Source: https://supreme.justia.com/cases/federal/us/240/214/
Timestamp: 2019-04-26 16:06:21+00:00

Document:
Final settlement of a contractor's account within the meaning of the Act of August 13, 1894, c. 280, 28 Stat. 278, as amended February 24, 1905, c. 778, 33 Stat. 811, is not when the final payment is made, but is the final administrative determination by the proper authority of the amount due; in this case, held that a suit by a subcontractor against the surety commenced six months after date of such determination, but less than six months after payment, was not prematurely brought, no action having been brought meanwhile by the United States.
Where the action on the contractor's bond was brought within the proper time, an amendment made after the expiration of such time, which does not set up a new or different cause of action, but merely corrects a defective statement, may be allowed. Texas Cement Co. v. McCord, 233 U. S. 157.
The contested liability of a surety on a contractor's bond is not to be determined in equity; the action under the Act of 1894 as amended in 1905 is one at law.
If the surety does not contest, but pays into court the full amount of liability, discharging all liability as provided by the statute, the proceeding is simply one for distribution of a fund in court.
Where a sub-contractor was not one of the original plaintiffs and there was no intervention on its behalf, held that a judgment could not be rendered in its favor more than a year after final settlement of the contractor's claim; nor does the fact that one claiming, but not proving such claim, to be its assignee was made a party plaintiff amount to a sufficient and timely filing of the claim of such a subcontractor.
215 F. 334 modified and affirmed.
The facts, which involve the construction of the Materialmen's Acts of 1894 and 1905 and the rights of subcontractors thereunder, are stated in the opinion.
This action was brought by subcontractors under the Act of August 13, 1894 (c. 280, 28 Stat. 278), as amended by the Act of February 24, 1905 (c. 778, 33 Stat. 811), in the name of the United States to recover upon a contractor's bond. The contract was for the construction of a post office building in Aiken, South Carolina (Act of March 30, 1908, c. 228, 35 Stat. 526, 528), and the Illinois Surety Company (plaintiff in error) was the surety. The summons and complaint were filed on March 4, 1913. Motion to dismiss was made on September 22, 1913, upon the ground that the complaint did not allege that there had been a completion and final settlement of the contract between the contractor and the United States, or that there had been such completion and settlement more than six months, and within one year prior to the commencement of the action.
"furnished to it a certified copy of the contract and bond, and that, on the 6th day of March, 1913, . . . the present action was instituted by the filing. . . . and by service of summons and complaint on defendant Surety Company."
It also appeared that no action had been instituted by the United States upon the bond within the six months allowed by the statute.
The district court gave judgment for amounts found to be due to those for whose benefit the action was brought, and to certain interveners, and this judgment was affirmed by the circuit court of appeals, 215 F. 334. The contentions presented are: (1) that the action was instituted prematurely, (2) that the amendment of the complaint was improperly allowed, (3) that there was no right of action at law, and (4) that the court erred in giving judgment for the Carolina Electrical Company, one of the subcontractors.
"If no suit should be brought by the United States within six months from the completion and final settlement of said contract, then the person or persons supplying the contractor with labor and materials shall, upon application therefor, and furnishing affidavit . . . be furnished with a certified copy of said contract and bond, upon which he or they shall have a right of action, and shall be, and are hereby, authorized to bring suit in the name of the United States . . . against said contractor and his sureties, and to prosecute the same to final judgment and execution; Provided, That . . . it shall not be commenced until after the complete performance of said contract and final settlement thereof, and shall be commenced within one year after the performance and final settlement of said contract, and not later."
for payment to the contractor on September 11, 1912, and that, in this view, the action was brought too soon.
