Source: https://m.openjurist.org/240/us/214
Timestamp: 2019-09-20 18:13:38
Document Index: 513793648

Matched Legal Cases: ['§ 235', '§ 3', '§ 2', '§ 406', '§ 271', '§ 2', '§ 368', '§ 236', '§ 368', '§ 57', '§ 8', '§ 4', '§ 390', '§ 6922', '§ 954', '§ 1591', '§ 1378', '§ 824']

240 U.S. 214 - Illinois Surety Company v. United States J a Peeler
UNITED STATES to the use of J. A. PEELER, L. M. Peeler, and P. A. Peeler, Partners, Trading under the Firm Name of Faith Granite Company, et al.
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. United States, 215 U. S. 533, 538, 54 L. ed. 315, 317, 30 Sup. Ct. Rep. 174; United States ex rel. Brown-Ketcham Iron Works v. Robinson, 130 C. C. A. 432, 214 Fed. 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 (United States use of Alexander Bryant Co. v. New York Steam Fitting Co. 235 U. S. 327, 337, 59 L. ed. 253, 257, 35 Sup. Ct. Rep. 108),—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.
The pivotal words are not 'final payment,' but 'final settlement,' and in view of the significance of the latter term in administrative practice, it is hardly likely that it would have been used had it been intended to denote payment. See United States v. Illinois Surety Co. 195 Fed. 306, 309; United States use of Chief All Over v. Bailey, 207 Fed. 782, 784; United States ex rel. Brown-Ketcham Iron Works v. Robinson (C. C. A. 2d C.) supra; United States use of Starrett-Fields Co. v. Massachusetts Bonding & Ins. Co. 215 Fed. 241, 244; United States use of John Davis Co. v. Illinois Surety Co. (C. C. A. 7th C.) 226 Fed. 653, 662. The word 'settlement,' in connection with public transactions and accounts, has been used from the beginning to describe administrative determination of the amount due. By the act of September 2, 1789, chap. 12 (1 Stat. at L. 65, Comp. Stat. 1913, § 235), establishing the Treasury Department, the Comptroller was charged with the duty of examining 'all accounts settled by the auditor.' (§ 3.) And it was made the duty of the auditor to receive 'all public accounts and after examination to certify the balance,' subject to the provision that any person whose account should be so audited might appeal to the Comptroller 'against such settlement.' The act of March 3, 1809, chap. 28, § 2 (2 Stat. at L. 536, Comp. Stat. 1913, § 406), gave authority to the Comptroller to direct the auditor forthwith 'to audit and settle any particular account' which he was authorized to audit and settle, and 'to report such settlement' for his revision and final decision. (See Rev. Stat. § 271.) By the act of March 3, 1817, chap. 45, § 2) 3 Stat. at L. 366, Comp. Stat. 1913, § 368), it was provided that '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.' This provision was carried into § 236 of the Revised Statutes (Comp. Stat. 1913, § 368). The words 'settled and adjusted' were taken to mean the determination in the Treasury Department for administrative purposes of the state of the account and the amount due. See 2 Ops. Atty. Gen. 518, 625, 629, 630. Referring to this provision, it was said by Mr. Chief Justice Waite, in delivering the opinion of the court in Cooke v. United States, 91 U. S. 389, 399, 23 L. ed. 237, 243: '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.' Again, the act of July 31, 1894, chap. 174 (28 Stat. at L. 162, 206-208, Comp. Stat. 1913, §§ 57, 425), relating to the examination of accounts by auditors, and revisions of accounts, etc., provides, in § 8, that '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,' except that any person whose accounts may have been 'settled,' the head of the executive department, etc., to which the account pertains, or the Comptroller of the Treasury, may, within a year, obtain a revision in the manner stated; also that '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, further, that 'when suspended items are finally settled a revision may be had as in the case of the original settlement.' By the act of May 28, 1896, chap. 252, § 4 (29 Stat. at L. 140, 179, Comp. Stat. 1913, § 390), the Secretary of the Treasury was directed to make report annually to Congress of such officers as were found 'upon final settlement of their accounts' to have been indebted to the government, and to have failed to pay the amount of their indebtedness into the Treasury.
In the present case, the construction of the building was in charge of the Secretary of the Treasury and under the general supervision of the supervising architect. The Secretary of the Treasury was authorized to remit the whole or any part of the stipulated liquidated damages as in his discretion might be just and equitable. 32 Stat. at L. 326, chap. 1036, Comp. Stat 1913, § 6922. On August 21, 1912, the supervising architect having received the certificate of the chief of the technical division of the office that all work embraced in the contract had been satisfactorily completed, made his statement of the amount finally due, recommending that only the actual damage (as stated) be charged against the contractor, and that the proper voucher should be issued in favor of the contractor for the balance, to wit, $3,999.01. And, on the same date, this recommendation was approved and actual damages charged accordingly by direction of the Secretary of the Treasury. This, in our judgment, was the 'final settlement' of the contract within the meaning of the act. We understand that the administrative construction of the act has been to the same effect. The regulation of the Treasury Department, as it appears from its circular issued for the information of persons interested in claims for material and labor supplied in the prosecution of work on buildings under the control of that Department (Dept. Cire. No. 45, Sept. 12, 1912), is as follows: '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.'
2. With respect to the amendment of the complaint, it is apparent that, as there was an existing right of action under the statute at the time the suit was brought, the case was not within the decision in United States ex rel. Texas Portland Cement Co. v. McCord, 233 U. S. 157, 58 L. ed. 893, 34 Sup. Ct. Rep. 550. No new or different cause of action was alleged in the amended complaint. The court merely permitted the defective statement of the existing right to be corrected by the addition of appropriate allegations, and in this there was no error. Rev. Stat. § 954, Comp. Stat. 1913, § 1591; Missouri, K. & T. R. Co. v. Wulf, 226 U. S. 570, 576, 57 L. ed. 355, 363, 33 Sup. Ct. Rep. 135, Ann. Cas. 1914B, 134.
