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UNITED STATES of America for the Use of WELLMAN ENGINEERING COMPANY, Appellee, v. MSI CORPORATION and Fullerton Construction Co., Comprising a joint venture known as Zarpas-Fullerton Joint Venture, and Aetna Casualty & Surety Company, Appellants

United States Court of Appeals for the Second Circuit1965-07-29No. No. 446, Docket 29519
350 F.2d 285

Summary

Holding. The court affirmed the district court's judgment, holding that Seneca was a subcontractor rather than a materialman under the Miller Act, and therefore Wellman Engineering Company, which supplied materials to Seneca under a direct contractual relationship, is entitled to recovery on the payment bond.

Wellman Engineering Company supplied hydraulic actuator and latch mechanisms to Seneca Industrial Machine Corporation, which had contracted with the general contractor Zarpas-Fullerton Joint Venture to manufacture and install a hydraulic system for a government missile site construction project. When Seneca failed to pay Wellman for the mechanisms, Wellman brought suit against Zarpas and its surety Aetna under the Miller Act payment bond. The district court found that Seneca was a subcontractor rather than a materialman, and therefore Wellman was entitled to protection under the Miller Act.

The appellate court affirmed, rejecting the argument that Seneca's lack of on-site work automatically classified it as a materialman. The court examined the totality of circumstances, including that Seneca manufactured items built to prime contract specifications for a specialized purpose, received progress payments under an agreement called a subcontract, and performed a specific part of the original contract requirements. The court noted that MacEvoy does not require on-site work to establish subcontractor status and that Congress intended the Miller Act to protect entities performing defined portions of contract work, not to extend indefinitely down a supply chain.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

  • Whether an entity that manufactures contract-specified components off-site qualifies as a subcontractor or materialman under the Miller Act
  • Whether lack of on-site work disqualifies an entity from subcontractor status under the Miller Act
  • The proper scope of protection under the Miller Act payment bond

Procedural posture

The United States District Court for the Western District of New York entered judgment on a Miller Act payment bond in favor of Wellman Engineering Company against the joint venture general contractor and its surety, and the obligor and surety appealed.

Authorities cited

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Opinion

majority opinion

J. JOSEPH SMITH, Circuit Judge:

The United States District Court for the Western District of New York, John 0. Henderson, Judge, entered judgment on a Miller Act (40 U.S.C. §§ 270a, 270b) bond in favor of use-plaintiff Wellman Engineering Company, and the obligor and surety on the bond appeal. Affirmed.

Appellants MSI Corporation and Fullerton Construction Co., as a joint venture known as Zarpas-Fullerton Joint Venture (Zarpas), were successful bidders on a government project for construction of a Bomarc missile site near Niagara, New York. Appellant Aetna Casualty & Surety Company is surety on Zarpas’ Miller Act bond on the contract.

Appellee, Wellman Engineering Company, contracted to furnish the Seneca Industrial Machine Corporation with certain hydraulic actuator and latch mechanisms needed by Seneca as part of a hydraulic system for opening and closing massive missile launcher roofs to be installed at a missile site then under construction by Zarpas, the general contractor for the Government project. Zarpas entered into a contract with Seneca entitled “Subcontract for Supply” whereunder Seneca was to manufacture and supply at the job-site the hydraulic system for opening and closing the roofs in accordance with contract specifications, sections 52 and 53 of the prime contract, including a designated change order, at a price of $85,000. Seneca did not have contractual responsibility for nor did it have anything to do with the installation of the system.

After Wellman had furnished all the mechanisms in accordance with the contract specifications, Seneca defaulted on its contract with Wellman and Well-man sought recourse against Zarpas. Timely notice of non-payment was given to Zarpas in accordance with the provisions of the Miller Act, and when Zarpas and its surety, the appellant Aetna Casualty & Surety Company refused payment, Wellman instituted this suit. The District Court, in finding for Wellman, held that Seneca was a subcontractor and that simply because Seneca did not perform any work on the job-site did not mean, as the court interpreted the Supreme Court decision in MacEvoy v. United States, 322 U.S. 102, 64 S.Ct. 890, 88 L.Ed. 1163 (1944), that Seneca must be considered a materialman. One who supplies material to a materialman is not protected by the Act. Considering the degree of responsibility assumed under Seneca’s contract, the type of work involved, the type of payment, and the nature and form of the agreement between the parties, the court concluded that Seneca was a subcontractor and not a materialman and that Wellman was therefore entitled to relief under the Miller Act.

We think that the court was correct in looking at the total picture here. It has been held, properly, we believe, that MacEvoy does not confine the resolution of the issue to expert opinion in the trade. United States for the Use and Benefit of Gulfport, etc. v. Monaco & Sons, 222 F.Supp. 175 (D.Md.1963), reversed on other grounds 336 F.2d 636 (4 Cir. 1964). While some courts have limited the definition of subcontractors under the Act to on-site performers, others have not, and we would not so narrowly read MacEvoy. See Basich Bros. Construction Co. et al. v. United States for the Use of Turner et al., 159 F.2d 182 (9 Cir. 1946). The Miller Act was substituted for the Heard Act to provide a separate payment bond on government contracts for the protection of subcontractors and materialmen in response to complaints of undue delay in collecting on the single bond for performance and payment provided for by the Heard Act, caused by the priority given to the government rights under the performance provisions of the bond. The Congressional Committee reports did not specify that protection was confined to those working on the job-site, but indicated that the protection was not, however, to extend to an endless chain of suppliers. “A sub-subcontractor may avail himself of the protection of the bond by giving written notice to the contractor, but that

is as far as the bill goes. It is not felt that more remote relationships ought to come within the purview of the bond.” House of Representatives Report No. 1263, 74th Congress, 1st Session. A subcontractor is “one who performs for and takes from the prime contractor a specific part of the labor or material requirements of the original contract, thus excluding ordinary laborers and mate-rialmen.” 322 U.S. at 109, 64 S.Ct. at 894. Here, Seneca and Wellman for Seneca built to specifications of the prime contract, items not generally available on the open market, were under close job supervision, and received progress payments, under what was called a subcontract. Seneca itself and using Wellman’s devices did perform a specific part of the requirements of the original contract. To paraphrase MacEvoy, it would have been easy for Zarpas to protect itself against loss by requiring Seneca to give security by bond, or otherwise, for the payment of those who contracted directly with Seneca. In United States to the use of Hardwood Products Corp. v. John A. Johnson & Sons, Inc. et al., 137 F.Supp. 562 (W.D.Pa.1955), doors built to contract specifications for a Veterans Administration Hospital, manufactured off-site were held to have been furnished by a subcontractor, although no on-site work was performed. See also Basich Bros. Construction Co. et al. v. U. S. for the use of Turner, et al., supra — where rock, sand and gravel was according to contract produced and delivered four and one half miles from the job-site. In the MacEvoy case the materials were apparently ordinary building materials for construction of dwelling units furnished to Miller, an ordinary materialman, not one who built to contract specifications components for the job. Mechanism built to the prime contract specifications, for the unique task of rapid movement of the heavy concrete roofs of missile launchers, qualify Seneca as “one who performs for and takes from the prime contractor a specific part of the labor or material requirements of the original contract * * The court properly placed the case on the subcontractor side of the line drawn by the Act, rather than make the determination that Seneca was merely a materialman solely on the basis of lack of on-site work. Since Wellman had direct contractual relation with Seneca and gave the required notice to Zarpas, Well-man is covered by the bond.

The judgment is affirmed.