It was evidently the purpose of the Act of 1905 to remedy the defect in the Act of 1894 by assuring to the United States adequate opportunity to enforce its demand against the contractor's surety, and priority with respect to such demand. Mankin v. Ludowici-Celadon Co., 215 U. S. 533, 215 U. S. 538; United States v. Robinson, 214 F. 38, 39-40. Accordingly, it was provided that, if the United States sued upon the bond, the described creditors should be allowed to intervene and be made parties to the action, but subject "to the priority of the claim and judgment of the United States." And it was only in case the United States did not sue within the specified period that the creditors could bring their action. With this object in view -- to protect the priority of the United States and at the same time to give a remedy to materialmen and laborers on the contractor's bond and a reasonable time to prosecute it (Bryant v. N.Y. Steamfitting Co., 235 U. S. 327, 235 U. S. 337) -- it was natural that the time allowed exclusively for action by the government should begin to run when the contract had been completed, and the government, in its final adjustment and settlement according to established administrative methods, had determined what amount, if any, was due. Then the government would have ascertained the amount of its claim, if it had one, and could bring suit if it desired. As such determinations are regularly made in the course of administration, nothing would seem to be gained by postponing the date, from which to reckon the six months, to the time of payment. Indeed, if an amount were found to be due from the contractor, and he was insolvent, there might be no payment, and if payment were essential, there would be no date from which the time for the bringing of the creditors' action could be computed.
"all claims and demands whatever, by the United States or against them, and all accounts whatever in which the United States are concerned either as debtors or as creditors, shall be settled and adjusted in the Treasury Department."
"Thus, it is seen that all claims against the United States are to be settled and adjusted 'in the Treasury Department,' and that is located 'at the seat of government.' The assistant treasurer in New York is a custodian of the public money, which he may pay out or transfer upon the order of the proper department or officer, but he has no authority to settle and adjust -- that is to say, to determine upon the validity of -- any claim against the government. He can pay only after the adjustment has been made 'in the Treasury Department,' and then upon drafts drawn for that purpose by the treasurer."
"the balances which may from time to time be certified by the auditors to the Division of Bookkeeping and Warrants or to the Postmaster General upon the settlements of public accounts shall be final and conclusive upon the executive branch of the government,"
"any person accepting payment under a settlement by an auditor shall be thereby precluded from obtaining a revision of such settlement as to any items from which payment is accepted,"
and to have failed to pay the amount of their indebtedness into the Treasury.
We should not say, of course, that instances may not be found in which the word "settlement" has been used in acts of Congress in other senses, or in the sense of "payment." But it is apparent that the word "settlement" in connection with public contracts and accounts, which are the subject of prescribed scrutiny for the purpose of ascertaining the rights and obligations of the United States, has a well defined meaning as denoting the appropriate administrative determination with respect to the amount due. We think that the words "final settlement" in the Act of 1905 had reference to the time of this determination when, so far as the government was concerned, the amount which it was finally bound to pay or entitled to receive was fixed administratively by the proper authority. It is manifestly of the utmost importance that there should be no uncertainty in the time from which the six months' period runs. The time of the final administrative determination of the amount due is a definite time, fixed by public record and readily ascertained. As an administrative matter, it does not depend upon the consent or agreement of the other party to the contract or account. The authority to make it may not be suspended or held in abeyance by refusal to agree. Whether the amount so fixed is due in law and fact undoubtedly remains a question to be adjudicated if properly raised in judicial proceedings, but this does not affect the running of the time for bringing action under the statutory provision.
"The Department treats as the date of final settlement mentioned in said acts [referring to the Acts of 1894 and 1905, supra] the date on which the Department approves the basis of settlement under such contract recommended by the supervising architect, and orders payment accordingly."
and in this there was no error. Rev.Stat. § 954; Missouri, Kans. & Tex. Ry. v. Wulf, 226 U. S. 570, 226 U. S. 576.
"The allowance of a docket fee of $10 to each claimant appears to us to be correct. Rev.Stat. § 824. The claims are several, and represent distinct causes of action in different parties, although consolidated in a single suit."
In the circuit and district courts and in the circuit courts of appeals, while it seems that objection has rarely been made, there has been almost complete uniformity in treating the creditors' action under the Act of 1905 as one at law. See United States v. Winkler, 162 F. 397; Stilzer v. United States, 182 F. 513; United States v. Boomer, 183 F. 726; United States v. Illinois Surety Co., 195 F. 306; Baker Contract Co. v.
