Robinson v. United States ex rel. Brown-Ketcham Iron Works

MAYER, District Judge (after stating the facts as above). [1] 1. The first question which arises is whether the action was brought “six months from the completion and final settlement of said contract.” Defendants contend that there has never been any “complete payment for the work by the government,” as required by the typical Fisher subcontract, and that until there is such complete payment the subcontractors have no claim against Robinson for the balance held out hy him. The meaning of the phrase “final settlement” was settled in United States v. Robinson, 214 Fed. 38, 130 C. C. A. 432, We agree that in that case no point as to the meaning of the words “the com] fieri on” was raised or passed upon. In that case the statute was construed ac - cording to its purposes, and must be similarly construed here. The decisions of the Supreme Court “have made it clear that the statute and bonds given under it must be construed liberally in order to effectuate, the purpose of Congress as declared in the act.” Illinois Surety Co. v. John Davis Co., 244 U. S. 376, 37 Sup. Ct. 614, 61 L. Ed. 1206. The limitation of time in the statute was intended for the benefit of the United States, and as soon as the rights of the United States on the bond were out of the way the subcontractors had the right to sue, assuming, of course, that their own contracts gave them rights against the main contractor. Illinois Surety Co. v. Peeler, 240 U. S. 214, 36 — 466 — Sup. Ct. 321, 60 L. Ed. 609. In other words, when it appears that the United States, through its proper officials, has indicated a determination not to sue on the bond by final settlement, and six months have elapsed, then the security becomes open to those who have trusted to the credit of the main contractor. It appears from the letter of the supervising architect that final settlement was approved by the Secretary of the Treasury under date of February 10, 1909. It is true that a part of the contract price was reserved for the completion of certain unfinished work, but enough had been completed to satisfy the United States that a final settlement 'could be made, and such final settlement was in fact made, and if it should later appear that the United States, acting through its officials, was wrong in that regard, it was the United States and none other which took the risk that by intermediate recoveries the subcontractors might so deplete the fund that the United States would bear the loss, if any, if it erred in approving the contract as finally settled. The word “completion,” in view of the purposes of the statute, and the attitude of the courts in giving those purposes effect, must be construed as meaning that the contract was completed in the sense that the United States was satisfied that enough had been done to discharge the surety as to the United States. Any other construction would inevitably lead to the defeat of some of the essential purposes for which the statute was ena'cted. A subcontractor who had performed his work would be compelled to wait for some indefinite period because some other subcontractor^ or the main contractor himself by reason of some default or dispute, made necessary the reservation of a certain sum to malee good that default or dispose of that dispute. It can readily be seen that in a contract involving, as did the contract at bar, over a million dollars, a subcontractor could be kept out of his money because of a dispute over a comparatiyely small sum, notwithstanding the fact that the government was satisfied to the point where it no longer looked to the surety bonds. Remembering that the purpose of the statute in this regard was to protect the United States, it follows that there is no merit in the contention that the subcontractor must wait to begin his action until disputes as to completion are finally settled, notwithstanding that the government on its part is entirely satisfied and approves the final settlement of the contract. [2] After August 10, 1909 (i. e., after six months from the date of final settlement), the subcontractors had the right to begin an action to recover on the bond, assuming that the contractors had defaulted in payment to them under the -terms of .their own contracts with him. The subcontracts must be construed, so far as possible, consistently with the main'contract, and were necessarily drawn-with reference to the main contract. The “complete payment” mentioned in the subcontracts is the final payment to be made by the United States in accordance with its final settlement, whereby is meant the final amount acknowledged by the United States to be due. As between the United States and Robinson, the latter may not be satisfied, and may contest the position of the United