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UNITED STATES EX REL. WOLTHER v. SEACOAST REPAIR C

January 17, 1957

UNITED STATES of America, For the Use and Benefit of Irving WOLTHER, Plaintiff,
v.
SEACOAST REPAIR CO., Inc., Defendant. The HOME INDEMNITY COMPANY, Defendant and Third-Party Plaintiff, v. NEW HAMPSHIRE FIRE INSURANCE COMPANY and Charter Electric Co., Inc., Third-Party Defendant



The opinion of the court was delivered by: GALSTON

This is a motion by beneficiary-plaintiff, Irving Wolther, for an order, pursuant to Rule 56 of the Federal Rules of Civil Procedure, 28 U.S.C.A., for summary judgment against defendant, The Home Indemnity Company.

The complaint, filed on July 12, 1956, alleges that the action is brought under Section 270b of Title 40, U.S.C.A., for $ 22,080, which plaintiff claims he is entitled to by virtue of material and labor furnished by Charter Electric Co., Inc., plaintiff's alleged assignor, to and on U.S.N.S. Lt. James Robinson, a vessel of the United States Government.

 According to the complaint, defendant Seacoast Repair Co., Inc., entered into a contract with the Government on or about June 21, 1955, for general repairs on the Robinson. It then alleges that at the same time defendant, Home Indemnity, issued a payment-bond accepted by the Government, guaranteeing payment of labor and material to those persons who furnished labor and material on and to said vessel on behalf of Seacoast, in the amount of $ 49,833. It further alleges that between June 22, 1955 and July 20, 1955, Charter Electric Co., Inc., as Seacoast's subcontractor, furnished certain of the labor and material for the Robinson under the aforesaid contract of repair in the amount of $ 22,080. It is then alleged that Charter duly assigned the said indebtedness to plaintiff, Wolther, due demand for payment, nonpayment thereof, and that there remains due and owing to the United States for the use and benefit of Wolther the sum as yet unpaid totalling $ 22,080.

 The complaint also alleges that one year has not expired since the date of final settlement of the contract in question between the Government and Seacoast. It also recites upon information and belief that on January 11, 1956, Seacoast filed a petition in bankruptcy under Chapter XI of the Bankruptcy Act, 11 U.S.C.A. 701 et seq., and that said Seacoast is insolvent and without sufficient assets to meet the claims of its creditors.

 In its answer, defendant, Home Indemnity, denies that the reasonable value of the labor and material furnished by Charter amounted to $ 22,080; that Charter assigned over to the plaintiff the said indebtedness; that due demand for payment was made upon Seacoast and that there is due and owing from Home Indemnity to plaintiff, Wolther, the amount of $ 22,080. The answer also denies knowledge that the complaint was filed within one year since the date of final settlement of the contract, and that Charter, as subcontractor of Seacoast, furnished labor and material on the Robinson.

 The answer also sets up a 'Fourth Defense, Set-off and Counterclaim' and a 'Fifth Defense, Set-Off and Counterclaim.'

 The Fourth Defense alleges that on or about July 7, 1955, Charter received from Seacoast checks in the amount of $ 4,755 and $ 6,000, which were applied by Charter for work done by Charter on the Government vessels, Golden Eagle and Kelley, respectively. It further alleges that these moneys obtained and received by Charter from Seacoast came out of a fund of $ 41,755.68 paid to Seacoast by the Government for repairs made on the vessel Robinson; that at the time of these payments Charter should have known, or had reason to believe that the said payments were made out of funds derived by Seacoast for work performed on the Robinson, and that Charter improperly and invalidly credited said sums for work done on the Golden Eagle and Kelley. The Fourth Defense also alleges that the New Hampshire Fire Insurance Company had issued payment bonds, accepted by the Government, guaranteeing to subcontractors of Seacoast payment for labor and materials supplied by them on and to the Golden Eagle and Kelley, and that Home Indemnity was under no liability for the payment of labor and materials claims of sub-contractors on said vessels.

 The Fifth Defense alleges in substance that on or about July 14, 1955, Charter received from Seacoast the sum of $ 4,000 which Charter knew or ought to have known was part of a fund of $ 34,449.48 received by Seacoast from the Government for repairs made on the Gen. H. F. Hodges, and that Charter improperly and invalidly credited the aforesaid $ 4,000 to moneys owing by Seacoast for work done by Charter on the Kelley. It also alleges that at the request of Seacoast, a corporation other than Charter furnished labor and materials for the General Hodges, whereas Charter had furnished labor and materials for the Kelley. It also alleges that the payment bond guaranteeing payment for labor and materials for the General Hodges was issued by defendant, Home Indemnity, and that the payment bond in connection with the Kelley was furnished by New Hampshire Fire Insurance Company.

 It thus appears from the allegations of the Fourth and Fifth Defense that it is defendant Home Indemnity's claim that the sum of $ 14,755 was misapplied by Charter, and that by reason of the wrongful diversion, defendant, Home Indemnity, is entitled to set off the $ 14,755 against the claim of the plaintiff.

 Defendant, Home Indemnity, has filed a third-party complaint against New Hampshire Fire Insurance Company and Charter Electric Co., Inc., alleging, in substance, that by virtue of the misapplication by Seacoast and Charter of the sum of $ 14,755, referred to above, to labor and materials furnished by Charter for the three vessels, Golden Eagle, Kelley and General Hodges, upon which New Hampshire was surety, the said New Hampshire and Charter are liable to Home Indemnity for said amount.

 Affidavits have been submitted in support of and in opposition to the motion for summary judgment. The reply affidavit of Charles C. Zimring, President of Charter Electric Co., Inc., in support of the motion, avers that at no time did Seacoast, either directly or indirectly, indicate to Charter the source of any funds used for the purpose of making payments due Charter for labor and materials furnished by Charter to Seacoast in connection with any of the vessels referred to in the pleadings. The affidavit of Edwin R. Wolff, attorney for Home Indemnity, though, in opposition to the motion, states that Charles C. Zimring did know at the time of the receipt of funds from Seacoast in the amount of $ 6,000 and $ 4,755 on July 7, 1955, that the payments were being made out of funds received by Seacoast from the Government for work done on the Robinson.

 Rule 56(e) of the Federal Rules provides as follows:

 'Supporting and opposing affidavits shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein.'

 The averments in the Wolff affidavit with respect to knowledge on the part of Charles C. Zimring and Charter of the source of funds out of which Seacoast made payments to Charter are based upon 'information and belief,' and upon statements made by a third party to the deponent not within the presence of the plaintiff.

 However, subsequent to the hearing on this motion, on application to this court, defendant was granted leave to submit an answering affidavit to the reply affidavit of Charles C. Zimring. The affidavit of Anthony Vitiello, President of Seacoast Repair Co., Inc., has ...


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