A-24587, JANUARY 2, 1929, 8 COMP. GEN. 318

A-24587: Jan 2, 1929

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IT APPEARS THAT THE BALANCE DUE THE CONTRACTOR FOR WORK PERFORMED PRIOR TO ITS DEFAULT IS MORE THAN SUFFICIENT TO REIMBURSE THE GOVERNMENT FOR EXPENDITURES IN COMPLETING THE WORK AND FOR ACCRUED LIQUIDATED DAMAGES FOR THE CONTRACTOR'S DELAY IN PERFORMANCE. IT IS ESTABLISHED THAT THE SURETY ON THE CONTRACTOR'S PERFORMANCE BOND HAS PAID CLAIMS OF LABORERS AND MATERIALMEN FOR WHICH IT WAS LIABLE UNDER SAID BOND. SAID SURETY IS ENTITLED TO THE BALANCE OF THE MONEYS OTHERWISE DUE THE DEFAULTING CONTRACTOR TO PARTIALLY REIMBURSE IT FOR PAYMENTS MADE AS SUCH SURETY. WHICH CONTRACT WAS ABANDONED BY SAID CONTRACTORS BEFORE COMPLETION. UNDER THE TERMS AND CONDITIONS OF SAID CONTRACT THE CONTRACTORS WERE OBLIGATED.

A-24587, JANUARY 2, 1929, 8 COMP. GEN. 318

CONTRACTS - DEFAULT - SURETY'S LIABILITY TO MATERIALMEN - PAYMENT TO SURETY WHERE A CONTRACTOR DEFAULTED IN PERFORMANCE OF ITS CONTRACT FOR GOVERNMENT WORK AND THE UNITED STATES FINISHED THE WORK, AND IT APPEARS THAT THE BALANCE DUE THE CONTRACTOR FOR WORK PERFORMED PRIOR TO ITS DEFAULT IS MORE THAN SUFFICIENT TO REIMBURSE THE GOVERNMENT FOR EXPENDITURES IN COMPLETING THE WORK AND FOR ACCRUED LIQUIDATED DAMAGES FOR THE CONTRACTOR'S DELAY IN PERFORMANCE, AND IT IS ESTABLISHED THAT THE SURETY ON THE CONTRACTOR'S PERFORMANCE BOND HAS PAID CLAIMS OF LABORERS AND MATERIALMEN FOR WHICH IT WAS LIABLE UNDER SAID BOND, SAID SURETY IS ENTITLED TO THE BALANCE OF THE MONEYS OTHERWISE DUE THE DEFAULTING CONTRACTOR TO PARTIALLY REIMBURSE IT FOR PAYMENTS MADE AS SUCH SURETY.

DECISION BY COMPTROLLER GENERAL MCCARL, JANUARY 2, 1929:

THERE HAS BEEN PRESENTED TO THIS OFFICE FOR CONSIDERATION AND SETTLEMENT THE CLAIM OF THE FIDELITY AND CASUALTY COMPANY OF NEW YORK FOR THE BALANCE OF THE MONEYS DUE UNDER THE CONTRACT OF JOSEPH C. NANCE AND LOUIS MOON, PARTNERS, COMPOSING THE FIRM OF MOON AND NANCE, WITH THE TREASURY DEPARTMENT, COAST GUARD, CONTRACT NO. TCG-1708, DATED MARCH 15, 1927, FOR THE CONSTRUCTION OF A MARINE RAILWAY, BOAT CARRIAGE, AND SPUR MOORING DOCK AT THE UNITED STATES COAST GUARD SECTION BASE 6, FORT LAUDERDALE, FLA., WHICH CONTRACT WAS ABANDONED BY SAID CONTRACTORS BEFORE COMPLETION, NECESSITATING COMPLETION OF THE UNFINISHED WORK BY THE GOVERNMENT.

