Opinion — United States Fidelity & Guaranty Co. v. United States Ex Rel. Struthers Wells Co.

UNITED STATES FIDELITY AND GUARANTY COM-

PANY v. UNITED STATES FOR THE USE AND BENE-

FIT OF STRUTHERS WELLS COMPANY.

ERROR TO THE CIRCUIT COURT OF APPEALS FOR THE SECOND

CIRCUIT,

No. 154. Argued March 5, 1008.— Decided April 6, 1908.

There is always a strong presumption that a statute was not meant to act

retrospectively, and it should never receive such a construction if sus-

ceptible of any other, nor unless the words are so clear, strong and impera-

tive as to have no other meaning.

The act of February 24, 1905, . 778, 35 Stat. S11, amending the act of Au-

gust 13, 1804, ¢. 280, 28 Stat. 278, is prospective and does not relate to

or affect actions based on rights of material-men which had acerucd prior

to its passage, and such actions are properly brought under the act of 1894

The absolute taking away of a present right to sue and suspending it until

after certain events have happened, and the giving of preferences bet ween

creditors, are not mere matters of procedure but affect substantial rights,

and as the act of February 24, 1905, consists of but a single section and

deals with such subjects and only incidentally applies to procedure, the

entire statute must be construed under the general rule that it is not retro-

spective in any respect.

151 Fed. Rep. 534, affirmed.

Tuis is a writ of error to the Circuit Court of Appeals for the

Second Circuit, which brings up for review the judgment of

that court affirming that of the Circuit Court of the Eastern

District of New York in favor of the defendant in error (plain-

U. 8. FIDELITY CO. v. STRUTHERS WELLS CO. 307

209 U. 8. Statement of the Case.

tiff below) against the plaintiff in error for the sum of $2,054.23.

The action was brought in the Circuit Court above mentioned,

in the name of the United States for the use and benefit of

Struthers Wells Company against the plaintiff in error, and

against the individual defendant Flaherty, as well as one

Lande, upon a bond dated December 10, 1903, executed by

Flaherty as principal, and the above-mentioned plaintiff in

error as surety, by which they were held bound in the sum of

$40,000, to be paid the United States as liquidated damages,

the condition of the obligation being that if Flaherty, his suc-

cessors, heirs, ete., should well and truly execute the contract

annexed to the bond, which he had entered into with Colonel

W. A. Jones, U. 8. A., Engincer, of the Fifth Lighthouse Dis-

trict, for and in behalf of the United States, by which Flaherty

covenanted and agreed to completely construct and deliver

the metal work for the Baltimore lighthouse, Maryland, ac-

cording to all the conditions of the said contract, and should

promptly make payments to all persons supplying said Flaherty

labor and materials in the prosecution of the work provided for

in such contract, thea the obligation was to be void; otherwise

to remain in full foree and virtue.

It was averred in the complaint that the action was brought

in the name of the United States by Struthers Wells Company,

for its use and benefit, against the plaintiff in error and Flaherty

(and also one Lande, who had been joined with Flaherty in

the contract), pursuant to the act of Congress of August 13,

1804. See 28 Stat. 278. The section is set forth in the margin.’

'28 Stat, Chapter 280, p. 278:

" Be it enacted, ete., That hereafter any person or persons entering into a

formal contract with the United States for the construction of any public

building, or the prosecution and completion of any public work, or for re-

pairs upon any public building or public work, shall be required before com-

mencing such work to execute the usual penal bond, with good and sufficient

sureties, with the additional obligations that such contractor or contractors

shall promptly make payments to all persons supplying him or them labor

and materials in the prosecution of the work provided for in such contract;

and any person or persons making application therefor, and furnishing

affidavit to the Department under the direction of which said work is being,

Wa) So Ra Ry Peet ae PEE RSE SON Fg RET EBS AT SCA TR ta a neh i ett 2 it HERS Matin: Bel, iad eUs sy

308 OCTOBER TERM , 1907.

Statement of the Case. 209 U.S.

The Struthers Wells Company, under an agreement with

the defendants Flaherty and Lande, and in or about the month

of March, 1904, supplied to them certain materials deseribed

in the complaint, for use by them in the prosecution of the

work, which they had contraeted with the United States to

do in constructing the metal work for the Baltimore lighthouse,

as mentioned in the bond. The material furnished by the

company was of the value of $1,890.25. The company duly

performed all the conditions of its contract with the defendants,

which it had agreed to perform, and made delivery as pro-

vided for in its agreement, and by reason of the premises there

became due and payable to the company from the defendants,

including the plaintiff in error, the sum of $1,890.25, with

interest from June 7, 1904, no part of which has been paid.

