United States v. Skilken

• Decision Date: 06 December 1943
• Docket Number: Civil Action No. 4830.
• Parties: UNITED STATES, for Use and Benefit of JONES CONTRACTING CO. v. SKILKEN et al.
• Court: U.S. District Court — Northern District of Ohio

53 F. Supp. 14

UNITED STATES, for Use and Benefit of JONES CONTRACTING CO. v. SKILKEN et al.

Civil Action No. 4830.

District Court, N. D. Ohio, W. D.

December 6, 1943.

Thos. B. Moore, of Detroit, Mich., and Richard T. Rector, of Columbus, Ohio, for plaintiff.

Justin L. Sillman and Crabbe, Garek & Sillman, all of Columbus, Ohio, for defendants.

KLOEB, District Judge.

The motion before the Court is that of the United States Fidelity and Guaranty Company to vacate and set aside the order of the Court heretofore entered herein impleading it as a defendant on the motion and supplemental answer of Skilken Brothers defendants, and also to quash, set aside and dismiss as to it the summons and to strike from the files the other papers served upon it. The principal grounds of the motion are that there is a lack of jurisdiction over the subject matter alleged in the answer and supplemental answer of Skilken Brothers and a lack of jurisdiction over the person of the movant defendant; that there is improper venue insofar as any alleged claims against it are asserted in said answer and supplemental answer; that there is insufficiency of service of process; that there is a failure to state any alleged claim upon which relief can be granted against the movant; that there has been no compliance with the condition precedent, pursuant to the terms and conditions of the bond of the movant; that ten days' notice in writing must be given it, and that Skilken Brothers have been guilty of laches and lack of good faith.

This action is brought under the provisions of the so-called Miller Act, passed August 24, 1935, Title 40 U.S.C.A. §§ 270a-270d, by the United States for the use and benefit of the Jones Contracting Company, an Ohio corporation, a subcontractor of the defendant Skilken Brothers, general contractor, under a government contract for the erection of a storage warehouse in Ottawa County, Ohio, in this district. The suit is against Skilken Brothers as principal and three bonding companies as sureties upon the payment bond required to be given under the statute for the benefit of persons furnishing labor or material under a contract with the principal contractor, as well as any person so doing having direct contractual relationship with a subcontractor but no contractual relationship with the principal contractor. The claim of the plaintiff is for a balance alleged to be due on two contracts in writing, one for grading in the amount of $20,700 (Exhibit B to the complaint), and another for a railroad improvement in the amount of $35,000 (Exhibit C to the complaint), for extra or additional work claimed to have been ordered by the defendant and for rental of equipment, for which judgment in the total amount of $25,000 is asked. The issues were made up by the answer of Skilken Brothers, containing a cross-petition on which judgment was asked against the plaintiff for the sum of $30,000 for breach of contracts, the plaintiff's reply to the cross-petition and the answers of the three surety companies on the payment bond. The case was about ready for trial, and a pre-trial conference was had on March 1, 1943. At that time counsel for Skilken Brothers were given leave to file a motion to make new parties defendants, including United States Fidelity and Guaranty Company. Such a motion was filed on March 22, 1943, making that company a party defendant and also making additional parties defendant of a number of persons alleged to have unpaid claims for work and labor or materials furnished on the project to the plaintiff, and an order was thereupon entered granting this motion and giving such parties leave to intervene, answer or otherwise plead. On the same day Skilken Brothers filed a supplemental answer, alleging that the United States Fidelity and Guaranty Company executed a bond in the sum of $35,500 as surety to the plaintiff on the railroad improvement contract (Exhibit C attached to plaintiff's complaint); that the plaintiff failed and neglected to perform said contract, as more particularly set forth in the answer and cross-petition of Skilken Brothers filed to the complaint, and asking judgment against the United States Fidelity and Guaranty Company for such sums as may be found due under said bond, but not in excess of $35,500. To this pleading plaintiff filed a reply on April 1, 1943.

