LASA Per L'Industria Del Marmo Soc. Per Azioni v. Alexander

Decision Date30 June 1969
Docket Number18455.,No. 18454,18454
Citation414 F.2d 143
PartiesLASA PER L'INDUSTRIA DEL MARMO SOCIETA PER AZIONI OF LASA, ITALY, Plaintiff-Appellee, v. Anthony L. ALEXANDER, Sr., Nick Quarin and A. Larry Alexander, Jr., individually and d/b/a Alexander Marble and Tile Company, a partnership, Alexander Marble and Tile Company, Inc., and Alexander Marble and Tile Company, a joint venturer, Defendants-Appellants, v. SOUTHERN BUILDERS, INC. OF TENNESSEE, the City of Memphis, Continental Casualty Company, A. L. Aydelott, individually and A. L. Aydelott and Associates, Inc., Defendants-Appellees. LASA PER L'INDUSTRIA DEL MARMO SOCIETA PER AZIONI OF LASA, ITALY, Plaintiff-Appellee, v. SOUTHERN BUILDERS, INC. OF TENNESSEE, Defendant-Appellant, v. Anthony L. ALEXANDER, Sr., Nick Quarin and A. Larry Alexander, Jr., individually and d/b/a Alexander Marble and Tile Company, a partnership, Alexander Marble and Tile Company, Inc., and Alexander Marble and Tile Company, a joint venturer, Defendants-Appellees.
CourtU.S. Court of Appeals — Sixth Circuit

Attys. for plaintiff-appellee.

Eugene Greener, Jr., Memphis, Tenn., Buchignani & Greener, Milton C. Picard, Memphis, Tenn., on brief, for Alexander et al.

D. Jack Smith, Jr., Memphis, Tenn., Rickey, Shankman, Agee, Harpster & Smith, Memphis, Tenn., on brief, for Southern Builders, Inc., et al.

Leo Bearman, Sr., and Leo Bearman, Jr., Memphis, Tenn., for A. L. Aydelott and A. L. Aydelott & Associates, Inc.

Before PHILLIPS and CELEBREZZE, Circuit Judges, and McALLISTER, Senior Circuit Judge.

PHILLIPS, Circuit Judge.

It has been said that the doctrine of ancillary jurisdiction providing for joinder of claims in the federal courts is "the child of necessity and the sire of confusion."1 The confusion in pleadings that can arise out of cross-claims, counterclaims and a third-party complaint, all involving the same construction project, is demonstrated by the present appeal.

The complicated procedural problems with which we are confronted arose out of the building of a new City Hall at Memphis, Tennessee.

The complaint was filed by an Italian corporation which had a contract with a subcontractor to furnish marble for the City Hall. Recovery is sought against the subcontractor, the prime contractor, its surety, and the City of Memphis for a balance alleged to be due for marble and labor.

Filed in the action were a series of counterclaims, cross-claims and a third-party complaint which are described in detail in the opinion of the District Court, published at 45 F.R.D. 435 (W.D. Tenn.). Reference is made to that opinion for a detailed summary of the various pleadings.

Among the pleadings were a cross-claim filed by the defendant subcontractor, Alexander, against the prime contractor, its surety and the City of Memphis; a counterclaim filed by the prime contractor against Alexander; and a third-party complaint filed by Alexander against the architect. The third-party complaint was treated by the District Court as a cross-claim against the architect as was the counterclaim of the prime contractor against Alexander.

Construing Rules 13(g) and 13(h), Fed.R.Civ.P.,2 the District Court dismissed the two cross-claims and the third-party complaint, holding that they do not arise out of the same transaction or occurrence that is the subject matter of the original action or of a counterclaim therein.

We reverse.

In the cross-claim of Alexander which was dismissed by the District Court, Alexander sues all cross-defendants for a balance of $158,061.75 alleged to be due under Alexander's subcontract with the prime contractor. In the second count of the same pleading Alexander sues the prime contractor for $250,000 in actual and punitive damages, averring that the prime contractor failed to prepare properly the concrete base upon which marble pieces were to be affixed and to install correct metal support angles in the concrete base; that the prime contractor required Alexander to work on marble installation in the most inclement cold and rainy weather, contrary to specifications; that the prime contractor terminated Alexander's subcontract without justification and brought in a new subcontractor at a highly inflated price, the cost of which was charged wrongfully to Alexander; and that the prime contractor damaged Alexander's business reputation and publicly blamed Alexander for many ills which were the fault of the prime contractor or the architect.