Judgment was demanded for that sum, with interest, as

stated.

The action was commenced on the twelfth of April, 1905.

The plaintiff in error demurred to the complaint on the ground,

first, that the court had no jurisdiction of the person of the

defendant, the United States Fidelity and Guaranty Company ;

second, that the court had not jurisdiction of the subject of

the action; and, third, that the complaint does not state facts

sufficient to constitute a cause of action against the defendant.

the United States Fidelity and Guaranty Company. This

demurrer was overruled, with leave to the defendant to answer,

which the defendant refused to do, and thereupon judgment

was entered for the plaintiff against it, which was affirmed

by the Cireuit Court of Appeals.

or has been, prosecuted, that labor or materials for the prosecution of such

work has been supplied by him or them, and payment for which has not been

made, shall be furnished with a certified copy of said contract and bond,

upon which said person or persons supplying such labor and materials shall

have a right of action, and shall be authorized to bring suit in the name of the

United States for his or their use and benefit against said contractor and

sureties, and to prosecute the same to final judgment and execution: Pro-

vided, That such action and its prosecution shall involve the United States

in no expense.”

U. S. FIDELITY CO. v. STRUTHERS WELLS CO. 309 d

209 U.S. Argument for Plaintiff in Error.

Mr. Leonidas Dennis for plaintiff in error:

The question of jurisdiction depends upon the law as it was

when the jurisdiction of the Circuit Court was invoked. Though

plaintiff's cause of action arose before the passage of chap-

ter 778, this action was not started until after the enactment

of this law and the provisions therein contained regulating

the enforcement of such cause of action apply to this action

as they do not affect the cause of action itself, but only the

method of enforeing the same. Larkins y. Saffarans, 15 Fed.

Rep. 147; 26 Am. & Ing. Ene. of Law, 695; Endlich on Inter-

pretation of Statutes, § 287; United States Fidelity & Guaranty

Co. v. Kenyon, 204 U.S. 359.

The court has no jurisdiction over the subject of this action.

The Cireuit Courts of the United States are of statutory

and not constitutional creation and jurisdiction. Whatever

jurisdiction they might have had over such an action prior to

February 24, 1905, that jurisdiction was repealed by the pas-

sage of the act of that date. The only court which has juris-

diction over a cause of action upon a bond like that involved

in this cause is the Cireuit Court in the district in which the

contract was to be performed and executed. The prohibi-

fion against other courts exercising jurisdiction, is equivalent

to a repeal. Insurance Company v. Ritchie, 5 Wall. 541,

O44.

When a law conferring jurisdiction is repealed without any

reservation as to pending cases, all such cases fall within the

law. Railroad Co. v. Grant, 98 U. S. 398: Assessors v. Os-

borne, 9 Wall. 567; Sherman vy. Grinnell, 123 U.S. 679: Gurnee

v. Patrick County, 137 U. 8. 141; McNulty v. Batty, 10 How.

71; Insurance Co. v. Ritchie, 5 Wall. 541; Ex parte McCardle,

7 Wall. 506, 514; National Exchange Bank y. Peters, 144 U.S.

570; Fairchild vy. United States, 91 Fed. Rep. 297.

The only vested right conferred on defendant in error by the

Statute of 1894, is the right to a pro rata share in the amount

of the bond after the contract has been completed, and the

statute of 1905 does not take away this right. Larkins vy.

310 OCTOBER TERM, 1907.

Argument for Defendant in Error. 209 U.S.

- Saffarans, 15 Fed. Rep. 147; American Surety Co. v. Lawrence-

_ ville Cement Co., 96 Fed. Rep. 25.

The legislature may change, as well as create, a limitation,

: provided adequate means of enforcing the right remain, and

the material-man here has no vested interest in the form of

the action to be commenced, or the mode or remedy to be ap-

plied.

Statutes prescribing a new or different limitation take effect

_ immediately. Sohn v. Waterson, 17 Wall. 596; Terry v. An-

_ derson, 95 U.S. 628; Wilson v. Kreminger, 185 U. S. 63.

