Robertson Lumber Co. v. Progressive Contractors, Inc.

• Decision Date: 03 July 1968
• Docket Number: No. 8462,8462
• Citation: 160 N.W.2d 61
• Parties: The ROBERTSON LUMBER COMPANY, a corporation, Plaintiff and Respondent, v. PROGRESSIVE CONTRACTORS, INC., a corporation, and Defendant, Continental Casualty Company, a corporation and Fidelity and Casualty Company of New York, a corporation, Defendants and Appellants. Civ.
• Court: North Dakota Supreme Court

Page 61

160 N.W.2d 61

The ROBERTSON LUMBER COMPANY, a corporation, Plaintiff and Respondent, v. PROGRESSIVE CONTRACTORS, INC., a corporation, and Defendant Continental Casualty Company, a corporation and Fidelity and Casualty Company of New York, a corporation Defendants and Appellants.

Civ. No. 8462.

Supreme Court of North Dakota.

July 3, 1968.

Syllabus by the Court

1. Where there is a conflict between decisions of the federal courts on federal questions which have not been passed upon by the Supreme Court of the United States, the state courts are free to decide the questions for themselves.

2. North Dakota district court has jurisdiction in a suit by a claimant against the sureties on a payment bond issued by the sureties on a Capehart housing project (42 U.S.C.A. Sec. 1594 et seq.), located in the county in which the said court has jurisdiction as provided by the bond terms.

3. The burden of showing former adjudication is upon the one asserting it.

4. A judgment in a former suit between the same parties is not conclusive in a subsequent action where it does not appear that the merits of a controversy were investigated and adjudicated but the former decision merely decided a procedural issue not present in the subsequent action.

5. Where payment bond prescribes notice of claim shall be given within specified period to any two of the following: 'The Principal, any one of the Obligees, or the sureties' as a condition precedent to suit on the bond by a claimant against the sureties, it does not require any notice be given to the sureties, and where claimant fails to give timely notice to any of the persons named in the bond and brings suit on the bond against the sureties, the sureties are exonerated only to the extent to which they are prejudiced by the omission. Section 22--03--06, N.D.C.C.

6. A surety is exonerated by the omission of a claimant to do anything which it is his obligation to do when required by the surety bond only to the extent to which the surety is prejudiced by such an omission. Section 22--03--06(4), N.D.C.C.

Degnan, McElroy, Lamb & Camrud, Grand Forks, for appellants.

Shaft, Benson, Shaft & McConn, Grand Forks, for respondent.

TEIGEN, Chief Justice.

The defendant sureties have appealed from the adverse judgment in a Capehart bond suit brought by a materialman who furnished materials on a housing project authorized under the Capehart Housing Act. The case was tried to the court and demand has been made for trial de novo in this Court.

The plaintiff, Robertson Lumber Company, which is the materialman, instituted this suit against Progressive Contractors, Inc., the prime contractor, and its two payment and performance bond sureties, the Continental Casualty Company and the Fidelity and Casualty Company of New York, for materials furnished several subcontractors of the prime contractor, for When the case came on for trial, the plaintiff and the defendant sureties stipulated the facts. The stipulation of facts admits that the plaintiff furnished the materials described in its complaint and that the value of the unpaid materials furnished was the sum of $13,780.08 and the stipulation provides that if judgment is entered for the plaintiff, it shall be entered for that amount.

which it had not received payment. The defendant Progressive Contractors, Inc. was the prime contractor for the construction of 744 housing units at the United States Air Force Base, at Grand Forks, North Dakota, authorized under the Capehart Housing Act. The defendant sureties furnished payment and performance bonds as required under the Capehart Housing Act, as amended, 42 U.S.C.A. Sec. 1594 (a). The defendant Progressive Contractors, Inc. failed to answer the complaint and judgment has been entered against it by default. The defendant sureties answered setting out several defenses.

It was also stipulated that the defendant Progressive Contractors, Inc. abandoned the building project on May 20, 1960, and notice as required by Sec. 4(a) of the payment and performance bond was sent to the principal alone (Progressive Contractors, Inc.) on July 22, 1960, which was within 90 days of the furnishing of the last materials but that no notice was given to the sureties. It was also stipulated that on April 20, 1961, (more than 90 days after the last materials were furnished) the plaintiff mailed notice as provided by Sec. 4(a) of the bond provisions to the required parties, and that such notices contained the proper information.

