United States v. Southern Construction Company

• Decision Date: 08 May 1964
• Docket Number: Civ. A. No. 8186.
• Citation: 229 F. Supp. 873
• Parties: The UNITED STATES of America for the Use and Benefit of GENERAL ELECTRIC COMPANY v. SOUTHERN CONSTRUCTION COMPANY, Inc., Continental Casualty Company, Mojave Electric Company, Inc., Irving Sulmeyer, Trustee in Bankruptcy for Mojave Electric Co., Inc., National Union Indemnity Insurance Company.
• Court: U.S. District Court — Western District of Louisiana

229 F. Supp. 873

The UNITED STATES of America for the Use and Benefit of GENERAL ELECTRIC COMPANY v. SOUTHERN CONSTRUCTION COMPANY, Inc., Continental Casualty Company, Mojave Electric Company, Inc., Irving Sulmeyer, Trustee in Bankruptcy for Mojave Electric Co., Inc., National Union Indemnity Insurance Company.

Civ. A. No. 8186.

United States District Court W. D. Louisiana, Shreveport Division.

May 8, 1964.

Michael H. Bagot, Jesse S. Guillot, New Orleans, La., for plaintiff.

A Morgan Brian, Jr., Deutsch, Kerrigan & Stiles, New Orleans, La., for defendants.

BEN C. DAWKINS, JR., Chief Judge.

This action is brought for the use and benefit of plaintiff, General Electric Company (GE), who furnished supplies for construction of the Barksdale Air Force Base Defense Area's Nike-Hercules Facilities at Bellevue, Louisiana.

GE executed a contract with a subcontractor, Mojave Electric Company, Inc. (Mojave), but had no contractual relationship with the general contractor. Nevertheless, the Miller Act, 40 U.S.C. § 270a et seq., conferred upon the subcontractor's materialmen a cause of action on the payment bond required to be given by the general contractor to the Government. It is upon this bond that GE's action against the general contractor, Southern Construction Company, Inc., (Southern), and its surety, Continental Casualty Co. (Continental), is based.

A joint stipulation of facts has been submitted by the plaintiff and all defendants except the subcontractor, Mojave, which is bankrupt and has not contested the validity of plaintiff's claim against it. The case is submitted on cross motions for summary judgment based upon the pleadings, affidavits, and stipulated facts.

For the reasons here assigned, we conclude that plaintiff has no right of action against Southern and its surety, Continental, or the subcontractor's surety, National Union Indemnity Insurance Company (Indemnity). It is stipulated that National Union Insurance Companies and National Union Fire Insurance Company were not sureties of the subcontractor and had nothing to do with the job involved.

Section 270b(b) of Title 40 U.S.C. 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 day on which the last of the labor was performed or material was supplied by him. The United States shall not be liable for the payment of any costs or expenses of any such suit."

Commencement of an action within the time limitation stated under §§ 270a-270d of 40 U.S.C. is a condition precedent to an action by a materialman seeking recovery under the Miller Act. United States For the Use of Soda v. Montgomery, 253 F.2d 509 (3 Cir. 1958). Plaintiff filed this suit on March 13, 1961. The only material supplied to Mojave Electric Company for this job on or after March 13, 1960, was that item listed on GE's account as Register No. 7598-5010-B (hereinafter called # 5010).

In connection with item #5010, the stipulation provided:

"Following MOJAVE's default and abandonment of its subcontract work, SOUTHERN and GE negotiated an arrangement whereby SOUTHERN would pick-up and reorder on its own purchase orders all materials which MOJAVE had already ordered but which had not yet been delivered and billed by GE, or necessary materials not yet even ordered by MOJAVE, and GE would sell and invoice these on open account directly to SOUTHERN. Written confirmation of this arrangement was made by SOUTHERN's March 25, 1960 letter to GE, typed by GE on its own stationery in its own office where SOUTHERN signed it * * *.

* * * * * *

"However, on April 12, 1960, SOUTHERN entered with now-dismissed defendant EVANS-JONES ELECTRIC, INC. (hereinafter called `EVANS') into a new subcontract, for completion of MOJAVE's abandoned work, which inter alia provided in pertinent part as follows:

"`ARTICLE I. Scope of the Work. Evans-Jones shall take and complete the sub-contract (of Mojave) * * * and shall furnish all the materials * * * required thereunder * * *.

"`Evans-Jones shall have no liability for payment of any claim for * * * materials incurred by Mojave * * * on account of that part of the sub-contract already done by it, except that Evans-Jones shall pay for all materials which have been ordered, or which are now being processed, or which are now in transit, and specifically the following items:

* * * * * *

"`General Electric Invoice No. 7598-5010B dated March 14, 1960 covering 6 cast iron boxes only per drawing 8332-DT and 6 cast iron boxes only per drawing 8333-DT and 12 covers, gaskets, and screws for boxes in amount of $1,977.74.' (emphasis added)

* * * * * *

"Said completion subcontract was separately bonded for $104,000 to SOUTHERN by EVANS with The Travelers Indemnity Company as surety on that bond * * *.