UNDER THE TERMS AND CONDITIONS OF SAID CONTRACT THE CONTRACTORS WERE OBLIGATED, FOR AND IN CONSIDERATION OF THE PAYMENT OF $18,262, TO FURNISH ALL LABOR AND MATERIALS AND TO PERFORM ALL WORK REQUIRED FOR THE CONSTRUCTION OF THE MARINE RAILWAY, BOAT CARRIAGE, AND SPUR MOORING DOCK AT THE UNITED STATES COAST GUARD SECTION BASE 6, AT FORT LAUDERDALE, FLA., IN ACCORDANCE WITH THE SPECIFICATIONS, SCHEDULES, AND DRAWINGS THEREFOR, ATTACHED TO AND MADE A PART OF THE CONTRACT, AND TO COMMENCE THE WORK WITHIN FIVE CALENDAR DAYS AFTER DATE OF RECEIPT OF NOTICE TO PROCEED AND TO COMPLETE SAME WITHIN 125 DAYS FROM SAID RECEIVING DATE. IN THE EVENT OF DELAY IN COMPLETION OF THE WORK THE CONTRACT PROVIDED FOR THE DEDUCTION OF LIQUIDATED DAMAGES AS PROVIDED IN THE SPECIFICATIONS, TO WIT, AT THE RATE OF $5 PER CALENDAR DAY FOR EACH DAY COMPLETION THEREOF WAS DELAYED.

TO GUARANTEE THE PERFORMANCE OF SAID CONTRACT IN ACCORDANCE WITH THE CONDITIONS THEREOF, THE CONTRACTORS, MOON AND NANCE, AS PRINCIPALS, AND THE FIDELITY AND CASUALTY COMPANY OF NEW YORK, AS SURETY, EXECUTED A PERFORMANCE BOND IN THE SUM OF $9,000, DATED MARCH 17, 1927, PAYABLE TO THE UNITED STATES OF AMERICA.

THERE WERE SOME CHANGES IN THE WORK, AS IT PROGRESSED, NOT CONTEMPLATED BY THE CONTRACT, BY WHICH THE COMPENSATION TO BE PAID THE CONTRACTORS WAS INCREASED $50, THUS INCREASING THE CONTRACT PRICE FOR THE WORK TO $18,312.

THE FACTS RELATIVE TO THE MATTERS INVOLVED IN THE SURETY'S CLAIM ARE STATED BY THE COMMANDANT OF THE UNITED STATES COAST GUARD, IN HIS LETTER OF DECEMBER 17, 1927, TO THE GENERAL ACCOUNTING OFFICE, TO BE AS FOLLOWS:

BRIEFLY STATED, THE FACTS IN THIS CASE ARE AS FOLLOWS: ON MARCH 24, 1927, AN EXECUTED COPY OF THE CONTRACT WAS FORWARDED TO THE CONTRACTORS, WITH NOTICE TO PROCEED WITH THE WORK. THE WORK WAS COMMENCED, BUT WAS NOT PROSECUTED WITH THE DILIGENCE REQUIRED TO ENABLE COMPLETION WITHIN THE TIME SPECIFIED, AND THE WORK WAS APPARENTLY ABANDONED BY THE CONTRACTORS. ON AUGUST 1, 1927, THE CONTRACTORS WERE NOTIFIED AT THEIR LAST KNOWN ADDRESS THAT THEIR RIGHT TO PROCEED UNDER THE CONTRACT WAS TERMINATED IN ACCORDANCE WITH ARTICLE 9 THEREOF. THE SURETY ON THE CONTRACTORS' BOND WAS COMMUNICATED WITH AND ASKED IF THEY CHOSE TO COMPLETE THE WORK. THE SURETY ADVISED THAT THEY ELECTED NOT TO UNDERTAKE THE COMPLETION OF THE WORK. FIELD ASSISTANT HITE WAS THEN DIRECTED TO TAKE OVER THE WORK AND PROSECUTE IT TO COMPLETION, AS THIS WAS DEEMED A MORE ADVANTAGEOUS METHOD THAN THAT OF SOLICITING BIDS FOR ITS COMPLETION. THIS WORK WAS TAKEN OVER BY THE GOVERNMENT AUGUST 2, 1927, AND WAS COMPLETED ON SEPTEMBER 1, 1927, AND WAS ACCEPTED SEPTEMBER 6, 1927. IT WILL BE NOTED FROM INCLOSURE (31) THAT FIELD ASSISTANT HITE ESTIMATES THE CONTRACT WAS 73.41 COMPLETED WHEN THE GOVERNMENT TERMINATED THE CONTRACTORS' RIGHT TO PROCEED. * * *

