United States v. Starr

• Citation: 20 F.2d 803
• Decision Date: 05 July 1927
• Docket Number: No. 2586.,2586.
• Parties: UNITED STATES, to Use of STALLINGS, et al. v. STARR et al.
• Court: U.S. Court of Appeals — Fourth Circuit

20 F.2d 803 (1927)

UNITED STATES, to Use of STALLINGS, et al. v. STARR et al.

No. 2586.

Circuit Court of Appeals, Fourth Circuit.

July 5, 1927.

Hugh H. Obear, of Washington, D. C., and R. E. Whitehurst, of Newbern, N. C. (A. D. Ward and Whitehurst & Barden, all of Newbern, N. C., Douglas, Obear & Douglas, of Washington, D. C., and Ward & Ward, of Newbern, N. C., on the brief), for plaintiffs in error.

Larry I. Moore, of Newbern, N. C., and Bynum E. Hinton, of Washington, D. C., for defendants in error.

Before WADDILL and PARKER, Circuit Judges, and BAKER, District Judge.

PARKER, Circuit Judge.

Starr & Bennett, hereinafter called contractors, on February 27, 1919, entered into a contract with the Director General of Railroads of the United States for the construction of four steel barges, and gave bond, with the Globe Indemnity Company as surety, for the faithful performance of the contract. This is an action instituted on the bond by Stallings Bros., as relators, to recover for materials furnished to the contractors. Sundry other furnishers of materials have intervened and been made parties to the action. In the court below a jury trial was duly waived by written stipulation, and the trial judge found the facts and rendered judgment in favor of the surety. By the exceptions to this judgment two questions are presented: (1) Whether the bond sued on covers the claims of laborers and materialmen; and (2) whether the action was instituted within 12 months of final settlement, as required by statute.

On the first question, it appears that the bond contained no provision obligating the surety to pay for labor or materials. The bond by reference incorporates the contract, but the contract contains no such obligation. The first paragraph of the contract provides that the contractors "at their own risk and expense" shall construct the barges contracted for, and shall furnish acceptable bond in the sum of $83,550, "conditioned upon the full and complete performance of the contractors under and in accordance with the terms of this contract." By a subsequent paragraph, the contractors agree to procure and keep in force "all such bond or bonds for the protection of claims and/or liens by laborers and/or materialmen, as may be required by the laws of the United States." It appears, however, that no such bond was given.

On the second question, the record shows that the action was instituted October 11, 1922. Judge Meekins found that on October 4, 1921, the barges had been completed, delivered, and accepted, and that on that date there was made by the proper government department and rendered to the contractors and their receiver a statement of the account under the contract, administratively determining the balance due to be $23,864.30; that on the same date the government issued and forwarded its voucher to the receiver of the contractors for the sum of $22,500, leaving a balance of $1,364.30 to be thereafter paid; and that the amount so determined was not thereafter changed, but was accepted as final payment of the balance due under the contract.

There was evidence to support this finding of the trial judge. The record shows that on October 4, 1921, the chief of the Inland and Coastwise Waterways Service of the War Department, whose duty it was to make settlement under the contract, sent a letter to the receiver of the contractors, inclosing a statement of account, and showing that the government owed a balance to the contractors of $23,864.30. The letter was as follows:

"There is inclosed for your certification voucher R-337 covering proposed payment on contract NYCS-11 between the Director General of Railroads and Starr & Bennett. Please sign the voucher at point indicated by `X' and return to this office, when check in the amount of $22,500 will be forwarded in accordance with the wording of the voucher.

"For your information there is inclosed statement of the account between the Director General of Railroads and Starr & Bennett as it appears on the books of the Inland and Coastwise Waterways Service as of October 3, 1921. It is believed that the statement is complete and includes all credits and charges. However, it is possible that additional charges will be discovered, as a number of small items have recently been reported by outside auditors who have just completed checking the accounts of the New York Canal section. Any change in the statement will be reported to you."

