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92 C. Cis. Syllabus 9. The claim was examined and determined by the Assistant Secretary of War under the provisions of the Act of March 4, 1921 (41 Stat. 1436), and the claim was approved by him with respect to both the amount and the facts of the loss.

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10. The claim, or any part thereof, has not been paid for the reason that the Comptroller General in an advance decision held that the loss in question is not within the provision of the statute.

11. The plaintiff claims the sum of $240.00 for the damage to, and loss of, his property as aforesaid.

The court decided that the plaintiff was entitled to recover, in an opinion per curiam, as follows:

The plaintiff is clearly entitled to recover, as we have heretofore held in several different cases. Franz J. Jonitz v. The United States, 89 C. Cls. 155; Lyle M. Shields v. The United States, 90 C. Cls. 675; Charles D. McColl v. The United States, 90 C. Cls. 676; and Orville Jackson v. The United States, 90 C. Cls. 526.

On authority of those cases judgment will be entered for the plaintiff in the sum of $240.00. It is so ordered.

UNITED STATES FIDELITY AND GUARANTY COMPANY, A CORPORATION, v. THE UNITED STATES

[No. 44293. Decided November 12, 1940]

On the Proofs

Government contract; completion of contract by surety; right to per

centages retained.Where surety on contractor's completion bond undertook to complete the contract when contractor became bankrupt, and contractor's right to proceed had been thereupon terminated by the Government; and where a supplementary agreement between the surety, plaintiff, and the Government was entered into whereby the Government agreed that the surety should complete the contract under the original contract, that payments as authorized therein should be made direct to the plaintiff for work performed thereunder, and that any amounts retained from payments made to the original con

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Reporter's Statement of the Case tractor should be made to the surety after deducting the amount of any damages suffered by the Government; and where the plaintiff thereupon did complete the work in accordance with the terms of said contract and agreement; it is held that the plaintiff (surety) is entitled to recover the amount of retained percentages earned under said contract and agreement, and withheld by the Government as due by the original contractor on two other contracts on neither of which the

plaintiff herein was surety. Same; subrogation.—The surety on the bond of the prime contractor

is entitled to all equities of the principal and also those of the creditor, under the doctrine of subrogation. Prairie State National Bank v. The United States, 27 C. Cls. 185; affirmed 164 U. S. 227, cited.

The Reporter's statement of the case :

Mr. Louis M. Denit for the plaintiff. Brandenburg and Brandenburg were on the brief.

Mr. Paul H. Luten, with whom was Mr. Assistant Attorney General Francis M. Shea, for the defendant.

The court made special findings of fact as follows:

1. The plaintiff, United States Fidelity and Guaranty Company, is a corporation duly incorporated under the laws of the State of Maryland.

2. On November 19, 1932, the United States through its duly authorized representatives, entered into a contract with the Construction Materials Corporation, hereinafter termed the contractor, by which the latter agreed to furnish all labor and materials, and perform all work required for deepening Ballards Reef Channel, Detroit River, and for construction of a compensating dike by the use of ledge rock removed from the channel, in accordance with specifications, schedules, and drawings accompanying the contract, for the consideration of $1.48 per cubic yard, place measurement, for full pay material above 28-foot grade, and 74 cents per cubic yard, place measurement, for half-pay material between 28-foot and 30-foot grades, in strict accordance with the specifications, schedules and drawings accompanying the contract. It was estimated that the cost of all work performed under this contract would be $980,167.00.

92 C. Cis.

Reporter's Statement of the Case

The contract provided that the contractor should commence work within 30 calendar days after the date of receipt of notice to proceed, and the work should be completed on or before June 30, 1935, with an extension of one calendar day for each 1,000 cubic yards in excess of the estimated quantity on which bids were canvassed.

A copy of the contract, plaintiff's exhibit 1, is by reference made a part of this finding.

3. Pursuant to notice received from defendant, the contractor undertook the work called for by said contract and prosecuted the same until January 17, 1934, when it was adjudicated a bankrupt and trustees were appointed.

4. The contractor had furnished a bond for the faithful performance of all work covered by the contract, which bond, in the penalty sum of $490,084.00, was executed by the plaintiff as surety.