THUS, IT APPEARS THAT THE CONTRACTORS ABANDONED THEIR CONTRACT ON OR BEFORE AUGUST 1, 1927, AND FAILED TO PERFORM THE WORK CONTRACTED FOR THEREUNDER, AND THAT THEIR SURETY ELECTED NOT TO COMPLETE THE UNFINISHED WORK, NECESSITATING THE SUBSEQUENT COMPLETION THEREOF BY THE GOVERNMENT. THE CONTRACTORS' RIGHT TO COMPLETE THE WORK WAS TERMINATED BY THE GOVERNMENT ON AUGUST 1, 1927, PURSUANT TO THE PROVISIONS OF ARTICLE 9 OF THE CONTRACT, AND THE UNFINISHED WORK THEREUNDER WAS COMPLETED BY THE GOVERNMENT ON SEPTEMBER 1, 1927.

WHERE A CONTRACTOR ABANDONS ITS CONTRACT, NECESSITATING THE TERMINATION THEREOF BY THE GOVERNMENT, AND THE SUBSEQUENT COMPLETION OF THE WORK CONTRACTED FOR EITHER BY ANOTHER CONTRACTOR OR BY THE GOVERNMENT, LIQUIDATED DAMAGES, WHEN PROVIDED FOR IN THE CONTRACT, ACCRUE ONLY TO THE DATE OF SUCH TERMINATION FOR DELAYS IN COMPLETION OF THE CONTRACT. SEE 7 COMP. GEN. 409.

THE CONTRACTOR IN THIS CASE APPEARS TO HAVE RECEIVED NOTICE TO PROCEED WITH THE WORK ON MARCH 26, 1927. THEREFORE, THE WORK SHOULD HAVE BEEN COMPLETED WITHIN 125 DAYS FROM THAT DATE, WHICH WAS JULY 29, 1927. HENCE, LIQUIDATED DAMAGES ACCRUED FROM JULY 29 TO AUGUST 1, 1927, OR FOR A PERIOD OF THREE DAYS.

THE CONTRACT PROVIDED:

