B-213488, DEC 23, 1983
Highlights
DIGEST: MILLER ACT PERFORMANCE AND PAYMENTS BONDS SURETY MAY BE REIMBURSED FROM RETAINAGES UNDER A DEFAULTED CONTRACT ONCE THE SURETY SUBMITS REASONABLE EVIDENCE THAT ALL OUTSTANDING CLAIMS OF LABORERS AND MATERIALMEN HAVE BEEN PAID. 023.71 IN RETAINAGES WHICH IS BEING HELD UNDER DEFAULTED CONTRACT NO. IS THE SURETY UNDER THE MILLER ACT (40 U.S.C. 270A-270F (1976)) PERFORMANCE AND PAYMENT BONDS PROVIDED BY THE DEFAULTED PRIME CONTRACTOR. DMA REPORTS THAT DIMARCO IS CONTESTING THE DEFAULT TERMINATION BEFORE THE ARMED SERVICES BOARD OF CONTRACT APPEALS. A PAYMENT BOND SURETY HAS THE RIGHT TO FUNDS RETAINED BY THE GOVERNMENT WHEN THE SURETY IS CALLED UPON TO PAY LABORERS AND MATERIALMEN. THIS RIGHT IS SUPERIOR TO THAT OF THE CONTRACTOR AND MATURES WHEN THE SURETY SATISFIES THE DEBT OF ITS PRINCIPAL.
B-213488, DEC 23, 1983
DIGEST: MILLER ACT PERFORMANCE AND PAYMENTS BONDS SURETY MAY BE REIMBURSED FROM RETAINAGES UNDER A DEFAULTED CONTRACT ONCE THE SURETY SUBMITS REASONABLE EVIDENCE THAT ALL OUTSTANDING CLAIMS OF LABORERS AND MATERIALMEN HAVE BEEN PAID.
DEFENSE MAPPING AGENCY - REQUEST FOR ADVANCE DECISION:
THE DEFENSE MAPPING AGENCY (DMA) HAS REQUESTED AN ADVANCE DECISION CONCERNING THE PROPER DISPOSITION OF $62,023.71 IN RETAINAGES WHICH IS BEING HELD UNDER DEFAULTED CONTRACT NO. DMA700-82-C-0099 PENDING RESOLUTION OF CONFLICTING DEMANDS FOR PAYMENT BY THE CONTRACTOR AND ITS SURETY. HERITAGE INSURANCE COMPANY OF AMERICA, WHICH HAS NOT AT THIS TIME SATISFIED ANY CLAIMS OF LABORERS OR MATERIALMEN, IS THE SURETY UNDER THE MILLER ACT (40 U.S.C. 270A-270F (1976)) PERFORMANCE AND PAYMENT BONDS PROVIDED BY THE DEFAULTED PRIME CONTRACTOR, DIMARCO CORPORATION, UNDER A CONSTRUCTION CONTRACT WITH DMA.
DMA REPORTS THAT DIMARCO IS CONTESTING THE DEFAULT TERMINATION BEFORE THE ARMED SERVICES BOARD OF CONTRACT APPEALS. FURTHER, FOLLOWING THE TERMINATION, HERITAGE DID NOT ELECT TO COMPLETE PERFORMANCE UNDER THE DEFAULTED CONTRACT; RATHER, DMA ARRANGED FOR THE COMPLETION OF THE WORK BY SEPARATE CONTRACT, AND THE RETAINAGES REPRESENT FUNDS REMAINING UNDER DIMARCO'S CONTRACT AFTER DEDUCTING CONTRACT COMPLETION COSTS AND APPROPRIATE LIQUIDATED DAMAGES. DMA ALSO STATES THAT AT LEAST ONE SUPPLIER HAS FILED SUIT, CURRENTLY PENDING, UNDER THE MILLER ACT AGAINST THE SURETY AND THE DEFAULTED CONTRACTOR. IN THIS RESPECT, HERITAGE ADVISES THAT IT HAS RECEIVED CLAIMS FROM DIMARCO'S SUPPLIERS AND SUBCONTRACTORS IN THE NET AMOUNT OF $89,989.83.
HERITAGE SHOULD BE REIMBURSED FROM THE RETAINED FUNDS ONCE IT HAS PAID THE CLAIMS IT HAS RECEIVED. A PAYMENT BOND SURETY HAS THE RIGHT TO FUNDS RETAINED BY THE GOVERNMENT WHEN THE SURETY IS CALLED UPON TO PAY LABORERS AND MATERIALMEN. SEE PEARLMAN V. RELIANCE INS. CO., 371 U.S. 132 (1962); HOME INDEMNITY CO. V. UNITED STATES, 376 F.2D 890 (CT.CL. 1967); FIREMAN'S FUND INSURANCE COMPANY V. UNITED STATES, 421 F.2D 706 (CT.CL. 1970). THIS RIGHT IS SUPERIOR TO THAT OF THE CONTRACTOR AND MATURES WHEN THE SURETY SATISFIES THE DEBT OF ITS PRINCIPAL. HOME INDEMNITY COMPANY V. UNITED STATES, SUPRA. AS A GENERAL RULE, HOWEVER, BEFORE THE PAYMENT BOND SURETY CAN SHARE IN CONTRACT RETAINAGES IT MUST PAY ALL LEGITIMATE CLAIMS OF LABORERS AND MATERIALMEN IRRESPECTIVE OF THE LIMITS OF ITS BOND. AMERICAN FIDELITY FIRE INSURANCE CO. V. UNITED STATES, 513 F.2D 1375, 1378 (CT.CL. 1975).
THUS, UPON SUBMISSION OF REASONABLE EVIDENCE TO DMA THAT IT HAS PAID ALL OUTSTANDING CLAIMS UNDER THE CONTRACT, INCLUDING THOSE CURRENTLY BEING LITIGATED, HERITAGE MAY BE PAID THE RETAINAGES NOT TO EXCEED ITS ACTUAL COSTS AND EXPENSES OF MEETING THOSE CLAIMS. AMERICAN FIDELITY FIRE INSURANCE CO., 58 COMP.GEN. 64 (1978), 78-2 CPD 333; AMERICAN FIDELITY FIRE INSURANCE COMPANY; HERITAGE INSURANCE COMPANY OF AMERICA, B-200374, OCTOBER 21, 1980, 80-2 CPD 307.