In general, as to the construction to be given to the provisions of the Miller Act, it has been said: "In construing the earlier Act, the Heard Act, for which the Miller Act is a substitute, we observed that it was intended to be highly remedial and should be construed liberally. United States for the use of Alexander Bryant Co. v. New York Steam Fitting Co., 235 U.S. 327, 337, 35 S.Ct. 108, 59 L.Ed. 253; Illinois Surety Co. v. John Davis Co., 244 U. S. 376, 380, 37 S.Ct. 614, 61 L.Ed. 1206; Fleischmann Construction Co. v. United States, 270 U.S. 349, 360, 46 S.Ct. 284, 70 L.Ed. 624. * * * `Technical rules otherwise protecting sureties from liability have never been applied in proceedings under this statute.' Illinois Surety Co. v. John Davis Co., supra. The same principle should govern the application of the Miller Act."

Section 270b (a) and (b), part of the so-called Miller Act relating to bonds of contractors for public buildings or works, covers the rights of persons furnishing labor or materials.

Section 270a provides for the furnishing of "a payment bond * * * for the protection of all persons supplying labor and material in the prosecution of the work provided for in said contract for the use of each such person."

Section 270b (a) provides for a right of action on the payment bond of a sub-contractor of the general contractor. It reads: "Every person who has furnished labor or material in the prosecution of the work provided for in such contract, in respect of which a payment bond is furnished under section 270a of this title and who has not been paid in full therefor before the expiration of a period of ninety days after the day on which the last of the labor was done or performed by him or material was furnished or supplied by him for which such claim is made, shall have the right to sue on such payment bond for the amount, or the balance thereof, unpaid at the time of institution of such suit and to prosecute said action to final execution and judgment for the sum or sums justly due him."

As to the rights of a person furnishing labor or material under a contract with a sub-contractor, the act further provides: "Provided, however, That any person having direct contractual relationship with a subcontractor but no contractual relationship express or implied with the contractor furnishing said payment bond shall have a right of action upon the said payment bond upon giving written notice to said contractor within ninety days from the date on which such person did or performed the last of the labor or furnished or supplied the last of the material for which such claim is made, stating with substantial accuracy the amount claimed and the name of the party to whom the material was furnished or supplied or for whom the labor was done or performed."

Section 270b (b), as to the jurisdiction of suits under this section, provides: "Every suit instituted under this section shall be brought in the name of the United States for the use of the person suing, in the United States District Court for any district in which the contract was to be performed and executed and not elsewhere, irrespective of the amount in controversy in such suit, but no such suit shall be commenced after the expiration of one year after the date of final settlement of such contract. * * *"

The Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c, as to bringing in additional parties on a cross-claim, provide as follows: Rule 13 (g): "A pleading may state as a cross-claim any claim by one party against a co-party arising out of a transaction or occurrence that is the subject matter either of the original action or of a counterclaim therein. Such cross-claim may include a claim that the party against whom it is asserted is or may be liable to the cross-claimant for all or part of a claim asserted in the action against the cross-claimant."

The rule further provides as to when additional parties may be brought in: "(h) When the presence of parties other than those to the original action is required for the granting of complete relief in the determination of a counterclaim or cross-claim, the court shall order them to be brought in as defendants as provided in these rules, if jurisdiction of them can be obtained and their joinder will not deprive the court of jurisdiction of the action."

See Simkins Federal Practice, 3 Ed., Section 318.

Seaboard Surety Co. v. United States, 9 Cir., 1936, 84 F.2d 348, cited by counsel for movant, was an action by the United States for the use of Marshal-Wells Co. to recover against the surety company on a bond of the contractor given under the Miller Act for materials furnished, in which the contractor was not made a party defendant. It was contended that the Court had no jurisdiction over the surety unless the principal was joined in the action. The facts in that case do not seem analogous to the case here, where there exists a counter-claim of the defendant against the plaintiff on which the surety company movant may be liable. Rule 13 was not involved, as the case was decided before the Rules of Civil Procedure were in effect.

The case of Contracting Division A. C. Horn Corp. v. New York Life Insurance Company, 2 Cir., 113 F.2d 864, 865, cited by counsel for movant in support of its argument that the Court has no jurisdiction and that there exists improper venue, was a suit for infringement of patent by a non-exclusive licensee, wherein defendant filed a counterclaim for declaratory judgment against another subsidiary company, which owned the patent, and the parent corporation. Neither of the corporations...