Petition for Writ of Certiorari — Hartford Accident & Indemnity Co. v. Continental Casualty Co.

Supreme Court brief1966

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JOHN F. DAVIS, oe

‘Supreme Court of the United sie

& | | October Term, 1 ee: S

; : No. Be

“,

Hartrorp ACCIDENT AND INDEMNITY Company, and

C. O. BRAND INC.,

Petitioners, |

VS. | a

CONTINENTAL CASUALTY COMPANY, _

| Respondent.

_ PETITION FOR WRIT OF CERTIORARI.

Davin ARTHUR BINDER,

_ 3810 Wilshire Boulevard,

Los Angeles, Calif. 90005,

| \ ; Attorney for Petitioners.

+.” Of Counsel, iy

, Brown & Brown,

Howarp B. Brown,

* Ropney Moss,

Rosert V. BLADE.

. : ; _

\ .

Parker & Son, Inc., Law Printers, Los Angeles. Phone MA. 6-9171...

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IN DEX TO APPEN DICES ,

Appendix “4°, Opini of ‘the United States

Court of Appeals od e Fifth Circuit,+: tneacnnsesnealenee

: ‘Apperidix vars, * Provisions of the. Millet, ae.

‘United States Code, Fitle-$0, Section 270a cote

pe iat sr one

SUBJECT INDEX eee

3 : ; : yt Page,

Opsing below? coaeeteesmetaioans <: Lacon Se

: Federal jurisdiction eee etc som aren tea oe We , ; 2

Statement of the case sons 2

‘Questions presented DELI Ae earn ee Neen eos 6

| Reasons for granting the TUE icsscsesans HN wines Rae a

a. Statute of limitations . : oy

b. “Adequacy of form of notice 0.0... 10°

c. Jurisdiction for service of process hie

d. _ Capacity to sue and be sued ...................... seins AO

e. ; Jurisdiction over ‘the subject ; matter enccii.. 11 oh

Conclusion ssanlidbidficbieeccubobapipsiin Ones 20°

_ Appendix 3s Provisions of the ‘Capehart Hous- —

ing Act, ‘United — Code, Title 42, Section .

1594 ae Jatbotbiecolansenceetbauss ee : a

‘Apperidix “D”, 1964, 1965 and 1966 cases arising

Angéniiix: “EY. Cases arising ane: out of ‘the :

Beale Air Force Base: project, a Capehart mee

ee Housing Act construction sre pee in California ~

CARE

rey

oS ees

5 + A

: $

: 2

, 4 .

get io, See

" TABLE OF AUTHORITIES CITED

Vee Cases vee 3 Page...

Allsop Lumber’ Company. v. Continental. Casualty

Company, 73. N.M. 64, 385 P OO GBS ccc SI a

Autry v. Williams & Dunlap, 343 F. 2d 10, 12.

_ Continental Casualty Company v. Allsop» Lumber __——

- Co., 336 F. 2d 445, cert. den. 379 U.S, 968°. Sas 10, 15

” Continental Casualty Company v. United. States ior...

“S _the Use of ‘Conroe Creosoting, 308 F. 2d 894 ........ ms

— Mires ceileeeehcintionétennnioheantin 12, 13, 16

a :Coctinental Calta Company v. Cite States for

Use of Robertson Lumber Company, : 305 F, 2d

794, cert den. 371U.S, 922 evenecuiinne 8, 9; 14, 19

Tisncer Form Corporation v. Trinity Universal

Co., 234 F. Supp. 930 ........ = eh Sie tee ae

Gypsum Contractors Inc. v. American Surety Com-

_ pany, 37 N.J. 315, 181 A. 2c < , Secaenlcto ennai | TR

Ireland! s Lumber Yard v." Progressive Contractors

Seo. At, paella acne la 10, 11

| " “‘Koppers ‘Company wv. Continental Casualty Com-

_ pany, 337 F. 24°499 . unico Sat!

Lasley v. United States for: Use of Westerman, 285 . i

a 24,98 ......,--- nies sone By 11, 12, -17

_-Minneapolis-Honeywell Regulator Co. v. Terminal 3

» Construction Corp., 41 N. J. 500, 197 A. 2d 557... 11

_ Missouri-Ilinois Tractge & Equipment Co. v..D &

L oo eee & Associates, 337 F. 2d

" Robson: ‘v. ‘United Pacific Insurance” Co., eee SW.

aw aR ris oe |

tend 9. |

ra ba

es ee

Sa ae

Russell v. Travelers Indemnity Co., 2M4 F. Supp.

tase ah Re ae

: Teavis Dinipmen Co. v. D: & L Construction Co.,

pe SO A ee aaa

United States for Use of” General Accident Fire & :

Life Assurance v.’ McGuire Homes Inc., 186 F. ne ke

We Dildigh C59 gna cccctaiecesicceens A Rte -

United States for ‘Use of. Miles Lumber poneriiae v.

'’ Harrison and Grimshaw Construction Company,

305 F. “a 363, cert. den. 371 U.S. 920 o }

Sete kale ponte, 9, 10, 11, 14, 18, 19

* United States for U se of R. W. Fine v. Travelers es

Indemnity. Co., 215 F. Supp. sp ne I 10

, Rules | me

Ral of Giyil Procedure, Rule 17(b) . ‘cpahiabede aK

Statutes tis ate

"Act of Soot 24, 1935, 49 Statutes at Large, a

Act of fon , 1948, 62 ‘Statutes at- cin Chap :

| 646, Bi FES ececesencames Qushiaesned |

Act of August ve 1955, Title 4, ‘Chap. 783, ‘Sete. \

403, 69 Statutes at Large; P. ¢ 7S Eee peer ee ea 2,7 :

Housing Act of 1956, Chap. 1929; Gee. 507 Fe

70 Statutes at Large, p. SEND, seers acin ins J

United States Code, Title 28; Sec. weg :

: ‘ United States Code, Title 28, Sec. 1382 .. ESA Rien SE Rat:

United States Code, Title 40, Sec. 270 cae ms |

=, ee

i | pie

as - Page

United States Code, Title 40, Sec. 270(b) ...........8, 16

United States Code, Title 40, Sec. 270b(b) ............ =.

Cagis, Ck |

50 Iowa Law Review (1965), p. 1217 ........... } sdlinsia’ 15

« , . int 2

: : < 2

- ra aes : : ‘= ms

‘ y, f

sss rie / INTHE. | : ue i

_ Spree Court of the United Sats ea |

: Oeiohies Term, 1965 , yee zm i «

” “No. ........ ras las siti ee é i

HARTFORD Accisities AND: INDEMNITY Company, and

C. O. Branp Inc,, 3 j Btn Ns ea

; f * Petitioners: ‘ NA ai Se

eo pat ; Canes Fi :

Niza ‘ Sage ight — Gone oe bes eee a

CoNTINENTAL CasuaLTy ComPaNy, aw | phere. el

: /t Respondent. cere

al gah hes 4

PETITION FOR WRIT OF- CERTIORARI.

‘To ‘the Honorable Chief Justice and Associate Justices :

of .the peared Court of ont United ot : ;

America: , j k ae

Petitioners, Hartford Accident ‘and tacesnisy Com.

pany and C. O. Brand, Inc., hereby pray for Writ of

Certiorari to issue to review the judgment of the United

‘States Court of Appeals for the Fifth Circuit, entered

on January 25, 1966, rehearirig denied March 16, 1966.

? : Opinion Below. Rane es

; On January 25, 1966, - the United States Court of :

_ Appeals forthe Fifth Circuit entered its opinion and e

_ judgment, which is. reported, in 355 F, 2d 969, a copy |

of same being attacked hereto in Appendix “A”. There-_

after, a Petition for Rehearing. was filed and the same. ‘a

was denied on March: 16, 1966. The judgment and opit- |

rect ce = ion of the Circuit Court of Appeals ‘reversed_an opin-_

eee Ben ae ion’ of the United*States District Court for the Western.

| a yoo) | District of Texas, which decision i is unreported.

Ee 2 SL tie Ss Federal Jurisdiction. __ |

AX poe e aes | i was originally brought in the United States Dis- ie

Ny eee Court ‘ for the District of Texas, Western Divi-

sion, under the provisions éf the Miller Act, 40. U.S.C.

me §270 (49 Stat. 794, August .24, ‘1935, Chap. 642) a

. copy of which is): attached héreto in Appendix’ _

ic. + .- "Phe jurisdiction. of this Honorable Court is invoked

2 under 28 U.S.C. 12541 (62.: Stat. 928, June 25, at

\ Chap. 646). :

Statement of the Case. ;

‘This case involves an action on‘a surety bond fur- ™~

Hea nished- under ‘the provisions - of the Capéhart Housing |

Sat Met, 42 U.S.C. $1594 et: seg: (Aug. 11, 1955, chap.

. 783, Title IV, §403, 69 Stat. 651, as-aménded), a-copy- =«s *—

ae of which is attached hereto in Appendix “C™% Pursuant $$

~ to the act, Hal B Hayes,-Inc. ( hereinafter referréd to as

| Hayes Inc.), as. the prime contractor, (or in the par- -

- lan nee-of the €apehart Act, the “eligible builder”) en-

tered into a contract with the United States of America

_ to build 410 military housing units at Ft. Bliss, El Paso,

Texas. Under the Capehart Housing Act, Hayes, Inc.;. =!

*, . as ‘the prime contractor, . was required to provide a.

_Payment and Performance Bond by a surety. satisfac- ,.

tory to the Secretary of. Space In this case such pie

° :

3 AN Teh suits instituted pursuant to ‘the Miller Act were 4

: . . solidated byaghe trial court, Vol. 1, Record’ on Appeal, p.

ene Defendants oved to dismiss the proceedings as not being © iis eee

-. "9. the purview of the Miller Act, ‘but the motions were denied and

a -. ‘the court retained jurisdiction by virtue “of the Miller. Act, 40

oh _ USC. $270().. 7 7

bond was furnished by the defendant Continental Cas-.

walty, Company (hereinafter referred to as Continental), |

as surety, and Hayes Inc.'as principal. In addition, as

required by. the Capehart Housing Act, Hayes Inc: or-:

ganized a separate company to stand as owner of the

-_ project during construction. This company, which in the ©

parlance. of the Capehart Housing’ Act is: called the oe

-mortgagorpbuilder, bore the-name Nike Village. -

After the project was organized, Hayes Inc. entered.

into & contract with one of: the petitioners herein, C. O.

- Brand, Inc. ( hereinafter referred to as Brand) wherein

‘Brand was to’act as a subcontracter on the project,

In connection with the subcontract. between Hayes Inc:

and Brand, Brand furnished a Payment and Perform-

ance Bond. The. surety*on the Brand bond was petition-

er Hartford Accident and Indemnity Company (herein-

after referred to as Hartford).

Before completion of the project, Hane Inc. became

naheni and defaulted. on its contract with the United

States and Continental, as Hayes Inc.’s ‘surety, was

compelled to and did compléte the construction project.

At the time of default, Hayes Inc. owed money to

. Brand in connection with Brand’s performance as a sub-

contractor. In addition, Brand owed money to ten ‘sub-

‘subcontractors and materialmen.. who had furnished

labor and materials to Brand.

Thereafter, Brand on its own behalf and the respec- °

_ tive ten sub-subcontractors and materialmen instituted

' suit’ against Continental on its Payment Bond. Also |

‘ named as defendants in said suits were Hayes Inc.,

_ Nike Village, Hartford and other persons and concérns.

