Pearlman v. Reliance Insurance Company

RESPONDENT: Reliance Insurance Company
LOCATION: Beaumont Mills

DECIDED BY: Warren Court (1962-1965)
LOWER COURT: United States Court of Appeals for the Second Circuit

CITATION: 371 US 132 (1962)
ARGUED: Oct 09, 1962 / Oct 10, 1962
DECIDED: Dec 03, 1962

Facts of the case


Media for Pearlman v. Reliance Insurance Company

Audio Transcription for Oral Argument - October 09, 1962 in Pearlman v. Reliance Insurance Company

Audio Transcription for Oral Argument - October 10, 1962 in Pearlman v. Reliance Insurance Company

Earl Warren:

-- Chester A. Pearlman, Trustee, Petitioner, versus Reliance Insurance Company.

Mr. Miles, you may continue with your argument.

Raymond T. Miles:

Mr. Chief Justice, may it please the Court.

Yesterday, at the conclusion of the session, I had pointed out how we, representing the trustee in bankruptcy were favored by three decisions of recent vintage including the decision of this Court, United States against the Munsey Trust Company decided in 1947, and the decisions of two Circuit Courts which clearly favor us.

One of the being an all force with the case before Your Honors.

I had also pointed out that time that the surety here claimed support from two cases of this Court, one decided 1896, the Prairie State National Bank against United States and the other, the case of Henningsen against United States Fidelity and Guarantee Company decided in 1907.

I'll repeat what I said yesterday that we have no quarrel whatsoever with the case of Prairie State against National Bank.

I've also pointed out I believe that there is an attack being made directly here on the Henningsen case.

Now we've shown how the courts have wandered around in an effort to sustain the results which have favored the surety in these cases which of course preceded the case as which we cite are supporting us since 1947.

Now, it would seem to me that it might be interesting to look to the position of the Government.

The Government, under the standard contract that it had in this case and it has in all of these types of cases, has a provision that the contracting officer is under no obligation to see that the laborers and the materialmen are paid, the suppliers and the materialmen are paid where 50% of the contract has been performed.

We think that this is indicative of the fact that either the Government has concluded there is no equitable obligation upon the Government to see that they are paid or that it is the Government's thought that the equitable obligation has been satisfied by the passage of the Miller Act.

Now, it might also be of some interest to look to the statements made in the Congress at the time that this Act was before the Congress.

I think it's clearly stated there that the passage of the Miller Act served two purposes.

The performance bond was to satisfy the obligation to the Government and the passage of the provision regarding the payment bond was to satisfy any obligation or any duty, call it what you will, to the suppliers and the materialmen.

Would the -- could I ask you a question?

Would the Government have had the right to use moneys in it's possession when it becoming new under the contract to the prime contractor to satisfy the claims of the materialmen?

Raymond T. Miles:

I do not think that they -- that there would be such a right.

I've never seen a statement made to that effect, but I would conclude that it would not have such a right because the materialmen have no enforceable rights directly against the Government.

It would almost seem that if they were doing so, it was in the nature of a gift.

Well, the answer to my question would turn whether the materialmen had rights against the Government, would it?

Raymond T. Miles:

Well, I don't think that the Government --

The Government could contract certainly with the -- with the prime contractor who give the right to that, asked you whether it might have.

Raymond T. Miles:

Oh, you mean to have an entirely different type of contract?

Well, I don't know whether it is or not.

Raymond T. Miles:

Well, it would be an entirely different con -- contract.

The contract --

You mean under this contract --

Raymond T. Miles:

Yes sir, the contract --

The Government would have no such right?