5. On March 13, 1934, the War Department terminated the contractor's right to proceed, and on the same day notified plaintiff as surety for the contractor of such action by a letter, the material portion of which is as follows:

You are hereby advised that, by letter of this date, the Government, under Article 9 of that contract, has terminated the contractor's right to proceed because of default in performance of the work required by said contract.

You are hereby notified that the Government will allow you as surety a period of ten days from date of receipt of this letter to state whether or not you desire to take over and complete the work. In case you elect not to complete the work, the Government will complete it by contract or otherwise and charge the excess cost to the surety and the principal. In case you elect to complete the work, you will be required to submit a statement within the aforementioned ten days, showing the plant you propose to use in the prosecution of the

contract to completion. 6. On March 15, 1934, plaintiff entered into a contract with the Merritt-Chapman and Whitney Corporation, whereby the latter agreed to furnish all labor and materials and perform all work required for completing the work on Ballards Reef Channel, Detroit River, which had been aban

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Reporter's Statement of the Case doned by the Construction Materials Corporation. The plaintiff agreed to pay the Merritt-Chapman and Whitney Corporation $150,000.00 in addition to turning over all progress payments with retained percentages thereafter earned, and to turn over when received, or in any event within 60 days after final completion and acceptance of the work, all progress payments and retained percentages earned prior thereto but unpaid.

A copy of this contract, plaintiff's exhibit 7, is by reference made a part of this finding.

7. Under date of March 16, 1934, the plaintiff advised the defendant in writing that it as surety elected to complete the contract, and that it had entered into a contract with the Merritt-Chapman and Whitney Corporation to perform the work.

8. Under date of April 16, 1934, a supplemental agreement was entered into between the United States Fidelity and Guaranty Company and the defendant whereby the United States agreed to modify the contract so that the United States Fidelity and Guaranty Company, surety for the Construction Materials Corporation, should be substituted for the prime contractor. The supplemental agreement stated that the prime contractor was a bankrupt and that the trustees who had been appointed by the Bankrupt Court had notified the Chief of Engineers by letter dated March 8, 1934, that they were unable to complete the work for lack of funds and could not comply with the terms of the contract; that the United States Fidelity and Guaranty Company, surety on the bond of the contractor, was desirous of assuming the completion of the contract for its own protection and had notified the contracting officer to that effect on March 16, 1934.

The defendant agreed that the contract should be completed by the surety, the United States Fidelity and Guaranty Company, that all payments as authorized in said contract should be made direct to said surety for the work performed thereafter and that any amounts theretofore retained from payments made to the contractor should be paid to the surety after taking therefrom the amount of any damages suffered by the United States.

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92 C. Cls.

Reporter's Statement of the Case

9. The contract with the Construction Materials Corporation provided that:

So long as funds are available, payments will be made monthly on estimates of such material as has been excavated and deposited in accordance with the specifications and not included in any prior estimate Ten percent of the amount of each estimate will be retained until the contract work is 75 percent completed, and thereafter with each monthly payment there will be paid such portion of the amount so retained as is in excess of 20 percent of the estimated cost of completing the work remaining to be done, until the amount retained is reduced to $50,000.00, after which the amount to be retained will remain unchanged until the completion

of the contract. The Construction Materials Corporation earned $132,694.58 up to the time its right to proceed was terminated. Ten percent of this amount in the sum of $13,269.46 was retained by the Government under the above-quoted terms of the contract.

10. The contract was completed on or about June 12, 1936.

Plaintiff as completing surety earned $870,715.26, which amount it received from the defendant.

In addition thereto $1,483.47 was paid to the plaintiff out of the retained balance of $13,269.46 specified in finding 9, leaving a retained balance of $11,785.99.

11. During the completion of the contract by the plaintiff, the Government incurred an expense of $2,588.30, which the plaintiff admitted was due the defendant, and agreed to deduction of this amount from the retained balance of $11,785.99, leaving a net retained balance of $9,197.69, the amount herein involved.

Plaintiff's losses in completion of the contract as surety were in excess of this amount.

12. Subsequent to January 28, 1937, the War Department submitted a voucher for plaintiff in the amount of $9,197.69 to the General Accounting Office for direct settlement.

Payment of the same was refused upon the holding of the Comptroller General that the plaintiff was not entitled to be paid any of the amount retained from payments to the Construction Materials Corporation because of the latter's

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