All suits were consolidated for trial, =

* Prior to pre-trial, Hartford, in inataiigs of its obliga:

_ tions under its Payment ‘Bond paid the claims of the |

_ ten sub-subcontractors and materialmen to whom Brand: _

“owed money. In connection with such payment, Hart-

' ford obtained assignments of the said claims “and was

subseqitently substituted i in as party —" in ~~ of

said teti claimants. - mots -)

s Thereafter, the matter proceeded to trial, Brand pro-

ceeding in its own right and Hartford proceeding as

the subrogee | and assignee of the ten claimants.”

After trial in January, 4962 and submission of -the

matter upon briefs* judgment was ordered against Con-

'_tinental and in favor of Hartford ‘for’the sum of

$102,266: 01 and in favor of Brand, for the sum of

$72,932.99, an aggregate of $175, 199.00,

On appeal, the Fifth Circuit Court él Appeals re-

versed. The appellate court held that the Miller Act did

. not govern actions against a Capehart surety and ac- —

cordingly preliminary notice of claim given in d-

- ance with the Miller Act was not sufficient to maintain

_ Suit against the ,Capehart ‘surety Cé&tinental. The court

further held that in order to maintain’ an action against

a Capehart surety, a-claimant must give the additional

_ preliminary notice provided by the Continental bond

form. Although recognizing that actual notice and

knowledge was obtained by the necessary parties, the

court held that because there was not literal and technical

compliance with the Continental bond form, the judg- —

ment must be reversed.

2The answers of Hayes, Nike Village and others were stricken

and their default entered’ by reason of thgir - ‘failuré to answer

arid tiae Pa :

cee Ss ee

The Miller - Act, 40 U.S.C. §270, as, 4 prerequisite 3

to suit against a surety, requires a delinaiit who does

ts not have a direct contractual telationship with the prime

contractor, to give’such contractor a preliminary notice

‘by registered mail. Such notice must set forth the na-

ture of the claim, the amount thereof, arid the —_ for

whom the work was performed. — . é

The boné form as used in the instant ‘case required

every Claimant, as a prerequisite to suit, to furnish sim-

ilar information, also to be sent by registered letter,

to any two of three persons, viz., (1) the prime con-

tractor, or (2): any of the obligees - or the lender, or

(3) the surety.

The essence of the trial court’s s findings as they ef-

fect this petition were as follows:

a. Brand was a subcontractor. having’ a dinect con-

tractual relation with Hayes Inc., the prime contractor.®

b. . Hayes. Inc. and Nike Village, although purport-

edly ‘different’ entities, were in fact one and the same

and what was. known. by one was known by both. re

c. Within the requisite time and prior to suit Brand

gave written preliminary notice to’ Hayes Inc. and Nike .

Village’of its claim including that of the ten sub-sub-

contractors and materialmen. Although . notice was di-

' rected to Hayes Inc., Nike Village, as a result of the

facts set forth i in “b”- ‘above, also obtained actual koe:

edge of the claims.

*Findings Nos. 9 and 12, Vol. 1, Record on Appeal pp. 92,

93 and 94.

‘Findings 4, 6-and 9, Vol: 1, Record on. Appeal, pp. 91, 92

and 93.

®Findings 4, 6, 9, 23 and 24, Vol. 1, Record on Appeal, pp.

90-98 incl; Exs. B-8 and. ‘B-9, pp. 199 and - 202, ‘Vol. 2,

Record on <Apped

7 vids In addition, within. thé sespblaiie time for giving -

preliminary notice, Continental had actual notice of sal

claim of Brand.°

‘Despite. these’ ‘apetific findings, the Fifth: Circyit

me Court of Appeals reversed, holding that compliance with

“the Miller Act was insufficient and -that by virtue of a

1956 Amendment to the Capehart Housing Act, the

strict-and formal preliminary fiotice requirements of the

Continental bond form had not been met. :

| Questions Presented,

ee Whether the 1956 Aimendment ‘. the Cunha

wae Act which merely provides for the furnishing

of sureties) satisfactory. to the. , pecretary . of Defense,

“empowered the Secretary of Defense to establish ‘notice

_ requirements in connection with suits against such sure-

. ties, which notice requirements are different and sub-

~~ stantially tmhore strict than Ce by the Miller oT

40 U.S.C, §270b(a). ° en RE

Pea Assuming, arguendo, that the Secretary of De-

fense was empowere to impose stricter notice require-

ments than those imposed by the Miller Act so as to

oa require notice to various persons, was- there compliance |

with such requirement: as to one ‘such person ‘by- the

giving of such notice to his alter ego. :

3. Assuming, arguendo, that the Secretary.,of De-

fense was empowered to impose stricter notice require-

‘ments than those imposed by the Miller Act so as to

require notice to various persons, was there. compliance

with such requirement as to one such. person by his

: silico actual bo paras and notice of a ee at

*Finding 25, Vol. 1, Record, on a eiepest, p- 98.

- : *f

«4. Assuming, arguendo, that the Secretary a De- :

‘ _ fense was empowered to impose notice reqtiirements

_ other than required by the Miller Act so as to require a

_ dual-notice, did not the circuit court of appeals err in

ignoring the specific findings of the trial court that |

claimants had complied with the dual-notice require-

* MMB 291 Dingo ere a seh

. Reasons for Granting the Writ.

hea, . sak

‘ The Capehart Act was enacted in 1955" to implement -

and satisfy the need for. financing of military housing.

The orginal act failed to make mention of any bonding

by ote ans In 1956 the a ecidh Act was amended?

as’ follo

“Any such contract shall provide for_the-fur=- Ke ‘a

__ nishing by -the contractor of a performance bond

_ anda payment bond’ with a surety or sureties satis-_

factory to the Secretary of Defense, or his de-»:

signee, and the furnishing of such bonds shall

be deemed a sufficient _ compliance with the pro - .

visions of Section 270% of Title 40. [The Miller .%\ .

Act], and no additional bonds’ shall be required iat

urider said-Section.” —

Following the amendment, the Sirota of Palen

prescribed the use of a form of bond to be used on—

Capehart constructions. The form prescribed did- not

comply with the “provisions ofsection 2704 of Title

40”, the’ Miller Act, but was rather a 1947 FHA dual its

| obligee form of bond.. pane ed in — 1957, a ee

‘

769 Stat. 651, 40 U.S.C. 51594.

_ 8Housing Act of 1956, ch. 1929, $507, 79 Stat. 1110, 42 U:S.C.

Ma): /

modified FHA form was prescribed so as to bring the

bond.'form to its current posture. Under the modified

form, before suit could be instituted against the sure-

ty, a preliminary notice had to be given to any two of -

the following: (1) the principal, in this case Hayes, Inc. —

or (2) any of the obligges, in this case Nike Village. oe. :

the lender, cz (3) the surety, in this case Continental. —

Under ‘the ier Act, however, such preliminary notice ‘

need be given only to the priucipal (prime-contractor ) :

and then only in cases where the claimant had no direct

contractual relationship with — oe 40 USC. oor

§270b(a):

ie 1962, decisions by the Eighth and Tenth Circuit

' Courts of Appeal® held that suits against Gapehart ;

"sureties could not be maintained where the preliminary _

hotice, although ddequate under the Miller Act,. 40

U.S.C. §270b, did not comply with the Capehart bond

form. Both cases ‘ignored the plain language of the

-Capehart Act 1956 Amendment and a ‘previous decision

of the Fifth Circuit Court of Appeals’ holding that the

. hliiad ‘of the Miller Act apply to suits on a Capehart

bond: just as they do to suits on a Miller Act bond.”

/ Since 1962, the conflict as to whether or not sctidiis

/ _ against Capehart sureties are governed . by the Miller |

°Continental Cecile Company v. United States for Use of

Robertson Lumber Company, 305 F. 2d 794 (CCA 8, 1962),

cert. den. 371 U.S. 922; United States for Use of Miles Lum-

ber Company v. Harrison and Grimshaw Construction omPgny,

308 F. 24 363 (CCA 10, 1962), cert. den. 371 U.S. 920. *

: 7 asley, v. United States , Use q Westerman, 285 F. 2d

98 (CCA 5, 1960).

“The dissent by Judge Pickett in -Miles Lumber Chen

_ Clearly recognized the inconsistency of the opinion of the Tenth _ :

Circuit Court of Appeals with the prior decision of the Fifth .

Cireuit — of Appeals.

—9 :

Act has continued to rage. This contiict 1 has ‘ionemranit

itself with questions involving the time. within which |

_ the surety ane sued, the form of preliminary fo- | :

tice to be given\to the surety, the place where parties —

to actions against the surety may be served, an e

ity of the parties to sue or be _be_sued;~ the Court

where suits against, the sureties mt must be brought.

+. seratin es Statute of Limitations.

The Capehart bond form provides for a statute ag

limitations for institution of suit within one year from

the date the principal ¢ or prime contractor completed his

work of .improvement. The Miller” Act provides for a

‘statute of limitations of one year from the date--the

" claimant completes his work. As previously pointed out,

while the Eighth.and Tenth Circuit Courts of Appeal

have held that the Miller -Act preliminary notice re-

. quirements were not applicable to Capehart’ projects”.

.. Subsequent decisions of the Eighth: Circuit Court

of Appeals and Distgict Courts within said - Circuit,

hhave held that the Miller Act statute of limitations was

. \applicable to actions against a Capehart surety and

- have ignored’ ‘the different. statute of limitations. pro-

vided = Pe the Capehart bond form.” .

- 13Continental Casualty Ciikgiad v. United States for Use of

_ Robertson -Lumber Company, supra; United States for Use of

Miles Lumber Company v. Acai and —— Construction

Company, supra.

13Koppers Company v. Continesttal Casualty Compas, 337, F

2d 499, 506 (CCA 8, 1964) ; Travis Equipment Co. v. D & L -.

Construction Co., 224 F. Supp. 410 .(DC Mo. 1963): affirmed,

Missouri-Illinots Tractor & quipment Co. v. D & L, Construc-

tion Company & Associates, 337 F. 2d 507 (CCA 8, 1964);

- Economy Form Corporation v. Trinity Universal. Insurance: Co.,

234 F. Supp. 930 (DC N.D. 1964).

: i b. Aubequncy: of Form of Notice.

As to the propriety of ‘the form of the preliminary %

notice, the Courts have looked to both the Miller Act

‘and the Capehart borid form provisions and have applied

the cet most libera] as to the Particular. claimant: *

c. Jurisdiction for Service of Process.

_ When a question. of the validity of the - service of ae

‘process beyond ‘the physical jurisdiction of the trial

_-’ court has been raised, the Circuit Courts of Appeal have

divided as to whether or/not the Miller Act cases cont

trol. The Tenth Circuit’ ; of Appeal’s has*held that.

Capehart construction is aot public construction and

accordingly, service beyond the’ physical jurisdiction of -

the Court is invalid.“ The. Eighth and. Fifth Circuit ae

- Courts of Appeal, however, have wigs in reliance upon

the Miller Act, such service is proper."®

de Capacity to Sue and Be Sued. '

“Where the issue has been raised re the capacity of

the. parties to sue or be sued, the courts have applied ay

the cases interpreting Mill’ Act.”

Continental Casualty Cndapenis v. Allsop Lumber Co.

F. 2d 445 (CCA 8, 1964), cert. den. 379 U.S. 968; Rufsell v.

Travelers Indemnity Co.,: 244 F. Supp. 419 (De. Mo. 1965) ;

’ Treland’s's Lumber Yard v. Progressive Contractors Ine.

