Petition for A Writ of Certiorari — Mather Construction Co. v. Continental Casualty Co.

i & Supreme @owrt, U.&

“~ LIBRARY [ff FILED

SUPREME COURT, U.F

] ©. ROBERT se CLERK

IN THE tee

Supreme Court of the Anited States

October Term, 1970

.

No. 138 0

MATHER CONSTRUCTION COMPANY,

D & L CONSTRUCTION COMPANY,

and

J. D. BRADLEY, INC.,

Petitioners,

Vv.

CONTINENTAL CASUALTY COMPANY, et al.,

| Respondents.

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

DANIEL J. ANDERSEN

CARL J. FELTH

600 Woodward Building

Washington, D.C. 20005

Counsel for Petitioners

THE CASILLAS PRESS, INC.—1717 K Street, N. W.—Washington, D. C.-223-1220

TABLE OF CONTENTS.

Page

CITATIONS TO OPINIONS BELOW ............. 2

PE sea wR be a we ne 2

THE QUESTIONS PRESENTED. ............... 2

CONSTITUTIONAL PROVISIONS, STATUTES

He Gen US ck ck eee ee es 3

meAsmeeeren OF Teme CARE... 6 ect cca 3

REASONS FOR GRANTING THE WRIT. .......... 6

CINE, oa a area WA ae eS ek 2 ela ee 10

APPENDIX A — Decision of the Court of Appeals... .. A-l

APPENDIX B — Order of the Court of Appeals

A. eae B-]

APPENDIX C — Excerpt from District Court

Hearing on February 28, 1969............... C-]

APPENDIX D — Order of the District Court of

i SO 6 sk wok ae ee a ee ead D-1

APPENDIX E — Order of the District Court of

SN rs NE eas eck oo ee ee ee ee E-]

APPENDIX F — Constitutional Provisions, Statutes

Se en Ek 8h oe kk ote ee os ee F-]

APPENDIX G — Affidavit of Carl J. Felth,......... G-1

APPENDIX H — Affidavit of D.L. Bradley.......... H-1

APPENDIX I — Affidavit of James E. Postula....... I-1

TE OR ¢ ram sree

(ii)

AUTHORITIES CITED

Page

Cases:

Adickes v. S. H. Kress,

Pe ee Oe I 6k ow ad ke ee 6, 9, 10

Apple Valley Bldg. v. Bonanza,

423 F.2d 661 (9th Cir. 1970). ............. 6, 10

Associated Press v. U.S.,

Sk sak kg ok ee ee a eR 9

Briggs v. Herrigan,

431 F.2d 967 (Ist Cir. 1970)... ............ 6, 10

City Nat. Bank v. Vanderboom,

Giz -P.ae Zal (Oe Cee. 19M)... ww tt es 6, 10

Hanley v. Chrysler Motor Co.,

433 F.2d 708 (10th Cir. 1970) ............. 6, 10

Inland Empire Builders, Inc. v. U.S.,

424 F.2d 1370, 1377 (Ct. Cl. 1970) ........... 4

Jones v. Borden,

430 F.2d 568 (Sth Cir. 1970).............. 6, 10

Keating v. Jones,

398 F.2d 1011 (Sth Cir. 1968) ............. 6, 10

Kirk v. Home Indemnity,

431 F.2d 554 (7th Cir. 1970). ............. 6, 10

Kletscha v. Driver,

411 F.2d 436 (2d Cir. 1969) ...........0.. 6, 10

Lemelson v. Ideal Toy,

408 F.2d 860 (2d Cir. 1969) ...........2.. 6, 10

Lovable v. Honeywell,

431 F.2d 668 (Sth Cir. 1970).............. 6, 10

Morgan v. Dillingham,

424 F.2d 200 (10th Cir. 1970) .......2..00.0. 6, 10

Poller v. Columbia Broadcasting System,

Mme Ue. OOO (UMM ok ce ee wean 10

(iii)

Page

Sartor v. Arkansas Natural Gas,

met Me TU nk kt cee eee eee en 10

U.S. v. Dibble,

429 F.2d 598 (9th Cir. 1970)............ 6, 7, 10

U.S. v. Diebold,

ee es ad saa de ow ee ee sk 10

U.S. v. Perry,

431 F.2d 1020 (9th Cir. 1970) ........... 6, 8, 10

Zahora v. Harnischfeger,

404 F.2d 172 (7th Cir. 1968)... Peery 2 ao a 6, 10

Statutes:

Title 11, District of Columbia Code, 1961 Ed.,

ey I ER ek o-oo od la a a ae an a 4

See a EE kc kK ek RS a ke kha es 4

er es es Dg ko kk ws be ee ek eee ae 2

28 U.S.C. Sec. 1352, as amended. .............. 4

Me Ghee A I I kc tc eek teehane 4

28 U.S.C. Sec. 2072....... aR se Emer Manas 3

Rules:

Federal Rules of Civil Procedure:

SPE Ee Paar weft Ai a an oe Ae” en 3, 6

IA atin re: utd a a eae oe han) 3, 5, 6, 7, 8

Other Authorities:

Moore’s Federal Practice, 2nd Edition, Volume 6,

ee ea ee ee ne 9

EE eae er a ee 9

Constitution of the United States:

Ue I ed ais hg he we a alee & bie 3

IN THE

Supreme Court of the Uniteh States

October Term, 1970

No.

MATHER CONSTRUCTION COMPANY,

D & L CONSTRUCTION COMPANY,

and

J.D. BRADLEY, INC.,

Petitioners,

Vv.

CONTINENTAL CASUALTY COMPANY, et al.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Petitioners pray that a writ of certiorari issue to re-

view the judgment of the United States Court of Appeals

for the District of Columbia Circuit entered on November

3, 1970.

i

PPAR eK Vjer MOEA Ee ~D.

sh a i Cn al et er

Pre NR SRR ORE IR Repeat Age

2

OPINIONS BELOW

There was no formal opinion of the District Court.

