United States of America, For The Use of The B's Company v. Cleveland Electric Company of South Carolina, 373 F.2d 585, 4th Cir. (1967)
United States of America, For The Use of The B's Company v. Cleveland Electric Company of South Carolina, 373 F.2d 585, 4th Cir. (1967)
United States of America, For The Use of The B's Company v. Cleveland Electric Company of South Carolina, 373 F.2d 585, 4th Cir. (1967)
2d 585
This is an appeal from a judgment by the court without a jury. The B's
Company, a use plaintiffs, brought suit under the provisions of the Miller Act
(40 U.S.C. 270a-270b (1964)) against the Cleveland Electric Company of South
Carolina, a prime contractor, and its bondsman for monies due it as a
subcontractor for labor and materials furnished on a contract with the Navy's
Polaris Missile Assembly Base at Charleston, South Carolina. The trial court
denied a setoff claimed by the prime contractor, and from that portion of the
decision it appeals.
Among other things, the contract required that a building be erected and that
after its completion it be covered with earth. The subcontractor's contract
required it to furnish the labor, material, and equipment necessary to perform
the earth work including the obligation to place earth fill over the building.
During the performance of the contract earth was removed and stored at the site
to be used for covering the building. This material was inspected and accepted
by the Navy's resident officer in charge of construction. The building was
completed and covered by the inspected material under Government
surveillance. Performance of that portion of the contract involved in the use
plaintiff's subcontract was completed, inspected, and accepted by the Navy on
November 22, 1963, and in the following January the subcontractor left the job
site.
3
The prime contractor back charged the subcontractor with the expense,
including an attorney fee for prosecuting the claim, plus a sum equal to interest
on the amount allowed for the period during which the money was withheld
while the claim was being prosecuted. The district court found that the
subcontractor was justified on refusing to return to the site and comply with the
Navy's order and it, therefore, denied the setoff. We conclude that the trial
court's findings of fact are not clearly in error and that its legal conclusions are
correct.
5
The basic error of the prime contractor in this appeal is his contention that the
subcontractor is bound in every way and exactly as the prime contractor is
bound by the terms of the prime contract. It is true that the terms of the
subcontract stated that the subcontractor was bound by the terms of the prime
contract and that it assumed the prime contractor's obligations to the
Government insofar as applicable to the work performed by the subcontractor,
but this identical language has been held, and we think properly, not to require
the subcontractor to pursue the administrative remedies given the prime
contractor in the disputes article. Central Steel Erection Co. v. Will, 304 F.2d
548 (9 Cir. 1962); Fanderlik-Locke Co. v. United States ex rel. Morgan, 285
F.2d 939 (10 Cir. 1960), cert. denied, 365 U.S. 860, 81 S.Ct. 826, 5 L.Ed.2d
823 (1961). The Government does not recognize or deal with the subcontractor
and owes no obligation to him for the work he performs. United States v. Blair,
321 U.S. 730, 64 S.Ct. 820, 88 L.Ed. 1039 (1944); United States v. Driscoll, 96
U.S. 421, 24 L.Ed. 847 (1877). The subcontractor is not a party to the
government contract and is obligated only to perform its contract with the prime
contractor without fault. Cf. John A. Johnson & Sons Inc. v. United States ex
rel. Baltimore Brick Co., 153 F.2d 534 (4 Cir.), cert. denied,328 U.S. 865, 66
S.Ct. 1372, 90 L.Ed. 1636 (1946). Having properly performed and having had
its work inspected and approved by both the prime contractor and the
Government, the subcontractor was entitled to collect his money and go about
his business. By the terms of the contract he was entitled to his pay 'on demand
for his work or materials as far as executed and fixed in place, less the retained
percentage, at the time the certificate should issue, even though the Architect
fails to issue it for any cause not the fault of the Subcontractor.' Here the
certificate had issued. If the subcontractor is not paid, his only remedy is a suit
under the Miller Act. He has no lien and no claim against the Government. This
is the reason for the Act and, while this right to sue may be waived by clear and
express provisions in the contract between the prime contractor and the
subcontractor, no such provisions are contained in the contract at issue here and
no such drastic curtailment of the subcontractor's rights will be read into a
general agreement to be bound by the terms of the prime contract in so far as
they affect the work of the subcontractor. See Central Steel Erection Co. v.
Wills, supra; Fanderlik-Locke We think that that agreement was intended to
cover the quality and manner of performance of the subcontractor, not the
rights and remedies between the prime contractor and the subcontractor. Thus
The order of March 23, 1964, did not purport to involve the changes article of
the contract, which was the article under which the prime contractor mistakenly
undertook to do the work. The order clearly purported to require the work to be
done in order to 'meet(ing) the compaction requirements for fill of 90%, all in
accordance with the contract specifications.' After acceptance and certification,
the Government could not compel the contractor to redo the work or do extra
work, even had the order been issued by the proper authority. The Armed
Services Board of Contract Appeals has so ruled in a number of instances. In
Octagon Process, Inc., ASBCA No. 2667, 59-1 BCA 2270, where the
Government had required replacement of an earthen cover, the Board said:
8
10
Affirmed.
Only the existence of a latent defect would have justified the Navy's order after
completion, inspection and acceptance of the job. Paragraph 10 of the general
provisions of the contract read:
'10. INSPECTION AND ACCEPTANCE
'(f) Unless otherwise provided in this contract, acceptance by the Government
shall be made as promptly as practicable after completion and inspection of all
work required by this contract. Acceptance shall be final and conclusive except
as regards latent defects, fraud, or such gross mistakes as may amount to fraud,
or as regards the Government's rights under any warranty or guarantee.'