N.W. 2d 554 (Supreme Court of North Dakota, 1963).

WU nited States for the. Use of Males. Lumbe ompany U.

Harrison and Grimshaw Construction C ompany, supra, at p. 369.

‘16Continental Casualty Company v. Allsop Lumber Company,

336 ‘F. 2d:445 (CGA 8, 1964), cert. den. 379 U.S. 968; United .

ye 2 for Use of R. W. Fine v. Travelers Indemnity Co., 215:

Cate Com 455 (DC Mo. 1963) ; Kappers Company v. Continental

Ci pany, 337 F. 2d 499 PCGCA 8, 1964); Autry Vv.

Williams &D Dunlap, 343. F. 2d 730 (CCA 5,. 1965).

United States for Use of RW. Fine v. Travelers Indemnity

* Co., 215 F. Supp. 455, 460 (suability of partnership under Rule ,

1706) of the Rules of Civil harppaaAe

. ©

ee bc

a . ’

e. " Jurisdiction Over the Subject Matter. -

The Miller Act provides that jurisdiction is exclusive-

ly within the Federal District. Courts. The Capehart —

-bond ‘form provides that suit -may’ be ‘brought within

either the Federal District Court or the- State Court

where. the project was located.. Despite the provisions

- Of the. Capehart bond form, the Fifth and Eighth.

- Circuit Courts of Appeal’ have held that jurisdiction of —

suits against a Capehart surety is exclusively in the

Federal Court. by virtue of the Miller Act, while the

| ‘Tenth Circuit Court of Appeals has held that jurisdiction

is exclusively’ i in the ‘State Courts.” Adding to the con-

fusion are the decisions ‘of the highest courts of two

states holding that jurisdiction is exclusively in the Fed-

eral Courts” while in‘ contrast the highest courts of

“two other states have ruled that jurisdiction between

the Federal and State Courts are concurrent.* ~

“In the case-at bar, the Fifth Circuit ‘Court of Ap-

peals has held that the preliminary notice Provisions -

_ requisite to suit against a Capehart surety set forth

, under the Miller’ Act have been superseded by the no-

whats v. United States for Use . Waders 285 F.2d 98

(CCA 5, 1960); Koppers Company v. Continental ey

Company, 337 F. 2d 499, 506 (CCA’8, 1964).

United States for. Use of ‘Miles: Lae C open v. Her.

rison & Grimshaw Construction C. ompany, 305 F.

10, 1962), cert. den. 371 U.S. ; United States for Use eof

General Accident Fire & Life As ance v. McGuire Homes Inc.,

186 F. Supp. 659 (D.C. Mass. 1959).

Gypsum. Contractors Inc. v. Ameriéan Surety - ‘Company; 37

N.J. 315 A. 2d 174 (New Jersey),; cf. Minneapolis-H.

Ny seen Co. v. Terminal Construction Corp., 41 N.J. 500,

197 A. 2d 557; Treland’s Lumber Company v. Pro rogressive Con-

tractors, Inc., 122 N.W. 2d 554 (North Dakota 1963)..

A Allsop Lumber Company v. Continental Casualty Company, |

73 N.M. 64, 385 P. 2d 625 (New Mex.,. 1963)’: gre V7

| United oS Pane occ Co., 3 S.W. 2d 855 (Me. 1965). :

x .

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P one

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—12—*

tice Neoinnialed of the Cipehart tionit form. It is sub-.

mitted that the instant. decision is in direct conflict with

the foregoing decisions ewherein it has been held, in

- actions against Capehart sureties, that the statute of _.

limitations provided for by the Miller. Act prevails over

the statute of limitations provided for in the Capehaet . -

; bond form, and those decisions holding that the Miller

e Act confines jurisdiction, in actions against Capehart

sureties, exclusively to the“ federal courts despite C Gpe-.

hart bond provisions conferring cancierrent state -_“

federal jurisdiction. wee

Moreover, the opinion of Fifth Circuit Court of Pas ¢

_ peals conflicts with the holdings of three earlier deci-

__ sions reached by that court. Lasley v. United States for

the Use of Westerman, 285 F. 2d 98 (CCA 5, 1962) ;

Continental Casualty Company v. United. States for the

” Use. of Conroe Creosoting, 308. F. 2d 894.(CCA 5,

cS “1962) and Autry v- Williams and pee, 343 F. 2d

730 (CCA 5, 1965)" 5 is

regarded and that by virtue of the Miller Act, actions ‘against

‘Capehart sureties were exclusively in the Federal Courts. In

. Autry, thé Fifth Circuit in an action on a Capehart bond, held in -

_ reliancé on the Miller Act, that extraterritorial use of process

-was proper. In addition, in Autry, the Fifth Circuit in footngte

30 on page 730 recognizes the sufficiency of a preliminary notice

giveti in a “timely and proper” manner, as required by the Miller, —

_ Act. In Creosoting, the defendant Continental argued .-that

othe claimant, being a sub-subcontractor to a subcontractor, was

under the terms of Coritinental’s bond too far’ removed ftom.

Hayes Inc. to’ recover under the bond. In rejecting such argu- ge

* ment, the Fifth Circuit held that the claimant, although dealing Ran

with entities purportedly. different _ from Hayes Inc., had ‘in fact

“dealt directly with Hayes Inc. inasmuch as ‘such other entities

. were the alter egos of Hayes Inc.

. (This footnote conned on the net page

xe ?

In Lasley, ‘the Fifth Gircuit held that the concurrent juris-

- diction provided for by the Capehart bond form should. bé dis-

If ones fo read at this point the simple language of ;

- the 1956 Capehart Amendment, it is difficult to under-

stand how the courts have allowed the aforementioned: .

conflicts and inconsistencies to soming into being. With-

out attempting any comment on the tortuous rationaliza-

tions employed ‘by the various courts in attempting to

explain the conflicts and inconsistencies,” it is: suggested oom

that all of such difficulties have actually arisen only asa

result of the failife to accept the plain meaning of the

language employed by Congress in the 1956 amendment. -.

_ Although it’is always difficult to argue about the “plain foe

‘meaning of words”, it is submitted,,that the language of

the 1956, amendment compels the conclusion that the ae

“amendment simply provides for Miller Act bondse on

_Capehart constructions with the additional proviso that

the sureties on such bonds, and. nothing more, must be

approved by the Secretary of Defense. If on review;

_ this Court adopts a construction based upon such “plain

meaning” it will dispense with the need for the ration-".

alizations employed by the various courts, including the -

instant court, resolve the : conflicts and inconsistencies

Pe eo which~have—plagued the various F ederal and State

courts, and, replace the arlarchy existing in the Capehart —

construction afea with a consistent rules aw.

bak

- In this coanéction, it is interesting to note that alter. ego,

_Tecognized by the Fifth ‘Circuit in the Creosoting case, is now

totally rejected ‘in the instant .case. See Point,III of Reasons

- for Granting: the Writ of this Petition. In ion, such incon-

sistency is compounded, in that the basis. for the Fifth Circuit

decision in Creosoting is the use of. interrogatories and answers

_ thereto propounded in the matter now before: this Court. See

og of 308 F. 2d and Civil Docket case number 2030, p. 1,. -

- Vol. 1, Record-on Appeal, and Finding 28, p. 99, Id.

.°8See point IT. of the instant decision, subsections E and oF,

— at PP. 976 and 977. .

¢. ~

| —4— —- :

eae eae bolasseet ‘3 Tl. - * . 48 |

S The need for this Court to set at rest, the foregoing

difficulties is one which has been drawing. increasing

recognition. As early as 1962, in two Capehart construc-

. tion: cases, Continental Casualty Company v. United

_- States fax Use of Robertson Lumber Company, 305 F.

2d 794 (CCA 8, 1962) and United States for Use’ of

| Construction Company,-305 F. 2d 363 (CCA 8, 1962),

. petitions for certiorari were -deriied. 371 U.S. 922 and ,

374US. 920. ‘Subsequently, in 1963 the Honorable John .

Ws Oliver, District. Judge for the Western District of

Missouri, in Travis Equipment Com

stfuction Company, 224 F. Supp. 410, i

on Capehart confusion wrote at page 417: ~

- ' “We are, of course, in radical disagreement with —

‘the rationale and with the conflicting decisions of .

*.the Supreme Court of New Mexico reported as _

Allsop Lumber Company v. Continertal Casualty

_ Company, 385 P. 2d 625 (1963). We note in

passing that the possibility of the ‘judicialchaos’ to

, which we alluded on page 474 of 215 Fed. Supp. .

is developing’ at a predictable rapid rate. Not only

are several of the Umited States Courts of . Ap-

peals in open and complete conflict, but the first

two of the potential fifty State Appellate Courts

_ax*~to decide the subject matter are also in open con-

flict. We cannot believe that-the Congress intended

_ that the rights, of suppliers of labor and material

and of the bonding companies that write the statu-

tory: bonds ,for the United States Government

eee

_* ®*Now four. | fie

‘

y4.D& LCon- ~

commenting.

mary ee

Military housing projects were to be Sceptiined by

the chance geographical location of a particular

- military housing project.” (Emphasis added. ) ;

In. 1964 the defendant in the instant action in the

case of Continental Casualty Company v. Allsop. Lum- .

ber Company, 336 F. 2d 445 (CCA 8, 1964), a Cape- -

hart case, : filed. a’ petition | for certiorarj to this Court

seeking a review of the limited question of whether the

Federal District Court had jurisdiction of

projects under a non-Capehart provision, viz., :

' $1352. This petition, ithe its 1962 predecessors, was

denied. 379 U.S. 968. . oe

. Since the beginning of 1964, the’ judicial chaés re-

ferred to by Judge’ Oliver. has proliferated, with - the

Federal District and Circuit Courts of Appeal continu- -

ing to render the multi-varied and inconsistent decisions

- hereinbefore. referred to. During the two year period

from* 1964 to date, the Capehart confusion has: run

unchecked with no less than 32 reported decisions hav-

‘ing been rendered by courts. confronted with. various

problems arising out of Capehart Construction.*

Recently in:50 Iowa Law Review'1217 (1965), the

entire chaotic situation which has resulted from: the |

1956 amendment to‘ the Capehart Act was brought into.

focus and the need for review by this Court poignantly

and succinctly stated. In the concluding paragraph *

page 1235 the reviewer comments :

“The iritent of Congress in enacting the 1956

' Amendment to the- Capehart Act can, in the final

analysis, be determinéd only by Congress itself. ©

That Courts have differed in their interpretations “

25See Appendix “D”.

| —16—. a

of the Amendment is pot surprising. Judicial con-

fusion is the inevitable result of poor legislative

draftmanship. In the absence of legislative revi-

sion, the best answer lies in a clarification by the

Supreme Court. In order to insure uniformity. in the

determination of legal rights throughout the Na-

tion, it is the necessary function of. the.Supreme

_ Céurt to decide issues on which the- Circuits dis-

agree. Jf ever a need existed for the exercise of —

that function, it exists. today in the confusion sur-

rounding the bonding requirements of the Cape-

hart Act. Whichever branch of the Government

acts, that action should be forthcoming’'in the near

future.” (Emphasis added.)

Il.

Y Tarting briefly, to the’merits of petitioners’ position,

the Circuit Court of Appeals has ‘for some inexplicable

reason chosen to disregard completely the specific find-

ings of fact made by the Trial Court. At the trial level.

petitioners took the position that the. preliminary notice

required of them, if any, in order to recover on Con-

tinental’s bond, was that notice fixed by the Miller

Act, bl appa Se. .