An excerpt of the transcript in that Court, including the

judge’s statement on granting summary judgment is repro-

duced in Appendix C to this Petition. The opinion of

the Court of Appeals, which sustained the judgment of

the District Court for the District of Columbia, is printed

in Appendix A hereto and is not yet reported in the offi-

cial reports.

JURISDICTION

The judgment of the Court of Appeals, printed in Ap-

pendix A hereto, was entered on November 3, 1970.

Timely Motion For Rehearing was filed and was denied

on December 7, 1970. A Suggestion for a Rehearing

En Banc was also filed on *'ovember 17, 1970, and to

date no action has been forthcoming on that suggestion.

This Court has jurisdiction under 28 U.S.C.A. Sec.

1254(1).

QUESTIONS PRESENTED

1. Whether the Court below misconstrued, misinter-

preted and misapplied Rule 56 of the Federal Rules of

Civil Procedure, and has ignored the law of this Court

and other Federal Courts in granting summary judgment

in this case?

2. Whether the decision of the Court below is arbi-

trary and unreasonable and therefore presents a depriva-

tion of property without due process of law?

3. Whether the exhibits relied upon to support the

motion for summary judgment, not being properly authen-

ticated, certified nor shown to be within the personal

3

knowledge of anyone competent to testify about them,

satisfy the requirements of Rule 56(e), Federal Rules of

Civil Procedure?

4. Whether testimony sought to be presented by af-

fidavit where affiant is not subject to cross-examination

on contested issues of fact, does not require greater

strictures, rather than lesser, to be properly admissible?

5. Whether the Court below improperly ignored the

two affidavits submitted by petitioners?

6. Whether a small, non-affluent businessman in chal-

lenging a corporate giant on contested issues of fact

should be denied a jury trial or. the merits?

CONSTITUTIONAL PROVISIONS, STATUTES

RULES INVOLVED

The constitutional provisions involved are the due proc-

ess Clause of the fifth amendment to the United States

Constitution and the right to a trial by jury in a civil

suit clause of the seventh amendment to the United

States Constitution. The statute giving the Supreme

Court authority to prescribe general rules of civil proce-

dure for the district courts is 28 U.S.C. Sec. 2072. The

rules applicable in this case pertaining to summary judg-

ment are Rules 56(c) and (e) of the Federal Rules of

Civil Procedure. These provisions are printed in Appen-

dix F hereto.

STATEMENT OF THE CASE

This is an action brought in the United States District

Court for the District of Columbia by the respondent

surety companies to claim petitioners’ escrowed funds on

deposit with the Escrow Deposit Agent. Jurisdiction was

4

under Title 11, District of Columbia Code, 1961 Edition,

sections 305 and 306; 12 U.S.C. sec. 1702; 28 U.S.C. sec.

1352, as amended, and sections 2201 and 2202.

Petitioners are the contractors who built 220 Capehart

housing units in three separately-identified projects, under

separate leases and surveys, each described by metes and

bounds; separate mortgages, mortgage notes and mortgage

amortization schedules; releases; three separate sets of

bonds, furnished by respondent sureties; and a separate

financial closing with three separate and distinct Escrow

Deposit Agreements covering two of the three completed

proiects.! |

Respondents Continental Casualty Company and Fidel-

ity and Casualty Company of New York, are the sureties

who furnished the performance and payment bonds for

each of the three projects. Respondent American Secur-

ity Corporation is the Escrow Deposit Agent. Respond-

ent Philip N. Brownstein was the Commissioner, Federal

Housing Administration, whose agency provided the mort-

gage insurance for the projects. Respondents Mather

AFB Housing No. Two, Inc., and Mather AFB Housing

No. Three, Inc., are the corporations owning the lease-

holds which were acquired by the U.S. Air Force as each

of the projects was completed and accepted by the Gov-

ernment.

At the closings, with the completion of the construc-

tion and acceptance by the Government for two of the

three projects, three separate Escrow Deposit Agreements

were executed setting forth precise terms and conditions

covering the contractors’ funds placed in escrow at the

! For an applicable discussion of such closings and projects,

see: Inland Empire Builders, Inc. et al. v. The United States,

424 F.2d 1370, 1377 (Ct. Cl. 1970).

5

direction of the FHA and the Air Force. It is the pre-

cise terms and conditions of these Escrow Deposit Agree-

ments which are in dispute. The sums involved originally

totalled more than $197,000.00, which, because of ad-

vances made, was reduced to $122,413.00, exclusive of

interest accruing since February and March 1960.

Respondent sureties brought suit in the U.S. District

Court for the District of Columbia claiming the re-

mainder of the escrowed funds. Petitioners opposed

the action and filed their counterclaim and demanded

trial by jury on the merits.

Respondent sureties moved for summary judgment

against the petitioners only relying on separate agreements

made with each of the remaining respondents.

Respondent sureties, as the plaintiffs in the District

Court, submitted a number of exhibits in support of

their motion for summary judgment, none of which was

— we, certified nor sworn to as required by Rule

56 (e).

On the day of the hearing, immediately prior to the

case being called, petitioners’ counsel was served in the

court room with a copy of one affidavit by a corporate

executive, purporting to support respondents’ motion

for summary judgment. Said affidavit does not meet

the requirements of Rule 56(e).? Prior to the decision

of the District Court, respondents submitted two affi-

davits raising disputed issues of material fact which ques-

tion the correctness of the decision of the District Court.

2 Appendix F.

3 Ibid.

EEPROM

6

REASONS FOR GRANTING THE WRIT

The decision of the Court below directly conflicts in

principle with a recent decision of this Court, Adickes v.

S. fl. Kress, 398 U.S. 144 (1969), as well as a number of

recent decisions of the Circuit Courts of Appeal for the

Tenth. Ninth, Eighth, Seventh,” Fifth, Second? and

First! Circuits. Each of these recent decisions deals with

substantive facets of the principles to be applied in deter-

mining whether (1) there has been a sufficient showing

that there is no genuine issue as to any material fact, and

(2) the supporting affidavits to sustain the granting of

summary judgment.

