Koppers Company v. Continental Casualty Company

• Citation: 337 F.2d 499
• Decision Date: 22 October 1964
• Docket Number: No. 17604.,17604.
• Parties: KOPPERS COMPANY, Inc., Appellant, v. CONTINENTAL CASUALTY COMPANY, Inc., et al., Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

337 F.2d 499 (1964)

KOPPERS COMPANY, Inc., Appellant, v. CONTINENTAL CASUALTY COMPANY, Inc., et al., Appellees.

No. 17604.

United States Court of Appeals Eighth Circuit.

October 22, 1964.

Richard K. Andrews, of Swanson, Midgley, Jones, Blackmar & Eager, Kansas City, Mo., made argument for appellant and filed brief with Roy P. Swanson, Kansas City, Mo., and Rotkin & Nazarian, Los Angeles, Cal.

John A. Biersmith, of Rafter, Biersmith, Miller & Walsh, Kansas City, Mo., made argument for appellees and filed brief.

Before MATTHES, BLACKMUN and RIDGE, Circuit Judges.

BLACKMUN, Circuit Judge.

We are confronted here with the question whether § 2(b) of the Miller Act,¹ 40 U.S.C. § 270b(b), applies to a claimant's suit on a Capehart Act payment bond so as to vest jurisdiction of the action exclusively in the appropriate federal court and to deny it to the state court. This is the second of two issues decided by the district court in an opinion applicable to a number of cases having to do with claims arising from Capehart housing at Fort Leonard Wood, Missouri. Travis Equip. Co. v. D & L Constr. Co. & Associates, 224 F.Supp. 410, 417-418 (W.D.Mo.1963).

The other issue decided by the court in that opinion was whether a claimant's action on a Capehart payment bond is subject to the limitation period specified by the same § 2(b) of the Miller Act. That issue is before us on a companion appeal by another supplier. We dispose of it in an opinion filed simultaneously with this one. Missouri-Illinois Tractor & Equip. Co. v. D & L Constr. Co. & Associates, 337 F.2d 507 (8 Cir. 1964).

We make, preliminarily, two general observations:

(a) Numerous cases emerging from the Capehart project at Fort Leonard Wood have come before the United States District Court for the Western District of Missouri. These concern many issues and many suppliers. See, in addition to the opinion below, United States for Use and Benefit of Fine v. Travelers Indem. Co., 215 F.Supp. 455 (W.D.Mo.1963, Judge Oliver); Triangle Elec. Supply Co. v. Mojave Elec. Co., 217 F.Supp. 913 (W.D.Mo.1963, Judge Oliver), affirmed under the name of D & L Constr. Co. v. Triangle Elec. Supply Co., 332 F.2d 1009 (8 Cir. 1964); Allsop Lumber Co. v. Continental Cas. Co. (W.D.Mo.1963, Judge Duncan, unreported opinion), affirmed under the name of Continental Cas. Co. v. Allsop Lumber Co., 336 F.2d 445 (8 Cir. 1964), and Fine v. Travelers Indem. Co., 233 F.Supp. 672 (W.D.Mo.1964, Judge Oliver).

(b) The Miller Act, 40 U.S.C. §§ 270a-270d, and the Capehart Act, now part of the National Housing Act, 42 U.S.C. §§ 1594-1594j, and 12 U.S.C. §§ 1748-1748g, their purposes, the types of projects to which they respectively apply, and, to a large extent, their similarities and differences, and their interplay, have been considered and discussed by this court in some length and depth in three recent opinions. Continental Cas. Co. v. United States for Use and Benefit of Robertson Lumber Co., 305 F.2d 794 (8 Cir. 1962), cert. denied, 371 U.S. 922, 83 S.Ct. 290, 9 L.Ed.2d 231; D & L Constr. Co. v. Triangle Elec. Supply Co., supra, 332 F.2d 1009 (8 Cir. 1964); Continental Cas. Co. v. Allsop Lumber Co., supra, 336 F.2d 445 (8 Cir. 1964). It is not necessary to repeat those observations and discussions here. We make general reference to the three opinions and, in a sense, now continue from where those cases left us.

Koppers Company, Inc., instituted the present action in 1961 in the Circuit Court of Pulaski County, Missouri. It is a suit to recover $9,654.64 for materials furnished by Koppers to Mojave Electric Company, Inc., a subcontractor on the Capehart project at the Fort. Among the defendants are a joint venture, D & L Construction Company & Associates, the prime contractor, and Continental Casualty Company, Inc., its Capehart bond surety. Prior to the institution of the suit Mojave was adjudged a bankrupt. Continental and D & L removed the action to federal court on the ground that the suit was one on two bonds executed under a law of the United States within the meaning of the bond statute, 28 U.S.C. § 1352.² Those defendants then filed an answer alleging, among other things, the federal district court's lack of jurisdiction over the subject matter. Two years later the trial court's general opinion, 224 F.Supp. 410, to which reference has been made above, was issued. The defendants pursuant to the suggestion contained in that opinion, p. 418, thereupon moved to dismiss the action. That motion was sustained. From the order of dismissal the present appeal is taken.