“

’ 26Parenthetically this was the identical position taken by Con-

tinental Casualty Cempany .in the’ case of Continental Casualty

‘Company v:-United States for the Use of Conroe Creosoting, 308

F. 2d 849 (CCA 5, 1962), which arose out of the same con-

struction. project and involved the same contracting * parties,

where Continental Casualty Company on page 28 of its Open~

ing Brief in said matter stated:

“. ° “While [Lasley v. United Sates. er rel Westerman, 285

- F.2d 98 (CEA 5, 1960)] involved the Miller Act provisions

regarding jurisdiction, the Miller Act provision regarding

- notice, would, of course. be equally applicable.” -

This position: was sustained, without comment, by the Fifth

Circuit Court of Appeals.

ae |

‘In the sheen petitioners eae that if the pre-

liminary dual-notice of the Capehart bond form did con- .

trol, then, even in such event, notice. sufficient to satisfy

the bond form requirements had been given.

The three persons to whom. notice might have been

given in this case were Hayes, Inc., Nike Village and

‘Continental and as hereinbefore set forth, notice to’ any

two of the foregoing would have satisfied, bea bond

form requirement.

The trial court found that written notice was given |

to Hayes Inc. and Nike Village and, in, addition, found

that Continental had, within the requisite time, ob- -

tained actual « ‘knowledge, of petitioners’ claim including

the nature and extent thereof.” ~

Despite such specific findings the Fifth Circuit Court

of Appeals, some four years after, the: trial of the .mat-

ter, concluded not only that the Miller, Act: did not con-

trol (ignoring; as hereinbefore set forth, its prior de- ~

‘cision in Lasley v. United States for Use ‘of Ww esterman,

supra), but in. addition concluded that because Hayes,

Inc. and Nike Village were both notified by*the same —

single piece of paper rather than’ by separate pieces of

paper to each, oT as specified i in as bond form

_ had not been given.” i ‘ ;

Setting ‘aside the additional fact that the third per-

son to whom notice could have been given, namely Con-

oa 23, 24, and 25 p. 98 of Vol. 1 of the Record on

Appeal. Finding 4 on p: 91 identifies Nike Village as being a patt

of the Hayes Organizations.

78QOn p. 978 the court states:

_ But to conclude that, because Nike Village knew what

Hayes knew, only notice to Hayes is required would ignore

the clear bond requirement ot ‘separate notice to two of several

onus Parties.”

2" “re

tinental, had at ‘all requisite times actual knowledge of

all of the particulars required by: the bond form, the

_ Fifth Circuit Court of Appeals’ position favoring two

‘pieces of paper over one, surely achieves a high water- i

mark in sustaining form over substance.

* | Bae

The questions presented by this Petition, particularly

. that: concerning the applicability of the Miller Act to

Capéhart bonds, ‘are deserving of review by this Court

for two principal reasons. In the first instance, the’ public -

' interest requires that the myriad of conflicting decisions

- of the Circuit Courts of Appeal and highest’ State Courts .

be resolved so that there can be uniformity of decision

regarding Capehart construction and congressional en-

actments..The resolution of. the problems presented by

9°

the 1956 Amendment to the Capehart Act is important

to those members of the construction jndustry who have

heen called upon to construct housing units for the

Armed Forces of the Unite tes and whose rights

are yet to be resolved_in the Eourts. *° The resolution is

similarly important: to that segment of the financial com-

- munity know as the: surety industry. Additionally, the

resolution is important to the jurists, both trial and ap-

' pellate;federal and state, who must continue to cope with

‘the vast spectrum * of -problems created by the 1956

Amendment. While it may very well be true that no

Capehart construction has ‘been recently commenced, it

is far too late to utilize such fact as a basis for arguing

“against review. by this Court. :

This very argument was advanced twice. during. the

year 1962 when the cases of United Ste tates for ne of

29See Appendix E.

Miles Lumber Company v. Harrison and‘ Grimshaw

Coustruction Company, 305 F. 2d 363 (CCA 10, 1962),

cert. den. 371 U.S..920 and Continental Casualty Com- . —

pany v. United States for Use of Robertson Lumber

Company, 305 F. 2d 794 (CCA 8, 1962), cert. den. 371

U.S. 922, were tenderéd to this court for review. Since

that time numerous decisions have continued to be, re-

ported arising out of Capehart constructions, which: de- :

cisions have touched upon significant’ and important

‘issues including the jurisdiction of the Federal ‘Courts.

As hereinbefore set forth, such decisions have re-

sulted in a reign of unbridled chaos. Congress has not

repealed 6r otherwise amended the Capehart Act. “Addi-

tional construction may be commenced at any time. De-

cisions involving the Act ‘continue to be reported. In

1966 alone, to the date of filing this Petition, there have

béen five more reported decisions involving Capehart |

housing construction. Numerous cases arising out of

Capehart construction, are still not resolved,” although

the’ precise number of. cases still pending, of course; can-

not be accurately determined. -No longer should the de-

_ termination of significant rights of the parties be made

dependent upon the obviously incorrect argument that

Capehart constructions are moot. Four years of contin-

_ uing decisions canctonteety belies hn Capehart is. a °

moot issue. er ‘ 4

Secondly, the Geist ‘court found that petitioners had

“rendered valuable services to the construction of a mili-

tary housing project and, having complied with the

necessary preliminary notices, were entitled to recovery

from the surety for the some contractor. On review,

30See Appendix E.

‘™

° %.

te ee

-_ the Circuit ‘Court “acknowledged that the services were

, rendered,- did not dispute that the surety had, actual

knowledge of petitioners’ claim, did not dispute that the

general contractor received written notice of the pe-

titioners’ claim and did ‘not dispute, that through the |

.. same written notice the third person to whom notice

could have been given, i.e. Nike Village, did also receive -

notice. Despite.such acknowledgments the Circuit Court

of Appeals concluded, that the $175,199.00 due and un- _

paid to petitioners should be denied them because notice

was transmitted by one documént instead of two. It is’

submitted that this Court, in its role of supervising

the | Federal judiciary and preventing the erosion of

sound legal principles, should review the result achieved

: by the. Fifth Circuit Court of Appeals.

Conclusion,

A ey, Rey alos ao

For the foregoing reasons, this petition for a.writ of |

certiorari should be granted. 3

* -, Respectfully submitted, : ?

Davip ArtHUR BINDER,

| Attorney for Petitioners.

Of Counsel; |

Brown & Brown,

Howarp B. Brown,

Ropney Moss,

Rosert V.. BLADE.

.. ee

- APPENDIX “A,

_: Opinion of the United States Court of Appeals for.

the Fifth Circuit.

‘In the United States Covgt: of: ees for the Fifth

Circuit. ag ‘

‘Contintntal Casualty eligi: Appellant, versus _

O. Brand, Inc., and Hartford \Accident and ceo A

Company, Appellees. No. 20468.

- Appeal from the United State District Court for .

the Western District of Texas. _

(January 25, 1966.

Retote Tage Chiéf Judge, Rives, and Widsom, Cir-

cuit Judges. |

Wisdom, Circuit Judge: The decisive i issue. betoré ‘the

Court is the validity of the dual notice provision in the

_ standard Capehart Act’ payment bond exegted on ,a

form prescribed by the Secretary of Defense. This pro-—

vision requires, as a prerequisite to suit on the bond, -

that a Capehart Act suppllier give notice of default to

any two of the following parties: (1) the prime con-. °

tractor; (2) any one of: the obligees ; and ( 3) the ‘surety.

A Miller Act? supplier who deals with a- subcontractor

- must give notice of .default before commencing suit ;

against.the prime’s surety, but is Fdquired to notify only

one person, the prime contractor. The defendant-appel-

- lant contends that the A gt ee on a — |

Act of yinee 1, 1955, Public Law 84-345, 69 Stat. 646

\ ff., as amended by Act of August 7,. 1956, Public Law 84 .

1020, 70 Stat. He Se USC §§1748 ff. and 42 USC §§1594

’ ££. ja

249 Stat. 795 ( 1938) 40 USC §270a et seq.

eco ee |

hart ‘Act bond, failed to give the required dual .notice.®

The plaintiffs-appellees assert that the Miller Act’s. lib-

eral notice provision controls Capehart/ Act bonds; that,

accordingly, the Secretary of eee had no authority

to provide for dual notice of default.

We hold, first, that the Miller Act single notice pro-*

. vision should not be read into a Capehart Act bond.

The Capehart Act, as amended, delegates to the Secre-

“tary of Defense authority to require Capehart payment °

bonds containing more stringent notice provisions than ‘

are contairied in Miller Act‘ borids. This conclusion is —

not inconsistent with decisions of this Court holding

that the Miller Act controls jurisdiction for actions by

suppliers against the prime contractor and the surety.

See Autrey v. Williams and Dunlap, 5 Cir. 1965, 343 F.

2d 730; Lasley v. United States for use of W esterman,

5 Cir. 1960, 285 F.2d 98fSecond, we hold that the -

district court’s finding that the claimants here gave the

required dual notice is clearly erroneous. We reverse. .

;

: Hal Hayes, Texas, Inc. was the prime contractor,

“eligible. bidder”, on a Capehart project for the con-

struction of 410 military housing units at Fort Bligs,

_ Texas, at a contract price of $6,473,000. The Capehart

Act and contract requires the eligible bidder: (1) to

ph 4a of the bond. reads :. .

“4. © suit or action shall be commenced hereunder by any

claihant, a.

(a) Unless Claimant shall have given written ‘notice to any

two of the following: The Principal;. any one of the

Obligees, or the Surety above named, before the expira-

‘tion of the period referred to in condition 2 above, stating

with substantial accuracy the amount claimed and the name

of the party.to whom the materials were furnished, or for

whom the work or labor was ‘done or performed. . . ”

oan:

. ad La f ‘ ‘ : . 2 .

organize a corporation, termed the “mortgagor-builder”’,

to hold title to the project until construction is com-..

pleted; (2). to obtain. loans from lending institutions, :

“mortgagee-lenders” » in an amount sufficient to cover -

the entire cost ,of the project, including profit; (3)

to furnish a performance bond to protect. the United

States and a Feta bond to protect the laborers and .

material men.* Complying with these, requirements.

Hayes organized three corporations as mortgagor-build- __

ers (referred to collectively as Nike Village), obtained

' the necessary financing from two lending institutions,

and gave three performance and payment bonds ag-

gregating the full contract price. ‘Continental - Casualty

Company, here the defendant-appellant, was the surety -

_ on the bonds; Nike Village’and the lenders were: the

dual obligees on the bonds.

April 30, 1959, Hayes, Geeta Witih Canines

Inc.® entered into a written subcontract for the proj-

ects. earthwork . sees Pale 3 | Brand Co.., an experienced

‘The financing, arrangements. permit : utilization of private

funds (protected by Government mortgage insurance) for Cape-

hart housing construction. Congress devised the scheme because

it ‘was, reluctant to make large appropriations ‘for new housing

needed -to help retain skilled personnel in the services. Under

the plan, private units own tlie projects under construction.

When the projects are completed the United States assumes own-

ership and pays off the mortgage in installments with funds

that. otherwise would have been expended in quarters allowances

' for military personnel. See Note, 50 Iowa L.Rev. 1217,.1218-

19 (1965).