The legal principles laid down by this Court in Adickes,

Other earlier decisions of this Court, as well as numerous

recent decisions of Courts of Appeals in other Federal

Circuits, are the principles petitioners contend should be

accorded to them under Rule 56(c) and (e), Federal

Rules of Civil Procedure, in granting them due process.

4 Morgan v. Dillingham, 424 F.2d 200; Hanley v. Chrysler

Motor, 433 F.2d 708, (10th Cir. 1970).

5 Apple Valley Bldg. v. Bonanza, 423 F.2d 661; U.S. v. Dib-

ble, 429 F.2d 598; U.S. v. Perry, 431 F.2d 1020, (9th Cir. 1970).

© City Nat’ Bank v. Vanderboom, 422 F.2d 221, (8th Cir.

1970).

7 Zahora v. Harnischfeger, 404 F.2d 172; Kirk v. Home In-

demnity, 431 F.2d 554, (7th Cir. 1968, 1970).

8 Keating v. Jones, 398 F.2d 1011; Jones v. Borden, 430 F.2d

568; Lovable v. Honeywell, 431 F.2d 668, (Sth Cir. 1968, 1970).

9 Lemelson v. Ideal Toy, 408 F.2d 860; Kletscha v. Driver,

411 F.2d 436, (2d Cir. 1969).

10 Briggs v. Herrigan, 431 F.2d 967, (Ist Cir. 1970).

7

Petitioners maintain that due process is being denied

them by the device of a legal maneuver which ignores

their efforts to have their rights determined in a trial

by jury. As the Court of Appeals held in U.S. v. Dibble,

429 F.2d 598, (9th Cir. 1970), “Summary judgment is

neither method of avoiding necessity for proving one’s

case nor clever procedural gambit whereby claimant can

shift to his adversary his burden of proof on one or

more issues.”

The District Court in the instant case (App. C) recog-

nized that there were “extensive pleadings”. This ad-

mitted fact, when considered with the affidavits of peti-

tioners (App. G and H), and the affidavit of respondent,

Continental Casualty Company, (App. I), places the deci-

sion of the District Court in direct conflict with the pre-

vailing rule of this Court and a substantial number ot

decisions of other Circuit Courts of Appeals.

A further direct conflict with the Dibble case, supra,

is the lack of authentication of the documents submitted

by respondents as required by Rule 56 (e), Rules of Civil

Procedure. While the decision of the Court below states

at Page 2 of App. A as follows: ‘“* * * This included

as exhibits photostats of some thirty-five cancelled checks,

* * *”. the Court below misapprehended the fact that

none of these “thirty-five cancelled checks” was admis-

sible in evidence since none was authenticated, sworn or

certified nor were they referred “fo in an affidavit at-

tached thereto or served therewith.!! Further in the in-

stant case, the Court below overlooked the fact that a

significant number of these cancelled checks included the

fact that they were in payment for projects other than

the one project for which these funds were escrowed.

It is issues of this kind where a “trial, with its oppor-

tunity for cross-examination and testing credibility of

1! Rule 56(e), Rules of Civil Procedure, App. F.

i Mee

mY

Po FW LLP OP Bam a Fee a ea

ah asen

Pane ep eT ee ee ee

as SS ARR Ae AI ER A Pi ial DS GEO Win eT

6 oh Meh ie eae.

8

witnesses, might disclose picture substantially different

from that given by affidavit.”!* It is this inability to

cross-examine respondents’ witness in testifying by affi-

davit, as to the precise content of these exhibits and to

establish that claims allegedly paid by respondents did

not include work and materials for projects other than

that for which petitioners’ funds were escrowed, that is

in conflict with the prevailing law of this Court and

other Circuit Courts of Appeal. At Pages 5 and 6 of

App. A, the Court below extends to respondents an evi-

dentiary advantage to which they are not entitled under

Rule 56 (e), Rules of Civil Procedure, nor the law as

enunciated by this Court and a substantial number of

other Courts of Appeal. The “Statement of Material

Facts as to Which There Is No Genuine Issue,” quoted

at Page 6, supra, was not sworn as required by Rule

56(e), nor is it accurate to say that: “This affirmation

was not contradicted by appellants before the District

Court.”

This case is important to a vast number of small, un-

known and non-affluent businessmen who are frustrated

by the legal procedures of sophisticated and affiuent cor-

porate giants who seek to cloud the facts with collateral

issues and extraneous matter which will not withstand the

Close scrutiny of a full trial on the merits.

The matter of affidavits in motions for summary judg-

ment is vitally important to a great number of the aver-

age small-litigants who challenge economically-powerful

adversaries in a forum where every man is entitled to his

day in court.

While one of the original purposes of the use of sum-

mary judgments was to expedite and facilitate the orderly

12 U.S, v. Perry, 431 F.2d 1020, (9th Cir. 1970).

9

administration of justice,!3 it was not intended to frustrate

and throttle the right of the small litigant where there

are genuine issues of dispute to resolve. The legal maneu-

verings by parties seeking to avoid a full trial on the is-

sues where legal proof is necessary; where witnesses must

appear before the Court in person; or testify by deposi-

tion, where provision is made for cross-examination; in-

volves more time, effort and expense than does a full

trial on the merits. A trial by jury with full legal pro-

tection for all parties is not an impediment to justice nor

a luxury to be avoided in complicated factual situations,

but rather a right to due process guaranteed by the Con-

stitution.

The decision of the District Court, with no reasons E

stated, and the action of the Court below, both in con- 2

flict with the provisions of the Rules of Civil Procedure F

and the prevailing law of this and other Federal Courts, :

leaves all future litigants in similar situations in a legal i

quandary as to their rights under the Constitution.

i

Because of Adickes, other decisions of this Court,!* as '

well as a substantial number of recent decisions of other f

Circuit Courts of Appeals,!> patently in conflict with the E

instant decision of the Court below, it is imperative that t

this decision be reviewed by this Court to establish uni-

formity and recognition of common principles applicable

in ali Circuits.

13 6 Moore, Federal Practice 2d Ed. 56.02, and 56.04.

14 Sartor v. Arkansas Nat. Gas Corp., 321 U.S. 620, 627 (1944);

Associated Press v. U.S., 326 U.S. 1, 5, 6 (1945); Poller v. Columbia

Broadcasting System, 368 4S. 464 (1962); U.S. v. Diebold, 369 U.S.

654 (1962).

15 See Footnotes 4 through 10, supra.

ener to Gre Phy Me

| iV

CONC LUSION

For the foregoing reagons, it is respectfully submitted

that this petition for certiorari should be granted.

Respecifully submitted,

DANIEL J. ANDERSEN

CARL J. FELTH

600 Woodward Building

Washington, D.C. 20005

Counsel for Petitioners

ay,

IN THE

Bnited States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 23,171

CONTINENTAL CASUALTY COMPANY, ET AL.

Vv.

AMERICAN SECURITY CORPORATION, ET AL.

MATHER CONSTRUCTION COMPANY, ET AL., Appellants

MATHER AFB HOUSING NO. TWO, INC., ET AL.

Appeal from the United States District Court

for the District of Columbia

Decided November 3, 1970

Mr. Carl J. Felth, with whom Mr. Daniel J. Anderson

was on the brief, for appeilants. Messrs. Thomas A. Flan-

nery, United States Attorney, Joseph M. Hannon, John A.

Terry and Miss Mary E. Folliard, Assistant United States

Attorneys, entered appearances for appellant Philip N.

Brownstein, Commissioner, FHA. Mr. Joel C. Wise also

entered an appearance for appellant American Security

Corporation.

Mr. Kahl K. Spriggs, with whom Mr. John F. Myers was

on the brief, for appellees.

Before MacKINNON and WILKEY, Circuit Judges, and

CHRISTENSEN,* U. S. District Judge, District of Utah.

” Sitting by designation pursuant to 28 U.S.C. £292 (0).

PER CURIAM: Continental Casualty Company and the

Fidelity and Casualty Company of New York, appellees,

brought this action against the construction contractors,

appellants Mather Construction Company, D&L Construc-

tion Company, and J.D. Bradley, Inc., to recover amounts

escrowed with the defendant American Security Corpora-

tion for unpaid bills for labor and materials and certain

unfinished iandscape items on the Mather Air Force Base

project. Appellees were sureties on the performance and

payment bonds given in relation to a contract for the con-

struction of 220 units of military housing under the Cape-

hart Act.!

The District Court granted summary judgment against

the three appellant contracting companies, and found the

appellees were entitled to the sums totalling $147,824.44

escrowed with the defendant American Security Corpora-

tion, the stakeholder who has not appealed. We affirm the

summary judgment granted by the District Court.

Pursuant to Rule 56 and according to the usual practice,

in support of their motion for summary judgment appel-

lees filed a “Statement of Material Facts as to Which

There Is No Genuine Issue.”2 This included as exhibits

photostats of some thirty-five cancelled checks, represent-

ing the satisfaction of claims, of persons performing work

as subcontractors or as suppliers furnishing materials,

against the appellees as sureties for the three appellant

contractors, as well as copies of the relevant contract and

1 42 USC. 8 1594-1594f; 12 U.S.C. & 1748-1748g. For a

description of the manner in which the Capehart Act scheme

Operates to accomplish its purpose of providing housing for mili-

tary personnel without the use of appropriated funds, see Anthony

P. Miller v. United States, 161 Ct. Cl. 455, 457 (1963).

2 See Rule 9(h) of the Rules of the U.S. District Court for the

District of Columbia.

indemnity agreements. An affidavit by an Assistant Vice

President of the appellee Continental Casualty Company

stated that the facts set forth in the affidavit were known

personally to the affiant and were reflected in the office

records of Continental Casualty Company to which the

affiant had access in the course of his official duties, that

the “‘Statement of Material Facts as to Which There Is No

Genuine Issue” was true, and that all claims against the

appellees as sureties were paid in good faith after investi-

gation and in the belief that appellees were liable therefor.

The itemized list of claims paid totalled $409,512.43.

The appellant construction firms did not file any affi-

davit contradicting the affidavit of the officer of the ap-

pellee surety company, nor did the appellants attempt to

contradict under oath any single claim of payment, as-

serted under oath as having been made by the appellee

surety companies. Appellants did file one affidavit, by D.

L. Bradley, which dealt in general terms with the project

and recited facts which were not in dispute by either party

and therefore not material to any issue in the lawsuit,

e.g., that Mather AFB Housing No. Two, Inc., and Mather

AFB Housing No. Three, Inc., projects were completed

(with certain exceptions) and turned over to the Air

Force. The important issue in the lawsuit was not about

the substantial completion of the projects, but concerned

unpaid materialmen and subcontractor bills left to be

cleaned up by the surety companies and escrowed funds

of undisbursed mortgage proceeds? which now are sought

partially to reimburse the sureties.

3 Under the Capehart Act system the construction costs, includ-

ing the builder’s profit, are derived entirely from such mortgage pro-

ceeds. In the instant case, a portion of these funds were escrowed

under three separate agreements to cover certain unpaid construc-

tion and landscaping costs. The appellee sureties, by virtue of their

payment of claims against the bonds, claim to be subrogated to, and

also, under the terms of their indemnity and assignment agreements,

entitled to, whatever interest appellant contracting companies have in

the escrowed ‘unds.

_ Fas OD.

PEN BOLE TIN QOL HPAES IE

SN as

A-4

Since the appellants had not put in issue by affidavits of

their own a single material fact relied upon by the appel-

lees in their motion for summary judgment, appellants’

counsel stated at oral argument that the issue on appeal

was the sufficiency of the appellees’ affidavit to support

the summary judgment granted by the District Court.

We find that the affidavit and the supporting documents

were sufficient and formed a firm foundation for the action

taken by the District Judge. This type of lawsuit, involv-

ing as it does numerous financial items, most of which are

not in dispute and are susceptible of simple accounting

treatment, is ideally suited for determination on summary

judgment after appropriate interrogatories and other dis-

covery processes have established that there is no genuine

dispute as to any material fact4

The affidavit here was by an officer of one of the appel-

lee companies, charged with the responsibility for the proc-

essing of claims, who made affidavit on his own personal

knowledge and on the records of his surety company with

which his duties required him to be familiar5 All of these

records would have been admissible at trial under the Fed-

eral Shop Book Rule,® and indeed their accuracy was in no

4 See Atlantic States Construction Co. v. Robert E. Lee & Co., Inc.

of South Carolina, 406 F.2d 827, 829 (4th Cir. 1969); C. WRIGHT,

FEDERAL COURTS 899 at 442 (1970).

5 Woods v. Allied Concord Financial Corp., 373 F.2d 733, 734

(Sth Cir. 1967). See Royal Indemnity Co. v. United States, 178 Ct.

Cl. 46, 371 F.2d 462 (1967).

6 28 US.C. § 1732.

A-5 ‘

way Challenged by the appellants’ cross-affidavit.? On the

record before him the District Judge properiy granted sum-

mary judgment 3

In oral argument appellants attempted to raise a ques-

tion as to whether each and every dollar paid out by the

surety companies was for a claim specifically related to one

of the housing projects on Mather Air Force Base, and

that the total claims paid on each of the projects was equal

to or in excess of the amount in each escrow fund. In the

posture of this case, appeal from a summary judgment, it

suffices to point out that in support of their motion for

7 As we found to be the case in Thompson v. Evening Star News-

paper Co., 129 US. App. D.C. 299, 302, 394 F.2d 774, 777 (1968)

appellants “in effect, relied on [their] pleadings to create an issue

of fact. That course is impermissible under F.R. CivP. 56(e).” In-

deed, in the face of Rule 56(e)’s explicit direction that a party op-

posing summary judgment “may not rest upon the mere allegations

or denials of his pleading, but his response, by affidavits or as other-

wise provided in this rule, must set forth specific facts showing that

there is a genuine issue for trial,” appellants’ reply brief contains the

following “comment” in summary of its argument that summary judg-

ment was erroneously granted:

Appellants submit that the sheer volume of the pleadings

and the controversial matters in dispute involving a substan-

tial sum of funds, escrowed by the appellants, prove con-

clusively that there are genuine issues of material fact to

be resolved in a full trial before a jury on the merits.

Such a position is so plainly at odds with the requirements of rule 56

as to require no further comment.

8 Chapman v. Rudd Paint & Varnish Co., 409 F.2d 635, 643 (9th

Cir. 1969); Atlantic States Construction Co. v. Robert E. Lee & Co.

Inc. of South Carolina, 406 F.2d 827, 828-29 (4th Cir. 1969); Mc-

Guire v. Columbia Broadcasting System, 399 F.2d 902, 905 (9th

Cir. 1968); Fox v. Johnson & Wimsatt, Inc., 75 U.S. App. D.C. 211,

218-19, 127 F.2d 729, 736 (1942).

A-6

summary judgment appellees’ “Statement of Material Facts

as to Which There Is No Genuine Issue,” whose contents

were sworn to by an officer of one of the appellee com-

panies, contained this language:

Plaintiffs paid out, through the drafts above men-

tioned, to subcontractors and suppliers claiming

and demanding unpaid amounts for work done and

materials furnished in the prosecution of the afore-

said housing construction work on the Mather AFB

Housing No. Two mortage area and on the Mather

AFB Housing No. Three mortgage area sums in ex-

cess of all amounts escrowed on each of such areas

with defendant American Security Corporation.

(Emphasis added.)

This affirmation was not contradicted by appellants before

the District Court.

Nor on the record before us do we see how it could have

been contradicted. On 16 March 1960 William E. Fitzpat-

rick certified on behalf of appellants D & L Construction

Company and J. D. Bradley, Inc., in relation to Mather

AFB Housing No. Three, Inc., that there were outstand-

ing liens totalling $97,728.44. On that same date there

was in the Special Escrow Account for this project, dated

16 March 1960, the sum of $72,317.00. There was also in

a second escrow fund, for incomplete work on the same

Mather AFB Housing No. Three, Inc., the sum of $28,498.-

00. There was in a third escrow fund, for incomplete work

on Mather AFB Housing No. Two, Inc., the sum of $21.,-

598.00. The sureties asserted that they had paid off each

and every one of the claims totalling $97,728.44, certified

by the representative of two of the appellants, plus other

claims on Mather AFB Housing No. Three, Inc., plus

claims on Mather AFB Housing No. Two, Inc., all total-

ling $409,512.43. Such claims were sworn to have been

“paid in good faith after investigation and in the belief that

A-7 |

plaintiffs were liable therefor, copies of the drafts for

such payments being annexed.” Appellees asserted under

oath, and it appears highly likely, even if not absolutely

certain, from the bare outline of facts we have given in

this opinion, that the appellees did pay claims totalling in

excess of all amounts escrowed on each of such areas, not

only a grand total greatly in excess of the totalled es-

crowed amounts.

The appellants, as the contractors responsible for these

projects, received the benefits of the payments made by

the sureties. Under the established law of subrogation, ap-

pellees would be entitled to claim through appellants what-

ever rights the appellants had to these escrowed funds.?

Appellants could not assert a right to these funds superior to

that of the surety appellees, on the uncontradicted facts here.

Furthermore, under the indemnity agreement and the as-

signments executed in regard to each project, the rights

of the appellants in each and all of these escrow funds,

whether derived from the same or a different project,

were assigned to the appellee surety companies to the

full amount of any and all sums paid by the sureties in

the settlement of any claims arising under the bonds, if

such claims were paid “in good faith under the belief that

they or any of them were liable therefor, whether liable or

not.”!© Moreover, as the appellees submitted in support of

? Pearlman v. Reliance Insurance Co., 371 US. 132 (1962); Morgen-

thau v. Fidelity & Deposit Co. of Maryland, 68 App. D.C. 163, 94

F.2d 632 (1937); Lyttle v. National Surety Co., 43 App. D.C. 136

(1915); Fidelity & Deposit Co. of Maryland vy. United States, 183 Ct.

