United States v. Massachusetts Bonding & Ins. Co.

• Decision Date: 05 April 1927
• Docket Number: No. 4638.,4638.
• Citation: 18 F.2d 203
• Parties: UNITED STATES for Use of SPENCER v. MASSACHUSETTS BONDING & INS. CO. et al.
• Court: U.S. Court of Appeals — Sixth Circuit

18 F.2d 203 (1927)

UNITED STATES for Use of SPENCER v. MASSACHUSETTS BONDING & INS. CO. et al.

No. 4638.

Circuit Court of Appeals, Sixth Circuit.

April 5, 1927.

T. T. McCarley, of Nashville, Tenn. (Jas. P. Atkinson and Richard M. Atkinson, both of Nashville, Tenn., on the brief), for plaintiff in error.

P. D. Maddin and Lowe Watkins, both of Nashville, Tenn., for defendants in error.

Before DENISON and MOORMAN, Circuit Judges, and WESTENHAVER, District Judge.

WESTENHAVER, District Judge.

Plaintiff in error, also plaintiff below, brought an action upon a bond given by Norman Ker Company, with the defendant bonding companies as sureties, for the performance of a written contract dated September 7, 1916, made by said company with the United States for certain extensions and changes in the post office and custom house at Nashville, Tenn. Her action was begun as a suit in equity in the state court, and was duly removed to the United States District Court. After such removal, the case was, on motion, transferred to the law side of the court. Thereafter the parties stipulated that the bill was to be taken as a declaration at law, that certain pleas previously filed were to be taken as defenses set up by demurrer, plea, or answer, and that all informalities in the pleadings were waived, in order that the case might be tried and decided on its merits. A jury trial was waived in writing, and the facts were agreed and found. Judgment was rendered for defendants, from which this writ of error is prosecuted.

The bond sued on was exacted by the United States pursuant to the provisions of the Act of August 13, 1894, as amended by Act of February 24, 1905 (U. S. Comp. Stat. § 6923). As this is an old statute and has been often before the courts, its provisions need not be quoted. They are cited in full in the margin in Texas Cement Co. v. McCord, 233 U. S. 157, 34 S. Ct. 550, 58 L. Ed. 893. Defendants contend that the bond is purely statutory, imposing no other and different liabilities than are imposed by the terms of that act, and that no one has acquired any greater or other rights and remedies than are thereby conferred. The plaintiff, on the other hand, contends that it contains provisions giving her a right of action outside of and in addition to the statutory rights and liabilities and not subject to all the restrictions of the statute. This contention, together with the provisions of the bond and contract from which it is deduced, will be later stated in detail.

The contract of Norman Ker Company with the United States was fully performed, and on November 24, 1920, a certificate of final settlement was issued. On June 6, 1921, a suit was brought in the name of the United States by William Wilby against the contractor and sureties, such as is authorized by the statute. Publication was duly ordered and made. On February 28, 1922, judgment was rendered in favor of all persons who had furnished labor and materials and who had intervened within twelve months from the date of final settlement. These judgments were settled and that case finally disposed of. Plaintiff, although having notice thereof, did not intervene.

Her claim is not for labor and materials. It is a judgment for damages ensuing upon the wrongful death of her husband, Doss Spencer. He was an employee of the Norman Ker Company, and met his death under such circumstances as gave the plaintiff a right of action. She recovered a verdict and judgment for $10,000, which was later affirmed by the Supreme Court of Tennessee. It is this claim which she now seeks to enforce in this action.

If the bond is purely statutory and contains no valid provisions giving plaintiff other and different rights, it is apparent that the judgment below was right. Plaintiff's counsel concede that her claim is not within the terms of the act, even under the liberal construction given thereto in Brogan v. National Surety Co., 246 U. S. 257, 38 S. Ct. 250, 62 L. Ed. 703, L. R. A. 1918D, 776. All persons coming within its terms must seek relief in the manner and within the time therein provided. They cannot sue until after the lapse of six months from the final settlement between the contractor and the United States. Only one suit on the bond can be brought, and it must be begun not earlier than six months nor later than twelve months after the final settlement. It must be brought in the District Court of the United States in the district in which the contract was to be performed and executed, and not elsewhere. All other persons within the terms of the act must intervene in that suit, and must do so within one year from the date of such final settlement. The United States is entitled to priority over all other claimants. If the bond is not sufficient to pay all other claimants, then they are to be paid pro rata. See Mankin v. Ludowici-Celadon Co., 215 U. S. 533, 30 S. Ct. 174, 54 L. Ed. 315; Texas Cement Co. v. McCord, 233 U. S. 157, 34 S. Ct. 550, 58 L. Ed. 893; Illinois Surety Co. v. Peeler, 240 U. S. 214, 36 S. Ct. 321, 60 L. Ed. 609; Illinois Surety Co. v. John Davis Co., 244 U. S. 376, 37 S. Ct. 614, 61 L. Ed. 1206. The principle announced and applied in these cases is that the statute creates a new liability and gives a new special remedy, and hence the limitations upon such liability become a part of the right conferred, and compliance with them is made essential to the assertion and benefit of the liability itself.

The defenses asserted and relied on as a bar to plaintiff's present right of action are: (1) That this court has not jurisdiction of the subject-matter, for the reason that an action could not be brought on this bond in a state court; (2) that the action is barred because plaintiff did not intervene in the former suit and does not assert her claim within twelve months from the date of the final settlement; (3) that the bond, being purely statutory, any provision inserted therein attempting to give plaintiff the rights and remedies now asserted, will be void because repugnant to the statutory provisions; (4) that the terms of the bond, properly understood, contain no provision imposing an obligation to pay plaintiff's claim, or conferring on her any right of action on the bond. In the view we take of the case, it is necessary to consider only the first and fourth defenses.

That the District Court had jurisdiction to determine the merits of the case is established by General Investment Co. v. New York Central R. R. Co., 271 U. S. 228, 46 S. Ct. 496, 70 L. Ed. 920. The judgment proper to be entered is and was one determining those merits, and not one dismissing the case for want of jurisdiction.

Upon the merits, we are of opinion that the fourth defense is sound, and the judgment below is correct. The contract and bond, rightly understood, contain no provisions tending to show that plaintiff or other claimants of like nature were intended to be included within its benefit and protection. The bond is in the usual form. It runs to the United States. Its penal clause binds the principal and sureties only to the United States. The conditions are only for the faithful performance of all undertakings, covenants, terms, and conditions of the contract of Norman Ker Company with the United States, copy of which is attached, and for the prompt payment to all persons supplying labor or materials in the prosecution of the work provided for in that contract. The first part of these conditions runs exclusively to the United States, and is apparently designed to benefit and protect the United States and no other person. The second part of the condition is for the benefit of third persons of a certain class. Read in connection with the statute, it is apparent that this part of the condition is for...