SHayes dealt’ with the subcontractors through Winn Con- :

tractors, Inc. Hayes wholly owned and controlled Winn. It is

conceded for purposes of this appeal, that the contract with

_ Winn was designed to enable Hayes. to escape liability to sup-—

pliers of labor and materials. On, appeal, Continental admits

. that Hayes and the surety could not escape liability on. the pay-

' ment bonds by relying on this fragile link in the chain of sub-

aren

‘.

contractor. The contract price was the lump sum of

~ $148,000. Hayes. knew that this figure was a -QTOSS -

understatement of the cost of the work. Hayes and

Brand had ‘a secret oral agreement that, regardless of ©

the written contract, “Hayes was to pay Brand ona.

| uriit-price. basis for ‘the work’ performed. The’ written

/. contract was a ‘sham to deceive their stireties as to the

extent of. their obligations and thereby protect their

, limited bonding position with their sureties. .

Unluckily for Brand, Hayes reneged on his gentle-

, ‘men’ s agreement. and insisted on Brand’s performing

’ the written | subcontract in strict accordance, with its

- “ruinous terms. Finaneial difficulties beset Brand. July -*

40, Brand. wrote Winns requesting adjustment of the

subcontract and estimating that $214,837.95 would be ,

necessary to complete it. July 23, Brand wrote a similar

~Tetter*to Hayes and Winf, No such letter was sent to.

’ the surety, Continental, or to the obligees on Continen-

tal’s Capehart payment: bond with Hayes : July 29, 1959;

Brand, totally lacking*in funds, unable to meet: payrolls, 5 « ‘

and unable to pry loose any payments from Hayes,

- abandoned the job. At: that time ‘Hayes ‘had. made prog- ~~

< ress payments to Brand amounting to. $134,000. Hayes ©

: called upon Brand's Surety, Hartford Accident_afid- In-

demnity Company, to complete the subcontract undef

Brand’s performance bond. Hartford refused. Hayes

ara completed the work at an gxpense | of about.

” $50,000. ° ee oe ‘ ee. Q 4 a

Pee Brand's unpaid suppliers of ‘hin and | materials

- biought°suit against Continental on. its paymerit bonds

ae with Hayes, and’against Hartford on its payment bond.

with Brand. The ‘suppliers obtained judgment: against.

Hartford aggregating $86,998.94. Hartford paid: the

a Bs

‘A

a -

. —5—

3 ts Sica 5 ; ; “a ’ r

judgments, taking subrogations and Wasignments from. .-

. the suppliers. Brand then brought this action against

Hayes and Continental. Hartford, as subrogee and .as-

signee of the claims of Brand’s suppliers of labor and

. " materials, joined Brand’s action against Hayes and Con-

_-“finental. eee :

®,

The district court found that Hayes had fraudulently

plotted to cause: Brand’s financial collapse.®. Accordingly, |

“the court annulled the subcontract between Hayes and

Brand, found that a reasonable subcontract price would

‘be $283,547.33, and entered judgment in quantum fiie-

_ Tuit against Hayes and Continental in the aggregate .

sum of $149,843.74 ($62,844.80 to Brand and $86,-

998.94 to Hartford). Continental appealed.

On. appeal,‘ Continental does~not ‘question the district

court’s finding that Hayes was guilty of fraud vig-a-vis

- Brand. Continental contends that Brand’s agreement

with Hayes to conceal the extent of their commitments

worked a. fraud onthe surety: We do not reach this

- The: acts»and conduct of the Hayes Corporations, their of-

ficers,; agents and employees, . . . were all part -of ‘a general,

. plan, thot and scheme to: (1) ‘obtain the signatures of subcon-

tractors to written contracts which were at a variance with prior

oral agreements and understandings and to thereby require said

subcontractors to agree, in writing, to-do work for less money

than they expected to receive;'(2) dé work other and more

than they ‘thought was being required of them; (3) to obtain

Performance Bonds and Payment Bonds for. the benefit of the

Hayes Corporations, well-knowing’.that the subcontractors, as

. principals, would not be able to pérforn? the .work ‘required of

them for the compensation agfeed upon; (4) avoid payment of

their obligations justly due by refusing to pay or by shifting the

_ obligations-to pay to the sureties of the subcontractors; .(5) keep |

and maintain the subcontrdetors:on the,construction projects by

firther promises and ‘represefitations ; and (6) extract letters and

docurnents from the subcontractors purporting to release and

. exculpate Hayes and the Hayes Corporations and organizations

from and of any liability, responsibility, ¢laim and demand.” ‘

“-

point, because we agree with Continental’s contention

that the claimants failed to give the dual notice required

as a prerequisite to suit'on a Capehart Act bond.

a — |

We discuss, first, the question. whether the single -

notice provision of the Miller Act, 40 USC §270b(a),

rather than the express dual notice provision of the

Capehart payment bond, controls a suit on the bond.

' A. Since 1894, the Heard Act and its successor, the ~

Miller Act, have required contractors of public works in

_ the United States to provide bonds for the protection

. of their suppliers.’ The Capehart Military Housing

Act, as originally enacted in 1955, did not refer to the

Miller Act nor did it specifically require that the eligible

bidder provide a payment bond for protection of sup-

pliers of labor and materials. Nevertheless, the Secre-

__tary of Defense and the Commissioner of Housing re-

. quired the bond during the first year-folldwing passage —

of the Capehart Act.®

7The Heard Act, ch. 280,.28 “Stat. 278 (1894), provided

for a single’ bond to protect both the syppliers and the United

States. The United States had the exclusive right to sue on the

-bond for the first six months after completion of the w This

often resulted in extended delays to suppliers. The “Miller

Act was intended to eliminate the difficulties by providing for

both a performance bond and a payment bond, giving the sup-

. pliers the right to sue on the payment ‘bond. See, MacEvoy v.

ompkins Co. 1944, 322 U.S. 102, 104. °

SAfter enactment of the Capehart Act; the Commissioner of

Housing promulgated comprehensive regulations (21 Federal

‘Register 319; 20 Federal Register 5969, 5970.), Sec. 292427’ of

which, entitled “Completion Assurance”, required'a bond to be

furnished satisfactory to the Commissioner and the Military. See

Hart, The Purpose, Form and Problems of the Capehart Housing

Pi 7 1961.A.B.A,. Section of Insurance, Negligence & Com-

‘pensation Law 231, 237&n. 22.

eS |

To clarify the relationship of Miller Act bond.require

ments to Capehart housing projects,? Congress amend-

ed the Capehart Act, August 7, 1956, to provide: oi

Any such contract shall provide for the furnishing

by the contractor of a performance bond and a _

payment bond'with a surety or sureties satisfactory

to the Secretary°of Defense, or his’ designee, and

the furnishing of such bonds shall” be deemed a

sufficient compliance with: the provisions of ' sec

tion 270a of, Title 40 [The Miller Act], and no

tion.”

This ae ee to the Capehart Act intensified thé am-

biguous relationship betweén that act and the Millet

Act. : eae <s

The Secretary’s standard bond was promulgated in’

1957 after numerous “meetings attended by representa-

tives of bonding companies, the Department of Defense,

the Army, Navy, Air Force, Federal Housing Adminis-

tration, and interested lending institutions."' Apparent-

ly, all of the agencies | read the amendment as delegating

to the Secretary of Defense discretionary authority to

write a payment “bond especially suited to Capehart hous-

ing projects. . .

Section 270(a) of :the Miller Act privides that: con-

tractors for certain public works shall. furnish a pay-

102 Cn fies. 9874 (1956).

Housing Act of 1956, ch. 1029, §507, 70 Stat. 1110, “42

USC $1594(a) (1958). 2

"Kenney, The Capehart Act Performance and Payment

Bonds, 1961 A.B.A. Section of Insurance, Negligence & Com-

pensation Law 251. The dual-obligee bond is Federal Housing

narra pee Form No. ss ialeaah Ibid. :

additional. bonds shall be required under such sec:

ment bond. Continental ‘points out that the notice pro-

6c“

‘vision in §270b(a) is applicable only to contracts in’

respect of which a payment bond is furnished under

§2704. . .” But, Continental argues, the Capehart bond

is not furnished under §270a; it is furnished under the

Secretary’s regulations under the 1956: amendment to —

the Capehart Act; therefore? §270b(a) of the. Miller

_ Act is not: applicable to Capehart bonds.- The language

in the 1956 amendment providing that a bond satisfac-

tory to’ the Secrefary ‘ ‘shall be sufficient compliance

with §270a [of ‘the Miller Act]’? does not disturb this

conclusion, so the argument runs; that language means

only that a single hond, the Secretary’s. js required for

- Capehart projects. See Comment, 111° U.Pa.L.Rev.

1014, 1018 (1963).

-On the other hand, Hartford,and Brand- contend

that the amendment substitutes the Secretary’s bond for

the bond §270a of the Miller Act ‘would otherwise re-

quire; that the remaining sections of the Miller Act con-

-ferring rights established by the bond required in §270a

apply as well to a substitute bond; therefore the notice

provision in §270b(a) is applicable to Capehart bonds.

Accordingly, the appellegs contend, the conflicting dual

notice provision whick the Secretary inserts is unauthor-

ized and void. See Comment, 49 Va. L.Rev. 174, 179-80

(1963). | @?

B. Little legislative history i is available. The Howe

| and conference! teports. that accompanied passage of

~ the 1956 amendment to the Capehart Act do not men-

tion the question of single or dual notice. The Senate .

report declares: “In order to resolve a legal uncertainty

concerning the bonding’ of. contractors whe build mili-

tary housing . . . the bill provides that such contrac-

all

LATIN: OTRAS Ant th ema ,

ae tie

‘tors shall furnish bonds satisfactory to the FHA Com-

missioner and the Secretary of Defense. This change -

was recommended by the Department of Defense*to

conform to the usual FHA bonding requirements.”

HR 11742, the final clean bill enacted by Congress

as the Capehart Act, succeeded and encompassed. an

‘earlier bill; HR 10157. Included as part of the record of

the Committee Hearings on HR 10157 was a letter

. dated June 4, 1956, from the office of the Secretary of

Defense to the Chairman of the Congressional Com~—~~

' mittee conducting the Hedfings. oe Patt, the Sécfe-

tary of Defense wrote: |

“It is also. recommended that HR 10157 be .

amended to make it clear that ‘the provisions of

- the Miller Act (40 USC 270a) are not applicable:

to Title VIII ‘Housing. It appears more ‘appro-'

priate to provide for use of the FHA dual obligee

bond form for both performance and payment

bonds. The cost of FHA bond is substantially less

than the. cost of bond required by the Miller Act

for public works, so that the proposed amendment

will serve to decrease the cost of construction and

otherwise facilitate contractual relationships. ‘Ac-

‘cordingly, it is. suggested that the ai wes amend-

ment be added to the bilt: . !

‘Section 403(a) of the Hosisiug Amendments of:

1955 is amended by adding before the final sen-

tence “thereof the following: “Any such contract »

shall provide for the furnishing by the Contractor

of a performance ee and a payment bond with

~~ 125 Rep. No. 2005, 84th bias. 2d Sess, 10 (1956).

18See Hearings on H.R. 10157 before the House. Committee -

on Banking and Currency, 84th Cong., 2d Sess. 195-96; 3 U.S.

