Southern Construction Company v. Pickard

PETITIONER:Southern Construction Company
RESPONDENT:Pickard
LOCATION:Clauson’s Inn

DOCKET NO.: 46
DECIDED BY: Warren Court (1962-1965)
LOWER COURT: United States Court of Appeals for the Sixth Circuit

CITATION: 371 US 57 (1962)
ARGUED: Oct 16, 1962
DECIDED: Oct 16, 1962

Facts of the case

Question

Audio Transcription for Oral Argument – October 16, 1962 in Southern Construction Company v. Pickard

Earl Warren:

Number 46, Southern Construction Company versus Pickard.

Mr. Harbison.

William Harbison:

May it please the Court.

If the Court please, in the interest of time, if this is agreed with the Court the two sides would be willing to split the remaining time for the day if that is satisfactory with the Court.

Earl Warren:

Yes.

William Harbison:

I think we state our points very briefly, if the Court please.

Earl Warren:

That will be agreeable.

William Harbison:

Alright, sir and so I will take just about 10 or 12 minutes, if the Court please.

May it please the Court, these are — this is a Miller Act case arising in the Middle District of Tennessee.

The case is here on writ of certiorari to the Court of Appeals for the Sixth Circuit.

If the Court please, briefly, I can state the situation.

This is a procedure case involving Rule 13 (a) or one of the other rules, Rule 8 in which, we have this situation, may it please the Court, and I think there is no dispute really about the underlying facts.

Southern Construction Company is in the general contracting business and had two separates sets of contracts with the United States Government for the rehabilitation of barracks.

One set of these contracts was at Fort Benning, Georgia, the other contract a much smaller one was at Fort Campbell, Tennessee.

The two contracts were let separately and there was no — nothing in common between them except it happened to be the same general contractor.

It happened also that the Pickard Engineering Company of Washington D.C. was the mechanical subcontractor, the successful bidder on each set of contracts, submitting a bid in Georgia and being awarded the subcontract there, another bid in Tennessee, being awarded the bid there.

The work on the two contracts, however, proceeded simultaneously and Pickard had one common supplier furnishing the majority of his materials being the Atlas Supply Company of Atlanta, Georgia from whom he bought most of the materials that he put into both of these two jobs.

Pickard left both jobs, if the Court please, before they were complete under circumstances that are not now particularly material except that he left the Fort Campbell job in December 1955, he left the Fort Benning jobs shortly after that and Southern the prime contractor completed both jobs.

At the time when Pickard left, if the Court please, he owed admittedly on account at Fort Campbell, Tennessee to at least of $34,520.

He had so certified to Southern and Atlas had also billed Southern in that amount.

At the time he left Fort Benning, Georgia, Atlas claimed that Southern owed it or that Pickard owed it and Southern secondarily under the Miller Act a $104,000.

The record in this shows that Southern never disputed the account at Fort Campbell, Tennessee, had no basis upon which they disputed.

But it disputed in its entirely the billing made to it because it was liable under the Miller Act by Atlas at Fort Benning, Georgia and denied any validity to that account whatever of Mr. Pickard’s.

If the Court please, businessmen don’t always act as one might wish them to act and in August 1956, Southern and Atlas met together and Southern paid Atlas a lump sum of $35,000 and accepted a complete release of it’s liability to Atlas under the Miller Act on both jobs.

Those — that check is in the record.

The money was paid.

There is no dispute about that.

The money — the payment was not allocated by Southern at that time to either job, both of them had some — had gone to substantial completion.

Mr. Pickard was shown of the record to be insolvent and Southern simply did not make an allocation at that time.

They just made the payment and settled a business transaction and the check is in the record.

William Harbison:

Then, if the Court please, in December 1956, some months after this payment was made on August, 1956, Mr. Pickard brought a suit against Southern under the Miller Act in the Middle District of Georgia claiming that he had not been fully paid on both jobs.

He — his suit clearly, a complaint is in the record, shows that he sued in that action in December 1956, on both at Fort Campbell, Tennessee job and the Fort Benning, Georgia job claiming certain amounts due to him.

Of course as the Court knows the time for pleading is 20 days and within the 20 days, Southern filed an answer and counterclaim setting up the defense that it had more than paid to Mr. Pickard or to his suppliers, the contract prices on both jobs and asserting a counterclaim against him on both jobs.