ARTICLE 9. DELAYS--- DAMAGES.--- IF THE CONTRACTOR REFUSES OR FAILS TO PROSECUTE THE WORK, OR ANY SEPARABLE PART THEREOF, WITH SUCH DILIGENCE AS WILL INSURE ITS COMPLETION WITHIN THE TIME SPECIFIED IN ARTICLE 1, OR ANY EXTENSION THEREOF, OR FAILS TO COMPLETE SAID WORK WITHIN SUCH TIME, THE GOVERNMENT MAY, BY WRITTEN NOTICE TO THE CONTRACTOR, TERMINATE HIS RIGHT TO PROCEED WITH THE WORK OR SUCH PART OF THE WORK AS TO WHICH THERE HAS BEEN DELAY. IN SUCH EVENT THE GOVERNMENT MAY TAKE OVER THE WORK AND PROSECUTE THE SAME TO COMPLETION BY CONTRACT OR OTHERWISE, AND THE CONTRACTOR AND HIS SURETIES SHALL BE LIABLE TO THE GOVERNMENT FOR ANY EXCESS COST OCCASIONED THE GOVERNMENT THEREBY. IF THE CONTRACTOR'S RIGHT TO PROCEED IS SO TERMINATED, THE GOVERNMENT MAY TAKE POSSESSION OF AND UTILIZE IN COMPLETING THE WORK SUCH MATERIALS, APPLIANCES, AND PLANT AS MAY BE ON THE SITE OF THE WORK AND NECESSARY THEREFOR. IF THE GOVERNMENT DOES NOT TERMINATE THE RIGHT OF THE CONTRACTOR TO PROCEED, THE CONTRACTOR SHALL CONTINUE THE WORK, IN WHICH EVENT THE ACTUAL DAMAGES FOR THE DELAY WILL BE IMPOSSIBLE TO DETERMINE AND IN LIEU THEREOF THE CONTRACTOR SHALL PAY TO THE GOVERNMENT AS FIXED, AGREED, AND LIQUIDATED DAMAGES FOR EACH CALENDAR DAY OF DELAY UNTIL THE WORK IS COMPLETED OR ACCEPTED THE AMOUNT AS SET FORTH IN THE SPECIFICATIONS OR ACCOMPANYING PAPERS AND THE CONTRACTOR AND HIS SURETIES SHALL BE LIABLE FOR THE AMOUNT THEREOF: PROVIDED, THAT THE RIGHT OF THE CONTRACTOR TO PROCEED SHALL NOT BE TERMINATED OR THE CONTRACTOR CHARGED WITH LIQUIDATED DAMAGES BECAUSE OF ANY DELAYS IN THE COMPLETION OF THE WORK DUE TO UNFORESEEABLE CAUSES BEYOND THE CONTROL AND WITHOUT THE FAULT OR NEGLIGENCE OF THE CONTRACTOR, INCLUDING, BUT NOT RESTRICTED TO ACTS OF GOD, OR OF THE PUBLIC ENEMY, ACTS OF THE GOVERNMENT, FIRES, FLOODS, EPIDEMICS, QUARANTINE RESTRICTIONS, STRIKES, FREIGHT EMBARGOES, AND UNUSUALLY SEVERE WEATHER OR DELAYS OF SUBCONTRACTORS DUE TO SUCH CAUSES: PROVIDED FURTHER, THAT THE CONTRACTOR SHALL WITHIN TEN DAYS FROM THE BEGINNING OF ANY SUCH DELAY NOTIFY THE CONTRACTING OFFICER IN WRITING OF THE CAUSES OF DELAY, WHO SHALL ASCERTAIN THE FACTS AND THE EXTENT OF THE DELAY, AND HIS FINDINGS OF FACTS THERE SHALL BE FINAL AND CONCLUSIVE ON THE PARTIES HERETO, SUBJECT ONLY TO APPEAL, WITHIN THIRTY DAYS, BY THE CONTRACTOR TO THE HEAD OF THE DEPARTMENT CONCERNED, WHOSE DECISION ON SUCH APPEAL AS TO THE FACTS OF DELAY SHALL BE FINAL AND CONCLUSIVE ON THE PARTIES HERETO.

ARTICLE 15. DISPUTES.--- EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN THIS CONTRACT, ALL DISPUTES CONCERNING QUESTIONS OF FACT ARISING UNDER THIS CONTRACT SHALL BE DECIDED BY THE CONTRACTING OFFICER OR HIS DULY AUTHORIZED REPRESENTATIVE, SUBJECT TO WRITTEN APPEAL BY THE CONTRACTOR WITHIN THIRTY DAYS TO THE HEAD OF THE DEPARTMENT CONCERNED, WHOSE DECISION SHALL BE FINAL AND CONCLUSIVE UPON THE PARTIES THERETO AS TO SUCH QUESTIONS OF FACT. IN THE MEANTIME THE CONTRACTOR SHALL DILIGENTLY PROCEED WITH THE WORK AS DIRECTED.

ARTICLE 16. PAYMENTS TO CONTRACTORS.--- (A)UNLESS OTHERWISE PROVIDED IN THE SPECIFICATIONS, PARTIAL PAYMENTS WILL BE MADE AS THE WORK PROGRESSES AT THE END OF EACH CALENDAR MONTH, OR AS SOON THEREAFTER AS PRACTICABLE, ON ESTIMATES MADE AND APPROVED BY THE CONTRACTING OFFICER. IN PREPARING ESTIMATES THE MATERIAL DELIVERED ON THE SITE AND PREPARATORY WORK DONE MAY BE TAKEN INTO CONSIDERATION.

