United States v. United Pacific Insurance Company, No. 71-2711.

CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)
Writing for the CourtWRIGHT and CHOY, Circuit , and TAYLOR
Citation472 F.2d 792
PartiesUNITED STATES of America for the Use of Stanton W. Payne, Plaintiff, v. UNITED PACIFIC INSURANCE COMPANY, a Washington corporation, Defendant and Third Party Plaintiff-Appellee, v. DISCOUNT COMPANY, INC., a corporation, et al., Third Party Defendants-Appellants.
Decision Date20 February 1973
Docket NumberNo. 71-2711.

472 F.2d 792 (1973)

UNITED STATES of America for the Use of Stanton W. Payne, Plaintiff,
v.
UNITED PACIFIC INSURANCE COMPANY, a Washington corporation, Defendant and Third Party Plaintiff-Appellee,
v.
DISCOUNT COMPANY, INC., a corporation, et al., Third Party Defendants-Appellants.

No. 71-2711.

United States Court of Appeals, Ninth Circuit.

January 5, 1973.

Rehearing Denied February 20, 1973.


Ralf H. Erlandson (argued), of Erlandson & Morgan, Milwaukie, Ore., for appellants.

Paul R. Meyer (argued), Daniel J. Seifer, of Kobin & Meyer, Theodore S. Bloom, Portland, Ore., for appellee.

Before WRIGHT and CHOY, Circuit Judges, and TAYLOR,* District Judge.

CHOY, Circuit Judge:

Stanton W. Payne furnished equipment and labor to appellant Discount Co., Inc. (Discount), a Washington corporation, for work in Oregon by Discount under a contract dated May 20, 1968 with the United States Department of Agriculture Forest Service at the Mona Campground and Lookout Boating Site (Mona Project). Pursuant to the Miller Act, 40 U.S.C. § 270b, Payne sued United Pacific Insurance Co. (United), a Washington corporation, surety for

472 F.2d 793
Discount on performance and payment bonds for the project

On August 8, 1967 Discount, its President Richard R. Norelius, and his wife Phyllis L. Norelius had entered into a general indemnity agreement with United covering all liabilities and attorney's fees incurred by United under the bonds posted for Discount. United had also posted similar bonds for another project in Oregon, the North Waldo Campground (Waldo Project).

In the summer of 1969, Discount having completed neither project, disputes arose between Discount and the Forest Service on the scope and progress of the work. In July and August 1969, the Forest Service terminated the contracts on both projects for default by Discount. As required by its performance bonds, United completed the work on the projects. United established reserves in excess of $110,000 expecting losses in completing the projects and in paying other claims besides Payne's. United demanded that Discount and the Noreliuses post collateral security pursuant to the 1967 indemnity agreement. Upon learning that Discount and the Noreliuses were transferring and concealing assets to avoid the demand for collateral, United impleaded Discount and the Noreliuses as third-party defendants.1

United prayed for specific performance of the indemnity agreement including the posting of additional security, an injunction against any transfer or concealing of assets, and for judgment against Discount and the Noreliuses for any liability to Payne.

In October, 1969, pursuant to stipulation by all parties, the injunction sought by United was issued. Discount and the Noreliuses did not comply with the injunction, so in December, 1969 Elim and Agnes Norelius (Richard's parents) were added as third-party defendants solely to the issue of fraudulent concealment of assets by the original third-party defendants.

In April, 1970, ten months prior to the trial, United settled Payne's claim for $2,162.40. Also prior to trial, United completed both projects at a total cost of $145,777.67.2 Thus, at the time of trial all of United's claims were liquidated and its suit for specific performance of the indemnity agreement was in effect a suit for damages.

The district court, sitting without a jury, held that the indemnity agreement was valid and awarded United $145,777.67 damages and $25,000 attorney's fees, granted United an accounting, transferred to United identified assets, and imposed a constructive trust on the house found to have been built with funds diverted from Discount.3 We reverse.

Payne's original claim was within federal jurisdiction because it arose under a federal statute. But the third-party claim was neither based on a federal statute nor asserted between citizens of different states. Independently considered, it was not within federal jurisdiction. However, the district court ruled that the third-party claim was "ancillary" to the original action and so no further jurisdictional basis was required to support it. The correctness of that ruling is the main issue on this appeal.

"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." Glens Falls Indemnity Co. v. United States ex rel. Westinghouse

472 F.2d 794
Electric Supply Co., 229 F.2d 370, 373 (9th Cir. 1955). This is true regardless of the absence of diversity of citizenship or of a federal question in the ancillary suit.4 Glens Falls, supra.

"Ancillary claims may be entertained `to prevent the relitigation in other courts of the issues heard and adjudged in the original suit'", Glens Falls, supra at 374; and to promote the economical and expeditious administration of justice by avoiding a multiplicity of suits through permitting issues and claims arising out of the same operative facts to be embraced in a single action. West's Federal Practice Manual, M.L. Volz, Ed. Vol. 6, Sec. 7367, pg. 412 (1970).5

But, we cannot lose sight of the fact that federal courts are courts of limited jurisdiction. We must weigh the "desire to preserve the integrity of constitutionally based jurisdictional limitations against the desire to dispose of all disputes arising from one set of facts in one action." 6 Wright & Miller, Federal Practice and Procedure, Sec. 1444, 221 (1971); accord, Dery v. Wyer, 265 F.2d 804, 811 (2nd Cir. 1959) (Lumbard, J. dissenting).

