United States v. Verrier

• Decision Date: 07 December 1959
• Docket Number: No. 1102 N.D.,1102 N.D.
• Citation: 179 F. Supp. 336
• Parties: UNITED STATES of America for the use and benefit of ALLEN CONSTRUCTION CORP. v. Robert A. VERRIER, d/b/a Verrier Construction Co. and American Surety Company, Hartford Accident & Indemnity Company, Massachusetts Bonding & Insurance Company, Continental Casualty Co., New Amsterdam Casualty Company.
• Court: U.S. District Court — District of Maine

179 F. Supp. 336

UNITED STATES of America for the use and benefit of ALLEN CONSTRUCTION CORP.

v.

Robert A. VERRIER, d/b/a Verrier Construction Co. and American Surety Company, Hartford Accident & Indemnity Company, Massachusetts Bonding & Insurance Company, Continental Casualty Co., New Amsterdam Casualty Company.

No. 1102 N.D.

United States District Court. D. Maine, N. D.

December 7, 1959.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Lewis I. Naiman, Gardiner, Me., Francis E. Day, Bangor, Me., for plaintiff.

Robert D. Schwarz, Herbert H. Bennett, Portland, Me., for defendant.

GIGNOUX, District Judge.

This matter comes before the Court upon the defendants' motions for summary judgment in their favor upon the claim set forth in the complaint and upon the counterclaim set forth in the answer. Fed.R.Civ.P. 56, 28 U.S.C.A.

The principal action arises under the Miller Act, 40 U.S.C.A. §§ 270a-270d. It seeks recovery of the sum of $159,680.70, plus interest, alleged to be due the use plaintiff Allen Construction Corp. for labor and materials furnished pursuant to contract with the defendant Verrier and used in connection with the construction by Verrier for the United States Government of Special AAA Facilities at Loring Air Force Base, Limestone, Maine. The remaining defendants are the sureties on the payment bond furnished by Verrier to the United States as required by the Miller Act. The defendants counterclaim for $162,550 damages allegedly resulting from the breach by the use plaintiff of the contract upon which its suit is based. The defendants have moved for summary judgment in their favor upon the plaintiff's claim on the grounds that: (1) the use plaintiff is not a proper party plaintiff under Rule 17(a) of the Federal Rules of Civil Procedure because it assigned to First National Granite Bank of Augusta, as security for loans made or to be made by the Bank, all amounts due or to become due under the contract,¹ and (2) the use plaintiff is barred from bringing this action by Rule 13(a) of the Federal Rules of Civil Procedure because it failed to assert its present claim as a counterclaim to a claim for breach of the same contract which was filed by Verrier and allowed by the Referee in recent bankruptcy proceedings in this Court (In re Allen Construction Corp., D.C.Me., Bankruptcy No. 6-62 Inv.S.D.). The defendants have also moved for summary judgment in their favor upon their counterclaim on the ground that the use plaintiff received no discharge from the Bankruptcy Court and the allowance of Verrier's claim by the Referee constituted a valid judgment which cannot be collaterally attacked by the plaintiff in this proceeding.

I.

The defendants have first asserted in support of their motion for summary judgment upon the complaint that the use plaintiff is not a proper party plaintiff under Rule 17(a) of the Federal Rules of Civil Procedure because it has assigned to First National Granite Bank of Augusta all its rights to amounts due under its contract with Verrier. The assignment, which was accepted by Verrier at the time of its execution by the use plaintiff, is in the following form:

"April 12, 1956

"In consideration of one dollar and other valuable considerations paid to the undersigned by the First National Granite Bank of Augusta, the receipt of which is hereby acknowledged, Allen Construction Corp. by its president hereunto duly authorized does hereby assign to said First National Granite Bank of Augusta all amounts due or to become due to said Allen Construction Corp. on its contract with Robert A. Verrier Construction Co. for construction work on Air Force facilities in Caswell and Limestone, Maine, as security for loans made, or to be made by said Bank to said Allen Construction Corp.

"Allen Construction Corp. "By /s/ Guy R. Allen _________________ "President"

Rule 17(a) provides:

"Rule 17. Parties Plaintiff and Defendant; Capacity

"(a) Real Party in Interest. Every action shall be prosecuted in the name of the real party in interest; but an executor, administrator, guardian, trustee of an express trust, a party with whom or in whose name a contract has been made for the benefit of another, or a party authorized by statute may sue in his own name without joining with him the party for whose benefit the action is brought; and when a statute of the United States so provides, an action for the use or benefit of another shall be brought in the name of the United States."

