United States v. JAJ Const. Co.

• Decision Date: 13 August 1943
• Docket Number: No. 8335,8394.,8335
• Citation: 137 F.2d 584
• Parties: UNITED STATES, to Use of PAR-LOCK APPLIERS OF NEW JERSEY, Inc., v. J. A. J. CONST. CO., Inc., et al. SAME v. LEWIS.
• Court: U.S. Court of Appeals — Third Circuit

137 F.2d 584 (1943)

UNITED STATES, to Use of PAR-LOCK APPLIERS OF NEW JERSEY, Inc., v. J. A. J. CONST. CO., Inc., et al. SAME v. LEWIS.

Nos. 8335, 8394.

Circuit Court of Appeals, Third Circuit.

Argued July 9, 1943.

Decided August 13, 1943.

Edward H. Cushman, of Philadelphia, Pa., for appellants the Companies.

John M. Smith, Jr., of Philadelphia, Pa., for appellant Lewis.

Meyer L. Casman, of Philadelphia, Pa., for appellee.

Before BIGGS, JONES, and DOBIE, Circuit Judges.

DOBIE, Circuit Judge.

These civil actions were argued before us together and they may be disposed of in a single opinion. The first action was brought by a materialman as use-plaintiff against a general contractor and its surety upon a payment bond given by the general contractor under the Miller Act, 49 Stat. 793, 40 U.S.C.A. § 270a. The second action was brought by a materialman, the use-plaintiff, in contract, against the subcontractor. In the United States District Court, Judge Kalodner sitting, without a jury, found in favor of plaintiff and entered judgment against the defendants. The defendants have duly appealed to this Court.

Judge Kalodner made the following seventeen findings of fact:

"1. On April 3, 1939, J. A. J. Construction Co., Inc. (hereinafter called the contractor) entered into an agreement with the United States of America for the erection and construction at Philadelphia, Pennsylvania, of the public improvement designated as `Philadelphia Defense Housing Project Pa-36011.'

"2. Pursuant to the requirements of the Act of Congress of August 24, 1935, chapter 642, 49 Stat. 793, 40 U.S.C.A. Sec. 270a, the contractor as principal, and the American Surety Company of New York as surety, made, executed and delivered to the United States in connection with the contract referred to above, their certain performance bond, and in addition thereto a payment bond on United States standard form No. 25-A approved September 16, 1935, in the penal sum of $738,000.00, conditioned for the payment of labor and material bills incurred in the prosecution of said public work.

"3. On April 21, 1941, the contractor entered into agreements in writing with John W. Lewis, of Philadelphia, Pennsylvania, for the performance of the plumbing, heating and other work required in and about the construction of the public improvement referred to in Finding (1).

"4. On April 21, 1941, at Philadelphia, Pa., Par-Lock Appliers of New Jersey, Inc. (hereinafter called Par-Lock) entered into an agreement with the said Lewis to furnish and install galvanized ducts and other labor and material at said housing project for the price or sum of $39,000.00. It is undisputed that later the agreement was amended to include extras of $1,629.89, making the total $40,629.89.

"5. On May 12, 1941, Lewis authorized the contractor to set aside and guarantee payment to Par-Lock the sum of $39,000.00 by the following letter:

"`May 12, 1941 "`J. A. J. Construction Co., Inc. "`270 41st Street "`Brooklyn, N. Y.

"`Gentlemen:

"`We hereby authorize you to set aside and guarantee payment to Parlock Appliers of New Jersey, Inc., 21 Muirhead Ave., Trenton, N. J., for the sum of Thirty Nine Thousand Dollars......($39,000.00).

"`Very truly yours "`John W. Lewis.'

"6. The said authorization was given with the knowledge and consent of the use-plaintiff Par-Lock.

"7. The aforesaid authorization was requested by the contractor from Lewis, and was accepted by the contractor, which obligated itself to make payment to Par-Lock of the sum set forth in the authorization. It is undisputed that subsequently the authorization was extended to include the extras of $1,629.89.

"8. Par-Lock furnished to said housing project under its aforesaid agreement with Lewis, and as extras required under Lewis' agreements with the contractor, labor and material aggregating $40,629.89.

"9. The contractor, acting in conformity with the authorization, made payments direct to Par-Lock as follows:

                On or about Amount
                  July 25, 1941       $ 9,652.00
                  August 29, 1941      18,455.40
                  October 1, 1941       6,616.60
                                      __________
                           Total      $34,724.00
                

"10. On or about the middle of the month of June, 1941, Par-Lock encountered payroll difficulties, and thereafter Lewis advanced to Par-Lock the following sums:

                Date Amount
                  June 27, 1941           $1,117.28
                  July 11, 1941            1,600.00
                  July 18, 1941            2,128.55
                  July 29, 1941            2,000.00
                  August 15, 1941            750.00
                                       ______________
                             Total        $7,595.83
                

"11. The sums advanced by Lewis to Par-Lock were loans by Lewis to Par-Lock, for which Par-Lock gave Lewis notes, which notes were paid to Lewis by Par-Lock in full, including interest.

"12. The funds from which Lewis made the loans to Par-Lock were obtained by Lewis from the contractor, in the manner described in Finding (13).

"13. The contractor made arrangements with the South Philadelphia National Bank whereby Lewis was permitted to borrow from said Bank sums not exceeding a total of $20,000.00 a month, for which Lewis gave his personal notes and paid interest thereon.

"14. The sums loaned by Lewis to Par-Lock, and described in Finding (10), were obtained by Lewis from the South Philadelphia National Bank, except in the case of the sum of $1,600.00, which was by error transmitted by the contractor to the Central-Penn National Bank.

"15. Par-Lock knew the source of the monies received by them, and described in Finding (13).

"16. The contractor knew of the loan transactions between Lewis and Par-Lock and treated them as independent transactions solely between Lewis and Par-Lock in which the contractor had no interest.

"17. The contractor knew that Par-Lock was obligated to repay, and did repay, the loans made by Lewis to Par-Lock and made no objection thereto."

On the basis of these findings of fact, Judge Kalodner made three conclusions of law:

"1. There has been no novation relieving the defendant John W. Lewis.

"2. All the defendants are liable to the use-plaintiff in the sum of $5,905.89, with interest from December 1, 1941.

"3. On the facts and the law, the judgment of the court must be in favor of the plaintiff and against all the defendants herein."

We think there is ample evidence to support these findings of fact, that the findings of fact justify the conclusions of law, and that the judgment below should be affirmed.

Only two questions need be considered by us: (1) The contention of the general contractor that the transfers of funds from the subcontractor, Lewis, to the materialman, Par-Lock Appliers of New Jersey, Inc., (hereinafter called Par-Lock), were payments and not loans; (2) the contention of the subcontractor Lewis that, upon all the evidence, there was a novation between the general contractor, the subcontractor and the materialman, operating in law to relieve the subcontractor of liability upon its contract with the materialman. We, therefore, proceed to discuss these two contentions.

1. Payment or Loan?

The general contractor, J. A. J. Construction Co., Inc., urges that the funds transferred by the subcontractor, Lewis, (which had been received...