Decisions discussing the concept of ancillary jurisdiction have applied a number of...

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21 practice notes
  • Hunter v. United Van Lines, No. 83-5911
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • 29 d2 Janeiro d2 1985
    ...construed to extend or limit the jurisdiction of the United States district courts ...."). United States v. United Pacific Insurance Co., 472 F.2d 792, 794 n. 5 (9th Cir.), cert. denied, 411 U.S. 982, 93 S.Ct. 2273, 36 L.Ed.2d 958 (1973); see generally 3A J. Moore & J. Lucas, Moore's Federa......
  • Ellison v. Shell Oil Co., No. 87-5721
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • 31 d1 Julho d1 1989
    ...(9th Cir.1986), cert. denied, 482 U.S. 914, 107 S.Ct. 3185, 96 L.Ed.2d 674 (1987); see also United States v. United Pacific Insurance Co., 472 F.2d 792, 794-95 (9th Cir.), cert. denied, 411 U.S. 982, 93 S.Ct. 2273, 36 L.Ed.2d 958 (1973). We have jurisdiction over Southern Pacific's timely a......
  • Maltais v. United States, No. 77-CV-98.
    • United States
    • United States District Courts. 2nd Circuit. United States District Court of Northern District of New York
    • 19 d3 Outubro d3 1977
    ...g., Fulton National Bank v. Hozier, 267 U.S. 276, 280, 45 S.Ct. 261, 69 L.Ed. 609 (1925); United States v. United Pacific Insurance Co., 472 F.2d 792 (9th Cir.), cert. denied, 411 U.S. 982, 93 S.Ct. 2273, 36 L.Ed.2d 958 (1973); United States v. Heyward-Robinson Co., 430 F.2d 1077 (2d Cir. 1......
  • Federman v. Empire Fire and Marine Ins. Co., No. 273
    • United States
    • United States Courts of Appeals. United States Court of Appeals (2nd Circuit)
    • 2 d1 Abril d1 1979
    ...and the permissive rules of joinder adopted by the Federal Rules of Civil Procedure. United States v. United Pacific Ins. Co., 472 F.2d 792 (9th Cir.), Cert. denied, 411 U.S. 982, 93 S.Ct. 2273, 36 L.Ed.2d 958 (1973). The scope of ancillary jurisdiction is not well defined and its applicati......
  • Request a trial to view additional results
21 cases
  • Hunter v. United Van Lines, No. 83-5911
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • 29 d2 Janeiro d2 1985
    ...construed to extend or limit the jurisdiction of the United States district courts ...."). United States v. United Pacific Insurance Co., 472 F.2d 792, 794 n. 5 (9th Cir.), cert. denied, 411 U.S. 982, 93 S.Ct. 2273, 36 L.Ed.2d 958 (1973); see generally 3A J. Moore & J. Lucas, Moore's Federa......
  • Ellison v. Shell Oil Co., No. 87-5721
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • 31 d1 Julho d1 1989
    ...(9th Cir.1986), cert. denied, 482 U.S. 914, 107 S.Ct. 3185, 96 L.Ed.2d 674 (1987); see also United States v. United Pacific Insurance Co., 472 F.2d 792, 794-95 (9th Cir.), cert. denied, 411 U.S. 982, 93 S.Ct. 2273, 36 L.Ed.2d 958 (1973). We have jurisdiction over Southern Pacific's timely a......
  • Maltais v. United States, No. 77-CV-98.
    • United States
    • United States District Courts. 2nd Circuit. United States District Court of Northern District of New York
    • 19 d3 Outubro d3 1977
    ...g., Fulton National Bank v. Hozier, 267 U.S. 276, 280, 45 S.Ct. 261, 69 L.Ed. 609 (1925); United States v. United Pacific Insurance Co., 472 F.2d 792 (9th Cir.), cert. denied, 411 U.S. 982, 93 S.Ct. 2273, 36 L.Ed.2d 958 (1973); United States v. Heyward-Robinson Co., 430 F.2d 1077 (2d Cir. 1......
  • Federman v. Empire Fire and Marine Ins. Co., No. 273
    • United States
    • United States Courts of Appeals. United States Court of Appeals (2nd Circuit)
    • 2 d1 Abril d1 1979
    ...and the permissive rules of joinder adopted by the Federal Rules of Civil Procedure. United States v. United Pacific Ins. Co., 472 F.2d 792 (9th Cir.), Cert. denied, 411 U.S. 982, 93 S.Ct. 2273, 36 L.Ed.2d 958 (1973). The scope of ancillary jurisdiction is not well defined and its applicati......
  • Request a trial to view additional results

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