Hadden v. United States

132 F. Supp. 202, 132 Ct. Cl. 529, 1955 U.S. Ct. Cl. LEXIS 154

Opinions

MADDEN, Judge.

In this case the plaintiff is the trustee in bankruptcy for a financial institution which loaned money to the contractor, taking as security an assignment of the contractor’s rights to receive payments from the Government for the performance of the contract. The intervenors are laborers and materialmen who furnished labor and materials to the contractor and have not been paid. The Government withheld a considerable sum which was otherwise due the contractor. The intervenors assert a right in that money superior to the right of the plaintiff.

The plaintiff sued for the amount withheld by the Government. The Government filed counterclaims for a total amount greatly in excess of the amount which it withheld. In several other cases brought by the same plaintiff, Nos. 50115, 49884, 48867, 413-52 and 49831, decided on April 5,1955, the Government filed most of the same counterclaims, and the court held that the counterclaims were not valid as against the claims there asserted, except to the extent that they were used up as credits in favor of the Government in that case. The outcome of those cases was a judgment in favor of the plaintiff trustee in bankruptcy for $303,156.44. That judgment has now become final. The sum admittedly withheld by the Government in the instant case is some $66,000 larger than the amount of any counterclaims by the Government now on file and not already dismissed.

In our decision in the instant case, we held that the Government was not a mere stakeholder, and that therefore the principle announced in Royal Indemnity Co. v. United States, 93 F.Supp. 891, 117 Ct. Cl. 736, was not applicable. But, by our decision dismissing the counterclaims in the plaintiff’s other cases referred to above, we made of the Government a mere stakeholder. In that situation, this court’s decision in Royal Indemnity Co. v. United States, supra, the Supreme Court’s dictum in United States v. Munsey Trust Co., 332 U.S. 234, 67 S.Ct. 1599, 91 L.Ed. 2022, recognizing its earlier decision in Henningsen v. United States Fidelity & Guaranty Co., 208 U. S. 404, 28 S.Ct. 389, 52 L.Ed. 547, as well as numerous other decisions of this and other Federal courts, show that we should recognize the rights of these intervenors. In the eases referred to above the plaintiff was a surety company, asserting rights derived from its payment of laborers and materialmen. If this right is enforeible, the laborers and materialmen, in whose shoes the surety in those cases stood, must have had rights. Greenville Savings Bank v. Lawrence, 4 Cir., 76 F. 545; In re P. McGarry & Son, 7 Cir., 240 F. 400; Belknap Hardware & Mfg. Co. v. Ohio River Contract Co., 6 Cir., 271 F. 144; American Surety Co. v. Westinghouse Electric Mfg. Co., 5 Cir., 75 F.2d 377, affirmed 296 U.S. 133, 56 S.Ct. 9, 80 L.Ed. 105; and Martin v. National Surety Co., 8 Cir., 85 F.2d 135, affirmed, 300 U. S. 588, 57 S.Ct. 531, 81 L.Ed. 822, are other Federal court cases in which laborers and materialmen, or sureties who have paid them, are held to have an equitable priority in money owed by the United States to a contractor.

The intervenors’ right is a right to the money, if any, owing by the United States to the contractor. If, as the litigation proceeds, it should develop that there is no such money, the intervenors will not be entitled to anything.

The motion of intervenors for a rehearing is granted, and the order contained in the opinion of April 5, 1955, granting plaintiff’s motion for judgment on the pleadings dismissing the petition in intervention is vacated.

It is so ordered.

JONES, Chief Judge, and WHITAKER and LITTLETON, Judges, concur.