States, as he is now doing in the Court of Claims; but such controversy on the facts in this case, the construe — 467 — tion of the statute, the main contract, and the stil¡contracts, does not in any manner affect the rights of the subcontractors as against: Robinson. So to hold is not to rewrite the contracts as between Robinson and tlie subcontractors, as counsel earnestly contend, but is merely to give the language of the parties the meaning which they intended it should have, for they were referring directly to the contract with the United vSlates, with its necessary security, and it is dear that the language thus used in the subcontracts could never have been intended, in effect, to require the subcontractors to waive their rights upon the bond, or to be postponed indefinitely after the United States bad so acted as to discharge all liability on the bond against it, and after the necessary six months had elapsed. We axe therefore of opinion that the action was properly and not prematurely brought. Winslow Bros. Co. v. Robinson, 173 Ill. App. 84. [3] 2. The marble work in the Robinson contract was sublet to the lusher Company, and Robinson did not do any of that work, in the letter of final settlement, supra, the supervising architect, with the approval of the Secretary of the Treasury, made the following deductions relating wholly to the marble work done by the R. C. Fisher Company: Por omission of proteclive coverings on interior marble work, 82,500; on account of inferior marble in rotunda and main hall, $3,-000. Both of these items under the Fisher subcontracts with Robinson were to have been performed to “the full satisfaction of the supervising architect.” These items, aggregating $5,500, were allowed by the referee and by the District Judge. Documentary* evidence showed that the supervising architect was not satisfied. Fisher & Co. introduced testimony to the effect that the work was fully and properly done. No testimony was adduced by Robinson to the contrary; his position being that, as the United States had deducted these amounts from him, he could not be called upon to pay the subcontractors the same amounts thus deducted. It also appears that in Robinson’s petition to the Court of Claims, after enumerating these two items, with others, he alleged that the deductions were without warrant, in that tlie provisions of the contract relating thereto had been fully complied with. The referee held that the action of the supervising architect was not “conclusive evidence of dissatisfaction. Under the circumstances, it is consistent with a desire to get even with Robinson for trouble and annoyance,” and found “as a matter of fact, the Fisher Company performed its work to the full satisfaction of the supervising architect, within the meaning of its contract.” The supervising architect was not called as a witness, and the only testimony as to his attitude consisted of writings in which he demonstrated affirmatively that he was not satisfied. The most that the evidence amounted to was that the architect ought to have been satisfied, not that he was. In the Court of Claims Robinson naturally was insisting that tlie government wrongly deducted these items; but that position was not inconsistent with his resistance to the payment of items withheld by the government from him. Whether or to what extent there is any conflict between the decisions of the United States courts and those of the New York courts, — 468 — as to the circumstances under which the architect’s certificate may be disregarded, we need not now consider. Kihlberg v. United States, 97 U. S. 398, 24 L. Ed. 1106; Sweeney v. United States, 109 U. S. 618, 3 Sup. Ct. 344, 27 L. Ed. 1053; Martinsburg & Potomac R. R. Co. v. March, 114 U. S. 549, 5 Sup. Ct. 1035, 29 L. Ed. 255; J. H. Sullivan Co. v. Wingerath, 203 Fed. 460, 121 C.C. A. 584; Thomas v. Fleury, 26 N. Y. 26; Nolan v. Whitney, 88 N. Y. 648; Crouch v. Gutmann, 134 N. Y. 45, 31 N. E. 271, 30 Am. St. Rep. 608. But where, as here, the main contract is for work and materials to be done and furnished for the government, and the subcontract is made in reference thereto, it must be assumed that the parties to the subcontract had in mind the relevant statute and applicable decisions of the United States courts. The Fisher Company knew that Robinson would not be paid in respect of any item until the supervising architect was fully satisfied. The supervising architect was not Robinson’s selection, nor under Robinson’s control, and therefore the provision as to “the full satisfaction of the supervising architect” was a necessary safeguard for .Robinson, to which the Fisher Company agreed. Robinson, as against the United States, may assert his rights and seek his remedy; but Fisher & Co. (bearing in mind that the subcontract was