Cl. 908, 393 F.2d 834 (1968); The Home Indemnity Co. v. United

States, 180 Ct. Cl. 173, 376 F.2d 890 (1967); United Pacific Insur-

ance Co. v. United States, 176 Ct. Cl. 176, 362 F.2d 805 (1966).

10 4 similar provision in an indemnity agreement has been upheld

by the Supreme Court. Martin v. National Surety Co., 300 U.S. 588

(1937). See also Royal Indemnity Co. v. United States, 117 Ct. Cl.

736, 93 F.Supp. 891 (1950).

A Sin NE Meh Bi ae BSH a

A-8

their summary judgment motion, according to the pro-

visions of the indemnity agreement, “‘an itemized state-

ment thereof, sworn to by an officer of the sureties, or

the voucher or vouchers, or other evidence of such pay-

ment . . . shall be prima facie evidence of the fact and ex-

tent of the liability of the applicants in any claim or suit

hereunder and in any and all matters arising between the

applicants and the sureties,” !!

Whether the theory of the sureties be reimbursement by

subrogation or by the specific assignments in the indemnity

agreements, !? the appellees were entitled to the escrow

funds held by American Security Corporation, and we can-

not conceive of any theory by which on a trial on the mer-

its appellants could possibly prevail.

The summary judgment of the District Court is hereby

affirmed. An order of this court of 15 January 1970 en-

joined the release of the escrow funds. Appellees have moved

to vacate such order. Consistent with this opinion, such or-

der is hereby vacated.

Affirmed.

1 The validity of a virtually identical piovision was approved by this

| court in Carroll v. National Surety Co., 58 App. D.C. 3, 24 F.2d 268

: (1928). See also Royal Indemnity Co. v. United States, 178 Ct. Cl. 46,

371 F.2d 462 (1967).

12 Compare the majority and concurring opinions in Pearlman vy.

Reliance Insurance Co., 371 U.S. 132 (1962).

A-9

[ Filed, December 10, 1970]

ORDER

It is ORDERED by the Court, sua sponte, that the opin-

ion of this Court filed herein on November 3, 1970, be

anended as follows:

On page 6, in the first full paragraph, lines 6,

7, and 8, change the sentence beginning “‘On

that same date... .” to read:

On that same date there was in the Special

Escrow Account for this project, dated 16

March 1960, the sum of $144,007.95,

which was reduced by the time the suit was

filed and at the time summary judgment

was granted, to $72,317.00.

On page 6, in the first full paragraph, line 14,

delete the words “totalling $97,728.44,” and

insert therefor ‘‘outstanding and”’.

Per Curiam

APPENDIX B

ORDER OF

THE UNITED STATES COURT OF APPEALS

(Filed December 7, 1970)

On consideration of appellant’s petition for rehearing,

it is

ORDERED by the Court that appellants’ aforesaid peti-

tion is denied.

Per Curiam

For the Court:

NATHAN J. PAULSON

Clerk

RORY EPS RIEL RNG Rane

APPENDIX C

EXCERPT FROM DISTRICT COURT HEARING

ON 28 FEBRUARY 1969

The above-entitled cause came on for hearing, pur-

suant to notice, before the HONORABLE OLIVER GASCH,

United States District Judge, at 10:15 a.m.

APPEARANCES:

FOR THE PLAINTIFFS:

Kahl K. Spriggs, Esq.

FOR THE DEFENDANTS:

Daniel J. Anderson, Esq.

* * * * *

[35] THE COURT: Mr. Spriggs, is there anything else?

MR. SPRIGGS: No, Your Honor.

THE COURT: Gentlemen, I have read your exten-

sive pleadings, and I think the movant is entitled to

summary judgment.

You may submit an order.

(Whereupon, at 10:33 a.m., the above-entitled

cause was continued sine die.)

CERTIFICATE OF OFFICIAL REPORTER

This record is certified by the undersigned reporter

of the United States District Court for the District of

Columbia to be the official transcript of the proceed-

ings indicated.

/s/ DUANE B. DUSCHAINE

Official Reporter

APPENDIX D

ORDER FOR SUMMARY JUDGMENT IN

FAVOR OF PLAINTIFFS AND AGAINST

DEFENDANTS MATHER CONSTRUCTION

COMPANY, D & L CONSTRUCTION COM-

PANY AND J. D. BRADLEY, INC.

Upon consideration of the motion of plaintiffs for

summary judgment against defendants Mather Construc-

tion Company, D & L Construction Company and J. D.

Bradley, Inc., and after oral argument thereon, it is by

the Court this 15th day of March, 1969,

ORDERED, that such motion be, and it is hereby,

granted; and it is further

ORDERED and ADJUDGED:

1. That such defendants indemnify and reimburse

plaintiffs, Continental Casualty Company and The Fi-

delity and Casualty Company of New York, out of the

mortgage proceeds or funds escrowed by them at the

final closing of mortgage areas Mather AFB Housing

No. Two, Inc. (Capehart FHA Project No. 136-81007,

Air 7) and Mather AFB Housing No. Three, Inc. (Cape-

hart FHA Project No. 136-81008, Air 8), pertaining to

Housing Contract No. AF-04 (612)-1032 dated Septem-

ber 4, 1958, among defendants D & L Construction

Company and J. D. Bradley, Inc. (a joint venture),

eligible builder; Mather AFB Housing, Inc., Mather

AFB Housing No. Two, Inc. and Mather AFB Housing

No Three, Inc., mortgagor builders, and the United

States (through the Department of the Air Force) for

construction of 220 units of military housing at Mather

Air Force Base, California;

2. That, as against defendants Mather Construction

Company, D & L Construction Company and J. D.

Bradley, Inc., plaintiffs are entitled to the sums so

D-2

escrowed with defendant American Security Corporation—

namely, the amounts of $97,728.44, $28,498.00 and

$21,598.00, or a total of $147,824.44, together with

any lawful interest which may be payable thereon.