The complaint does not state that the contract, for the per-

formance of which the bond was given, has been fully com-

pleted, and that six months had expired since such completion

; and before the commencement of this action without the Uni-

ted States starting suit on said bond, all of which elements

are conditions precedent to maintaining the suit.

Although the material-man under the statute of February 24,

1905, has not an unconditional right of action, but must wait

until after the completion of the contract, this provision is

not a material change in the right of the material-man as, un-

der the former statute, their right to a pro rata share could only

be determined after the contract had been completed. Lavw-

renceville Cement Co. v. American Surety Co., supra.

Mr. Herbert A. Heyn for defendant in error:

The act of 1905, was not intended by Congress to apply to

or have effect upon causes of action which had accrued before

its passage. Plaintiff's cause of action is therefore exclusively

governed by tie material-men’s act of 1894, under which the

bond in suit was given and under which all rights against the

surety became fully vested long prior to the enactment of

the new statute.

A statute shall never be given retrospective effect unless the

legislature in most unambiguous and unmistakable language

has directed that such should be its operation. Laws are to

operate prospectively. Jackson v. Van Zandt, 12 Johns. R.

U. S. FIDELITY CO. v. STRUTHERS WELLS CO. 311

209 U.S. Opinion of the Court.

168; Sutherland, Statutory Construction, 1158, 1161; Wade,

Retroactive Law, § 34; United States v. American Sugar Co.

202 U.S. 563, 577; United States v. Heth, 3 Cranch, 413.

While the general principles above considered have not

always been applied with the same strictness to statutes re-

lating to procedure and practice, even in respect to such stat-

utes the intention of the legislature is just as important and

binding upon the courts as in reference to any others. Wade

on Retroactive Law, §§ 38, 39.

See also to the same effect: Pierce v. Cabot, 159 Massachu-

setts, 202; Shallow v. Salem, 136 Massachusetts, 136; Eddy v.

Morgan, 216 Illinois, 437; Auditor Gen. v. Chandler, 108 Michi-

gan, 569; Bedier v. Fuller, 116 Michigan, 126.

There is nothing in the act itself that indicates the intention

that the provisions in reference to practice and remedy were

intended by Congress to operate retrospectively.

Mr. Justice Prcknam, after making the foregoing state-

ment, delivered the opinion of the court.

The demurrer put in by the plaintiff in error is founded upor.

an amendment of the above mentioned act, which, it is con-

tended, applies to the case before us. The amendment is set

forth in the margin.

Chapter 778, 33 Stat., p. 811:

“ Be it enacted, ete., That the act entitled ‘An Act for the protection o!

persons furnishing materials and labor for the construction of public works,

approved August thirteenth, eighteen hundred and ninety-four, is hereby

amended so as to read as follows:

“*That hereafter any person or persons entering into a formal contract

with the United States for the construction of any public building, or the

prosecution and completion of any public work, or for repairs upon any

public building, or public work, shall be required, before commencing such

work, to execute the usual penal bond, with good and sufficient sureties

with the additional obligation that such contractor or contractors shall

promptly make payments to all persons supplying him or them with labor

and materials in the prosecution of the work provided for in such contract;

and any person, company or corporation who has furnished labor or materi-

als used in the construction or repair of any public building or public work

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312 OCTOBER TERM, 1907.

Opinion of the Court. 209 U. S.