(B) IN MAKING SUCH PARTIAL PAYMENTS THERE SHALL BE RETAINED 10 PERCENT ON THE ESTIMATED AMOUNT UNTIL FINAL COMPLETION AND ACCEPTANCE OF ALL WORK COVERED BY THE CONTRACT: PROVIDED, HOWEVER, THAT THE CONTRACTING OFFICER, AT ANY TIME AFTER 50 PERCENT OF THE WORK HAS BEEN COMPLETED, IF HE FINDS THAT SATISFACTORY PROGRESS IS BEING MADE, MAY MAKE ANY OF THE REMAINING PARTIAL PAYMENTS IN FULL: AND PROVIDED FURTHER, THAT ON COMPLETION AND ACCEPTANCE OF EACH SEPARATE BUILDING, VESSEL, PUBLIC WORK, OR OTHER DIVISION OF THE CONTRACT, ON WHICH THE PRICE IS STATED SEPARATELY IN THE CONTRACT, PAYMENT MAY BE MADE IN FULL, INCLUDING RETAINED PERCENTAGES THEREON, LESS AUTHORIZED DEDUCTIONS.

(C) ALL MATERIAL AND WORK COVERED BY PARTIAL PAYMENTS MADE SHALL THEREUPON BECOME THE SOLE PROPERTY OF THE GOVERNMENT, BUT THIS PROVISION SHALL NOT BE CONSTRUED AS RELIEVING THE CONTRACTOR FROM THE SOLE RESPONSIBILITY FOR THE CARE AND PROTECTION OF MATERIALS AND WORK UPON WHICH PAYMENTS HAVE BEEN MADE OR THE RESTORATION OF ANY DAMAGED WORK, OR AS A WAIVER OF THE RIGHT OF THE GOVERNMENT TO REQUIRE THE FULFILLMENT OF ALL OF THE TERMS OF THE CONTRACT.

(D) UPON COMPLETION AND ACCEPTANCE OF ALL WORK REQUIRED HEREUNDER, THE AMOUNT DUE THE CONTRACTOR UNDER THIS CONTRACT WILL BE PAID UPON THE PRESENTATION OF A PROPERLY EXECUTED AND DULY CERTIFIED VOUCHER THEREFOR, AFTER THE CONTRACTOR SHALL HAVE FURNISHED THE GOVERNMENT WITH A RELEASE, IF REQUIRED, OF ALL CLAIMS AGAINST THE GOVERNMENT ARISING UNDER AND BY VIRTUE OF THIS CONTRACT, OTHER THAN SUCH CLAIMS, IF ANY, AS MAY BE SPECIFICALLY EXCEPTED BY THE CONTRACTOR FROM THE OPERATION OF THE RELEASE IN STATED AMOUNTS TO BE SET FORTH THEREIN.

PARAGRAPH 7 OF THE SPECIFICATIONS PROVIDED:

LIQUIDATED DAMAGES.--- THE DAMAGES THAT MAY RESULT FROM ANY DELAY IN COMPLETION OF ANY WORK BY THE TIME AGREED UPON WILL BE DIFFICULT, IF NOT IMPOSSIBLE, TO DETERMINE. IF ANY WORK IS NOT COMPLETED ON OR BEFORE THE DATE FIXED FOR ITS COMPLETION BY THE TERMS OF THE CONTRACT, OR BY THE DATE ARRIVED AT BY ANY EXTENSION OF TIME THAT MAY BE ALLOWED UNDER THE TERMS OF THE CONTRACT, THE CONTRACTOR SHALL PAY TO THE GOVERNMENT AS FIXED, AGREED, AND LIQUIDATED DAMAGES, FIVE DOLLARS ($5) FOR EACH CALENDAR DAY THEREAFTER UNTIL THE WORK IS SATISFACTORILY COMPLETED, OR UNTIL SUCH TIME AS THE GOVERNMENT MAY REASONABLY PROCURE THE COMPLETION OF THE WORK BY ANOTHER CONTRACT, OR COMPLETE THE WORK ITSELF: PROVIDED, THAT NO DELAY SHALL BE CHARGED AGAINST THE CONTRACTOR IF THE HEAD OF THE DEPARTMENT CERTIFIES, BEFORE FINAL PAYMENTS, THAT SUCH DELAY HAS CAUSED NO DAMAGE TO THE GOVERNMENT. WHATEVER SUMS MAY BE DUE AS LIQUIDATED DAMAGES FOR DELAY MAY BE DEDUCTED FROM PAYMENTS DUE THE CONTRACTOR OR MAY BE COLLECTED FROM THE CONTRACTOR OR HIS SURETIES.

