United States Fidelity Guaranty Company v. United States (231 U.S. 237)

The United States, for the benefit of Frank P. Bartlett, brought suit in the circuit court of the United States for the southern district of New York against the plaintiff in error, as surety upon a bond given pursuant to the provisions of an act of Congress (28 Stat. at L. 278, chap. 280, U.S.C.omp. Stat. 1901, p. 2523), to the effect that any person or persons contracting with the government for the prosecution of public work should be required to furnish a bond conditioned that the contractor or contractors would 'promptly make payments to all persons supplying him or them labor and materials in the prosecution of the work provided for in such contract.' Upon trial a verdict was rendered in his favor, and judgment entered accordingly. The circuit court of appeals for the second circuit affirmed the judgment (111 C. C. A. 71, 189 Fed. 339), and this writ of error is brought to review its judgment.

The record shows: The United States government contracted with one Donovan on February 18, 1903, for the construction of a breakwater off Point Judith, Rhode Island, it being provided in the contract that he should be 'responsible for and pay all liabilities incurred in the prosecution of the work for labor and material.' Donovan executed a bond containing the obligation required by the act, with the plaintiff in error as surety. Donovan was associated with Hughes & Bangs, and it was agreed that they should perform the contract, and that he would turn over the government's estimates to them, this fact being known to the plaintiff in error.

An arrangement was made between Hughes Brothers & Bangs and Bartlett that he should engage the labor, open the quarry of the former, located at Sachems Head, Connecticut, about 50 miles from the breakwater, and superintend the furnishing of stone for the construction of the breakwater. Bartlett was also to maintain a commissary at the quarry from which the men might be supplied with provisions and merchandise, an account to be kept of the articles purchased, and, after approval by the men, forwarded to the office of Hughes Brothers & Bangs, who would deduct the amount from the wages of the laborers, this practice being with their consent, and credit Bartlett's account.

The quarry was operated, labor being employed in various ways, from clearing the surface preparatory to blasting to loading the stone on scows, and the stone was transported to the breakwater and there deposited according to the direction of a government inspector. All, save the inspector and a few of the more skilled workmen, were provided for at the commissary, and, under the arrangement described, the amount of their purchases was deducted from their wages by Hughes Brothers & Bangs. Separate account was kept of the men who were actually employed at the breakwater, for the reason that Bartlett had to wait for them to come back to procure their approval of his charges, before he could send in his statement to Hughes Brothers & Bangs.

The contract was completed November 8, 1903, and on December 22, 1903, the last retained percentage of $8,956.44 was paid by the United States. Hughes Brothers & Bangs became insolvent in 1907 or 1908. Suit on the bond was begun June 4, 1909.

Messrs. Emanuel J. Myers, Gordon S. P. Kleeberg, and Leonidas Dennis for plaintiff in error.

[Argument of Counsel from pages 239-242 intentionally omitted]

Messrs. Edward W. Norris, Horace L. Cheyney, and Henry B. Hammond for defendant in error.

Statement by Mr. Justice Day:

After making the foregoing statement, Mr. Justice Day delivered the memorandum opinion of the court: