Court Opinion

ID: 9453417
Source: CourtListenerOpinion
Date Created: 2023-08-04 18:12:33.142383+00
Date Added: 2024-06-11T17:33:38.819542
License: Public Domain

GODBOLD, Circuit Judge
(dissenting) :
I dissent from the holding of the majority that a state court determination of liability of the principal is to be given no collateral estoppel effect in a Miller Act suit against the surety in federal court.
Federal jurisdiction over Miller Act claims is exclusive. There is no equivocation in the words of the statute as to where venue properly lies. But statutory pronouncements of jurisdiction and venue do not answer the question presented here.
The usual rule of suretyship law is as stated by the majority, that if the surety has full knowledge and opportunity to defend a suit against the principal, a judgment against the principal is conclusive against the surety (absent fraud and collusion). See Lake County for Use and Benefit of Baxley v. Massachusetts Bonding & Ins. Co., 75 F.2d 6 (5th Cir. 1935); Seaboard Surety Co. v. Westwood Lake, Inc., 277 F.2d 397 (5th Cir. 1960). Fidelity & Guaranty had knowledge of the suit against its principal and an opportunity to defend it. Both the state court proceeding against the principal and the federal suit on the bond took place in Pensacola, Florida. The same attorneys represented the principal in state court and the surety in federal court. Though the state suit was filed long before the federal suit it lay dormant, and in the active stages of litigation the two cases proceeded more or less concurrently.
Were it not for the Miller Act there would be no doubt of the applicability of the normal principal-surety rule to the circumstances of this case. We are called upon to decide whether the language and legislative history of the Miller Act preclude application of this rule to Miller Act cases.
I dissent from the conclusion of the majority. It is inconsistent with all previous Miller Act case law I am able to find on the subject. It is in violation of the terms and policy of the federal full faith and credit statute, 28 U.S.C.A. § 1738.
The usual rule referred to above has long been applied in Miller Act and Heard Act cases without regard to whether the judgment against the principal was obtained in state or federal court. Massachusetts Bonding & Ins. Co. v. Robert E. Denike, Inc., 92 F.2d 657 (3d Cir. 1937) (state court judgment); United States, for Use and Benefit of Larkin v. Maryland Casualty Co., 45 F.Supp. 286 (D.Mass.1942) (state court judgment); Herzog v. DesLauriers Steel Mould Co., 46 F.Supp. 211 (E.D.Pa.1942) (federal court judgment). Compare United States, for Use of Vigilanti v. Pfeiffer-Neumeyer Const. Corp., 25 F.Supp. 403 (E.D.N.Y.1938).
*23Section 1738, 28 U.S.C.A., provides an independent ground requiring that effect be given to the state adjudication in the case before us. (That section was not mentioned in Massachusetts Bonding and Larkin.) The effect which must be accorded a state judgment by a sister state is governed by the full faith and credit clause of the Constitution.1 In 1790 the Congress acted to extend the force of the full faith and credit clause to federal courts. Act of May 26, 1790, 1 Stat. 122.2 This act, as amended, but with the operative language substantially unchanged, now appears at § 1738.
As a general proposition § 1738 requires federal courts to give state adjudications the same effect they would have in the rendering jurisdiction. Union & Planters’ Bank v. City of Memphis, 189 U.S. 71, 23 S.Ct. 604, 47 L.Ed. 712 (1903); Wayside Transp. Co. v. Marcell’s Motor Express, Inc., 284 F.2d 868 (1st Cir. 1960); see Midessa Television Co. v. Motion Pictures for Television, Inc., 290 F.2d 203 (5th Cir. 1961), cert. denied, 368 U.S. 827, 82 S.Ct. 47, 7 L.Ed.2d 30 (1961); Rich v. Naviera Yacuba, S.A., 197 F.Supp. 710 (E.D.Va.), aff’d 295 F.2d 24 (4th Cir. 1961) (dictum). As with the full faith and credit clause itself it is always permissible for the court in which a prior judgment is asserted to inquire into the jurisdiction of the rendering court. Otherwise the rule appears to permit no exceptions, and in the absence of the Miller Act would require the federal court to give collateral estoppel effect to a state court determination of identical issues in litigation on another cause of action. See United States v. Silliman, 167 F.2d 607 (3d Cir.), cert. denied, 335 U.S. 825, 69 S.Ct. 48, 93 L.Ed. 379 (1948).
The question thus becomes whether by enacting the Miller Act in 1935 the Congress created an exception to the operation of § 1738. I find nothing to indicate that it did.
It is readily apparent that there is no pertinent express repealer incorporated into the provisions of the Miller Act.3 If § 1738 was affected by passage of the Miller Act it was by implication.
Repeals by implication are not favored, and where possible statutes with potentially inconsistent provisions will be construed so as to give effect to both. See United States v. Zacks, 375 U.S. 59, 84 S.Ct. 178, 11 L.Ed.2d 128 (1963). Unless there is “some manifest inconsistency or positive repugnance between the two statutes” we are required to construe them harmoniously. Mercantile Nat. Bank v. Langdeau, 371 U.S. 555, 83 S.Ct. 520, 9 L.Ed.2d 523 (1963); United States v. Borden Co., 308 U.S. 188, 60 S.Ct. 182, 84 L.Ed. 181 (1939). At the most repeal by implication has limited vitality, and it falls to its lowest ebb, if having any scope at all, when asserted in derogation of a statute which incorporates into federal-state jurisprudence a principle of state-to-state jurisprudence that is of constitutional dimension.
