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UNITED STATES EX REL. SGB UNIVERSAL BUILDERS SUPPL

August 30, 1979

UNITED STATES FOR THE USE OF SGB UNIVERSAL BUILDERS SUPPLY, INC., Plaintiff, against FIDELITY AND DEPOSIT COMPANY OF MARYLAND, Defendant.


The opinion of the court was delivered by: NICKERSON

MEMORANDUM AND ORDER

The use plaintiff (herein called plaintiff) brought this action under the so-called Miller Act, 40 U.S.C. §§ 270a through 270d, against the surety on a bond for the benefit of persons supplying labor and materials for construction work at the United States Merchant Marine Academy at King's Point. The case was tried to the court.

 On March 11, 1976 Falco Construction Corporation ("Falco") and the United States government entered into a contract for the job. Defendant supplied the bond for "payment to all persons supplying labor and material in the prosecution of the work."

 On April 19, 1977 plaintiff made an agreement with Tino Masonry Corp. ("Tino"), a subcontractor of Falco, renting to Tino certain scaffolding and shoring equipment to be used in the work. The lease, on plaintiff's printed form, provided for a specified rental to be paid every four weeks, the rental period to "commence on the date of delivery to the job site" and to "terminate on the date of redelivery" of the equipment to plaintiff. The form also recited that equipment not returned "shall be considered sold to the customer at the list price established" by plaintiff and that should the customer fail to pay the rent promptly plaintiff might retake the equipment and bill the customer for the cost of doing so. A similar rental agreement for further equipment was made on May 24, 1977.

 In addition to the scaffolding and shoring materials rented to Tino for use on the government job involved in this case plaintiff leased Tino equipment for use on four other jobs. Evidently in the summer of 1977 Tino found itself in financial difficulty. By August 12, 1977, it owed plaintiff a total of $ 7,648 on the rentals at all five jobs. On that date it paid plaintiff $ 1,600 but this amount was not allocated by either Tino or plaintiff to any particular job. Tino never made any further payments to plaintiff. Finally Tino abandoned the subcontract with Falco. The last day Tino did any work on the project was September 23, 1977.

 Apparently plaintiff soon became aware of this because it sent no further bills for rental to Tino after that date. Moreover, on November 8, 1977, plaintiff wrote to Falco confirming a telephone conversation of the same day, enclosing a list of plaintiff's equipment on the site, and asking cooperation "in assisting us to pick up our material at the site." However, at that time plaintiff did nothing further to retake its equipment.

 On November 16, 1977, plaintiff's attorneys wrote by registered mail to Falco and the Director of Finance of the Merchant Marine Academy stating that plaintiff had a claim against Tino for $ 11,233.20 for material delivered and for $ 1,223.70 in unpaid rentals and asking for information as to any surety bond. On December 19, 1977, the attorneys wrote by registered mail to defendant claiming those amounts.

 Eventually on March 28, 1978, Falco wrote to plaintiff saying that materials abandoned by Tino were obstructing the progress of the work and that if plaintiff claimed and could prove ownership and would hold Falco harmless as to any claims with regard to the materials, plaintiff should remove them or they would be scrapped. On May 4, 1978 plaintiff removed certain equipment from the site, having executed an indemnification to Falco against any claim to ownership by others.

 Plaintiff now claims $ 1,345.95, the alleged value of the equipment originally delivered to the site but not recovered by plaintiff, and $ 2,545.62 representing rentals through March 23, 1978.

 The relevant statutory provision is 40 U.S.C. § 270b, which provides in pertinent part, that "(e)very person who has furnished labor or material in the prosecution of the work" and has not been "paid in full" before the expiration of ninety days after the day on which "the last of the . . . material was furnished or supplied by him" may sue on the bond, provided that a person having a direct contractual relationship with only a subcontractor must give written notice to the contractor "within ninety days from the date on which such person . . . furnished or supplied the last of the material for which such claim is made . . . ."

 Plaintiff contends that it continued to "furnish or supply" the equipment until the March 1978 date when Falco asked for their removal and that defendant is responsible for rentals to that date. Plaintiff also asserts that it may recover the value of the materials not returned, relying on the provision of its contract with Tino stating that equipment received on the site but not returned would be deemed sold to Tino at list price.

 Ever since Illinois Surety Co. v. John Davis Co., 244 U.S. 376, 37 S. Ct. 614, 61 L. Ed. 1206 (1917), it has been settled that rentals for equipment furnished for the job and used "in the prosecution of the work" may be recovered under the bond. But neither the Supreme Court nor the Court of Appeals for the Second Circuit appears to have addressed the question of the date on which notice must be given to the contractor in the event of a default in rental payments by a subcontractor. Defendant contends that the statute requires that notice be given within ninety days of the date of the first delivery of the equipment to the site because that and no later date is when the equipment has been "furnished or supplied."

 Any such reading would be fatuous. During the period of ninety days after delivery the lessee may well make all rental payments in strict accordance with the lease. Yet the notice required of the claimant must state, among other things, the amount claimed against the subcontractor. Plainly therefore the legislation does not contemplate that the ninety day period will commence on the date a lessor makes delivery. The only sensible interpretation of the notice requirement in the case of rentals is that the equipment continues to be "furnished or supplied" by the lessor for some period after delivery. Every court which appears to have considered the matter has reached the same conclusion. See, e.g., United States ex rel. Carter-Schneider-Nelson, Inc. v. Campbell, 293 F.2d 816, 820 (9th Cir. 1961) Cert. denied 368 U.S. 987, 82 S. Ct. 601, 7 L. Ed. 2d 524 (1962).

 So much is evident. But the precise event which causes the ninety day period to commence is less clear. The statutory language says it shall begin on "the date on which" the claimant ...


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