At that time, the $35,000 payment was included in this Georgia case because the Tennessee contract was also in the Georgia case at that time.

Now it is true that the Miller Act provides that suits shall be brought in the district where the work is done and nowhere else.

So some months later in April of 1957, Mr. Pickard brought a separate suit in the Middle District of Tennessee on the Fort Campbell, Tennessee contract, although that wasn’t formally deleted from the pleadings in Georgia until the trial of the Georgia case, he did bring a separate suit in Tennessee in April 1957 on the Tennessee contract alone.

It was then, if the Court please, that Southern was faced with the problem of where this $35,000 payment made on August 1956 properly should be allocated because it was now faced with two separates suits on two separates contracts.

The underlying facts as I have stated to the Court were that Southern had paid $34,520 on the Tennessee contract which it did not dispute to Atlas and a token payment on the Fort Benning’s contract which it had disputed in its entirety and obtained a complete release.

Now, Southern is a bonded contractor and obviously its position about there being a substantial dispute in the Atlas billings must have been correct because otherwise there would be no reason for Atlas to make such a settlement with Southern.

So Southern, if the Court please, under this undertaking claimed this $34,520 payment as a credit on the Tennessee contract which the District Court allowed over the objection however of Mr. Pickard that the $34,520 payment or $35,000 payment was a compulsory counterclaim and had to be asserted by Southern in the Georgia proceedings or not be asserted at all that — paid it to assert it there would be res judicata.

The Georgia case was tried first in March of 1959 and in that trial of that case, neither side listed this $35,000 payment or any part of it as being a credit on the Georgia contract.

That has been found concurrently by both the District and the Court of Appeals and this is a fact, if the Court please.

It was not claimed by Southern in the trial of that case.

It was not credited by Mr. Pickard in the trial of that case as properly being allocable to that case, any part of it.

The Tennessee case came only for trial some months later and Southern claimed the $35,000 payment or $34,520 of it in as a credit in the Tennessee case which the District Court allowed, but which this Court of Appeals for the Sixth Circuit reversed and held that the $35,000 payment was a compulsory counterclaim under Rule 13 (a) in Georgia and could not be asserted by Southern in the Tennessee case.

Arthur J. Goldberg:

[Inaudible]

William Harbison:

If the Court please —

Arthur J. Goldberg:

[Inaudible]

William Harbison:

There was — let me — say this, there was a trial, there was jury verdict for Mr. Pickard which were set aside by the District Court.

Mr. Pickard’s theory in that case, if the Court please, was a rescission of the contract in a quantum merit in the District Court.

Arthur J. Goldberg:

[Inaudible]

William Harbison:

No, sir.

Mr. Pickard’s suit has been dismissed.

Now Southern’s counterclaim in the Georgia case has remained open, if the Court please, Southern claimed that they overpaid Mr. Pickard and that remains open in the Georgia case, if the Court please, at this time.

Southern —

Arthur J. Goldberg:

Mr. Harbison, do you claim [Inaudible]

William Harbison:

Well, if the Court please, I assume we are free to assert it if it belongs there, although, the trial of that case is a very lengthy and very expensive process.

And —

Arthur J. Goldberg:

[Inaudible]

William Harbison:

We could not collect it, if the Court please —

Arthur J. Goldberg:

[Inaudible]

William Harbison:

They have a judgment against us in Tennessee as a result to the different — Court of Appeals decision, if the Court please, where its —

Arthur J. Goldberg:

[Inaudible]

William Harbison:

Exactly.

Exactly, if the Court please, that if — excuse me —

Arthur J. Goldberg:

But the — your counterclaim in Georgia has been allowed to [Inaudible] —

William Harbison:

No, sir.

Arthur J. Goldberg:

— was filed [Inaudible]?

William Harbison:

It has been filed, if the Court please, Southern has a notice out to get an affirmative judgment against Pickard and has no desire to proceed with it unless we are compelled to proceed there with it.

Arthur J. Goldberg:

[Inaudible] anyway now about the Tennessee decision [Inaudible]

William Harbison:

If the Court please, there is a judgment against us for 34,000 odd dollars with interest which has been stayed temporally pending this Court’s decision of the matter by bond which is of somewhat expensive process.