/s/ OLIVER GASCH

Judge

[Subscription Omitted in Printing]

* * + * *

Ne te thet hee

APPENDIX E

ORDER OF THE DISTRICT COURT

OF 17 MARCH 1969

Upon consideration of the motion by the defendants

for the Court to reconsider its granting of the motion

for summary judgment by the plaintiffs, the matter hav-

ing been submitted and opposed by memoranda from

both parties and it appearing to the Court that no new

circumstances have been shown which should alter the

~ Court’s original decision, it is by the Court this 17th

day of March, 1969,

ORDERED that the motion by the defendants to re-

consider be and the same hereby is denied.

/s/ OLIVER GASCH

Judge

APPENDIX F

CONSTITUTIONAL PROVISIONS, STATUTES

AND RULES INVOLVED

RULES OF CIVIL PROCEDURE

* * * ok *

Rule 56. Summary Judgment.

(a) For Claimant. A party seeking to recover upon

a claim, counterclaim, or cross-claim or to obtain a

declaratory judgment may, at any time after the expira-

tion of 20 days from the commencement of the action

or after service of a motion for summary judgment by

the adverse party, move with or without supporting af-

fidavits for a summary judgment in his favor upon all

or any part thereof.

(b) For Defending Party. A party against whom a

claim, counterclaim, or cross-claim is asserted or a de-

claratory judgment is sought may, at any time, move

with or witiiout supporting affidavits for a summary

judgment in his favor as to all or any part thereof.

(c) Motion and Proceedings Thereon. The motion

shall be served at least 10 days before the time fixed

for the hearing. The adverse party prior to the day of

hearing may serve opposing affidavits. The judgment

sought shall be rendered forthwith if the pleadings,

depositions, answers to interrogatories, and admissions

on file, together with the affidavits, if any, show that

there is no genuine issue as to any material fact and

that the moving party is entitled to a judgment as a

matter of law. A summary judgment, interlocutory in

character, may be rendered on the issue of liability

alone although there is a genuine issue as to the

amount of damages.

PSAP MLE

— eeameaen comarca bescalined ~ iaehe

a

F-2

(d) Case Not Fully Adjudicated on Motion. If on

motion under this rule judgment is not rendered upon

the whole case or for all the relief asked and a trial

is necessary, the cuurt at the hearing of the motion,

by examining the pleadings and the evidence before it

and by interrogating counsel, shall if practicable ascer-

tain what material facts exist without substantial con-

troversy and what material facts are actually and in

good faith controverted. It shall thereupon make an

order specifying the facts that appear without substan-

tial controversy, including the extent to which the

amount of damages or other relief is not in contro-

versy, and directing such further proceedings in the ac-

tion as are just. Upon the trial of the action the facts

So specified shall be deemed established, and the trial

shall be conducted accordingly.

(e) Form of Affidavits; Further Testimony; Defense

Required. Supporting and opposing affidavits shall be

made on personal knowledge, shall set forth such facts

as would be admissible in evidence, and shall show af-

firmatively that the affiant is competent to testify to

the matters stated therein. Sworn or certified copies

of all papers or parts thereof referred to in an affidavit

Shall be attached thereto or served therewith. The court

may permit affidavits to be supplemented or opposed

by depositions, answers to interrogatories, or further

affidavits. When a motion for summary judgment is

made and supported as provided in this rule, an ad-

verse party may not rest upon the mere allegations or

denials of his pleading, but his response, by affidavits

or as otherwise provided in this rule, must set forth

specific facts showing that there is a genuine issue for

trial. If he does not so respond, summary judgment,

if appropriate, shall be entered against him.

(f) When Affidavits Are Unavailable. Should it ap-

pear from the affidavits of a party opposing the motion

F-3

that he cannot for reasons stated present by affidavit

facts essential to justify his opposition, the court may

refuse the application for judgment or may order a con-

tinuance to permit affidavits to be obtained or deposi-

tions to be taken or discovery to be had or may make

such other order as is just.

(g) Affidavits Made in Bad Faith. Should it appear

to the satisfaction of the court at any time that any

of the affidavits presented pursuant to this rule are pre-

sented in bad faith or solely for the purpose of delay,

the court shall forthwith order the party employing

them to pay to the other party the amount of the rea-

sonable expenses which the filing of the affidavits caused

hin. to incur, including reasonable attorney’s fees, and

any offending party or attorney may be adjudged guilty

of contempt.

(As amended Dec. 27, 1946, eff. Mar. 19, 1948:

Jan. 21, 1963, eff. July 1, 1963.)

* * * * *

UNITED STATES CONSTITUTION

AMENDMENT V

No person shall be held to answer for a capital, or

otherwise infamous crime, unless on a presentment or

indictment of a Grand Jury, except in cases arising in

the land or naval forces, or in the Militia, when in ac-

tual service in time of War or public danger: nor shall

any person be subject for the same offence to be

twice put in jeopardy of life or limb; nor shall be com-

pelled in any criminal case to be a witness against him-

self, nor be deprived of life, liberty, or property, with-

out due process of law; nor shall private property be

taken for public use, without just compensation.

Pe Fic ae Oe YUEN BEI oa SEIN la SELON

F4

AMENDMENT VII

To bared aaa aati

In Suits at common law, where the value in contro-

versy shall exceed twenty dollars, the right of trial by

jury shall be preserved, and no fact tried by a jury

shall be otherwise reexamined in any Court of the

United States, than according to the rules of the com-

mon law.

APPENDIX G

AFFIDAVIT OF CARL J. FELTH IN SUPPORT

OF DEFENDANTS’ MATHER CONSTRUCTION

COMPANY, D & L CONSTRUCTION COMPANY,

AND J.D. BRADLEY, INC., MOTION FOR RE-

CONSIDERATION OF ORDER

District of )

) ss

Columbia )

Carl J. Felth, being first duly sworn, deposes and says

that he is one of the attorneys of record in the above

captioned litigation, and that he was personally ac-

quainted with the late William E. Fitzpatrick, the per-

sonal representative and attorney-in-fact for these de-

fendants at the closing of the Capehart projects cover-

ing construction of military family housing at Mather

Air Force Base, California, and that he knows of his

personal knowledge that conversations with him as

counsel in subject litigation, that monies claimed to

have been paid by plaintiffs in this case included pay-

ments for labor and materials other than that specifi-

cally identified in the Escrow Deposit Agreement, dated

March 16, 1960, and that he verily believes that addi-

tional evidence of such fact can be procured with addi-

tional time and the opportunity to travel to witnesses

believed to have such information.