In its third-party complaint against the architect, treated by the District Court as a cross-claim under Rule 13(h) (n. 2 supra), Alexander sued the architect for actual and punitive damages, alleging that the architect negligently provided improper specifications and insisted that they be followed; negligently failed to require the prime contractor to perform its work properly; wrongfully directed Alexander to install marble in inclement weather; willfully refused to approve Alexander's estimates for work done; influenced the prime contractor to terminate Alexander's subcontract and to bring in a new subcontractor at an inflated price and with preferred treatment through modified specifications; and wrongfully and maliciously injured Alexander's business reputation.

The prime contractor's cross-claim against Alexander, which also was dismissed by the District Court, seeks to hold Alexander liable for unliquidated damages for delays, faulty materials and workmanship and the failure of Alexander generally to conform to specifications. The count of the cross-claim of the prime contractor for indemnity against Alexander in the event of judgment for the plaintiff against the prime contractor was not dismissed.

After the dismissal of these claims there remain in the case now pending in the District Court the amended complaint, the answer and counterclaim of Alexander, the answer and counterclaim of the prime contractor, and the answer of the surety and the cross-claim by the prime contractor against Alexander for indemnity. Trial on these pleadings has been delayed pending disposition of the present appeal.

Under the Federal Rules of Civil Procedure the rights of all parties generally should be adjudicated in one action. Rules 13 and 14 are remedial and are construed liberally. Both Rules 13 and 14 are "intended to avoid circuity of action and to dispose of the entire subject matter arising from one set of facts in one action, thus administering complete and evenhanded justice expeditiously and economically." Blair v. Cleveland Twist Drill Co., 197 F.2d 842, 845 (7th Cir.). The aim of these rules "is facilitation not frustration of decisions on the merits." Frommeyer v. L. & R. Construction Co., 139 F.Supp. 579, 585 (D.N.J.).

A decision involving jurisdiction over cross-claims in litigation growing out of a construction project similar in some respects to the issues presented on this appeal is Glens Falls Indemnity Co. v. United States, 229 F.2d 370 (9th Cir.). In that case the Court said:

"It is well settled that a grant of jurisdiction over particular subject matter includes the power to adjudicate all matters ancillary to the particular subject matter. * * * Therefore, if either a cross-claim under Rule 13 or a third-party claim under Rule 14 does arise out of the subject matter of the original action and involves the same persons and issues, the claim is ancillary to the original action. In such cases, if the court has jurisdiction to entertain the original action, no independent basis of jurisdiction for the cross-claim or third-party claim need be alleged or proved." 229 F.2d at 373-374.

To like effect see United States for Use and Benefit of Claussen-Olson-Benner, Inc. v. Doolittle Construction Co., 195 F. Supp. 537 (D.Neb.).

The District Court held that no part of Alexander's cross-claim against the prime contractor, his third-party complaint against the architect or of the prime contractor's cross-claim against Alexander for breach of contract arose out of the transaction or occurrence that is the subject matter of the original action or the two counterclaims. With deference to the well-written opinion of the District Judge, we disagree.

In 1A Barron & Holtzoff, Federal Practice & Procedure (Wright ed.) § 424, at 653, the rule is stated as follows:

"It is the theory of the rule that the defendant\'s right against the third party is merely the outgrowth of the same aggregate or core of facts which is determinative of the plaintiff\'s claim. In this view, the court which has jurisdiction over the aggregate of facts which constitutes the plaintiff\'s claim needs no additional ground of jurisdiction to determine the third-party claim which comprises the same core of facts. It is in this sense that the court is said to have ancillary jurisdiction over the third-party claim."

In Moore v. N. Y. Cotton Exchange, 270 U.S. 593, 609-610, 46 S.Ct. 367, 371, 70 L.Ed. 750, the Supreme Court construed the words "arising out of the transaction which is the subject matter of the suit" in Equity Rule 30, precursor of Rule 13, Fed.R.Civ.P. The Court said:

"`Transaction\' is a word of flexible meaning. It may comprehend a series of many occurrences, depending not so much upon the immediateness of their connection as upon their logical relationship." 270 U.S. at 610, 46 S.Ct. at 371.

The words "transaction or occurrence" are given a broad and liberal interpretation in order to avoid a multiplicity of suits. Princess Fair Blouse, Inc. v. Viking Sprinkler Co., 186 F.Supp. 1, 4 (M.D.N.C.). See 3 Moore's Federal Practice §§ 13.13, 13.34.

Our reading of the pleadings in this case convinces us that there is a "logical relationship" between the cross-claims (including the third party complaint against the architect) and the "transaction or occurrence" that is the subject matter of the complaint and the two pending counterclaims. Although different subcontracts are involved, along with the prime contract and specifications, all relate to the same project...

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