The record shows that the contract between Flaherty and

the United States was entered into December 10, 1903, and

the material was furnished to Flaherty by the Struthers Wells

Company in March, 1904. It thus appears that the bond was

executed under the provisions of the original act of Congress,

and the materials were furnished Flaherty while that act was

in force and before its amendment. The legal rights of the

Struthers Wells Company had become vested before the enact-

ment of the amendment. It is contended on the part of the

plaintiff in error that the passage of the amendment (Feb-

ruary 24, 1905) made it necessary for the defendant in error

to follow its provisions when it commenced this action on the

twelfth of April, 1905. It is argued that the amendment pre-

scribes the procedure to be followed by material-men in en-

forcing claims against a surety on a bond of the nature of the

one in suit; that, as amended, the law prohibited a material-

man from commencing any action in any district other than

that in which the contract was to be performed (in this case

and payment for which has not been made, shall have the right to intervene

and be made a party to any action instituted by the United States on the

bond of the contractor, and to have their rights and claims adjudicated in

such action and judgment rendered thereon, subject, however, to the priority

of the claim and judgment of the United States. If the full amount of the

liability of the surety on said bond is insufficient to pay the full amount of

said claims and demands, then, after paying the full amount due to the

United States, the remainder shall be distributed pro rata among said inter-

venors. If no suit should be brought by the United States within six months

from the completion and final settlement of said contract, then the person or

persons supplying the contractor with labor and materials . . . shall,

upon application therefor, and furnishing affidavit to the Department under

the direction of which said work has been prosecuted, that labor or materials

for the prosecution of such work has been supplied by him or them, and pay-

ment for which has not been made, be furnished with a certified copy of said

contract and bond, upon which he or they shall have a right of action, and

shall be and are hereby authorized to bring suit in the name of the United

States in the Cireuit Court of the United States in the district in which said

contract was to be performed and executed, irrespective of the amount in

controversy in such suit, and not elsewhere, for his or their use and benefit,

against said contractor and his sureties, and to prosecute the same to final

judgment and execution: Provided, That where suit is instituted by any of

U. S. FIDELITY CO. v. STRUTHERS WELLS CO. 313

209 U.S. Opinion of the Court.

the Maryland District of the Fourth Circuit), and also not until

after the complete performance of the contract, for the per-

formance of which the bond was given, and until the expira-

tion of six months after such completion, during which time

the United States alone has the right to commence an action.

The plaintiff in error insists that, although the cause of action

herein arose before the passage of the amendment, the action

itself not having been commenced until after that time, all

the provisions of the amendment regulating the enforcement

of such cause of action apply to the action before us, as they

do not affect the cause of action itself, but only the method

of enforcing the same. In other words, it is contended that

the amendment is to have retroactive effect in all matters

relative to procedure, and that, as so construed, this action

was improperly brought in the Circuit Court of the United

States for the Eastern District of New York, and that it was

prematurely brought because it does not appear that at the

time of the commencement of this action the contract had

such creditors on the bond of the contractor it shall not be commenced until

after the complete performance of said contract and final settlement thereof nt

and shall be commenced within one year after the performance and final

settlement of said contract and not later: And provided further, That where

suit is so instituted by a creditor or by creditors, only one action shall be

brought, and any creditor may file his claim in such action and be made party

thereto within one year from the completion of the work under said contract,

and not later. If the recovery on the bond should be inadequate to pay the

amounts found due to all of said creditors, judgment shall be given to each

creditor pro rata of the amount of the recovery. The surety on said bond

may pay into court, for distribution among said claimants and creditors, the

full amount of the sureties’ liability, to wit, the penalty named in the bond,

less any amount said surety may have had to pay to the United States by

reason of the execution of said bond, and upon so doing the surety will be

relieved from further liability: Provided further, That in all suits instituted

under the provisions of this act such personal notice of the pendency of such

suits, informing them of their right to intervene as the court may order, shall

be given to all known creditors, and in addition thereto notice of publication

in some newspaper of general circulation, published in the State or town

where the contract is being performed, for at least three successive weeks,

the last publication to be at least three months before the time limited

therefor.’ ”

314 OCTOBER TERM, 1907.

Opinion of the Court. 209 U.S.

been completed or that six months had expired since its com-

pletion, or that the United States had not itself sued on the

bond.

The act which is amended consists of but one material sec-

tion, the second section providing only for the comparatively

unimportant matter of security for costs. The act amending

the section also consists of but one section. The question is

whether the amended act applies to this ease.

There are certain principles which have been adhered to

with great strictness by the courts in relation to the construc-

tion of statutes as to whether they are or are not retroactive

in their effect. The presumption is very strong that a statute

was not meant to act retrospectively, and it ought never to

receive such a construction if it is susceptible of any other.

It ought not to receive such a construction unless the words

used are so clear, strong and imperative that no other meaning

can be annexed to them or unless the intention of the legis-

lature cannot be otherwise satisfied. Dash v. Van Kleeck, 7

Johns. 499; Jackson v. Van Zandt, 12 Johns. 168; United States

v. Heth, 3 Cranch, 399, 414; Southwestern Coal Co. v. McBrize,

185 U. S. 499, 503; United States v. American Sugar Co., 202

U.S. 563, 577.

The language of the amended act is prospective, as it pro-

vides “that hereafter any person or persons entering into a

formal contract with the United States,” ete. That language

standing alone would leave little doubt as to the intention of

Congress in the matter of the taking effect of the amendment.