Code —— Adm., Ness (1956) —

a surety or. sureties satisfactory to the. Commis-

sioner and the Secretary of Defense, or their des- -

ignees, and the furnishing of such bonds shall be

. deemed sufficient compliance with the provisions

of section 1 of the Act of August 24, 1935, and

-no additional bonds will be required under such

section.” ’ ’’ (Emphasis added) . as

. The language Congress used in amending the Cape-

hart Act’ is virtually identical with that recommended

- by the Secretary of Defense in his letter to the Com-

mittee. The letter, however, like the amendment, ‘refers

to §270a only, and does not explain how the suggested

- amendment would affect other sections of the Miller

- Act. “Nevertheless” as the Supreme’ Court of New

Jersey observed in discussing the effect of this letter,

“the broad language uséd therein, i.e., that the amend- -

ment be adopted to ‘make it clear that the provisions’

“of the Miller Act (40 USC 270a) are not applicable '

to Title VIII Housing’ (which includes Capehart hous- ~

ing), coupled with- the reference to the approved FHA

type bond which contgins the provision. permitting

suit in the appropriate state or federal court [and, .we

add, the dual noticé pfovision] should not be ignored.

It lends persuasive force. to the view expounded by the .

‘Eighth and Tenth Circuit Courts that by the 1956

amendment to the Capehart Act Congress intended’ to

authorize the Secretary of Defense or his designee in :

' fis discretion to approve a bond which sanctioned the

bringing of suit therein in a designated state court as

well as in an ‘appropriate United States District.

’ Court.” We do not go that far. But the letter does.

14Minneapolis-Honeywell Regulator Co. Terminal Constr.

_Corp., 41 N.J. 500, ses, 197 A.2d 557, 565-66 came

« %

porns,

show that the purpose of the amendment was to. ap-

prove an FHA type bond denominated a “Dual-Ob-—

ligee” bond and containing a dual notice provision.”

| C. Understandably enough, courts -have disagreed

about the applicability of the Miller Act to Capehart

. bonds.’* Courts agreeing in the result have diverged

widely in the rationale for their holding.’”

The Tenth Circuit has held that. the Miller Act

(other than §270a) is inapplicable to Capehart bonds,

because ° Capehart housing projects are not “public

works” within thé meaning of the Miller Act. United .

States ex rel. Miles Lumber Co. v. Harrison & Grim-

shaw Construction Co., 1962, 305 F.2d 263, cert. de-

nied, 371 U.S. 920. This Court, disagreeing with the |

Harrison & Grimshaw rationale, has held that §270(b)--

(b) of the Miller ‘Act confers jurisdiction for ma-

terialmen’s suits on Capehart bonds. Autrey v. Williams

& Dunlap, 1965, 343 F.2d 730; Lasley v. United States

for use of Westerman,. 1960, 285 F.2d 98. Autrey ‘and

Lasley accept the principle that a “public work” within

~. the Miller Act is “any work in which the United States

‘is interested and which is done for the public and for

which the United States is authorized’ to expend

: 2

18See footnote 11.

16See Note, 50 Iowa’ L.Rev. 1217 (1965).

17F.g), compare United States ex rel. Miles Lumber Co. v.

Harrison & Gfimshaw Constr. Co., 305 F.2d 363, (10th Cir.),

cert. denied, 371 U.S. 920 (1962), (Miller Act notice provi-

sion inapplicable to Capehart bonds because Capehart projects

‘held not to be “public works” within meaning of Miller Act)

and, Continental Cas. Co. v. United States ex rel. Robertson

Lumber Co., 305 F.2d 794 (8th Cir.), cert. denied, 371. U.S,

922 (1962) (Miller Act notice provision inapplicable to Cape-

-hart bonds because Capehart notice provision is a “procedural” .

provision which Secretary of Defense may prescribe.) :

—12—

funds.’"* Under this test, Capehart housing projects —

are public in nature even before title. shifts to the

United States.” . Pipe) it Sen |

To construe the. Capehart Act as ‘entirely insulating

Capehart bonds from the Miller Act would be to as-

sume: that Congress delegated to:the Secretary of De-

fense virtually unlimited power to define the rights of .—

suppliers of these important public projects. Something

--more than an ambiguous ‘amendment to the Capehart _

Act is necessary~before we will attribute to Congress

an intention to abandon the policy implicit in the Heard

and Miller Acts of defining by statute the rights of .

suppliers of public works. Similarly, the Eighth Cir-

cuit has said: “We do not regard the Robertson opinion

_ [Continental Cas. Co. v. U.S. for Robertson Lumber

Co., 1962, 305 F.2d 794, cert. denied, 371 U.S. 922]

‘as taking Capehart bonds ‘out of the Miller Act’ in

18Peterson v. United States ex-rel. Marsh Lumber Co., 6 Cir.

1941, 1119 F.2d 145, 147 (federal flood control funds used for

_ relocation of railroad bed and track). See also United States,

‘to. use of Noland Co., ‘Inc. 1942, 316 U.S. 23, 29, 62 S.Ct.

899, 902, 86 L.Ed. 1241 (federal funds used to’ construct li- ,

brary at Howard University) ; United States ex rel. Gamerston

& Green Lumber Co. v. Phoenix Assurance Co., N.D. Cal. 1958, .

163 F.Supp. 713 (non-appropriated federal funds used to build

library for use of personnel at military post). ° L

19The “private” company building a project is a skeleton cor-

poration with no interest in the property except to hold title

until the United States assumes tbicmatag: upon the project’s.

completion. The private funds financing the building are fully

protected -by Government Mortgage insurance. The property -.

upon which the houses are bttilt is:Government-owned. In addi- |

tion, the United States provides specificatiogs for the projects,

regularly inspects work progress, and maintains substantial con-

_ trol over developments from start to finish. Finally, the, housing

' projects have an important public purpose in that they are de-

signed to improve the quality of the military by helping to re-

‘tain skilled personnel: See Autrey v. Williams & Dunlap, 5 Cir.,

1965, 343 F.2d 730, 734; Comment, 49. Va.L.Rev. 174, 175-

79 (1963) ; Comment, 111 U.Pa.L.Rev. 1014 (1963). |

every respect and particularly so far as jurisdictional

.. matters are concerned.” Continental Casualty -Co.. v.

oe ee ey ee

Allsop Lumber Co., 1964, 336 F.2d 445, 451.

- We carefully limited Autrey and ‘Lasley to ‘the nar-

row holding that the jurisdictional’ provision of the

Miller Act, §270b(b), applies to Capehart bonds. We

‘were reluctant. to draw from an ambiguous stattite an

unnecessarily ‘broad rule. Exercising ‘similar caution,

this Court addresses itself only to the specific question

| whether the notice provision of the Miller Act, §270b-

(a), applies to this Capehart payment bond. é;

-D.z Although we consider Capehart projects “public:

works,” what distinguishes them from. the public. works

for which the Miller Act ‘was ‘designed is the absence’ ———

of. appropriated funds.: This is the central fact in the/

realm of Capehart. As a result, the Secretary of Defense .

and the Federal Housing Commissioner found it neces-

"Neary to contrive a complicated three-cornered legal

- structure: (1) Instead: of a prime contractor, there is

an “eligible bidder” who receiyes not a contract but, a

“letter of acceptability” which he undertakes to carry .

out at the risk-of losing his security. (2) The “mort-

gagor-builder” is a. nominal obligee. (3) The “lender”

' mortgagee is the only authentic obligee; and, upon de- ©

-’ fault, since the mortgagee may call upon the FHA for

its full insurance coverage, the rights of the ‘obligees

may be. assigned to the FHA. Within this eontext,

the Secretary of Defense, working -closely with the

FHA Commissioner, fashioned a bond suitable for the

elaborate and unique financing scheme established: in

the Act. The 1956 amendment, providing for a bond

“satisfactory to the Secretary”. is completely meaning- |

less unless it is construed as’ delegating flexible author-

Aaa |

AS ity. to the Secretary to require an appropriate bond. At

the same time, the absence in the amendment .of a clear

grant of exclusive authority to the Secretary and the

“gress limited the scope of ‘his authority to prevail over

the Miller Act: Capehart. bond provisions should pre-

vail,.when the provisions are reasonable and pecotiasly

suited to Capehart ‘projects. The dual otice require- \

- ment appears to be just the sort of provision Congress

must have\had in mind in a. the amendment the

Secretary proposed.

It is evident\ that Congress envisioned an expansive

role for. the Setretary. of Defense in administering

Capehart projects. The Secretary has considerably more

authority over Capehart projects than the contracting

/ officer has over Miller ‘Act projects. Indeed, the Cape-

hart Act grants the. Secretary almost complete: control

over the terms of the housing contract and over hous-

- ing construction. “Each housing unit shall be placed

under the control of the Secretary of Defense, or -

designee, as soon as the unit is available for eccypancy.”

42 USC. §1594.

In an ordinary Miller Act prdject, notice by the sub-

contractor’ s materialmen of the subcontractor’s default

need go only to the prime -contractor. The prime con-

_ tractor has the option of advancing or withholding pay-

\ reference to the. Miller Act seem to indicate that Con- ma

. sh

ments to the subcontractor. If the prime contractor ad-

vances payments, he may be-able to prevent a loss- from

his miscalculation of costs“ by renegotiating with the

government. In Capehart projects, however, the prin- .

cipal contractor, or “eligible :bidder”, is unable to re-.

negotiate his contract because the amount available for

the project is strictly limited to thé amount of the

sis”

bid. Seni the “eligible bidder” may be reluctant or un-

able to advance credit to a subcontractor, the. surety

may feel compelled to advance credit in order to avoid

default. - The. Capehart surety therefore is as. much in

need of materialmen’s notice of default as is the prime,

contractor in an ordinary Miller Act project. The Secre-

3 tary’ s Capehart bond requirement that if notice is given

to the “eligible bidder” it must also be given either to

one of the bond obligees or to the sutety achieves this” 2

result. ”

. Another -reason why it is vensicianiile for the Secre--

tary to require especially adequate. notice of default to

a Capehart surety is that the surety may be liable ‘for a.

greater amount than a Miller Act surety. The penal.

amount of aMfiller Act payment *bond is one-half the

contract amount, where the amount does not exceed

$1, 000,000, forty pes cent of the amount when it is be-

tween $1, 060,000 and $5,000,000, and, in any event,

may ‘not. exceed $2, 500,000.00. 40 USC > §270a(a). The |

penal amount of the Capehart. pa étit “bond is not —

limited by statute and may be, one hundred per cent-of

the contract price. ‘In this casé, Continéntal’s payment

‘bonds with Hayes for the Fort Bliss ‘project aggregated .

the full contract price, $6,473,000. 3

“The interpretation placed: upon [the Cuipetiaee Act]

‘by the agencies charged with its enforcement is ‘entitled

to great weight”. Continental C asualty Co. v. United

States ex rel. Robertson Lumber Co:., 8 Cir. 1962,

_ 305 F.2d 797, 799. The. interpretation administrators of

_ Capehart projects place upon the Capehart Act, as

‘ amended, fortifies our conclusion here. The Secretary

ee | sc.

- 20See Comment, 111 U.Pa.L.Rev. 1014, 1017 (1963).

\rl6e—

‘of. Defense, - upon whose recommendation the 1956°

amendment was enacted, obviously construed the en-

_’. aetment of the amendment as approval of his view -

_ that. Miller: Act: proyjsions . ware inapplicable to “the >.

-.. FHA dual obligee bond form” used on Capehart proj- ° _

ects. The Federal Housing Administration, insurer.of » 9

the mortgaged: property which is the basis of the ifi-

tricate ‘Capehdrt financing, agreed with, the Secretary.”