made with reference to the statute and the main contract) cannot substitute for the fact of “full satisfaction” the conclusion of court or jury that the supervising architect ought to have been satisfied. In any event, if we go beyond the contract, the evidence fails to establish Fisher & Co.’s right to recovery, in view of such cases as Sweeney v. United States, supra, and J. H. Sullivan Co. v. Wingerath, supra. We conclude, therefore, that the award of $5,500 and interest was erroneous. While, however, Fisher & Co. cannot recover for these two items, because of lack of the supervising architect’s approval, the supervising architect did hot have authority to fix the amount of the deductions as between Fisher & Co. and Robinson. If $5,500 is riot the correct figure for the deduction, Fisher & Co. may prove the contract price of the rejected items, and thus the correct amount can be ascertained. [4] 3. The claim of Rinn could be disposed of for the reasons just stated; hut, in addition, there was evidence to support the referee’s finding that the work was badly performed, and the action being at law, such a finding of fact, approved by the District Court, cannot be reviewed. [5] 4. The question of interest: The various subcontracts contained clauses as to the date when the reserved payments should be made, substantially similar to that of the Fisher Company contract, as follows: “Tire remaining fifteen per cent. (15%) to be paid" by Robinson to Msher ■“within ten days after the final approval and complete payment of the work by the government.” The referee allowed interest from such dates, and defendants contend that interest should be allowed only from date of entry of judgment, on the theory that the claims were unliquidated. In determin — 469 — jug this question we follow the New York decisions. Illinois Surety Co. v. John Davis Co., 244 U. S. 376, 37 Sup. Ct. 614, 61 L. Ed. 1206. The latest expression of the New York Court of Appeals on the question of the allowance of interest is found in Faber v. City of New York, 222 N. Y. 255, at page 262, 118 N. E. 609, at page 610, as follows: •‘The question o£ the allowance ol: interest on unliquidated damages has boon a difficult one. The rule on this subject has been in evolution. To-day, however, it may he said that, if a claim for damages represents a pecuniary loss, which may be ascertained with reasonable certainty as of a fixed day, then interest is allowed from that day. The test is not whether the demand is liquidated. Was the plaintiff entitled to a certain sum? Should the defendant have paid it? Could the latter have determined what was due, either l>y computations alone, or by compulation in connection with established market values, or other generally recognized standards? Van Rensselaer v. Jewett, 2 N. Y. 135 [51 Am. Dec. 275]; McMahon v. N. Y. & Erie R. R. Co., 20 N. Y. 163; Gray v. Central R. R. Co. of N. J., 157 N. Y. 483 [52 N. E. 555].” Going no further back than White v. Miller, 78 N. Y. 393, 34 Am. Rep. 544, the more important New York cases here relevant (in which many other cases are referred to) seem to be De Carricarti v. Blanco, 121 N. Y. 230, 24 N. E. 284, Sweeny v. City of New York, 173 N. Y. 414, 66 N. E. 101, and Bradley v. McDonald, 218 N. Y. 351, 389, 113 N. E. 340. In Stephens v. Phœnix Bridge Co., 139 Fed. 248, 71 C. C. A. 374, the action was brought to recover the reasonable value of materials and labor. It appeared that the materials and labor were furnished under a contract between the parties, by which the plaintiff undertook to complete certain work at a specified date and “to be subject to a penalty of one hundred dollars per day for any time beyond that day.” As performance was not completed within the time specified by the contract, but was subsequently made, and as the defendants accepted the work and paid all sums due, by the terms of the contract, except the reserved payment, the action was not brought upon the contract, but on a quantum meruit. Defendants contended that, the contract not having been performed by plaintiff within the specified time, plaintiff was not entitled to recover, and, in any event, that defendants were entitled to a deduction of $100 per day for delay. The trial judge ruled against these contentions, and allowed defendants to prove the amount of their actual damages caused by the delay. In such circumstances, the amount of damage caused by delay was uncertain, and the court stated: “The sum owing- from the defendants to the i>laintiff was uncertain, and unaseerlaiuahle by computation, at the time of the commencement of the action; it depended, not only upon what should be found to bo the reasonable value of the material and services furnished by Ihe plaintiff, but also upon the amount which it should be found ought to