304 F.

2d 753

GOLDEN WEST CONSTRUCTION COMPANY, a

corporation, and General
Insurance Company of America, a corporation, Appellants,
v.
UNITED STATES of America for the Use and Benefit of
George
BERNADOT, d/b/a George W. Bernadot, Red-E-Mix Concrete
Company; and Joseph Campbell, Comptroller General of the
United States of America, Appellees.
No. 6780.

United States Court of Appeals Tenth Circuit.

May 31, 1962, Rehearing Denied July 2, 1962.

Richard I. Singer, San Diego, Cal. (William J. Cayias, Salt Lake City,
Utah, Ben B. Rubin, Norman T. Seltzer, Herbert J. Solomon, San Diego,
Cal., and D. Eugene Livingston, Salt Lake City, Utah, on brief), for
appellants.
Max K. Mangum, Salt Lake City, Utah (H. Arnold Rich and Leonard W.
Elton, Salt Lake City, Utah, on brief), for appellees.
Before MURRAH, Chief Judge, and BREITENSTEIN and HILL, Circuit
Judges.
MURRAH, Chief Judge.

By this appeal Golden West Construction Company and its surety, Gneral
Insurance Company of America, attack a judgment in a Miller Act (40 U.S.C.A.
270a et seq.) case for the reasonable value of labor and materials furnished by
appellee-Bernadot in connection with the construction by Golden West of
government radar stations in Utah.

Shortly after Bernadot began work under its subcontract with Golden West, a
new agreement was orally entered into between the parties which the jury, by

special interrogatory, found to require Golden West to take over and perform
the sub-contract; pay Bernadot's outstanding obligations incurred in connection
with the sob-contract; reimburse Bernadot a reasonably amount, to be
determined at a later date, for the use of equipment left on the job site by
Bernadot. Judgment was entered in the amount stipulated by the parties as
reasonable in the event the issues were resolved in favor of Bernadot.
3

Appellants contend that Bernadot's suit was not commenced within the
limitation period prescribed by the Miller Act; that the trial court erred in the
admission and exclusion of evidence; that General Insurance Company was
relieved from its surety liability by reason of the substitution of a new
agreement between Golden West and Bernadot; and that the trial court
erroneously allowed interest against General Instuance Company prior to its
notice of Golden Wests' default.

The timeliness of Bernadot's suit is governed by 40 U.S.C. 270b, which, prior

to amendment in 1959, provide that 'miller Act' claims must be commenced
within one year of the 'final settlement' date of the general contract under which
the obligation sued upon arose.1 At that time, section 270c provided that the
date certified by the Comptroller General of the United States as the 'final
settlement' date '* * * shall be conclusive as to such date upon the parties.'2 The
parties agree that this suit was commenced within one year from the date
certified by the Comptroller General. Appellants contend, however, that the
Comptroller General's certificate is reviewable for fraud or bad faith and assert
that the determination of the final settlement date was so erroneous as to imply
bad faith. And see Peerless Casualty Company et al. v. United States for Use
and Benefit of Bangor Roofing and Sheet Metal Company (1 C.A.), 241 F.2d
811; United States of America for Use of Soda v. Montgomery et al.
(U.S.D.C.M.D.Pa.), 170 F.Supp. 433; 269 F.2d 752 (3 C.A.).

Assuming that the certification by the Comptroller General under the preamended statute was reviewable in the manner suggested, the trial court
specifically found that there was '* * * no evidence of bad faith or fraud in
conncetion with the certification of the Comptroller General of the United
States' and that the certification is supported by 'substantial evidence.' We agree
with the trial court. The record shows that the Comptroller General had, prior to
his certification, information in the form of letters indicating that work had
been completed and accepted by January 16, 1959; that an Equalization Order
had been entered on March 20, 1959, making final account for all unfinished
items on the contract; and that the final balance due on the contract had been
determined as of the date of the Equalization Order. The Order itself however,
states that some of the work had not been completed as of the date of its entry,

and it was estimated that another 60 days would be required. And, the record
further shows that changes in the contracted work made pursuant to the
Equalization Order were not accepted by the United States until April 15, 1959- the date certified by the Comptroller General as the 'final settlement' date. We
accordingly hold that Bernadot's suit was timely filed.
6

During the course of the trial, a letter from Bernadot's attorney to M. L.

