Allsop Lumber Co. v. Continental Cas.Co., 7259

• Decision Date: 07 October 1963
• Docket Number: No. 7259,7259
• Citation: 1963 NMSC 182,385 P.2d 625,73 N.M. 64
• Parties: ALLSOP LUMBER COMPANY, Inc., a corporation, Plaintiff-Appellee and Cross-Appellant, United States of America, Housing V, Inc., and Housing VI, Inc., for the Use and Benefit of Allsop Lumber Company, Inc., a corporation, Plaintiffs-Appellees, v. CONTINENTAL CASUALTY COMPANY, D & L Construction Co. & Associates, a joint venture, and D & L Construction Co., a corporation, and Louis Lesser Enterprises, Ltd., and Lesser Industrial Properties, Ltd., limited partnerships, and the individual members thereof, Defendants-Appellants and Cross-Appellees.
• Court: New Mexico Supreme Court

Page 625

385 P.2d 625

73 N.M. 64

ALLSOP LUMBER COMPANY, Inc., a corporation Plaintiff-Appellee and Cross-Appellant, United States of America, Housing V, Inc., and Housing VI Inc., for the Use and Benefit of Allsop Lumber Company, Inc., a corporation, Plaintiffs-Appellees, v. CONTINENTAL CASUALTY COMPANY, D & L Construction Co. &amp Associates, a joint venture, and D & L Construction Co., a corporation, and Louis Lesser Enterprises, Ltd., and Lesser Industrial Properties, Ltd., limited partnerships, and the individual members thereof, Defendants-Appellants and Cross-Appellees.

No. 7259.

Supreme Court of New Mexico.

Oct. 7, 1963.

Kool & Kool, Albuquerque, Rafter & Biersmith, Kansas City, Mo., for appellants.

J. D. Weir, J. R. Crouch, Las Cruces, Frank J. Gaffney, Pittsburgh, Pa., for appellees.

MOISE, Justice.

The appellants are D & L Construction Co. & Associates, the 'eligible builder,' hereinafter referred to as 'D & L' and Continental Casualty Company, the bonding company surety on the payment bond given to guarantee payment for labor and materials furnished in connection with construction of housing at White Sands Missile Range, pursuant to a contract entered into under authority of the Capehart Act (August 11, 1955, c. 783, Title IV, Sec. 403, 69 Stat. 651; August 7, 1956, c. 1029, Title V, Secs. 506(b)-(d), 507, 70 Stat. 1110; 42 U.S.C.A. Sec. 1594).

Allsop Lumber Company, Inc., hereinafter referred to as 'Allsop' or 'appellee,' is a lumber supplier who, pursuant to written contract with D & L supplied lumber and materials for which it claims it was not paid.

Without detailing the dealings between the parties, it appears that D & L, as principals, and Continental, the bonding company, as surety, entered into two payment bonds. The bonds were furnished to meet the requirements of 42 U.S.C.A. Sec. 1594, and were on form FHA 2452CP, with Housing V, Inc., on one and Housing VI, Inc., on the other, as 'mortgagor-Builders,' and The National Commercial Bank & Trust Company of Albany, as 'Mortgagee,' were the obligees. (It is noted that the second page on one of the bonds, as shown by the exhibit thereof, admitted in evidence, appears to be from a 'performance' bond, rather than a 'payment' bond. However, since the court found and the parties do not contend otherwise, we assume this to be an error in the exhibit, and that in fact the bonds were identical payment bonds, both containing the provisions of paragraph 4, quoted post.) Each of the bonds provided that it secured any one 'having a direct contract with the Principal [D & L] * * * who has furnished * * * material * * * in the prosecution of the works provided for in the contract, and who has not been paid in full therefor.' The bond provided for direct right of action by a claimant, subject to certain conditions of which the following are material to our case:

'2. The above named Principal and Surety hereby jointly and severally agree with the Obligees that every claimant as herein defined, who has not been paid in full before the expiration of a period of ninety (90) days after the date on which the last of such claimant's work or labor was done or performed or materials were furnished by such claimant or before the expiration of the period provided by the law of the place where the project is located for the giving of first notice of a lien of the category claimed by claimant, whichever period be longer, may sue on this bond for the use of such claimant in the name of either of the Obligees or their assignee hereunder, or in the name of the claimant, prosecute the suit to final judgment for such sum or sums as may be justly due claimant, and have execution thereon; provided, however, that the Obligees or their assignee hereunder shall not be liable for the payment of any costs or expenses of any such suit.