be deducted from the plaintiff’s claim, and thus amount was likewise uncertain, and unascertainable by computal ion.” On the facts in -that case the decision of the court was not inconsistent with the New York decisions. In United States ex rel. Proctor Mfg. Co. v. Illinois Surety Company, 228 Fed. 304, 142 C. C. A. 596, it was stated: — 470 — “Interest has been allowed on the various claims beginning May 1, 1914, that being the date of final hearing.” This sentence, if only read in the opinion and unexplained hy an examination of tire record, might be confusing. The record shows that on September 18, 1914, the court made a final decree, which was not printed, and was not airy part of the record on appeal. On October 29, 1914, counsel for complainant and for defendant claimants moved to reopen the final decree and modify the same “by allowing to the complainant and each of the said defendants interest on their respective claims from the time the same became due; respectively.” The court on November 12, 1914, made what is called in the record its “final decree as modified,” and in that decree provided, inter alia, as follows: “Ordered, adjudged, and decreed as of the 18th day of September, 1914, that the said final decree entered herein on that day be, and the same hereby is, in all things vacated and set aside. * * * ” In the decree of November 12, 1914, interest is accorded to the various 'claimants from different periods down to September 18, 1914, the date of the original decree, so that the total of principal and interest in favor of each claimant was the amount figured down to the date (September 18, 1914) common to all as the date of the original decree. The date, however, from which interest was allowed in the case of each claimant, was the date when payment should have been made, on the same principles as are applicable to the case at bar, and the result is that this case of United States ex rel. Proctor Mfg. Co. v. Illinois Surety Company, supra, is an authority precisely in point. In determining the questions of interest in the case at bar, it is only necessary for us to apply the rules heretofore referred to as laid down by the New York Court of Appeals to the particular facts here presented. The 'District Court was clearly right in its allowance of interest to the Tiffany Studios, Brown-Keteham Iron Works, and Sykes Steel Roofing Company. Winslow Brothers Company: The District Court allowed interest on the Winslow Company’s claim from March 30, 1909. At that date so much of tire claim as was allowed by the court was liquidated, as the government had paid that amount to Robinson. At the hearing before the referee, the Winslow Company withdrew several of its claims for extras, but such withdrawal does not affect the good claims insisted upon. Spalding v. Mason, 161 U. S. 375, 395, 16 Sup. Ct. 592, 40 L. Ed. 738. The only items in dispute were four in number, the amounts claimed by the Winslow Company being as follows: Item 1, $8,552.50; item 2, $2,475; item 3, $4,895; item 4, $6,470— total, $22,392.50. On or before March 1, 1909, all work done, and material and labor furnished, by the Winslow Company was finally approved by the government, and complete payment made or tendered therefor by the government to Robinson. The government allowed Robinson items 1 and 3 at the same figures as claimed by tire Winslow Company, but allowed $2,200, instead of $2,475, for item 2 and $3,~ 715, instead of $6,470, for item 4 — the total of the allowances as made — 471 — by the government aggregating $19,362.50, instead of $22,392.50, as claimed by the Winslow Company. The referee allowed to the Wins-low Company as against Robinson on these items the $19,362.50. which the government had allowed to Robinson. It is plain, therefore, that the amount on these items had been fixed and computed on or before March i, 1909, and under the terms of the subcontract were payable from Robinson to the Winslow Company on March 30, 1909. Robinson could have tendered the sum of $19,362.50, or have allowed the same, and left for further controversy- the additional amount claimed by the Winslow Company, for items 2 and 4. The facts bring the claim of the Winslow Company well within the I'aber and other New York cases, and the interest on this claim was properly allowed. The Fisher claim: This claim ivas made up of the contract price and two items liquidated by the architect prior to the date fixed by the referee for interest. The only possible question is of the allowances. Under date of October 14, 1917, the Fisher Company rendered Robinson a bill. There were certain of the extras on this bill which on the trial the Fisher Company did not undertake to prove; otherwise the bill stood as the amount of the Fisher Company claim and extras containing also a statement