It is urged, however, that as the amendment in this respect

but reiterates the language of the original act, the use of the

word “hereafter” in the commencement of the amendment

ought not to have the significance which would otherwise at-

tach to it, because it is simply in this particular reénacting the

law as it already stood.

There is considerable force in the suggestion that the word

“hereafter” is not to receive the weight which in other cir-

cumstances it ought to have. The question is, however, one

TE ——@

U. 8. FIDELITY CO. v. STRUTHERS WELLS CO. 315

209 U.S. Opinion of the Court.

as to the intention of Congress, and when we come to look at

the provisions of the statute, as amended, we are convinced

that Congress did not intend that the amendment should apply

to cases where the bond had already been executed, the work

done, the respective rights of the parties settled, and the cause

of action already in existence. If Congress had intended

otherwise, we think it would have still further amended the

original act by providing in plain language that the amend-

ment should apply to all cases, and not be confined to the

future.

The plaintiff in error contends that where an amendment

to ar act relates only to procedure, it takes effect upon causes

of action existing when the amendment was passed, and hence

that part of the amendment in question applies and prevents

the taking of jurisdiction by the Circuit Court for the Eastern

District of New York. It is admitted by the plaintiff in error

that the act is not confined to procedure but deals with sub-

stantive rights in some instances, one of which is the provision

granting a preference to the United States over all other cred-

itors. In such ease counsel admits that the provision must

be construed and held to apply to bonds executed subsequent

to the enactment of the statute, and to such bonds alone.

Under the statute of 1894 no such preference could be ob-

tained. American Surety Co. of New York v. Lawrenceviile

Cement Co., 96 Fed. Rep. 25; United States v. Heaton, 128

Fed. Rep. 414.

It would follow necessarily that if the full amount of the

liability of the surety on the bond were insufficient to pay all

the claims and demands, the provision that, after paying the

full amount due the United States, the remainder only should

be distributed pro rata among the intervenors, would also be a

substantive amendment and not one of procedure. Hence

counsel admits that the full amount which may be due the Uni-

ted States depends upon whether the bond was executed prior

or subsequent to the amendment of the statute; that if the

bond were executed prior thereto, the Government is only en-

3

4

IOS SBR,

316 OCTOBER TERM, 1907.

Opinion of the Court. 209 U.S.

titled to its pro rata share, while if executed subsequently the

full amount of its claim, regardless of the claims of the other

creditors, would be the amount due. In other words, these

provisions, contained in the single section of the act, are to be

considered as prospective only and as applicable to bonds

executed subsequently to the passage of the amendment.

There is another most important amendment, by which the

material-man’s right to sue is suspended until after the com-

pletion of the work and final settlement and for six months

thereafter, during which the United States can alone sue upon

the bond. Instead of a right to sue at once upon the non-

payment of his claim, he is precluded from doing so, perhaps

for years,

Although the time in which to commence action may be

shortened and made applicable to causes of action already

accrued, provided a reasonable time is left in which such ae-

tions may be commenced (Terry v. Anderson, 95 U. 8. 628;

Wilson v. Iseminger, 185 U. §. 55), yet that is a different prin-

ciple from taking away absolutely a present right to sue until

a period of time, measured possibly by years, shall have

elapsed.

These various provisions are all contained in the same see-

tion of the statute, and there is not much of it left to be made

retrospective, as matter of procedure, after these other pro-

visions have been held to be prospective only. If the limita-

tion as to the district in which the suit upon the bond could

be brought were to be regarded as simply matter of procedure

(which we do not assert), we still think it is not to be construed

as applying retrospectively. As it is only a question of inten-

tion we are not prepared to hold that the section is prospec-

tive in its operation in regard to all its other provisions, but

retrospective in the one instance, as to the district in which

the suit is to he commenced. Even matters of procedure are

not necessarily retrospective in their operation in a statute,

and we see no reason for holding that this statute, of but one

section, should be split up in its construction, and one por-

NAT’L LIFE INS. CO. v. NAT’L LIFE INS. CO. 3i7

209 U.S. Statement of the Case.

tion of it made applicable to cases already existing and other

portions applicable only to the future. We are convinced

Congress did not intend such separation. Viewing the whole

section, we think Congress meant that only in future cases

should the provisions of the amendment apply, although some

trifling portion of those provisions might be regarded, tech-

nically, as in the nature of procedure. It is therefore wiser

to hold the entire section governed by the usual rule and as

applying only to the future.

The judgment of the Circuit Court of Appeals was right,

and is

Affirmed.