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'4. No suit or action shall be commenced hereunder by any claimant:

'(a) Unless claimant shall have given written notice to any two of the following: The Principal, any one of the Obligees, or the Surety above named, before the expiration of the period referred to in condition 2 above, stating with substantial accuracy the amount claimed and the name of the party to whom the materials were furnished, or for whom the work or labor was done or performed. Such notice shall be served by mailing the same by registered mail, postage prepaid, in an envelope addressed to the Principal, any one of the Obligees, or Surety, at any place where an office is regularly maintained by the addressee for the transaction of business, or served in any manner in which legal process may be served in the place in which the aforesaid project is located, save that such service need not be made by a public officer. For the purpose of this condition 4(a), either the giving of notice, or the filing of lien, in accordance with the pertinent lien law of the place where the project is located is a sufficient notice hereunder.

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'(c) Other than in a State court of competent jurisdiction in and for the county or other political subdivision of the State in which the project, or any part thereof, is situated, or in the United States District Court for the district in which the project, or any part thereof, is situated and not elsewhere.'

Suit was filed in three counts: alleging in the first count a balance of $61,565.35 unpaid for materials furnished to D & L for use in performance of its contract and seeking payment under the bond; alleging in the second count that a mechanics lien had been filed and seeking its foreclosure; and in a third count seeking damages and interest because of failure to pay according to contract.

After trial to the court, judgment was entered in favor of plaintiff against D & L and Continental for $61,565.35, without interest, and providing that if the amount of the judgment was not paid within 30 days the materialman's lien sued on should be foreclosed and 'all right, title and leasehold interest of Housing V, Inc., and Housing VI, Inc., in all land and improvements described in the lien be foreclosed ana sold to satisfy the judgment, plus $2.75 recording fee and $255.00 attorney fee for preparing and filing the lien. The 30-day period was extended in the event an appeal was taken and supersedeas bond filed, which was done. The plaintiffs, in turn, filed a cross-appeal complaining of the court's failure to grant interest as prayed in their third cause of action.

D & L and Continental here argue eight points which they rely on for reversal.

They first assert that jurisdiction is exclusively in the federal courts under the provisions of the Miller Act (August 24, 1935, c. 642, Sec. 1, 49 Stat. 793, 40 U.S.C.A. Sec. 270a) which clearly provides that every suit thereunder 'shall be brought * * * in the United States District Court * * * and not elsewhere,' and quote from Lasley v. United States (5 C.A., 1960) 285 F.2d 98, in support of their position. We are satisfied that the correct rule is as stated in United States for Use and Benefit of Miles Lumber Co. v. Harrison and Grimshaw Construction Company (10 C.A.1962) 305 F.2d 363, and Continental Casualty Company v. United States (8 C.A.1962) 305 F.2d 794. Both of these cases clearly hold that a Capehart bond and suits thereon are not actions on a Miller Act bond, and that the jurisdictional provision noted above is not applicable. Also, as pointed out in United States v. Harrison and Grimshaw Construction Company, supra, we do not perceive any real conflict between what was there held and the result in Lasley v. United States, supra. We are satisfied that the conclusion announced in the two cases from the 10th and 8th federal courts of appeal support concurrent state and federal jurisdiction and accordingly hold appellants' first point to be without merit. We recognize that New Jersey, in Gypsum Contractors, Inc. v. American Surety Co., 37 N.J. 315, 181 A.2d 174, decided otherwise, based upon Lasley v. United States, supra, and Autry & Goad Const. Co. v. Williams and Dunlap (D.C.La.1960) 185 F.Supp. 802. These decisions antedate the two cases from the 8th and 10th courts of appeal and are neither controlling nor persuasive.

We are aware that the two circuit court opinions referred to did not directly hold that the state courts had concurrent jurisdiction in actions such as the instant one. However, no other possible result could be reached on this question in the light of the conclusion arrived at by these courts that compliance with the provisions of the Miller Act as to notice were not applicable to Capehart Act bonds. The following language in United States v. Harrison and Grimshaw Construction Co., supra, is clear and unambiguous:

'* * * We are convinced that in any event Cogress did not intend that the Capehart Act performance and payment bonds, and suits thereon, should be governed by the Miller Act.

'The Capehart Act as passed in 1955 contained no provision for a bond. This was added by a 1956 amendment which reads:

"Any such contract shall provide for the furnishing by the contractor of a performance bond and a payment bond with a surety or sureties satisfactory to the Secretary of Defense, or his designee, and the furnishing of such bonds shall be deemed a sufficient compliance with the provisions of section 1 of the Act of August 24, 1935 (49 Stat. 793) [Miller Act], and no additional bonds shall be required under such section.'

'By this amendment Congress recognized the peculiar characteristics of a Capehart Act military housing project. Congress provided for performance and payment bonds with sureties satisfactory to the government and said that the furnishing of such bonds was a sufficient compliance with the Miller Act. It did not say that the provisions of the Miller Act apply to such bonds. * * *'

Equally clear and unambiguous is the following, quoted from Continental Casualty Company v. United States, supra:

'* * * While we think that Congress...