* * * * * *

"On April 13, 1960, SOUTHERN notified GE of the take-over by EVANS, that part of the previous order-pick-up arrangement by SOUTHERN was superceded sic by EVANS' new order-pick-up agreement as specified in said completion subcontract, and that GE should commence selling and invoicing such orders directly to EVANS on its own separate open account. * * *

* * * * * *

"GE consented to this and wrote EVANS on April 18, 1960, confirming that invoice #5010 in the amount of $1,977.74 was being shifted from MOJAVE's account to a new account with EVANS. * * *

* * * * * *

"Subsequently, GE actually did transfer invoice #5010 to its new account with EVANS * * *.

* * * * * *

"On May 31, 1950, EVANS paid GE in full for invoice #5010 * *."

Since the action against Southern and Continental was not brought within a year after supplying the last material for which claim is made, it must be dismissed.^*

Even though plaintiff forfeited its rights against the prime contractor by failure to bring suit within the time required by statute, it is possible that a claim still existed against the subcontractor and its surety upon the conventional payment and performance bond which Southern required Mojave to furnish. The bond provided in pertinent part as follows:

"* * * MOJAVE ELECTRIC COMPANY, as Principal, and NATIONAL UNION INDEMNITY COMPANY, as Surety, are held and firmly bound unto SOUTHERN CONSTRUCTION CO., INC., Augusta, Georgia, in the sum of ONE HUNDRED SEVENTEEN THOUSAND, SEVEN HUNDRED AND SEVENTY SIX AND NO/100 DOLLARS ($117,776.00), for the payment of which sum, well and truly to be made, we bind ourselves, our heirs, executors, administrators and successors, jointly and severally, firmly by these presents.

"The condition of this obligation is such that whereas the Principal has entered into a certain subcontract, hereto attached, with Southern Construction Company, Inc., dated SEPTEMBER 22, 1959.

"Now, if the said Principal shall well and truly perform all of the work and furnish all the labor and materials required by said subcontract, and any changes or additions thereto which may hereafter be made, and shall perform all the undertakings stipulated in said subcontract, and shall promptly make payment to all persons supplying labor and materials in the prosecution of the work provided for in said subcontract, then this obligation to be void; otherwise to remain in full force and effect.

"No extension of time given to the said Principal for the performance of said subcontract, and no change in said subcontract shall release the Surety hereon."

In researching the jurisprudence for cases involving interpretation of a similar agreement, we find that this is one of those rare instances in which there exists an appellate decision of a case which is almost on "all fours" with this one; namely, Socony-Vacuum Oil Co. v. Continental Casualty Co., 219 F.2d 645 (2 Cir. 1955). There the court noted that state law controls interpretation of a conventional suretyship agreement. It applied Vermont law and concluded that since the prime contractor had required the subcontractor to obtain a payment bond conditioned upon the payment of all laborers and materialmen, the bond provided protection for them. The court criticized the decision in McGrath v. American Surety Co. of New York, 307 N.Y. 552, 122 N.E.2d 906 (1954), in which it was held that a materialman had no right of action against a surety of a subcontractor under a similar private bond.

The Socony-Vacuum decision reached an equitable result, which we would be inclined to follow but for the fact that Louisiana courts have adopted a position similar to that pronounced in McGrath. In Louisiana only the named obligees on such conventional contractor's bonds, not third party materialmen, may recover from the surety on the bonds. Carolina Portland Cement Co. v. Carey & Boettner, 145 La. 773, 82 So. 887 (1919); State v. C. S. Jackson & Co., 137 La. 931, 69 So. 751 (1915); Lhote Lumber Mfg. Co. v.Dugue, 115 La. 669, 39 So. 803 (1905); Hughes v. Smith, 114 La. 297, 38 So. 175 (1905); and Salmen Brick & Lumber Co. v. LeSassier, 106 La. 389, 31 So. 7 (1901).

Although the correctness of the Louisiana position under modern civil law theory has been questioned, Smith, Third Party Beneficiaries in Louisiana: The Stipulation Pour Autrui, 11 Tul.Law Rev. 18, 35-47 (1936), unless and until the Louisiana Supreme Court alters its position, we are bound to follow it. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Therefore, the action against Southern, Continental and Indemnity will be dismissed.

A proper decree shall be presented.

APPENDIX

From Defendants' Memorandum Brief of July 30, 1963, pp. 8-15:

"That part of the Miller Act applicable to a materialman's action against prime and surety on the statutory payment bond is found in 40 USC § 270b, and consists of two subparts of...