Through the full faith and credit clause “local doctrines of res judicata * * * *24become a part of the national jurisprudence.” Riley v. New York Trust Co., 315 U.S. 343, 349, 62 S.Ct. 608, 86 L.Ed. 885, 891 (1942). Section 1738 was enacted to extend the full faith and credit concept to the federal courts. The implied repeal or limitation of a statute with such fundamental constitutional underpinnings would require a “manifest inconsistency” of the highest order, if indeed such a statute can be rescinded or modified in any way other than by direct congressional pronouncement. Nor should the courts, in a particular type of case, lightly carve out of “the national jurisprudence” established doctrines of res judicata and create a new and special federal law of res judicata in their stead for that particularized situation only.
It has long been recognized that the dominant motive underlying passage of the Miller Act was protection of subcontractors and materialmen by requiring the contractor to post a separate bond to insure their prompt payment.4 Such a construction is fully supported by the legislative history. See generally S.Rep. No. 1238, 74th Cong., 1st Sess. (1935); H.R.Rep. No. 1263, 74th Cong., 1st Sess. (1935); Hearings on Bonds of Contractors on Public Works Before a Subcomm. of the House Comm. on the Judiciary, 74th Cong., 1st Sess., ser. 4 (1935). There is no basic inconsistency between this protection and the terms of § 1738. In the absence of a “manifest inconsistency or positive repugnance” between the statutes, we must assume that Congress enacted the Miller Act in light of § 1738, and, construing them so as to give effect to both, must conclude that in a suit against a Miller Act surety a federal court is required to give to a prior state adjudication in a suit by a subcontractor against the principal the same effect as by law or usage the courts of such state would give. One need not speculate on what effect a Florida state court, in a suit against the surety, would give to a prior Florida state judgment against the principal. Seaboard Surety, supra, was a Florida case and cites the Florida state law. Lake County, supra, was a Florida case also, though citing general authorities.
Finally, I do not read the congressional history and intent as do the majority, who dilute the long-recognized statutory purpose of the Miller Act — protection of suppliers and subcontractors — by deducing an unexpressed congressional intent in enactment of the same Act to protect surety companies from inconvenience. This 180-degree change in direction is based upon congressional retention of the exclusive jurisdiction provision when the separate payment bond was provided for and separate actions thereon permitted by the various suppliers. A representative of the surety industry, before the House committee, expressed the fear that if subcontractors were permitted to maintain separate suits in their own state courts a likely result would be that the surety would be required to pay more than the face amount of the penalty bond.5 As I read this statement it is clear that the witness was referring to a provision included in one of several bills pending before the committee, H.R. 4461, 74th Cong., 1st Sess. (1935), which would have permitted actions on the bond to be “commenced in any court of competent jurisdiction in the State wherein the contract is to be performed.” The sure*25ties wanted retention of the single suit provision. Congress rejected this in favor of allowing multiple claimants’ suits on the bond, but continued the principle of exclusive federal jurisdiction for suits on the bond against the surety, which laid to rest the apprehension of the surety companies of possible liability in excess of the bond penalty. Subject to a nominal exception 6 a single federal court now has, as it had in the past, responsibility for ascertaining ultimate liability of the surety, and that court can, and no doubt will, see to it that judgments are not entered by it against the surety exceeding the penal sum of 'the bond. As Judge Clark spelled out in United States for Use and Benefit of Bryant Electric Co. v. Aetna Casualty & Surety Co., 297 F.2d 665 (2d Cir. 1962), the Act created “a race among subcontractors until the bond was exhausted,”
I find nothing in the legislative history evidencing that Congress reached any conclusion on the manner in which, in a suit against the surety in the court having jurisdiction thereof, liability and damages are to be determined, or whether the normal rules of collateral estoppel applied to principal and surety were to be changed (or that Congress even dealt with these subject matters). Aetna, after discussing the various surety company requests that Congress would not accede to, says: “Thus the section retained scant utility, save as a convenience to the defendants.” 297 F.2d at 668. Nothing in Aetna suggests that the phrase “convenience to the defendants” is in any way related to or concerned with the privilege of being exempted from the normal rules of collateral estoppel.
Quite clearly there was no congressional mandate against multiplicity of suits — in fact, rather than retaining for each payment bond the Heard Act’s single suit requirement, as it might have done, Congress allowed each claimant to file a separate action. Congress refused to heed the request of surety company officials for retention of the single suit for all creditors, and declined to adopt a proposed bill that included the single suit requirement. H.R. 5054, 74th Cong., 1st Sess. (1935). Also the shift from one to several possible districts (see n. 5, supra) reduced the possibility that suits could be consolidated. See Aetna, supra at 668.
I see no basis for deviating from the normal rules of collateral estoppel, from the previous federal cases applying those rules in Heard Act and Miller Act cases, from the federal full faith and credit statute, and from the basic purpose, until now recognized, of the Miller Act. “The primary aim of the Miller Act was to secure greater protection for the subcontractor * * * and to facilitate suit by those supplying labor or. materials to the general contractor.” Aetna, supra at 668-669. I would affirm.

