabry, Albuquerque, N. M., with him on the brief), for appellant.

Edwin E. Piper, Jr., Albuquerque, N. M. (James H. Foley and Jack Smith, Albuquerque, N. M., with him on the brief), for appellees and cross appellants.

Before PICKETT, LEWIS and HICKEY, Circuit Judges.

HICKEY, Circuit Judge.

The plaintiff-appellant, State Electric Supply Company, initiated the action in the lower court, pursuant to Section 270b of the Miller Act,¹ against defendant-appellees, Hesselden Construction Company, and its surety, Travelers Indemnity Company, for the balance due on materials furnished to a subcontractor, Fulkerson Electric Company. The lower court entered a judgment denying appellant's claim.

The issues presented on appeal are whether the trial court erred in determining that the final materials supplied by the appellant materialman were not a part of the original contract, and whether a letter agreement wherein a prime contractor agrees to issue checks payable jointly to a subcontractor and his materialman creates a direct contractual relationship between the prime contractor and the materialman?

The United States, acting through the Bureau of Indian Affairs, entered into a contract with Hesselden Construction Company for the construction of a school. In accordance with the provisions of the Miller Act² Hesselden furnished a payment bond for the protection of materialmen with Travelers Indemnity Company as surety on the bond. Hesselden then subcontracted the electrical requirements of the project to Fulkerson Electric Company who in turn entered into a contract with State Electric Supply Company whereby State agreed to supply Fulkerson with material required on the project. As the work on the project was progressing, Hesselden noted that the materials necessary for the electrical work were not on the job site. Hesselden's concern over this situation prompted him to arrange a meeting with Fulkerson and State in order to come to an agreement concerning delivery dates of the needed material. At the meeting State indicated to Hesselden that there was a substantial sum of money then owing to State by Fulkerson. State then agreed to supply the needed materials and Hesselden agreed to make further payments of the receipts due Fulkerson by checks payable to Fulkerson and State jointly.

Following the conference, State prepared a letter dated April 30, 1964 directed to Hesselden and reciting the agreement reached at the conference. This letter was then approved by Hesselden and thereafter joint checks were issued. As the project was nearing completion, State issued an invoice on August 31, 1964 covering certain sound equipment with the notation "Final charges on clock and sound systems." On November 4, 1964 State issued another invoice covering "3 Gamewell P.C. IV Pedistal sic Comp." with the notation "plus freight charges on complete Gamewell." The facts then show that subsequently State supplied another pedestal on February 22, 1965, and additional sound equipment in the form of a receptacle and two transformers on March 5, 1965. Approximately two weeks later Fulkerson filed for bankruptcy without having paid State for the materials supplied. Accordingly, on March 23, 1965, State directed a notice and demand for payment to both appellees in conformance with § 270b of the Miller Act.

It is first argued by State that the written notice was given within ninety days of the date on which the last of the material was supplied as required by the Miller Act.³ In regard to this it becomes important to determine the critical date from which the ninety-day period of limitation commences. The correct rule was set out by the Ninth Circuit when it provided that "An accurate statement of the test to be applied is whether the work was performed and the material supplied as a `part of the original contract' or for the `purpose of correcting defects, or making repairs following inspection of the project.'"⁴ The problem in the case at bar, then, is to determine whether the material supplied on February 22, 1965 and March 5, 1965 were materials supplied as a "part of the original contract," or whether they were for the purpose of "correcting defects, or making repairs."

In the trial court's memorandum opinion the following facts are found: (1) The last pedestal delivered on February 22, 1965 was a replacement for a damaged or lost piece of equipment which was included in the invoice of November 4, 1964. (2) The material supplied through the invoice of March 5, 1965, upon which the notice was based, was for corrective purposes. Unless clearly erroneous, we must accept these findings of the trial court.⁵

The evidence in the record shows that the original contract required three complete pedestals. The invoice of November 4, 1964 shows that three pedestals were furnished and were billed as complete. More than three months later another pedestal was delivered. State urges that the government would not accept the project as finished until after this last pedestal had been ordered and installed. It is true that the final acceptance did not come until February 25, 1965, but there is no evidence to the effect that acceptance was delayed because of any missing pedestal. In fact, final inspection was held September 9 and 10, 1964, and a government letter of February 26, 1965, which set forth certain deficiencies, makes no mention of any missing pedestal. Therefore the project must have been complete up to that point as to the pedestals. The evidence, therefore, substantiates the trial court's findings that the final pedestal was merely a replacement part for a lost or damaged piece included in the original invoice.

In regard to the sound equipment supplied through the invoice of March 5, 1965, i. e. the receptacle and two transformers, the record shows that the original sound system for the project had been...