The single question presented below and on this appeal is the liability of a surety on a payment bond, given for the protection of persons furnishing labor and materials in the construction of public works, to pay interest to a claimant after all principal claims have been paid in full. The question arises in the surety’s action of inter-pleader, with which the separate actions of the various claimants were consolidated. This defendant is the sole claimant for interest; it was successful in the court below.
The payment bond in question was given on February 25, 1943, by the plaintiff surety company as surety for Leo Construction Co. Inc., the contractоr for the construction of two government warehouses at Rome, New York. It was in the penal sum of $266,459.30, or half, the original contract price, and was conditioned on payment to “all persons supplying labor and material in the prosecution of the work provided for in said' contract,” as required by the contract and by the Miller Act, 40 U.S.C.A. § 270a. Plaintiff was also surety on the required performance bon'd .of $133,-229.65 for the protection of the Government itself. In July, 1943, the -contractor defaulted, the Government terminated the contract, and the contractor was adjudicated a bankrupt. Creditors’ claims under the Miller Act, 40 U.S.C.A. § 270b(b), could then be filed until one year after the final settlement date for 'the contract. It was not until June 25, 1948, that the Comptroller General certified that date to be February 26, 1948, thus making it conclusive upon thе parties. 40 U.S.C.A. § 270c. After creditors’ claims, including the defendant’s claim, had been asserted against plaintiff substantially in excess of its liability on the bond, and after it had paid off wage claims by laborers and workmen, it instituted this action on December 14, 1943, under the Federal Interpleader Act, 28 U.S. C.A. § 41(26) — now 28 U.S.C.A. §§ 1335, 1397, and 2361 — to enjoin all pending individual actions and compel all claimants to submit their claims in the interpleader action. To fulfill the jurisdictional requirement of that Act that either the money in dispute be paid in court or an acceptable bond be furnished, it supplied a bond of $100,000 duly approved by the court.
On May 2, 1944, the court ordered pending actions on the bond consolidated with the interpleader suit; it also stayed pending and prospective actions. Included was the action of this claimant, the present defendant-aрpellee, instituted November 29, 1943. On October 10, 1947, the stay order was vacated to permit defendant to proceed with its claim as part of the consolidatеd action. But meanwhile plaintiff had been-able to make full payment, without interest, of all claims as finally adjusted, by obtaining from the United State's, on behalf of the clаimants, the balance of the contractor’s unpaid earnings, after deducting the Government’s damages for default. In assigning their rights against the United States to plaintiff for collection, all of the claimants except defendant waived any claim for interest, thus leaving defendant’s claim therefor alone to be determined in thе consolidated action below. The judgment appealed from awards defendant $2,-601.26 and costs, thus allowing interest on its claim' from November 29, 1943, the date of its originаl action, to the date of judgment.
The parties and the court below appear to be in accord that the -surety’s liability for interest must be determined by the law of New York, the state where the contract and bond were made; and we are not disposed to question this, since the Miller Act contains no specific provisions as to it. See Illinois Surety Co. v. John Davis Co.,
Hence the substantial question here is as to the effect of the interpleader suit. It has been argued that an interpleader suit cannot affect the independent actions brought by Miller Act claimants, since the Miller Act itself repealed the provisions of its predecessor, the Heard Act, 40 U.S.C.A. § 270, which required that all clаimants join in a single action. But the inter-pleader remedy existed independently in equity, American Surety Co. v. Lawrence-; ville Cement Co., C.C.Me.,
This situation was thought by the court to be аnalogous to that in the Tuzzeo case, supra, to constitute a basis for the starting of the interest to run. In that case no interest was allowed until the bringing of an action wherein the stakeholder could have cited in the other claimants. It was allowed thereafter because the stakeholder did not pay the amount involved into court. So here it is contended that plaintiff became liable for interest when it failed to pay the sum in dispute into court' in December, 1943. The court stated thаt if plaintiff had made such payment and had not attempted to make the settlements which it did so successfully later, the claimants might not have been paid as exрeditiously or perhaps in full and that there would surely have been additional attorneys’ fees and expenses, which were avoided by the course taken. 1 In other words, no one would have profited by application of the law as thus stated; probably all the claimants would have lost. But the law was accepted as adamant.
We think, however, this is to fail to do justice to the express provisions of the Federal Interpleader Act. Until 1936 and after 1926, the statute required only a deposit in court, so that had the case then arisen it would have been fairly analogous to the Tuzzeo case. But a defect of the earlier Act was thought to bе the failure to acquire jurisdiction except on payment of a deposit, which was not possible or not feasible in all cases; and hence since 1936 thе Act has provided expressly for the alternative of filing a bond. 3 Moore, Federal Practice ff22.06, 22.10, 2d Ed. 1948; Cha-fee, The Federal Interpleader Act of 1936: I, 45 Yale L.J. 963, 977. Here the bond was so filed with the explicit approval of this district judge. Indeed defendant asserts that it asked the judge to require the deposit of money; while plaintiff quоtes his unreported decision approving the $100,000 bond as adequate, saying “that here there is no question of the financial ability of the plaintiff,” and pointing out that plaintiff, in addition to filing the bond, had already paid out money to the mechanics and laborers who had claims, and had made, and was attempting to make, other рayments to claimants. In view of this decision we do not think the judge can now appropriately find
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the surety in default in following the option expressed in the Act itself and his own directions and findings. The case is therefore one where the surety never having been in default cannot be held for interest. American Surety Co. v. Lawrenceville Cement Co., supra; United States v. Anchor Warehouses, 2 Cir.,
Reversed.
Notes
Plaintiff also secured a slight advantage for itself, for, upon ultimate settlement after receiving the salvage from the Government, it had a balance of $13,449.-05, which it asserts is much less than its attorneys’ fees in the various proceedings.