3. It is contended that the right given by the statute to the described creditors is of an equitable nature, and that the court erred in permitting recovery at law. The objection in the present case is merely technical, as the parties stipulated to waive trial by jury, and the case was heard and decided by the district judge upon facts about which there is no dispute. The question has not been raised heretofore in this court, but it has been assumed in many cases that the action to be brought under the statute upon the contractor's bond, whether the action were instituted by the United States (United States v. Congress Constr. Co. 222 U. S. 199, 56 L. ed. 163, 32 Sup. Ct. Rep. 44), or by creditors in the name of the United States, was an action at law. United States Fidelity & G. Co. v. United States, 209 U. S. 306, 52 L. ed. 804, 28 Sup. Ct. Rep. 537; Mankin v. United States, 215 U. S. 533, 54 L. ed. 315, 30 Sup. Ct. Rep. 174; Title Guaranty & T. Co. v. Crane Co. 219 U. S. 24, 35, 55 L. ed. 72, 77, 31 Sup. Ct. Rep. 140; United States ex rel. Alexander Bryant Co. v. New York Steam Fitting Co. 235 U.S. 327, 59 L. ed. 253, 35 Sup. Ct. Rep. 108. In Title Guaranty & T. Co. v. Crane Co. 219 U. S. 24, 35, 55 L. ed. 72, 77, 31 Sup. Ct. Rep. 140, a question arose as to the propriety of allowing a docket fee to each claimant. Section 824 of the Revised Statutes (Comp. Stat. 1913, § 1378), provides for a docket fee of $10 'in cases at law, when judgment is rendered without a jury.' The court said: '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 use of Watson-Flagg Engineering Co. v. Winkler, 162 Fed. 397; Stitzer v. United States (C. C. A. 3d C.) 105 C. C. A. 51, 182 Fed. 513; United States use of Gibson Lumber Co. v. Boomer (C. C. A. 8th C.) 106 C. C. A. 164, 183 Fed. 726; United States ex rel. James B. Clow & Sons v. Illinois Surety Co. 195 Fed. 306; Baker Contr. Co. v. United States (C. C. A. 4th C.) 122 C. C. A. 560, 204 Fed. 390; Eberhart v. United States (C. C. A. 8th C.) 123 C. C. A. 180, 204 Fed. 884; United States use of Chief All Over v. Bailey, 207 Fed. 783; Vermont Marble Co. v. National Surety Co. (C. C. A. 3d C.) 130 C. C. A. 65, 213 Fed. 429; United States ex rel. Brown-Ketcham Iron Works v. Robinson (C. C. A. 2d C.) 130 C. C. A. 432, 214 Fed. 38; United States use of Starrett-Fields Co. v. Massachusetts Bonding & T. Co. 215 Fed. 241; United States use of Fowden v. Emery, 225 Fed. 287; United States use of John Davis Co. v. Illinois Surety Co. (C. C. A. 7th C.) 226 Fed. 653. It was expressly held to be an action at law in United States ex rel. Proctor Mfg. Co. v. Stannard (D. C. N. D. N. Y.) 207 Fed. 198, 202. The contrary conclusion was reached in United States use of Brading-Marshal Lumber Co. v. Wells (D. C. E. D. Tenn.), 203 Fed. 146, 147; Illinois Surety Co. v. United States (C. C. A. 2d. C.) 129 C. C. A. 584, 212 Fed. 136, 139, and United States use of Pittsburg Planing Mill Co. v. Scheurman (D. C. Idaho) 218 Fed. 915, 919. The point was raised on rehearing in United States use of John Davis Co. v. Illinois Surety Co. (C. C. A. 7th C.) 226 Fed. pp. 663, 664, but, as it came too late, it was not decided.
The statute provides that the bond shall have '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.' In this respect, the provision is substantially the same as that contained in the act of 1894, and the obligation in favor of the materialmen and laborers has been held to be a distinct obligation. United States Fidelity & G. Co. v. Golden Pressed Brick & Fire Co. (United States Fidelity & G. Co. v. United States) 191 U. S. 416, 423, 425, 48 L. ed. 242, 245, 246, 24 Sup. Ct. Rep. 142; United States use of Hill v. American Surety Co. 200 U. S. 197, 201, 202, 50 L. ed. 437, 439, 440, 26 Sup. Ct. Rep. 168. It is an obligation for the payment of money to the persons described, which they are entitled to enforce. The nature of the obligation is not changed by the fact that there is to be but one action. If the United States brings the action, the persons described are entitled to be made parties, and 'to have their rights and claims adjudicated in such action, and judgment rendered 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 & T. Co. v. Crane Co. 219 U. S. 24, 35, 55 L. ed. 72, 77, 31 Sup. Ct. Rep. 140. 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.
4. The plaintiff in error contends that the court erred in giving judgment in favor of the Carolina Electrical Company. The record shows that among those named as the persons instituting the action was the 'Electrical 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.
In this, we think, the court erred. The Carolina Electrical Company was not one of the plaintiffs and there was no intervention on its behalf. The trial court in its findings sets forth the interventions of certain other parties, and states that no more interventions appear to have been filed in the cause. It is true, of course, that the real party in interest who is entitled to enforce the cause of action may be substituted as plaintiff. See McDonald v. Nebraska, 41 C. C. A. 278, 101 Fed. 171, 178. But the present case is not one of misnomer, or of a nominal plaintiff for whom the real party in interest is substituted, or indeed of any proper substitution. The plaintiff, the Electrical Engineering& 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.