PROGRESS OR PARTIAL PAYMENTS, ON THE BASIS OF 90 PERCENT OF THE ESTIMATED VALUE OF THE COMPLETED WORK, WERE MADE TO THE CONTRACTORS BY THE UNITED STATES COAST GUARD'S DISBURSING OFFICER, AS FOLLOWS: CHART JUNE, 1927, ON VOUCHER NO. 198576- - - - - - - - - - - - - - $3,543.56 JULY, 1927, ON VOUCHER NO. 2447- - - - - - - - - -- - - - - $5,423.81

TOTAL PAYMENTS TO CONTRACTORS - - - - - - - - - - - - 8,967.37

THE COMMANDANT OF THE UNITED STATES COAST GUARD UNDER DATE OF OCTOBER 13, 1928, REPORTED TO THIS OFFICE THAT THE TOTAL AMOUNT EXPENDED BY THE UNITED STATES TO COMPLETE THE WORK AFTER ITS ABANDONMENT BY THE CONTRACTORS AGGREGATED $5,204.62.

UNDER THE TERMS OF THE CONTRACT LIQUIDATED DAMAGES ACCRUED TO THE UNITED STATES AT THE RATE OF $5 PER DAY FOR THE THREE CALENDAR DAYS OF DELAY IN COMPLETION PRIOR TO THE TERMINATION OF CONTRACTORS' RIGHT TO COMPLETE, AMOUNTING TO $15.

DEDUCTING FROM THE CONTRACT PRICE OF $18,312 FOR THE WORK REQUIRED, (1) THE $8,967.37 PAYMENTS MADE TO THE CONTRACTORS, (2) THE $5,204.62 EXPENDITURES MADE BY THE UNITED STATES IN COMPLETING THE CONTRACT, AND (3) THE $15 ACCRUED LIQUIDATED DAMAGES, THERE REMAINS OF THE CONTRACT PRICE THE SUM OF $4,125.01. AND AS THE WORK WAS 73.41 PERCENT COMPLETED BY THE CONTRACTORS, THE AMOUNT EARNED TO DATE OF DEFAULT WAS $13,442.84, WHICH, AFTER DEDUCTING THE LIQUIDATED DAMAGES AND THE AMOUNT PAID TO CONTRACTORS, LEAVES AN EARNED BALANCE OF $5,460.47, WHICH INCLUDES THE RETAINED PERCENTAGES, AMOUNTING TO $995.88, AND IS IN EXCESS OF THE BALANCE OF $4,125.01 DUE UNDER THE CONTRACT.

THE FIDELITY AND CASUALTY COMPANY OF NEW YORK, SURETY ON THE CONTRACTORS' PERFORMANCE BOND, CLAIMS THE $4,125.01 BALANCE DUE UNDER THE CONTRACT IN ORDER PARTIALLY TO REIMBURSE IT FOR EXPENDITURES ON BEHALF OF CONTRACTORS FOR WHICH IT WAS LIABLE UNDER THE PERFORMANCE BOND. THE PERFORMANCE BOND PROVIDED:

NOW THEREFORE, IF THE PRINCIPAL SHALL WELL AND TRULY PERFORM AND FULFILL ALL THE UNDERTAKINGS, COVENANTS, TERMS, CONDITIONS, AND AGREEMENTS OF SAID CONTRACT DURING THE ORIGINAL TERM OF SAID CONTRACT AND ANY EXTENSIONS THEREOF THAT MAY BE GRANTED BY THE GOVERNMENT, WITH OR WITHOUT NOTICE TO THE SURETY, AND DURING THE LIFE OF ANY GUARANTY REQUIRED UNDER THE CONTRACT, AND SHALL ALSO WELL AND TRULY PERFORM AND FULFILL ALL THE UNDERTAKINGS, COVENANTS, TERMS, CONDITIONS, AND AGREEMENTS OF ANY AND ALL DULY AUTHORIZED MODIFICATIONS OF SAID CONTRACT THAT MAY HEREAFTER BE MADE, NOTICE OF WHICH MODIFICATIONS TO THE SURETY BEING HEREBY WAIVED, AND IF SAID CONTRACT IS FOR THE CONSTRUCTION OR REPAIR OF A PUBLIC BUILDING OR A PUBLIC WORK WITHIN THE MEANING OF THE ACT OF AUGUST 13, 1894, AS AMENDED BY ACT OF FEBRUARY 25, 1905, SHALL PROMPTLY MAKE PAYMENT TO ALL PERSONS SUPPLYING THE PRINCIPAL WITH LABOR AND MATERIALS IN THE PROSECUTION OF THE WORK PROVIDED FOR IN SAID CONTRACT, AND ANY SUCH AUTHORIZED EXTENSION OR MODIFICATION THEREOF, THEN, THIS OBLIGATION TO BE VOID; OTHERWISE TO REMAIN IN FULL FORCE AND VIRTUE.

THE INVOLVED GOVERNMENT CONTRACT FOR THE CONSTRUCTION OF THE MARINE RAILWAY, ETC., AT THE UNITED STATES COAST GUARD SECTION BASE 6, AT FORT LAUDERDALE, FLA, IS A PUBLIC WORK WITHIN THE MEANING OF THE ACT OF AUGUST 13, 1894, 28 STAT. 278, AS AMENDED BY THE ACT OF FEBRUARY 24, 1905, 33 STAT. 811, WHICH PROVIDES FOR THE PROTECTION OF PERSONS FURNISHING MATERIALS AND LABOR FOR THE CONSTRUCTION OF PUBLIC BUILDINGS AND WORKS. THE COURTS HAVE HELD THAT UNDER A PERFORMANCE BOND FOR PUBLIC BUILDINGS AND WORK UNDER SAID STATUTE THE OBLIGATION HAS A DUAL ASPECT, TO WIT, FIRST, TO SECURE TO THE GOVERNMENT THE FAITHFUL PERFORMANCE OF THE CONTRACT, AND, SECOND, TO PROTECT THIRD PERSONS FROM WHOM THE CONTRACTOR MAY OBTAIN MATERIALS OR LABOR; AND THAT THE ACT WAS INTENDED TO PROVIDE A SECURITY FOR LABORERS AND MATERIAL MEN ON WHICH THEY COULD RELY CONFIDENTLY FOR PROTECTION, UNLESS THEY RELINQUISHED THE BENEFIT OF SUCH SECURITY BY THEIR OWN DEALINGS WITH THE CONTRACTOR. UNITED STATES V. NATIONAL SURETY CO., 92 FED.REP. 549; EQUITABLE SURETY CO. V. UNITED STATES, 234 U.S. 448.

UNDER THE CONDITIONS OF THE BOND, AND IN VIEW OF SAID STATUTE, THE SURETY BECAME BOUND FOR PERFORMANCE OF THE WORK BY THE CONTRACTOR IN ACCORDANCE WITH STIPULATIONS OF THE CONTRACT AND FOR THE PROMPT PAYMENT OF MONEYS DUE TO ALL PERSONS SUPPLYING LABOR AND MATERIALS TO THE CONTRACTOR FOR THE WORK UNDER INVOLVED CONTRACT.