Further affiant sayeth not.

/s/ CARL J. FELTH

Subscribed and sworn to before me in the City of

Washington, District of Columbia on this the 4t?, day

of March 1969.

G-2

ROBERT A. SIMMONS, Clerk

/s) HELEN BENDURE

Deputy Clerk

APPENDIX H

AFFIDAVIT OF D. L. BRADLEY IN SUPPORT

OF MOTION BY DEFENDANTS MATHER CON-

STRUCTION COMPANY, D & L CONSTRUCTION

COMPANY, AND J. D. BRADLEY, INC., FOR RE-

CONSIDERATION OF ORDER FOR SUMMARY

JUDGMENT FOR PLAINTIFFS

STATE OF CALIFORNIA )

is

COUNTY OF LOS ANGELES )

D.L. Bradley, being first duly sworn, deposes and

States that he is the President of D & L Construction

Company, who, together with J.D. Bradley, Inc., were

the joint venturers and eligible builder identified in the

Escrow Agreement, dated March 16, 1960, Re: Mather

AFB Housing No. Three, Inc., FHA Project No. 136-

81008-Air-8, with its principal place of business at 13238

Sherman Way, North Hollywood, California;

That this affidavit is made in support of defendants

Mather Construction Company, D & L Construction

Company, and J.D. Bradley, Inc.’s Motion For Recon-

sideration Of Plaintiffs’ Motion For Summary Judgment

in the above-captioned action:

That he knows of his own personal knowledge, as

the eligible builder for the project identified, that de-

fendants D & L Construction Company and J.D. Brad-

ley, Inc., made deposits and contributions into the

working capital fund established to finance construction

of such project which deposits and contributions totalled

approximately $200,000.00:

That as a requirement for the issuance of the bonds

referred to in plaintiffs’ complaint, plaintiffs required

fin IE dab Nog AML AM hens f z eit bi Seda lds hy

H-2

that such working capital fund be put in the control of

others than D & L Construction Company and J.D. Brad-

ley, Inc., to wit one Hal B. Hayes and his agents;

That the said Hal B. Hayes was engaged in the con-

struction of » 67 unit Bachelor Officers’ Quarters hous-

ing project at Mather Air Force Base, similar in all re-

spects to the Capehart housing construction, which was

being built at approximately the same time and which

project was being administered from the same field con-

struction office at Mather Air Force Base as was the

Capehart Housing project;

That the said Hal B. Hayes was also engaged in the

construction of similar Capehart Housing projects at

nearby Beale Air Force Base, California, north of the

city of Sacramerio, as well as elsewhere, which projects

were bonded by plaintiffs, and that in many instances

the same subcontractors and materialmen who partic-

ipated in the Mather Project, participated in the con-

struction of such other projects;

That Mather AFB Housing No. Two, Inc., FHA Proj-

ect No. 136-81007-Air-7, was completed and turned

over to the Air Force for their use and occupancy,

except for some minor exterior work, principally land-

scaping, on or before 1 February 1960;

That Mather AFB Housing No. Three, Inc., FHA

Project Iko. 136-81008-Air-8, was completed and turned

over to tue Air Force for their use and occupancy, ex-

cept for exterior work, principally landscaping, on or

before 16 March 1960;

That in both of these incomplete work escrow agree-

ments, the eligible builder was required to escrow 200%

of the estimated cost of completion as determined by

the Air Force Contracting Officer;

H-3

That the escrows required to be established by the

Government, i.e., the Federal Housing Administration

and the Air Force, were for the express purposes set

forth in the agreements.

/s/ D.L. BRADLEY

Subscribed and sworn to before me this 13th day of

March, 1969.

? /s/ FRANK W. PINE

Notary Public in and for

the State and County

aforesaid

My Commission expires: Dec. (SEAL)

APPENDIX I

WT SETS ERIS a te

AFFIDAVIT OF JAMES E. POSTULA IN SUPPORT

OF MOTION BY PLAINTIFFS FOR SUMMARY

JUDGMENT AGAINST DEFENDANTS MATHER

CONSTRUCTION COMPANY, D & L CONSTRUC-

TION COMPANY AND J.D. BRADLEY, INC.

STATE OF !ILLIONIS _ )

>. oa

COUNTY OF COOK )

James E. Postula, being first duly sworn, deposes and

says that he is Assistant Vice President of plaintiff Con-

tinental Casualty Company, a corporation organized and

existing under the law of the State of Illinois, with its

principal place of business at 310 South Michigan Ave-

nue, Chicago, Illinois;

That this affidavit is made in support of motion by

the plaintiffs for summary judgment against defendants

Mather Construction Company, D & L Construction Com-

pany and J.D. Bradley, Inc. in the above-entitled cause;

That the facts set forth herein are known personally

to affiant and are refizcted from office records of Con-

tinental Casualty Company to which affiant has access

in the course of his official duties;

That the plaintiffs’ statement of material facts as to

which there is no genuine issue, which affiant has read,

is true; that all claims against plaintiffs, as sureties for

defendants and indemnitors D & L Construction Com-

pany, J.D. Bradley, Inc. and Mather Construction Com-

pany, by persons performing work as subcontractors or

as suppliers furnishing materials in the prosecution of

the work of the construction of the Mather AFB 220

I-2

project referred to in plaintiffs’ statement of material

facts as to which there is no genuine issue, were paid

in good faith after investigation and in the belief that

plaintiffs were liable therefor, copies of the drafts for

such payments being annexed thereto as Exhibit H (1

through 18).

/s)} JAMES E. POSTULA

Subscribed and sworn to before me this 11th day of

February, 1969.

/s/ L. SORENSEN

Notary Public in and for

the State and County

aforesaid

My Commission Expires Oct. 22, 1972.