. U.S.Const. art. 4, §1: “Full Faith and Credit shall be given in each State to the public Acts, Records, and Judicial Proceedings of every other State. And the Congress may by general Laws prescribe the Manner in which such Acts, Records and Proceedings shall be proved and the Effect thereof.”

. “The acts of the legislature of any State or Territory, or of any country subject to the jurisdiction of the United States, shall be authenticated by having the seals of such State, Territory, or country affixed thereto. The records and judicial proceedings of the courts of any State or Territory, or of any such country, shall be proved or admitted in any other court within the United States, by the attestation of the clerk, and the seal of the court annexed, if there be a seal, together with a certificate of the judge, chief justice, or presiding magistrate, that the said attestation is in due form. And the said records and judicial proceedings, so authenticated, shall have such faith and credit given to them in every court within the United States as they have by law or usage in the .courts of the States from which they are taken.”

. The Miller Act contained a provision which repealed its predecessor, the Heard Act. Act of Aug. 24, 1935, c. 642, § 5, 49 Stat. 794. But the repealer purported to have no further effect.

. See, e. g., United States for Benefit and on Behalf of Sherman v. Carter, 353 U.S. 210, 77 S.Ct. 793, 1 L.Ed.2d 776 (1957); Clifford F. MacEvoy Co. v. United States for Use and Benefit of Calvin Tomkins Co., 322 U.S. 102, 64 S.Ct. 890, 88 L.Ed. 1163 (1944); St. Paul Eire & Marine Ins. Co. v. United States for Use of Dakota Elec. Supply Co., 309 F.2d 22 (8th Cir. 1962), cert. denied, 372 U.S. 936, 83 S.Ct. 883, 9 L.Ed .2d 767 (1963); United States for Use and Benefit of J. A. Edwards & Co. v. Thompson Const. Corp., 172 F.Supp. 161 (S.D.N.Y.), aff’d, 273 F.2d 873, 78 A.L.R.2d 421 (2d Cir. 1959), cert. denied, 362 U.S. 951, 80 S.Ct. 864, 4 L.Ed .2d 869 (1960).

. “If you have a dual bond, unless you have the form very carefully prescribed in which suit must be brought you may render it impossible for the surety companies to write bonds. If, for example, under one of these present pending bills you can sue in any court — now, you gentlemen know full well what would happen if in the District of Columbia — I will keep away from it — if in Maryland a *25job is being performed and we had a performance bond under which a man from California <and a man from Texas and a man from Michigan, and a man from Maine were all furnishing materials they would all sue in their own States. If that were the case, we might have to pay the penalty of the bond three or four times. T frankly tried to find authority for it, and I cannot find any very substantial authority for the proposition that we could plead in California the rendition of a judgment against us in Maine, reducing the penalty on the bond.” Hearings on Bonds of Contractors on Public Works, supra at 48.

. The Heard Act limited suit to one district—the district in which the contract was to be performed. The Miller Act amended this provision to permit suit in any district in which performance would occur. See United States for Use and Benefit of Bryant Electric Co. v. Aetna Casualty & Surety Co., 297 F.2d .665, 668, (2d Cir. 1962); n. 5 of majority opinion.