Lawrence, an officer of Golden West, containing Bernadot's version of the oral
agreement, was introduced into evidence over appellants' objection. Prior to
receiving the exhibit, the trial court asked whether the addressee of the letter
would testify, and counsel for appellants assured the court that he would.
Indeed, Mr. Lawrence, the addressee, admitted on direct examination that he
had received the letter and he was cross-examined as to the accuracy of its
contents. But appellants contend that the letter was a self-serving declaration
and that Golden West's failure to respond thereto improperly imputed an
implied admission on its part that the letter had accurately reported the terms of
the oral agreement. It is, of course, settled law that one may not make his case
by pulling on his own evidentiary bootstraps. See Leach & Company, Inc. v.
Pierson, 275 U.S. 120, 48 S.Ct. 57, 72 L.Ed. 194; Farris v. Sturner (10 C.A.),
264 F.2d 537. But this does not mean that all writings with self-serving
propensities are, ipso facto, inadmissible. In this instance, the parties had orally
abrogated a written contract and the substituted parol agreement was
incomplete. Important matters were left for future negotiations and the evidence
indicates that further communications were contemplated. The subject letter
was written by appellee's counsel, who was present during the oral
negotiations, and understandably sets forth appellee's version of the events
leading to the cancellation of the written agreement as well as the terms and
conditions of the new agreement. It was, to be sure, designed to advocate the
interest of the appellee and, to that end, it was argumentative as well as
expository. But it did purport to perpetuate the oral understanding of the parties
and it invited close scrutiny and corrections of 'any inaccuracies.' It was not
admitted as the 'written agreement' of the parties. Rather, it was admitted under
careful instructions to the effect that it might be considered by the jury as some
evidence of the oral agreement between the parties. And we think it was
admissible for that purpose.

Appellants next contend that General Insurance Company was relieved from
any and all liability on its payment bond because the oral change in the
contractual relationship between Bernadot and Golden West was prejudicial to
its interest and negotiated without its knowledge or consent. Generally, a surety
company is discharged from liability under its payment bond when a material
change between the principal and the sub-contractor, without the consent of the

surety, results in prejudice to the surety's interest. See American Bonding Co. of
Baltimore et al. v. United States to Use of Francini et al. (3 C.A.), 233 F. 364;
Piel Construction Co. v. Commonwealth of Pennsylvania to Use of Hendricks
(3 C.A.), 35 F.2d 265; National Surety Co. v. Lincoln County, Mont. (9 C.A.),
238 F. 705; Bank of Eng., Ark. v. Maryland Casualty Co. (D.C.E.D.Ark.), 293
F. 783; Pickens County v. National Surety Co. (4 C.A.), 13 F.2d 758; United
States v. Quaker Industrial Alcohol Corp. (D.C.E.D.Pa.), 2 F.Supp. 863, 866867; American Auto Insurance Co. v. United States for Use and Benefit of
Luce (1 C.A.), 269 F.2d 406. But 'Technical rules otherwise protecting sureties
from liability have never been applied in proceedings under this statute' or its
predecessor, the Heard Act (28 Stat. 278, and 33 Stat. 811). See Illinois Surety
Co. v. John Davis Co., 244 U.S. 376, 380, 37 S.Ct. 614, 61 L.Ed. 1206;
Fleisher Engineering & Construction Co. v. United States for Use and Benefit
of Hallenbeck, 311 U.S. 15, 61 S.Ct. 81, 85 L.Ed. 12; Fanderlik-Locke Co. v.
United States (10 C.A.), 285 F.2d 939, and cases there cited. 'The purpose of
the Miller Act is to provide security for those who furnish labor and material in
the performance of government contracts, and a liberal construction should be
given the Act to accomplish this purpose.' Fanderlik-Locke Co. v. United
States, supra, at p. 942, and cases there cited.
8

Whatever may be said of the application of the general rule as between the
principal on the payment bond and the surety, it may be doubted whether it
should be applied to prevent recovery by the supplier of labor and material for
whose benefit the statutory bond was executed. We entertain some doubt
whether the supplier should be required to obtain the permission of the surety
before enlarging or altering his original sub-contract at the risk of forfeiting his
statutory protection. But we have no occasion to resolve the doubt here for the
issue of prejudice to the surety was presented to the trial court for
determination, and the court specifically found that the insolvency of Golden
West was the result of its own proor management, and that General Insurance
Company had not in any way been prejudiced by the change in the contractual
relationship between Golden West and Bernadot. These findings are
substantiated by the record and, not being clearly erroneous, are dispositive of
General Insurance Company's claimed release from liability.

Appellants also complain of the trial court's exclusion of evidence relating to a

claim made against General Insurance Company by another of Golden West's
sub-contractors. They reason that such a claim was a contingent liability on the
part of General Insurance Company and that it demonstrated the prejudice
resulting from Golden West's insolvency. But the claim of this third party was
not proof that the modification of the agreement between Golden West and
Bernadot had caused the latter's financial difficulties. And, absent such proof,

any claims against General Insurance Company other than that of Bernadot
were entirely immaterial.
10