The defendant sureties in this appeal raise three principal issues which we must consider: first, jurisdiction over the subject matter; they contend the federal courts have exclusive jurisdiction in suits on Capehart bonds; second, the matter is res judicata; and, third failure to give notice in accordance with the bond terms.

Thus, although the case is before us for trial de novo, there is no issue of fact for determination on this appeal. The issues raised are purely questions of law.

HISTORY

This case and a companion case commenced by the same plaintiff but against Wilshire Contractors, Inc., and Continental Casualty Company, have followed a parallel course through the federal and state courts before this appeal was taken.

The two companion actions were first brought under the Miller Act, as provided by 40 U.S.C.A. Sec. 270b, in the Federal District Court, Northeastern Division in December of 1960. At a pretrial conference, the facts being stipulated and the contractor having defaulted, the issue between the plaintiff and the defendant sureties was narrowed to a single question of law. The question presented was whether the plaintiff had a right to maintain the actions for recovery upon Capehart payment and performance bonds when the notice requirements of the Miller Act had been complied with, but the notice requirements of the bonds had not been met. The district court rendered its decision in favor of the plaintiff. It held that the plaintiff had a right to sue upon the payment bond if it had complied with the provisions of the Miller Act, 40 U.S.C.A. secs. 270a--270d, which provides for a single notice. The Capehart bond provisions provided notice requirement as follows:

'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 Sureties above named, * * *'

United States for Use and Benefit of Robertson Lumber Company v. Progressive Contractors, Inc., 196 F.Supp. 171 (D.C.N.D.1961).

The opinion of the district court was rendered on May 24, 1961. Prior to that time, to wit: On April 20, 1961, the plaintiff mailed notices, as required by Sec. 4(a) of the bond, to the required parties as provided by the bond provisions. The decision of the federal district court was appealed to the Court of Appeals of the Eighth Circuit, and that court rendered its decision on June 30, 1962. (See Continental Casualty Company v. United States for Use and Benefit of Robertson Lumber Company, 305 F.2d 794 (8th Cir. 1962. (Cert. denied, 371 U.S. 922, 83 S.Ct. 290, 9 L.Ed.2d 231.) It reversed the federal district court and held that the notice provisions of the Miller Act did not govern in a suit on a Capehart bond. The circuit court ordered the judgment appealed from reversed and the cause was remanded to the district court with directions to dismiss the complaint.

While the federal cases were pending and after due notices had been given on April 20, 1961, the plaintiff commenced separate actions on the claims in the state court. These actions were brought on the bonds under the provisions of 28 U.S.C.A. Sec. 1352, providing concurrent jurisdiction in the state and federal courts. On May 15, 1961, counsel for the plaintiff and counsel for the defendant sureties stipulated '* * * that the above captioned matter shall be and hereby is removed * * * to United States Federal District Court for the District of North Dakota, Northeastern Division * * *.' Pursuant to the stipulation, the Honorable Ronald N. Davies, Judge of the Federal District Court, ordered that the two cases be removed to the United States Federal Court for the District of North Dakota, Northeastern Division. This order was made on May 18, 1961. On the same date, the defendants Continental Casualty Company and Fidelity and Casualty Company filed their separate answers in federal court. No answer or other responsive pleading has ever been received, served, or filed by either of the defendants Progressive Contractors, Inc., or Wilshire Contractors, Inc.

The defendant sureties filed motions for summary judgments on February 26, 1963. Following oral arguments on said motions and the submission of briefs, Judge Davies, on July 17, 1963, entered his orders denying both motions for summary judgments and directed that both actions be tried in the federal court on the merits.

The issues raised in the motions for summary judgments were the claims that the plaintiff had been non-suited in both cases commenced in federal court under the identical fact situation and therefore, the issues were res judicata. However, the federal district court found that the notice requirements contained in the bonds, as a condition precedent to an action an the bonds, were questions of fact for determination and that if the plaintiff can establish compliance, the actions may be decided on the merits. Thereafter, the above entitled actions came on for pretrial conferences before the Honorable George S. Register, Chief Judge of the United States District Court for North Dakota. Following the pretrial conferences, Judge Register ordered the cases remanded to the state court on the ground the federal court was without jurisdiction. The order was entered on May 6, 1964, and was premised on the ground that the parties may not confer jurisdiction on the federal court by acquiescence in the removal and, in addition, that all the...