National Surety Co. v. Washington Iron Works

NETERER, District Judge. These actions involve the same subject-matter, and the motions were submitted together. The plaintiff Surety Company, a nonresident, and plaintiff Pederson, a resident, have commenced an action (No. 114) in equity against the Washington Iron Works, a resident corporation, and the United States, and allege, in substance, that in September, 1914, Pederson agreed to furnish to the United States certain machinery, etc., for the Lake Washington Canal, a public improvement; that the Surety Company became a surety for the use and benefit of all persons furnishing labor, etc.; that Pederson secured the Washington Iron Works to furnish “said machinery,” etc., “as shown by specifications, * * * and as fully itemized and set forth in said written agreement between Hans Pederson and Washington Iron Works”; that the contract between plaintiff Pederson and the United States has been fully performed and accepted by the United States, and certified as completed on the 25th day of June, 1916; that the United States withheld from the plaintiff Pederson from the final payment a sum amounting to the sum of “about $10,000” of the contract price, which fund is still withheld and in the possession of the United States under “a claim of right to withhold the same, the said United States having asserted and is now asserting its right to lawfully and justly withhold and retain said fund from the plaintiff Pederson, and to retain and withhold the same for the use and benefit of the United States, and has declined and declines to distribute said fund, or any part thereof, either to. Hans Pederson, or his [262] creditors, or claimants to said fund”; that the same was withheld because, it is alleged, of the failure, neglect, and dereliction upon the part of the defendant Washington Iron Works; that the amount deducted on account of the dereliction on the part of the Washington Iron Works is $5,411.83; that Pederson in like manner withheld said payment from the Washington Iron Works; that the Washington Iron Works refuses to recognize the right of the United S'tates toi make said deductions, and is threatening to institute an action at law against the said Pederson and his bond for the recovery; that, if the defendant Washington Iron Works has any just or valid claims against the plaintiffs for and on account of the moneys'withheld by the United States, then the plaintiff Pederson has by right in equity the same lawful claim against the United States for any and all such amounts; that it is necessary, in order that justice and equity may be done to all parties, that a full, true, and correct accounting be had between the plaintiff, the defendant Washington Iron Works, and the United States, and a prayer for judgment is then made: “That all matters in controversy * * * shall be fully heard, * * * and the rights and liabilities of the various and respective parties on account thereof * * * settled and fixed, and that a full, true, and correct accounting be had, * * * and judgment rendered and entered in accordance therewith, and that, if finding shall be made that the United States was * * ¥ entitled to retain * * * the fund by it retained, it be held and adjudicated that said retention was justified through, the fault and neglect of the defendant Washington Iron Worlrs, and that this plaintiff, I-Ians Pederson, have judgment against the Washington Iron Worts for all such sum’s so retained and withheld, and in addition thereto, his damages in the sum of $7,000. * * * ” The defendants, United States and Washington Iron Works, have severally moved to dismiss on the ground that the court is without jurisdiction, and that the plaintiff does not state a cause for equitable relief. [1] A reading of the complaint discloses that the contention is primarily between Plans Pederson and the Washington Iron Works, both residents of the state of Washington, and as between these litigants this court is without jurisdiction. The primary cause of the litigation is a fund of money in the possession of the United States, a balance alleged to be due on a contract for a public improvement of Take Washington Canal; the deduction being made from the contract price between the United States and Pederson. It is alleged by Pederson that the default, if any, is due to the Washington Iron Works, who assumed the burdens of the contract between Pederson and the United States, to which contract the United States is not a party. No judgment is prayed against the United States directly in this proceeding, but it is sought to have the court examine into the entire matter and to adjudicate between the respective parties as the right may appear. It is manifest that the relation between Pederson and the Washington Iron Works is an independent relation, to which the United States is a stranger. Thej'’ being citizens of the state, the court is without jurisdiction. 1 U. S. Comp. Stat. 1916, § 991; Judicial Code, _§ 24. [2-5] I think it is likewise apparent that there is a misjoinder of parties plaintiff, as well as parties defendant. The National Surety Company has no cause of action against the defendant Washington [263] Iron Works or the United States; nor is there a joint liability by the defendants. There is likewise a misjoinder of causes of action. The plaintiff asserts a claim against the Washington Iron Works of $5,411.-83, and one against the United States for the difference between this sum and $10,000. Both asserted claims are legal rights, and it does not appear that tho plaintiff has not a plain, adequate, and complete reined) at law. Section 723, Rev. Stat. U. S. (Comp. St. 1916, § 1244), provides: “Suits in equity shall not be sustained in either of the courts of the United States in any case where a plain, adequate, and complete remedy may be had at law.” Following the commencement of this action, the Washington Iron Works, in tho name of the United S'tates, for its use and benefit, commenced an action (No. 117) against Flans Pcdorson and the National Surety Company, for $11,281.53, alleging the furnishing of labor, machinery, and material for the Rake Washington locks, on which there is an unpaid balance due in said amount, and caused notice to be given pursuant to Act Feb. 24, 1905, in which provision is made for bonds of contractors for public works, and it is provided that any person entering into a contract with the United States for the construction of any public work shall execute a bond, with surety, etc., and giving a party, six months after the completion and final settlement of said work, “a right of action and shall be, and are hereby,- authorized to bring suit in the name of the United States in the Circuit Court of the United States of the district in which said contract was to be performed and executed * * * for Ids or their use and benefit, against such contractor and its sureties, and to prosecute tlie same to final judgment and execution.” Upon the filing of this complaint, order was entered directing notice, pursuant to the provisions of this act, to creditors. Hans Pederson and the National Surety Company have filed a “motion for stay and a plea in abatement,” praying “an order staying this proceeding until a hearing can be had” upon the issues tendered in an equity proceeding, cause No. 114, and that upon a hearing this action be abated. The Surety Company and Hans Pederson rely upon Illinois Surety Company v. United States, 212 Fed. 136, 129 C. C. A. 584. I do not think that this case helps the plaintiffs in the equity (No. 114) proceeding. The Illinois Surety Company Case, as the Washington [ron Works Case, was predicated upon the act of 1905, supra, and not upon an original equitable proceeding. The only point decided in that case was whether the proceeding under this act of Congress was a proceeding in equity or an action at law. The Illinois Surety Company contended that the complaints were in equity, and not at law, and the trial court overruled its objection. The Court of Appeals (212 Fed. at page 139, 129 C. C. A. at page 587) said r “We see in this amendment an intent on the part oí Congress to substitute, for a number of independent actions at law, in which, vigilant had. a priority over non vigilant creditors, a suit in which all creditors shall be given notice and an opportunity to intervene and share ratably in a fund intended for the equal protection of all. 'This provision, which is not adapted to, nor indeed available in, actions at law, distinctly marks the proceeding as equitable’’ —and reversed the trial court. [264] [6] The proceeding on the bond in the name of the United States is a proceeding in equity (Ill. Surety Co. v. U. S., supra), expressly authorized by act of Congress of 1905, supra. It is designed to afford a speedy remedy for all parties. The United States has no liability or responsibility, except as fixed by the contract. It recognizes no subcontractors. There is no privity between subcontractors and the United States. The primary liability to the United States is by Pederson; the primary liability from the United States is to Pederson; the liability to subcontractors is from Pederson and the plaintiff bonding company; and special statutory provision having been made for the issue which is here presented, and the court being without jurisdiction, and a misjoinder of parties and causes of action appearing in cause No. 114, the motion to dismiss will be granted, and the motion to stay and abate the proceedings denied.