And the United States, General Accounting office bea a

expressed the opinion that: the Capehart bonds-are “in- :

dependently established” ‘and that “the Miller Act is

- not controlling as to, them.’’”?’ “While we think that

Congress intended that Capehart suppliers should havé

substantive bond protection essentially similar tg that ,

ae tp : afforded Miller Act supplier's, we think: also’ that Con:

aoeeate \ gress intended that. the procedural. provisions of Cape- |

NX. 1. hart bonds [for example, the notice provision] should

a worked out and prescribed by the two agencies: [De- |

aga partment of Defense and Federal- ‘Housing Administra-

*< tion] in light of the unigye nature of Capehart con-

struction of the ° peculiar problems which might be .

: encountered ‘in connection’ with such construction.”

~~. Robinson, supra, 305 F.2d en Ai ee

E. Our decision here not to apply to Capehat pay-

"ment bonds the Miller Act notice provision, §270(a), is

~ not inconsistent with our earlier decisions i in Autrey and -

Sha to apply to the sameé bonds the Miller ee, je |

Sree ° Fart, The Purpose, Fotm and Problenis of the Capehart

oes * Housing Program, supra, note 4 at 238 & n: 26...

* 28United States General ‘Accounting Office Letter B.59805; = ~

dated June 11, 1958, reported in Hart, The Purpose, Form: and | ,

poe, . Broblems of ‘the. Capehart ——— Program, .supra note 4 at

‘ey "238 &: n. a7.

— s 2

« —=

, : eats ho Si ‘ *

>. &

pies

risdictional pr vision, §270b(b). The principal'basis. for

the’ decision here is’ that in establishing a unique finan-

~ gial arrangenient® over which ;the Secretary of Defense

has broad control Congress grarited:implied authority to”

the Secretary -to establish reasonable: notice provisions |

- peculiarly siitable for.a Capehart project. Nothing in -

the financing scheme implies a need for a jurisdictional

provision different from that prescribed for suits by -

suppliers of public works in the Miller Act.

In addition, in Autrey the Court was unwilling to in-

‘fer from an unelear statute Congressional sanction for a

, jurisdictional provision severely diluting the adequacy of .

Suppliers’ ‘remedy by not. providing for extraterritorial

- service of process as the Miller Act does. 343 F.2d at

735. By contrast, our refusal here not to apply the no-

tice provisions of the Miller Act does not dilute the long-

standing efforts of Congress to secure suppliers’ rights.

Applying the dual notice requirement does not seem un-

fair to the plaintiffs in this case. We are. persuaded, in

part, as was Judge Blackmun, “by the completely un-

explained failure of [these] plaintifffs] to avoid [the]

, “difficulty in the first instance by. taking the small

trouble to give the dual notice so clearly required by

the bond.”: Robertson, supra, 305 F.2d at 800. In:the

| abesnce of a decision on point in.this circuit, Hartford

and Brand could’ not disregard the express notice pro-

vision of the bond on which they sue. and could not *

_ justifiably rely upon. a statutory ambiguity and con- -

flicting decisions in other circuits to ae a less strin-

gent notice requirement.

.. F..The result we reach in this. case is ; Similar to the -

| result reached by apparently every court that has con-.

—B— *

‘sidered the quéstion,” although we may differ from

some of the courts in rationale. For example, in Con-

tinental Casualty Co. v. United States ex rel. Robertson:

Lumber Co.,.8 Cir. 1962, 305 F.2d 797, 798, the court

relied, at least, in part, upon its determination that a

notice provision is “procedural” rather than “substan-

tive” in finding that the Miller Act notice provision does

not apply to Capehart bonds. “Procedural” and “sub- .

stantive” are: words so freighted with conflicting inter-

pretations that we prefer not to apply them in the con-

fusing area of thé relationship of the Capehart Act to

the Miller Act. We hold only that the 1956 armnendment

to the Capehart Act, when considered with the scheme of

a Capehart project, expresses the will of Congress to

delegate to the Secretary of Defense authority to write:

into Capehart bonds a dual notice provision.

. ae

The remaining, question is whether the district court

erred in its findings that Brand complied with the dual _

notice provision of the Capehart bond. .

The borid requires written and timely notice to any

Hayes; ( 2) any one of the — in this case Nike

National State Bank v. Terminal Pinal Corp., 1963 D.N.J.,

217 F.Supp. 341, aff'd, 3 Cir. 1964, 328 F.2d 1 ited States

ex rel. iles Lumber ‘Co. v. Harrison & Fa tee ag onstr. Co.,

10 #Cir. 1962, 305. F.2d 363, cert. denied 371 U.S. 920. Conti-

nental ‘Cas. Co. v. United States ex. rel. Robertson. Lumber =

8 Cir. 1962, 305 F.2d 794. United States, for use of Fi

v. Hal B. Ha & Associates, Inc., 1963, eND.Cal, 221 :

~ Supp. 260, B. C. Richter Contracting Co. v. Continental —

Cas. Co., 1964, 41 Cal. R . 98. Allsop Tenher Co. ¢. Cont

* ‘nental Cas. Co., 1963, 73 NM. 64. 385 .P.2d° 625 (dicta).

Treland’s Lumber Yard v. Progressive Contractors, Inc., _—

122 N.W. 2d 554 (dicta). i

= P

Village and the lending institutions; (3) the surety, in

this case the appellant, Continental. sti

There is no suggestion that claimants gave notice

either to the lending institutions or to Continental. That —

leaves Hayes and Nike Village. Brand offers letters he

wrote to Hayes and Winn on July 20, 1959, and July

23, 1959, as evidence of notice to his claim to Hayes.

Brand further argues that because Hayes wholly owned

and dominated NIKE, the letters also constitute no-

tice to NIKE, thereby fulfilling the Capehart require-

ment of notice to two of the designated parties. |

Hayes originally dominated Nike ‘Village i in the ‘sense

that the mortgagor-builder was a creature of the eligible

“ bidder. But this is the case in every Capehart situation.

The mortgagor-builder (Nike Village) is an entity es- ~

_ tablished of doctrinaire ‘necessity, to own property upon

can be mortgaged in order to obtain building loans from

‘private insti itutions A | But to conclude that, because Nike ~

Village knew what Hayes knew, only notice to Hayes

is required would ignore the clear bond- requirement of

separate notice to two of several designated parties.

Such a result would ignore an essential part’ of - Cape- .

‘hart financing that makes notice to the ‘mortgagor-

builder important even if notice, is. also given to the

eligible bidder. Under Capehart procedure, the Housing -

Contract for the Fort Bliss project provides that, upon.

. delivery of the contract, the: eligible [bidder] must. place

ih escrow with the mortgagee the mortgagor-builder’ S

stock, endorsed in blank, and ‘signed resignations of ” |

“See Hart, supra, dat 233.

—w

—20—

tle officers and directors of ‘the mortgagor-builder.

Thus, at the time the contract is executed the lender

(mortgagee)* has such control over the mortgagor- -

builder that notice to: the mortgagor-builder.is also no-

_ tice to the lender. This result comports with the purpose

of the dual notice provision; which is to provide more

adequate notice of default to the surety and lender, those -

responsible for financing the Capehart project. -

; Therefore, even if Brand’s letters of July 20 and July

23 were timely sufficient notice to Hayes (which we do

_ not decide), the letters were not also notice to Nike Vil-

lage. The district court erred in finding that. claimants

in this case met the dual notice requirement of the Cape-

hart bond.

We find unnecessary to address ourselves to other

issues raised. eis se

The judgment of the district court is REVERSED. ~:~

- -28Article XV of the Housing Contract provides : a

(24) The:eligible builder simultaneously with the delivery

of this Housing Contract shall hang in escrow with the

_ mortgagee resignations of the o

gor-builder, for delivery to the Départment either (i) upon

issuance.of the Determination .of Completion and the final

endorsement of the mortgage note for mortgage insurance

by the Commissioner, or (ii) upon complete termination of

the Housing Contract for the convenience of the Department

prior to completion of the project, whichever’ event occurs

first. The escrow agreement shall be in a form acceptable

to.the Department and the Commissioner. . . . PD ccierias hot

1e officers and directors’of the.

_mortgagor-builder, together with certificates, endorsed in -

blank, representing all of the capital stock of the mortga-

SR) DR. TCT BSR ae.

—21—

: APPENDIX “5”,

§270a. Bonds of contractors for public buildings or

| works ; waiver of bonds covering contract per-

formed in foreign country

(a) Before any contract, exceeding $2,000 in amount,

for the construction, alteration, or repair of any public

building or. public work of the United States is

awarded to any person, such person shall furnish to the

United States the following bonds, which shall become

binding upon the award of the contract to such person,

who is hereinafter designated as “contractor”

“MD A. ‘performance . bond with a surety or sureties

: satisfactory to the officer awarding such contract, and

in such amount as he shall deem adequate, ip the pro-

- tection of the United States.

(2) A payment bond with a surety or. sureties satis-

- factory to such officer for the protection of all per-

sons supplying labor and material in the prosecution of

the work provided for in said contract for the use of

each such person. Whenever the total amount payable

_ by the terms of the contract shall be not more than~

$1,000,000 the said payment bond shall be in a sum of

' one-half the total amount payable by the terms of the

. contract. Whenever the total amount payable by ‘the

terms of the contract shall ‘be more than $1,000,000°

_arid not more than $5, 000,000, the said payment bond

shall. be in a sum of 40 per centum of the total amount

payable by the terms. of the contract. Whenever the total

, amount payable by the terms of the contract. shall be

‘more® than $5,000,000 the said payment bond shall be

. in the sum of $2, 500,000.

(b) The contracting officer in respect of any con-

tract is authorized to waive the requirement of a per-

,_ =

formance bond and payment bond for so much of the

work under such contract as is to be performed in a

foreign country if he finds that it is ieee for _

thé contractor to furnish such bonds.

_ the authority of any contracting officer to require a

. performance bond or other security in. addition to.

those, or in cases other. than the cases specified in Sub-

section: (a) of this section. Aug. 24, 1935, c. 642, § 1,

' 49 Stat. 793. |

§ 270b.' Same; rights of persons furnishing labor or

material

(a) Every person’ who has furnished labor or mate-.

rial in the prosecution of the work provided for in such

contract, in respect of which a payment bond is fur-.

nished under section 270a of this title and who has not |

been paid in full therefor before the expiration of a .

' period of ninety days after the day on which the last of

the labor was done or performed by him or material

was furnished or supplied by him for which such claim

is made, shall have the right to sue on such payment

bond for the amount, or the balance thereof, unpaid at

_ the time of institution of such suit and to prosecute

’ said action to final execution and judgment for the

sum or sums justly due him: Provided, however, That

any person having direct contractual relationship with a

subcontractor but.no contractual relationship express or.

implied with the contractor furnishing said payment

bond shall have a right of action upon the said-payment

' bond upon giving written notice to said contractor

-.” within ninety days from the date on which such person

_ did or’ performed the last of the labor-or furnished or

| "supplied the last of the material for which such claim |

—23— ‘

is made, stating with substantial -accuracy the amount

claimed and“the name of the party to whom the. mate-

rial was furnished or supplied or for whom the labor

was done or performed.. Such ‘notice shall be ‘served by

mailing the same by registered mail, postage prepaid, ir .

‘an envelop addressed to the contractor at any place he

maintains an office or conducts his business, or his resi-

dence, or in.any manner in which the United States

marshal of the district in which tht public improvement

is situated is authorized by law to serve summons.

§ 270b. Same: ‘Fights of persons furnishing labor or |

material

(b) Every suit instituted under this section shall be

brought in the name of the United States for the use of

the persons sying, in the United States District Court

for any district in which the contract was to be per-.

formed 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 per-

formed or’ material was supplied by him. The United c

.States shall not be liable for the payment of any costs

or expenses of any such suit.

