United States ex rel. Westinghouse Electric v. James Stewart Co.

336 F.2d 777
CourtCourt of Appeals for the Ninth Circuit
DecidedSeptember 1, 1964
DocketNo. 18967
StatusPublished
Cited by9 cases

This text of 336 F.2d 777 (United States ex rel. Westinghouse Electric v. James Stewart Co.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United States ex rel. Westinghouse Electric v. James Stewart Co., 336 F.2d 777 (9th Cir. 1964).

Opinion

McNICHOLS, District Judge.

This is an appeal from a District Court jury verdict in favor of the defendants (appellees) on a Miller Act claim (40 U.S. C.A. 270b). Appellant, Westinghouse Electric Company, (hereinafter referred to as Westinghouse) brought claim as an unpaid materialman of a subcontractor, Mojave Electric Company,1 (hereinafter referred to as Mojave) against the ap-pellees, James Stewart Company (hereinafter referred to as Stewart), the prime contractor, and Amsterdam Casualty Company (hereinafter referred to as Amsterdam or as the surety), surety, on the statutory payment bond (40 U.S.C.A. 270a).

Stewart entered into a contract, dated April 30, 1958, with the United States of America, through the Department of Navy, for the construction of a training building at N.A.S. Miramar, San Diego, California (hereinafter called the Mira-mar Job) for the contract price of $710,-000. 00. Amsterdam was surety on the payment bond required by the Miller Act. Stewart subsequently subcontracted with Mojave for the performance of electrical work; and Westinghouse furnished electrical material to Mojave to be used on the Miramar Job.

i There is conflicting but substantial evidence supporting the following factual situation: In late November, 1958, Stewart management became concerned as to the status of payments by Mojave to Westinghouse for material furnished on the Miramar Job. Some $18,000.00 had been paid to Mojave and a $50,000.00 payment was about to be made. A phone call was initiated by Stewart to one Don Gediman, an officer of Westinghouse, who advised Stewart that a W. J. KNley2 (hereinafter referred to as Kelley), Credit Manager of Westinghouse, was in charge of the Mojave account. On December 2, 1958, officers of Stewart talked, by long distance telephone, with Kelley and learned that Mojave owed Westinghouse, for material furnished on the Miramar Job, approximately $30,000.-00, which amount was due and unpaid and that Westinghouse was worried about the account. Kelley asked the aid of Stewart in seeing that Westinghouse was paid. Stewart offered to withhold the $50,000.00 payment about to be made to Mojave, or alternatively, to issue a check made jointly payable to Mojave and to Westinghouse. Kelley informed Stewart that this was not necessary and urged that the $50,000.00 payment be made directly to Mojave stating that he was satisfied that Mojave would then pay Westinghouse. Stewart did, that day, in reliance on Kelley’s representations, make a payment to Mojave of $50,749.40. At the close of the above telephone conversation, of December 2, 1958, Stewart officials asked Kelley to verify, in writing, when payment was received by Westinghouse from Mojave and Kelley agreed to furnish a letter when payment was so received. Additionally, and during the same telephone conversation, Kelley was asked as to how Stewart should handle payments to Mojave in . the future to insure that the material-, man, Westinghouse, would be paid. Kelley advised the Stewart officials that Westinghouse would let Stewart know any time that Mojave failed to make payments satisfactory to Westinghouse. Kelley and the Stewart officials then arrived at an agreement that Westinghouse would advise Stewart any time Mojave was delinquent and that Stewart could rely on such notice and in the absence thereof could proceed to make future payments to Mojave.

Stewart heard no more from Westinghouse for ten days regarding the confirmation of payment by Mojave to Westinghouse, so another telephone inquiry was initiated by Stewart on December 12, 1958. This time the Westinghouse contact was Don Gediman who promised “action”. As a consequence of this second phone call, a letter, dated December 15,1958, was received by Stewart [779]*779from Kelley as Credit Manager of Westinghouse.3

Thereafter regular payments were made by Stewart to Mojave, totalling some additional $78,000.00, in round figures, the final payment being made in July, 1959. Mojave made no payment to Westinghouse on the Miramar Job from October 29, 1958 until October 27, 1959. Mojave became bankrupt and failed to pay Westinghouse the total amount due for materials furnished. No notice of any delinquency by Mojave on its obligation to Westinghouse was communicated to Stewart after the letter of December 15, 1958, until September 18, 1959, when a formal notice as required by the Miller Act was served by mail on Stewart. This notice showed a material-man’s claim in favor of Westinghouse for balance of purchase price of material furnished Mojave in the sum of $79,-000.00.

Stewart officials testified they relied on Kelley’s promise to give notice of any failure on the part of Mojave to pay for materials and that the subsequent payments made to Mojave were based on such reliance.

Appellant brought suit as use plaintiff under the Miller Act against Stewart, as prime contractor, against Mojave, as subcontractor, and against Amsterdam, as surety. Appellees defended with denials and an affirmative defense of estoppel. The primary issue presented on this appeal arises out of the defense of estoppel successfully advanced by the appellees. The defense, simply stated, was an attempt to establish that Westinghouse promised to advise Stewart if Mojave failed to pay for material and that the appellants failed to do so and Stewart paid Mojave in reliance on the promise, to Stewart’s detriment. The jury ap=' parently accepted the evidence of the appellees on this point and found both specifically and by implication that the estoppel was established. Whether an estoppel is present is a question of fact. Quon v. Niagara Fire Insurance Co., (C.A. 9, 1951) 190 F.2d 257. Substantial evidence exists to support the jury finding. Consequently we may not substitute our judgment for that of the jury. Lyons v. Gilliland, (C.A. 9, 1962) 308 F.2d 452, cert. denied 371 U.S. 923, 83 S.Ct. 291, 9 L.Ed.2d 231.

But appellant asserts that the defense of estoppel will not lie in a Miller Act case in any event. As appellant perceives the law, a material supplier to a subcontractor, having no direct contractual connection with the prime contractor, is completely protected by giving the 90-day notice required under the Act, regardless of other conduct. It is argued that to require the giving of other notice, or be estopped for failure to do so, would be in contradiction of the envisioned congressional policy in enacting the Miller Act. Appellant cites no authority for this position. Our research discloses that the defense of estoppel has been frequently and successfully raised under comparable factual situations in Miller Act litigation. Moyer v. United States (C.A. 4th, 1953) 206 F.2d [780]*78057; 39 A.L.R.2d 1098 (Annotated). We hold that in a proper case a materialman to a subcontractor in a Miller Act case may so conduct himself as to be estopped to claim the protection of the Act.

Appellant has a second string to this bow and contends that, as to the surety, at least, the defense of estoppel is not available. Reliance is placed on the Powers Regulator Company case.4 Powers was a State of California decision based on the California Public Works law.5 The plaintiff therein, a material supplier to a sub-subcontractor, brought suit solely, against the surety, on the statutory public works bond.

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