With the letter and statement went a voucher for $22,500, with the notations, "Payment on account of contract, * * *" and "This does not represent a complete settlement of balance due on the above contract." The voucher for the $1,364.30 was sent to the receiver some time prior to February 7, 1922, exactly when does not appear, but on that date the receiver petitioned the superior court, by which he had been appointed, for authority to accept the voucher. The authority was granted, the receiver certified the voucher as correct, and on February 15, 1922, it was approved by the proper official of the War Department and paid by check of that date. It contained, among other things, the following notation:

"Final settlement on account NYCS No. 11. This payment represents the amount found due under contract, * * * and it is further agreed that this is a final payment and full and complete settlement of all disputed claims and all claims and demands * * * of every kind and character which the said Starr & Bennett has or may have against the United States, the Secretary of War, or the Director General of Railroads in any wise connected with or growing out of the contract, upon which this payment is made."

We think that the learned District Judge was correct in holding that the bond in suit did not cover the claims of laborers and materialmen. It is true that on a contract such as this, the Hurd Act (Act Feb. 24, 1905, amending Act Aug. 13, 1894, 28 Stat. 278, 33 Stat. 811, U. S. Comp. Stat. § 6923), requires that the bond given for the performance of the contract shall contain an obligation guaranteeing the payment of such claims. But this requirement of the statute does not authorize a recovery by laborers and materialmen, where neither the bond itself nor the contract contains such obligation. Babcock & Wilcox v. American Surety Co. (C. C. A. 8th) 236 F. 340; U. S. v. Montgomery Heating & Ventilating Co. (C. C. A. 5th) 255 F. 683; U. S. v. Stewart (C. C. A. 8th) 288 F. 187; U. S., to use of Zambetti, v. American Fence Construction Co. (C. C. A.) 15 F.(2d) 450.

Of course, the rights of the parties in this case are to be determined in the light of the law as declared by the federal courts; but, as the bond here considered was given within the state of North Carolina, it is worth while to note that the rule followed by the federal courts is the same as the rule followed by the courts of that state. Warner v. Halyburton, 187 N. C. 414, 121 S. E. 756; Ideal Brick Co. v. Gentry, 191 N. C. 636, 132 S. E. 800; Page Trust Co. v. Carolina Construction Co., 191 N. C. 664, 132 S. E. 804. Under the law of North Carolina, the mere requirement of the statute that a bond contain an obligation does not of itself incorporate the obligation in the bond; for, as said by Chief Justice Stacy in Ideal Brick Co. v. Gentry, supra:

"It is a principle too well established to require the citation of authorities that, `as a party consents to bind himself, so shall he be bound.'"

A statutory provision that a bond given under the statute shall protect the claims of laborers and materialmen, whether such provision be incorporated in the bond or not, will be given effect. See Standard Electric Time Co. v. Fidelity & Deposit Co. of Maryland, 191 N. C. 653, 132 S. E. 808, construing chapter 100, Public Laws N. C. 1923. But, in the absence of some such statutory provision, the courts will not read into a bond an obligation which it does not contain.

It is insisted, however, that the bond is obligated to laborers and materialmen because the contract provides that the contractors shall furnish a bond for their protection as required by the laws of the United States. But the trouble is that the contractors did not furnish such bond. The same point was involved in the case of Babcock & Wilcox v. American Surety Co., supra, in which Judge Carland, speaking for the Circuit Court of Appeals of the Eighth Circuit, in denying the contention, said (236 F. 342, 343):

"When all is said the case is simply this: That Opdhal by his contract agreed to give a bond obligating himself to pay the claims of materialmen, but he failed to give any such bond. The surety company signed the bond which was executed, and no other. The bond itself did not provide for the payment of materialmen, nor did the contract contain any such provision. The case is not difficult, unless we try to make it different from what it really is."

To the same effect are U. S. v. Stewart, supra, and U. S., to the use of Zambetti, v. American Fence Construction Co., supra, in the latter of which cases the Circuit Court of Appeals for the Second Circuit treated the question as too well settled to permit of discussion.

Counsel for plaintiffs in error strenuously contend, however, that the provision of the contract that the contractors shall "at their own risk and expense" construct the barges is in effect an obligation imposing upon the contractors the duty to pay for labor and materials supplied them, and that, as the bond guarantees the performance of this as well as other provisions of the contract, recovery may be had thereunder. Without questioning for a moment the rule that laborers and materialmen may recover under the bond where the contract obligates the contractor to pay claims for labor and materials, we do not think that the provision of the contract relied on has that effect. Exactly the same question was before the Supreme Court of North...