: _ APPENDIX “C”. — |

§ 1594. Contracts fot construction—Contract provi-

sions ; competitive bids

(a) The Secretary of Defense or his designee is au-

thorized to enter into contracts with any eligible bidder

to provide for. the construction of urgently needed hous- .

ing on larids owned or leased by the United States and —

' situated on or near a military reservation or installa-

‘tion for the purpose of providing suitable living’ accom-

modations for military personnel of the arried services.

_ assigned to duty at the military installation at or in the

area where‘the housing is situated. Any such contract

shall provide that each housing unit in the project shall |

be placed under the control of the Secretary of Defense,

or his designee, as soon as the unit is available for

-. oecupancy as determined by the Commissioner. Any i

such contract shall also provide that, except. for stock

held by the Commissioner, the capital stock of the mort-

-gagor (where the mortgagor is a corporation) be trans- aa

ferred to the Secretary of Defense, or his designee,

when the housing has been completed as detérmined by

the Commissioner. Any such contract shall contain such

terms and conditions as the Secretary may determine

to be necessary to protect the interests of. the United.

States. Any. such contract shall provide for the fur-.

nishing by the contractor of a performance bond and

_a- payment .bond with a surety or sureties satisfactory

to the Secretary of Defense, or his designee, and the

furnishing of such bonds shall be deemed a sufficient

‘compliance with the provisions ‘of section 270a of Title | |

40, and no additional bonds shall-be required under such

section. Before the Secretary ‘shall enter into any con-

tract as authorized by this section for the construction

\er

EOS LE LEE LE OG

er ie

‘of tricieia: he shall invite the submission of competi-

tive bids after advertising in the manner’ prescribed in

section 152 of Title 41.

Definition of “eligible bidder”

(b): For the ‘purposes of this subchapter, the term

“eligible bidder” means a person, partnership, firm, or .

corporation determined by the Secretary after consulta- F

perience and financial responsibility to construct hous-

ing of the type described in subsection (a) of this. sec-

tion, and (2) to have submitted the lowest acceptable

bid. c ;

Acquisition of capital stock of property

: ae ee by mortgage

Secretary. of Defense or his designee is authorized to —

acquire the capital stock of mortgagors holding property

the National Housing Act, as amended by the Housing

Amendments of 1955, and to exercise the rights as hold:

er of ‘such capital stock during the life of such pees

” gage and, upon the termination of the mortgage, to dis-

solve the corporation ; to guarantee the payment of notes

or other legal instruments required. by the Commission-

. er of such mortgagors; to make payments thereon, and

to guarantee and indemnify the Armed.Services Hous-

ing Mortgage Insurance Fund against loss in cases

- where. so ‘required. All housing facilities placed under

provisions of this subchapter shall be deemed to be hous-

ing facilities under “the jurisdiction of the military de-

partment to which they are assigned.

| » Of title to any property on which it is proposed to con-

—26—

- Opinion as to title to property; guarantee,

| title search and title insurance

(d) On request by the Secretary.of Defense, the At-

torney .General shall.furnish to the Secretary of De-

fense, or his designee, an opinion as to the sufficiency

struct_housing; or.on which housing has been construct-

ed, under this section. If the opinion of the Attorney

General i is that the title to any stich property is good and

‘sufficient, the Secretary of Defense is authorized to

guarantee, or enter into a commitment to guarantee, the

mortgagee, under a mortgage on such property which

—4s insured under sections 1748-1748g and 1748h—1 toa

1748h—3 of Title 12, against any losses that may.

thereafter arise from adverse claims to title... None of

the proceeds of any mortgage loan hereafter insured

under stich sections 1748-1748g¢ and: 1748h—1 to_

- 1748h—3 of Title 12 shall be used for. title search and

title insurance costs: Provided, That if the Secretary ¥

-of Defense, or his designee, “determines in the case of.

any housing project, that the financing of the construc-

tion of such project is impossible unless title insurance |

is provided, the Secretary. may provide, for the’ payment

of the ‘reasonable costs necessary for obtaining ‘title

search and title i insurance. Any. payments by the Secre-

. tary hereunder shall be made from the revolving fund

established under section: 1594a( g:) of this title. Any

. determination: by the Secretary under the foregoing

proviso shall be set forth in writing, together with the

reasons therefor. The Committee on Armed Services of

the: Senate and House of Representatives shall . be

- . promptly notified of ‘each. such determination, and of

the amount of any payment made by the Secretary. for

_ title search and title‘i ‘insurance costs.

woe et ti te

“3 a

APPENDIX “D”.

1964, 1965 and — cases arising out of. Capehart

| constructions :

| 1964

C ontinental Casualty Company v. Allsop Lum-

ber Company, 6 F. 2d 445 oi =

1964) ;

Koppers £ ompany v. C ontinental Casmilty Com-

pany, 337 F. 2d 499 (C.C.A. 8, 1964) ;

Missouri-Illinois Tractor & Equipment Co. v. D

— oP? C onstruction C ompany, 337 F ine 507

(C.C.A. 8, 1964) ;

‘D & L Construction’ C ompany v. Triangle Elec-

tric Supply Company, 332 F. 2d: 1009 (‘C.C.A.

8, 1964) ;

Fine v. Travelers Indemnity Company, 233 F.

‘Supp. 672 (D.C. Mo. 1964) ; ‘

Triangle Electric Supply C ompany v. Johave

Electric Co., ‘234 F. Supp. - (DC. Mo.

1964) ;

_ Grinders and Shaw Inc. v. Federal Insurance

Company; 234 F. Supp. a (D.C. <a

1964);

Economy Forms Ct or poration Vv. Trinits Univer-

sal Ins. Co., 234 F. Supp. 930 (D.C. N.D.

1964), aff'd, 340 F. 2d 613 (C.C.A. 8, 1964) ;

B, C: Richter Contracting Co. v. Continental

| Casualty - Company, 230 Cal. App. 2d. 491 :

(Cal. App. 1964) ;

Minneapolis-H oneywell Regulator Company: v. -

Terminal C onstruction GC or poration, 197 A. 2d

$57 (N.J. Decne

United States. for Use of Griffin v. Atlantic

~ + Contactors, Inc., 231 F. mem 356 (D.C. :

ii _ NC. 1964). ;

| ye eas 1965

~~ Sill Corporation v. United States, 343 F. 24 411.

ee % ~—(G-C.A. 10, 1965);

|| es aaa Autrey v: Williams and Durdop, 343 F. 24 730

| aeores Ashi Sola & Sons, Inc. v- United Pe

3 LS +, 345 F. 2d 808 (Ct. CL 1965); >

| _ Autrey v. Williams and Dunlap, 346 F. 2d 1007,

(C.C.A. 5, 1965) ; )

Anthony P. Miller, Inc. v. United States, 348}

F. 2d 475 (C.C.A. 5, 1965); oe.

ae Triangle Electric Supply Co. v. hijab Electric

fi: ’ Co., 238 F. Supp. 815 (D.C. Mo. 1965);

| | Winston v. United States, 342 F. 2d 750 (CCA.

a sen od

S's. -Silberblatt, Inc. v. "United States, 333 F.

2d 545 (C.C.A/5, 1965);

a iis - | LL’ & E Company v. United States, 351 F 2d

3 3 ‘880 (C.C.A. 9, 1965);

-Gersten Construction Co. v: United States, 346

F. 2d 973 (Ct.Cl. 1965) ; he |

55 ” Russell v. Travelers Indemnity Company, 244 F.

> * . Supp. 419 (D.C. Mo.“1965);

Seeing National Union First Insurance Co. of Pitts-

Pee ie burgh v. D & L Construction Co., 333. F. 2d.

169 (C.C:A. 8, 1965); | |

Robson v. United i Jasurence C 0., 391 |

S.W. 2d 855 oe 1965) ; 7

ch eee?

‘J

4 peas “

¢ “6

allen

United. States for Use of 1 Reelin Lumber

_ Company v. Continental Casualty C ompany, rate

340 F, 2d 958 (C.C.A. 8, 1965) ;

National Landscaping Co., Inc. v. Custionadt

Laiacisie 4 Co., 238° F. Supp. 193 (D.C. Mo.

1966 i

_Seabord Surety Co. v. United States 355 F. 2d ;

- 139 (C.C.A. 9, 1966); -

4 Tufano. Contracting Corp. v. United States, 356

-F. 2d 535 (C.C.A. 9, 1966); «

on Heers v. United States, 357 F. 2d 344: (CECL

es. ee a

Black, Raber-Kief & Assocites: v. U nited Ss tates,

_ 357 F. 2d: 355 (Ct.Cl. 1966);

Continental Casualty Company v. &: O. ‘Brand,

Inc., 355.£. ere §, — |

~ a aie

. . \. :

: \

—30—

APPENDIX E.” .

- Counsel for petitioners have still pending in ‘their own

files. the following ten cases arising only out of the

- Beale Air Force Base project, a Capehart Military siantondl

ing Act construction project i in California.

Céntinental Casualty Company v. Hartford Ac-

cident and Indemnity Company : “4, Country

Boys, Inc., 3 Civ. 11110 (this case is‘on appeal

in the ‘District Céurt of’ Appeal of California) ;

B: €. Richter Contracting Co., Inc. v. Hal B.

Hayes and Agsociates and Continental Casualty

ti 90 ompany, Yuba veer Superior Court case,

. No. 14960;

B. C. Richter Contracting dba-R-& E Materials

v. Hal B. Hayes and Associates and Continen- -

tal Casualty C ompany, Yuba County Superior

Court case No. 14491;

Lord & Bishop Inc. v. C. O. Brand, — Hart-

__ ford Accident and Indemnity and Continental

€ asualty Gi ‘ompany, Sacramento Municipal

- Court case No. 63937; 7

"United States for the Use of C. O. Brand: Tne; v.*

- Hartford Accident ‘and Indemnity Company, —

' with cross-complaint’ of Continental Casualty

6% i

Casualty Gompany, United States . District

v. C. O. Brand, Inc.. with cross-complaint by

Continental Casualty Co ompany, against Anchor’

' Company v. C. O. Brand, Inc. and Anchor |

Ee Oe ; Court, Northern District of California, North-

-‘ . . ern Division Case No. 8284; peti Ss

United States for the Use of Tay-Holbrook Inc.

- <—31— : fe es da | ht ge tee &

ae C alae C ‘ompany, United States District .

- -Court, Northérn District of California, North-

ern Division Case No. 8031 ; Ale :

United States for Use of Grinnell C 1 Cobapeny of

the’, Pacific v. C. O; Brand, Inc. with cross-

complaint of Continental Casualty C ompany

, ° against Anchor Casualty Company, United

' States District Court, ‘Northern District of | v6 My See

‘| California, Northern Division Case No. 8035; .&° - ce

C. O. Brand, Inc. v. Wurtsiith and Continental = *

Cesualty Company, Yaba County —

Court case No. 15169; . a

C: O.. Brand, Inc. v: Hal B. pea lie: and ae

‘Continental Casualty Company, Yuba County f.

. Superior Court case No. 15170; _

tc O.. Brand, Inc. v. Hal B. Hayes and Continen-

tal Casualty Company, Yuba County — |

Court Case No. 15171. :

‘ Obviously, these cases from cvtaaialal own files cannot

and do not constitute the Sole _Temaining uncompleted

litigation.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.