The bonds in question state,

"No suit or action shall be commenced hereunder by any claimant * * (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."

We thus have, for what interest it may afford, a situation (a) where the bonds refer to "a State court of competent jurisdiction" and (b) where the amount which this particular claimant, Koppers, seeks to recover is less than that which would be required for an action under the present form of either 28 U.S.C. § 1332 (a) or § 1331.

It is to be noted that if § 2(b) of the Miller Act, 40 U.S.C. § 270b(b), is applicable to this Capehart action and federal court jurisdiction is exclusive, such jurisdiction is neither created nor acquired by the removal from the state court. Removal gives the federal court only derivative jurisdiction. This is no better than that possessed by the state court in which the action was begun. Thus, if jurisdiction is lacking in the state court in the first instance, it is not brought into being by the removal, even though the federal court to which the suit was removed would have had jurisdiction had the action originated there. This result offhand may seem somewhat anomalous but the law is well settled. Lambert Run Coal Co. v. Baltimore & O. R. R., 258 U.S. 377, 382, 42 S.Ct. 349, 66 L.Ed. 671 (1922); Minnesota v. United States, 305 U.S. 382, 389, 59 S.Ct. 292, 83 L.Ed. 235 (1939); Freeman v. Bee Machine Co., 319 U.S. 448, 449, 63 S.Ct. 1146, 87 L.Ed. 1509 (1943); Henderson v. Shell Oil Co., 173 F.2d 840, 842 (8 Cir. 1949).

This brings us, then, to the issue. We touched upon it and really decided it in Continental Cas. Co. v. Allsop Lumber Co., supra, when we were confronted with the question of the validity of out-of-state service upon individual defendants. We concluded that such service was valid, and we closed our comments (which were largely concerned with the holding and with the extent of application of certain conclusionary language in our earlier case of Continental Cas. Co. v. United States for Use and Benefit of Robertson Lumber Co., supra) upon this point with the following observation, p. 452 of 336 F.2d:

"If strict logic perforce demands a conclusion that this decision is but another way of saying that § 270b (b) of the Miller Act has application to a Capehart bond suit, we may be understood as going that far in our present holding. This result is reached, we feel, without impinging in any way upon the authority of Robertson" (footnote omitted).

After careful reconsideration we perceive no convincing reason why we should depart from that conclusion in its application to the case at bar. The same factors which we mentioned in Allsop, p. 452, namely,

"* * * the legislative history; the policy and the purpose behind the Miller and the Capehart Acts; the variances in state law; the common characteristics of these construction projects; the fact that participants who join in them often come from various parts of the country; the realization that there is a need for a practicable and yet a fair and reasonable means of assembling in one forum all the interested parties who were ready enough initially to devote their constructional abilities to a project in the local area; the fact that the policy behind the Miller Act recognized and met that need; the added fact that the policy has equal application to Capehart construction; and the awareness that delay and expense otherwise to be incurred by multiple litigation in geographically separated forums will thereby be avoided * * *",

fortify us in this conclusion. Allsop is therefore governing here and compels an affirmance of the order of dismissal entered by the district court.

Koppers, however, urges upon us some cases and some factors which merit comment:

1. United States for Use and Benefit of Miles Lumber Co. v. Harrison & Grimshaw Constr. Co., 305 F.2d 363 (10 Cir. 1962), cert. denied 371 U.S. 920, 83 S.Ct. 287, 9 L.Ed.2d 229, was decided by a divided panel of the Tenth Circuit almost simultaneously with our decision in Robertson. The primary issue in Harrison and the sole issue in Robertson were the same, namely, whether the notice provision of a Capehart payment bond, which was more stringent than that of § 2(a) of the Miller Act, 40 U.S.C. § 270b (a), was to govern an action on that bond. Both we and the Tenth Circuit majority reached the same conclusion and held that, because the bond's notice provision was not satisfied, the complaint was to be dismissed. The Supreme Court denied certiorari in both cases on the same day.

The routes by which we and the Tenth Circuit majority reached our respective conclusions, however, were not at all the same. We reasoned, p. 799 of 305 F.2d, that while "Congress intended that Capehart suppliers should have substantive bond protection essentially similar to that afforded Miller Act suppliers", it also "intended that the procedural provisions of Capehart bonds should be worked out" by the administrative agencies; that the dual notice provision of the bond was neither unreasonable nor oppressive; and that it was valid. The Tenth Circuit majority, on the other hand, followed the lead of ...