Finally, appellants urge that the trial court erred in allowing interest prior to the
date of the commencement of the suit for the reason that demand for payment
on the bond is prerequisite to liability for interest, and there is no proof of any
demand prior to suit. The applicable Utah law is 'that the right to interst is not
to be determined by whether the damages are liquidated or unliquidated, 'but
whether the injury and consequent damages are complete'.' Wunderlich
Contracting Co. v. United States (10 C.A.), 240 F.2d 201, 206, and cases there
cited. Here, the injury and consequent damage was complete when Bernadot
had furnished the material, equipment had labor, and Golden West had
defaulted on the payment therefor. And the trial court's uncontested findings
were that Bernadot had furnished these items between the dates July 21, 1958
and September 30, 1958, and that Bernadot had not been paid anything.
Clearly, an award against Golden West, whose breach had occasioned the
damage, for the amount due plus interest from September 1958 would be
proper. But there is a distinction between interest claimed as part of the
principal's obligation to account, and interest charged against the surety as
damages for failure to make good the default of his principal. See Annot. 57
A.L.R.2d 1317. Our question is whether notice was a prerequisite to its surety
liability for interest on the debt. For even though Bernadot's statutory cause of
action is coextensive with the terms of the bond requiring, in essence, that the
surety indemnify all suppliers wao were not 'promptly' paid by the general
contractor, we do not understand these terms to constitute a waiver of what
appears to be the prevailing rule requiring a demand for payment upon the
surety in order to activate interest liability. See American Auto Insurance Co. v.
United States (1 C.A.), 269 F.2d 406; United States for Use of Baltimore
Cooperage Co. v. McCay (D.C.Md.), 28 F.2d 777, 781; United States for Use
and Benefit of Caldwell Foundry and Machine Co. v. Texas Construction Co.
(5 C.A.), 237 F.2d 705; Royal Indemnity Co. v. Woodbury Granite Co., 69
App.D.C. 364, 101 F.2d 689, cert. granted 306 U.S. 627, 59 S.Ct. 645, 83 L.Ed.
1030, cert. dismissed, 308 U.S. 628, 60 S.Ct. 63, 84 L.Ed. 524; United States
for Use of John Davis Co. v. Illinois Surety Co. (7 C.A.), 226 F. 653, affirmed
244 U.S. 376, 37 S.Ct. 614, 61 L.Ed. 1206; United States to Use of Forsberg v.
Fleischmann Construction Co., D.C., 298 F. 320, affirmed 4 Cir. 298 F. 330,
affirmed 270, U.S. 349,46 S.Ct. 284, 70 L.Ed. 624; United States v. United
States Fidelity & Guaranty Co., 236 U.S. 512, 35 S.Ct. 298, 59 L.Ed. 696;
London & Lancashire Indemnity Co. of America v. Smoot, 52 App.D.C. 378,
287 F. 952; United States v. Quinn (2 C.A.), 122 F. 65; United States to Use of
J. E. Sadler & Co. v. W. H. French Dredging & Wrecking Co. (D.C.Del.), 52
F.2d 235; United States for Use and Benefit of Farwell, etc. v. Shea-Adamson

Co. (D.C.Minn.),21 F.Supp. 831, 838; United States for Use and Benefit of
Belmont v. Mittry Bros. Construction Co. (D.C.Idaho), 4 F.Supp. 216. And
since we find no definitive statement on this limited issue within the body of
the law of Utah, we assume that its courts would follow this general rule.
Accordingly, we hold that interest against General Insurance Company should
not have been allowed prior to the institution of the suit-- the first record proof
of any demand for payment made upon it.
11

Appellee argues, however, that even if interest could only be awarded from the
date of the earliest demand by Bernadot upon the surety, a finding by the trial
court should be implied in accord with the judgment awarding interest from
September 29, 1958-- i.e., a finding that a demand on the surety was made on
that date. And, appellee relies upon the cases of Mourikas v. Vardianos (4
C.A.), 169 F.2d 53; and Hinshaw v. New England Mut. Life Insurance Co. (8
C.A.), 104 F.2d 45, to support this proposition. But though we have recognized
and applied the presumption contended for by appellee, we did so only in a
case, like those cited by appellee, where there was evidence to support the
presumed finding. See Aetna Insurance Co. v. Rhodes (10 C.A.), 170 F.2d 111.
In this case there is no evidence from which the trial court might have found
any demand by Bernadot upon General Insurance Company prior to the date of
the institution of the suit, and we may not presume a finding which is
unsupported by any evidence.

12

The judgment is modified to award interest on the judgment against General

Insurance Company from the date of suit and, as modified, is affirmed.

The 1959 amendment to 270b provided that the one year limitation period
would run from 'the day on which the last of the labor was performed or
material supplied * * *' rather than the date of the 'final settlement' of the
contract

Contemporaneously with the 1959 amendment of 270b, subsection 270c of that

statute was amended by deleting its provisions relating to the 'final settlement'
of the contract and the 'conclusiveness' of the Comptroller General's certificate
thereof