United States, 204 F. 390; Eberhart v. United States, 204 F. 884; United States v. Bailey, 207 F. 783; Vermont Marble Co. v. National Surety Co., 213 F. 429; United States v. Robinson, 214 F. 38; United States v. Massachusetts Bonding Co., 215 F. 241; United States v. Emery, 225 F. 287; United States v. Illinois Surety Co., 226 F. 653. It was expressly held to be an action at law in United States v. Stannard, 207 Fed.198, 202. The contrary conclusion was reached in United States v. Wells, 203 F. 146, 147; Illinois Surety Co. v. United States, 212 F. 136, 139, and United States v. Scheurman, 218 F. 915, 919. The point was raised on rehearing in United States v. Illinois Surety Co., but, as it came too late, it was not decided.
"the additional obligation that such contractor or contractors shall promptly make payments to all persons supplying him or them with labor and materials in the prosecution of the work provided for in such contract."
thereon." If the United States does not sue within the time specified, they may bring action on the bond in the name of the United States, and "prosecute the same to final judgment and execution." Any creditor who duly presents his claim in such an action becomes a party thereto with a distinct cause of action. Title Guaranty Co. v. Crane Co. , supra. The obligation of the surety thus enforced in a single action is a legal obligation to the United States for the use and benefit of the several claimants. We do not regard the requirements that "the claim and judgment of the United States" shall have priority, and that the aggregate recovery shall not exceed the penalty on the bond, as insuperable obstacles to proceeding at law. It is the case of an undertaking for the payment of many claims, not to exceed the specified penalty. If the total amount due exceeds the penalty of the bond, it is provided that "judgment shall be given to each creditor pro rata of the amount of the recovery." This, however, merely requires an arithmetical calculation after the different causes of action have been passed upon, and the amount due upon each determined. We see no ground upon which the conclusion can be justified that the liability of the surety on its bond is to be determined in equity. The contrary has been the generally accepted, and we think the correct, practice.
It should be added that a different situation would arise if the surety, availing itself of the statutory privilege, should pay into court the full amount of its liability, to-wit, the penalty on the bond, for distribution. In that case, the legal obligation of the surety would be discharged by the express terms of the statute, and the proceeding would be simply for the distribution of a fund in court.
Engineering & Contracting Company, assignee of Joseph B. Cheshire, Jr., receiver of the Carolina Electrical Company." The complaint set forth that the Carolina Electrical Company (a North Carolina corporation) had furnished to the contractor certain material and labor for which there remained unpaid the sum of $498.69; that, on October 4, 1912, Joseph B. Cheshire, Jr., was appointed receiver of that company, and that, on March 1, 1913, its claim had been "assigned and transferred for value" to the above-named plaintiff by the receiver, and that the plaintiff was the sole owner of the account, and had succeeded to all the rights incident thereto which had belonged to the Carolina Electrical Company. The alleged transfer was denied. Evidence was introduced to show the incorporation and the appointment of the receiver. The district judge found that the order proved was insufficient to establish the authority of the receiver to assign the claim, but held that the proceeding in the case was a sufficient filing of the claim on behalf of the Carolina Electrical Company. Judgment was awarded in favor of that company, with direction that it should be paid "only to such person as may be authorized by law to receive it for said Carolina Electrical Company," and the judgment to this effect was affirmed.
& Contracting Company, was not a nominal party, nor was the action in any sense brought for the benefit of the Carolina Electrical Company. The record shows that it was brought, so far as this claim is concerned, solely for the benefit of the Electrical Engineering & Contracting Company upon the allegation that the claim had been assigned to it for value, and that it was the exclusive and beneficial owner. According to the record, the Carolina Electrical Company was not made a party at any stage of the action unless this was accomplished by the decision and the judgment. But, at the time of the decision, November 10, 1913, by reason of the express limitation of the statute, it was too late for that company to intervene.
The judgment is modified by striking out the provision in favor of the Carolina Electrical Company, and, as thus modified, is affirmed.
* The statute is set forth in full in the margin of the opinion in the case cited.

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