of the credits due Robinson. This bill shows a balance due the Fisher Company of $71,066.75. This bill was corrected by statement of counsel for the Fisher Company, on the trial, to the effect that Robinson was entitled to a further deduction of $478. The claim of the Fisher Company thus became a claim for $70,588.75. The referee found that the work done by the Fisher Company was in strict accordance with the architect’s plans and specifications, and that the Fisher Company had performed all’ the terms and conditions of its contract. From the claim of $70,588.75 the referee deducted some small extras, amounting to $1,843.55, as follows: Item 1, $161.31; item 2, $4; item 3, $1,020; item 4, $304.95; item 5, $154; and item 6, $199.30 — leaving due, according to- the referee’s figuring, $68,745.20, with interest from March 10, 1909. in the bill rendered by the Fisher Company to Robinson on October 14, 1907, were two items which Robinson contested on the ground that they were extras, and that the government architect had allowed Robinson less than the Fisher Company charged him. One item was for $661.86, and the government allowed Robinson for this item $500.55, and therefore the referee reduced this item to the extent of the difference, viz., item 1, $161.31. The other item was reduced for the same reason from $116.50 to $112.50; vide item 2, $4. The next two items which the architect allowed Robinson were counterclaims, one for the use of the elevator hoist, amounting to item 3, $1,020, and the other for miscellaneous items of labor and materials, amounting to item 4, $304.94. Neither the amount of these items nor the right of Robinson to counterclaim them was questioned at the trial. Two other items — item 5, $154, and item 6, $199.30, respectively — were ruled by the supervising architect as being within the plans and specifications, and were therefore deducted by the supervising architect from Robinson’s bill, and consequently were deducted by the referee from the amount claimed by the lusher Company. These various items — 472 — make the total of $1,843.55 with which the referee credited Robinson, and which he deducted from $70,588.75', leaving the balance of $68,-745.20. These items were all susceptible of computation and Robinson could have paid over this net amount on March 10, 1909, reserving for further controversy the small sum in excess thereof. This net amount’ was ascertainable “with reasonable certainty” as of March 10, 1909. From this amount, of course, should be deducted $5,500, with interest, referred to supra. Eastman Brothers & Co.: This claim was allowed at $14,829.60, with interest from March 10, 1909, subject to two deductions: (1) For $3,488.80, with interest from March 30, 1907, the amount due the George S. Holmes Company, one of the intervening plaintiffs herein, for materials furnished and work done for the Eastman Company; and (2) for $658.90, with interest from July 3, 1906, found due the Eong Island Sand Company, an intervening plaintiff, for sand furnished to the Eastman Company. In the amount in controversy between the Eastman Company and Robinson were some items which placed the dispute outside of the authority of the Faber Case, in that the true amount could not be ascertained, either with reference to the contract or to the market value of services and materials concerned. On January 20, 1909, however, an interview was had between Roy H. Robinson, as representing defendant Robinson, and one Avery, the assignee of the claim of Eastman Company. On that occasion a statement in detail was gone over, and all the items checked up’, with the result that as of that date it was entirely clear that Robinson was indebted to the extent of $12,991.53. Under the terms of the contract between Robinson and the Eastman Company, payment of this amount should have been made in any evenf on March 10, and therefore interest should be allowed on $12,991.53 from March 10, 1909. Interest on the balance of $1,838.09 should be allowed from the date of filing the referee’s report, to wit, April 4, 1917. The deductions’for the amounts due George S. Holmes Company and Eong Island Sand Company were properly made by the court below. If these modifications as to interest are accepted by the Eastman Company, the correct amount can readily be computed. The judgment is affitmed, except as to the claims of Shaffer, as trustee, and Eastman Bros. & Co. If Shaffer, as trustee, deducts $5,500, with interest, as heretofore indicated, the judgment as to the Shaffer claim is affirmed; otherwise, reversed. If Eastman Bros. & Co. accede to the amount ascertained after recalculating interest as above set forth, the judgment as to the claim of Eastman Bros. & Co. is affirmed; otherwise, reversed. Judgment dismissing the Rinn claim is affirmed.