IN THE INSTANT MATTER THE CONTRACTORS DEFAULTED IN PERFORMANCE OF THEIR CONTRACT, AND THE SURETY ELECTED NOT TO COMPLETE THE CONTRACT, AND THE UNITED STATES WAS COMPELLED TO COMPLETE THE WORK. HOWEVER, AT THE TIME OF SAID DEFAULT THERE WERE FUNDS DUE THE CONTRACTORS FOR WORK PERFORMED WHICH ARE MORE THAN SUFFICIENT TO REIMBURSE THE GOVERNMENT FOR ITS EXPENDITURES IN COMPLETING THE CONTRACT. AFTER PAYMENTS OF THE AMOUNTS DUE THE GOVERNMENT, BOTH FOR NECESSARY EXPENDITURES AND ACCRUED LIQUIDATED DAMAGES FOR DELAYS IN PERFORMANCE, THERE REMAINS OF THE CONTRACT PRICE FOR THE WORK THE SUM OF $4,125.01 AS BALANCE WITHHELD FROM THE DEFAULTING CONTRACTOR.

IT IS A WELL SETTLED PRINCIPLE OF LAW THAT WHERE A SURETY UPON A CONTRACTOR'S BOND HAS PAID CLAIMS IT WAS OBLIGATED TO PAY, IF ITS PRINCIPAL DID NOT, IT IS ENTITLED BY RIGHT OF SUBROGATION, TO BE REIMBURSED FOR SUCH PAYMENTS FROM AND NOT TO EXCEED THE AMOUNT OF ANY FUNDS IN THE HANDS OF THE GOVERNMENT OTHERWISE DUE THE CONTRACTOR FOR WORK PERFORMED UNDER THE INVOLVED CONTRACT. IN THIS CONNECTION SEE UNITED STATES V. NATIONAL SURETY COMPANY, 92 FED.REP. 549; HENNINGSEN ET AL. V. UNITED STATES FIDELITY AND GUARANTY COMPANY OF BALTIMORE, MD., ET AL., 143 FED.REP. 810, AFFIRMED BY THE UNITED STATES SUPREME COURT, 208 U.S. 404; PRAIRIE STATE BANK V. UNITED STATES, 164 U.S. 227; FIDELITY AND DEPOSIT COMPANY OF MARYLAND V. CLAIBORNE PARISH SCHOOL BOARD ET AL., 11 FED.REP. (2D) 404; FIDELITY AND DEPOSIT COMPANY OF MARYLAND V. UNION STATE BANK OF MINNEAPOLIS ET AL., 21 FED.REP. (2D) 102; AND HARDAWAY V. NATIONAL SURETY COMPANY, 211 U.S. 552. SEE, ALSO, 8 COMP. GEN. 266.

THE EVIDENCE PRESENTED BY THE CLAIMANT CLEARLY SHOWS THAT, AS SUCH SURETY ON THE DEFAULTING CONTRACTORS' PERFORMANCE BOND, IT HAS PAID OBLIGATIONS AND LIABILITIES TO MATERIAL MEN AND LABORERS UNDER THE SAID CONTRACT AGGREGATING AN AMOUNT IN EXCESS OF THE BALANCE DUE FROM THE GOVERNMENT UNDER THE CONTRACT, AND THAT THERE ARE PENDING FOR ADJUSTMENT BY IT ADDITIONAL CLAIMS, AMOUNTING TO SEVERAL HUNDRED DOLLARS, FOR THE PAYMENT OF WHICH IT MAY BE LIABLE ON THE BOND.

ACCORDINGLY, THERE IS CERTIFIED AS DUE THE CLAIMANT, THE FIDELITY AND CASUALTY COMPANY OF NEW YORK, THE SUM OF $4,125.01 AS THE BALANCE DUE UNDER THE CONTRACT NO. TCG-1708, DATED MARCH 15, 1927, AND A CHECK THEREFOR WILL ISSUE TO SAID SURETY IN DUE COURSE.