The defendants' contention is that because of the assignment, the Bank, and not Allen, is the "real party in interest" and under Rule 17(a) is the only party entitled to prosecute an action on the contract.

The true meaning of the "real party in interest" provision in Rule 17 (a) has been summarized by Professor Moore as follows: "An action shall be prosecuted in the name of the party who, by the substantive law, has the right sought to be enforced."² 3 Moore, Federal Practice § 17.07 (2d ed. 1948). See also 2 Barron & Holtzoff, Federal Practice and Procedure § 482 (1950). In an ordinary diversity case the law which would determine who has this substantive right is, of course, the law of the state in which the federal district court is sitting. 3 Moore § 17.07; See Sheehan v. Municipal Light & Power Co., 2 Cir., 1945, 151 F.2d 65, 70. And although jurisdiction in this case is conferred by the Miller Act and not by diversity of citizenship, the weight of authority supports the view that state law properly rules here, where the issue does not involve the interpretation or applicability of a federal statute and there is no supervening federal interest which dictates a need for federal uniformity. See Continental Casualty Co. v. Schaefer, 9 Cir., 173 F.2d 5, 7-8, certiorari denied, 1949, 337 U.S. 940, 69 S.Ct. 1517, 93 L.Ed. 1745; Macri v. United States, 338 U.S. 820, 70 S.Ct. 63, 94 L.Ed. 497; United States v. Rogers & Rogers, D.C. S.D.Cal.1958, 161 F.Supp. 132, 135; Hart & Wechsler, The Federal Courts and the Federal System 694-700 (1953). Hence this Court should decide this question as would the courts of the State of Maine, where this Court sits and all relevant events regarding the contract occurred.

It seems clear from the Maine cases that the assignor of a chose in action for collateral security retains an enforceable substantive right for the purposes of an action against the debtor when the right of action assigned is substantially in excess of the debt secured, at least when the assignee has expressly or impliedly consented to suit by the assignor in his own name. Simansky v. Clark, 1929, 128 Me. 280, 147 A. 205, 65 A.L.R. 1316; Rosenberg v. Cohen, 1928, 127 Me. 260, 143 A. 97.³ In the latter case the issue involved was whether or not a mortgagee, who had assigned the mortgage to a bank as collateral security for his own loan, could foreclose the mortgage and maintain a writ of entry in his own name. The Court summarized the Maine law as follows (127 Me. at page 263, 143 A. 98):

"It would appear, then, that a mortgagee who has assigned his mortgage and the note secured thereby to a third party as collateral, may maintain foreclosure proceedings and a writ of entry in his own name, provided that such proceedings are brought with the consent of his assignee, and that, even without such consent he may proceed in his own name if the pledged security is larger in amount than the note for which it is given as collateral, he then being clearly a party in interest * * *." (Emphasis supplied.)

In Simansky, this rule was reaffirmed and applied to permit recovery in a suit upon a promissory note brought in his own name by an indorsee, who had pledged and indorsed the note over to the bank as collateral security for a smaller note given by him to the bank. The record disclosed that the action had been brought with the knowledge and consent of the bank.

The application of the foregoing doctrine to the facts disclosed in the instant case compels the conclusion that the use plaintiff has an enforceable right under Maine law and is therefore a real party in interest within the meaning of Rule 17(a) for the purposes of this action. The assignment shows on its face that it was executed for collateral security only, the Bank acquiring no interest in the proceeds of the assigned contract except as security for its loans to the use plaintiff. The amount claimed by the use plaintiff in the present action is $159,680.70, which is approximately five times the amount claimed by the Bank in its companion action as the balance of the loans owed to it by the use plaintiff.⁴ There is further abundant evidence in this record to show that the Bank has knowledge of and consents to the maintenance of this suit for the benefit of the use plaintiff in its own name.

It is accordingly the conclusion of this Court that the use plaintiff is a proper party plaintiff under Rule 17(a) and that the first ground assigned by the defendants in support of their motion for summary judgment upon the complaint is without merit.

II.

The defendants next argue in support of their motion for summary judgment upon the complaint that the use plaintiff is barred from bringing the instant action by Rule 13(a) of the Federal Rules of Civil Procedure because of the failure of the use plaintiff to assert its present claim as a counterclaim to the claim for breach of the same contract which was filed by Verrier in the recent bankruptcy proceedings. Rule 13(a) provides:

"Rule 13. Counterclaim and Cross-Claim

"(a) Compulsory Counterclaims. A pleading shall state as a counterclaim any claim which at the time of serving the pleading the pleader has against any opposing party, if it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction, except that such a claim need not be so stated if at the

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