William J. Brennan, Jr.:

[Inaudible]

William Harbison:

Exactly.

The court — we have to pay that, if the Court please, it’s gone.

We can never get —

William J. Brennan, Jr.:

[Inaudible] can’t collect it?

William Harbison:

Can’t collect —

William J. Brennan, Jr.:

[Inaudible]

William Harbison:

Exactly sir.

We can’t —

William J. Brennan, Jr.:

[Inaudible]

William Harbison:

Exactly.

William J. Brennan, Jr.:

[Inaudible]

William Harbison:

Yes, sir.

That is exactly the practical situations that we find ourselves faced with, if the Court please.

And we feel that the Court of Appeals has given it — for it to have a technical construction to Rule 13 (a) because they said this, if the Court please, their rationale was that we — they said this item was compulsory in either of two suits and was compulsory and assumed which we first had to plead, overlooking the fact however that the two suits were not filed simultaneously, they were filed at separate times.

The Georgia suit was filed first and then the Tennessee suit is taken out of that and filed separately in Tennessee.

That that is the — the fact situation we were faced with and we tried to plead this claimants according to the underlying facts which have been found concurrently and I think they’re not in dispute, if the Court please, and we feel that the payment belonged to the Tennessee contract and not to the Georgia one.

Hugo L. Black:

On what do you base that?

William Harbison:

Because, if the Court please —

Hugo L. Black:

On what practical interpretation of the Rule?

William Harbison:

I beg your pardon?

Hugo L. Black:

On what practical interpretation of the Rule?

William Harbison:

Well, if the Court please, the — as I said the rationale was this of the Sixth Circuit that we had — that there were two suits against us and it was compulsory in either of them.

We say they were not too simultaneous suits.

We had to plead in Georgia first, if the Court please.

And in — for example, there were a number other payments on the Tennessee contract, in addition of this $34,000 one.

There’s been no objection to have — withdrawing them from the Georgia and filing them in the Tennessee case.

But this one item which settled both accounts, they say, we have no option that the defendant has no option where to plead it whatever the underlying facts are.

This is what —

Hugo L. Black:

Do say that he does that he did it in either or both?

William Harbison:

Yes, sir.

If the Court please, where you have — Rule 13 (a) it seems to us never contemplated the situation where defendant was faced with two separate suits on two separate contracts.

Byron R. White:

[Inaudible]

William Harbison:

Exactly.

If the Court please —

Byron R. White:

[Inaudible]

William Harbison:

Yes, sir.

I would say this Your Honor.

If the two suits had been filed simultaneously so that we had an option of pleading it according to its underlying facts, we would be bound by that option, but that didn’t happen.

Erroneously, it — there was a suit brought in Georgia pertaining to the Tennessee contract which was later withdrawn and brought separately in Tennessee and when that was done, we claimed the right to plead as a defense and we claimed that this is really in a — a defense we are seeking no affirmative judgment over in the sense of a counterclaim in that sense of an affirmative judgment that it belongs in the case where the payment was admittedly made or all but just a token part of it, if the Court please.

Arthur J. Goldberg:

[Inaudible]

William Harbison:

Exactly sir.

Yes, sir.

Thank you very much.

Earl Warren:

Mr. Gallagher.

Edward Gallagher:

Mr. Chief Justice, may it please the Court.

The position of respondent is based or rooted in the proposition that to a large extent the substance of this counterclaim throughout of the Georgia contract.

It was logically related to the Georgia contract.

And being so logically related, it was part of the Georgia transaction or occurrence as those terms are implied in the Rule.

Edward Gallagher:

This being true, it was a compulsory counterclaim in the Georgia proceeding.

It was injected by the operation of the rule, it was injected into the Georgia proceeding and became part of the issues in the Georgia case.

Being part of the issues, it was adjudicated there and when an effort was made at a subsequent date to litigate the same claim in the later Tennessee proceeding it was res judicata.

Now, there’s been some talk about or argument about to what extent was an attempt made to prove the claim in the Georgia case.

According to our interpretation of the rule, it is not important to what extent proof was submitted in support of the claim.

It is not important whether it was even ignored.

The important thing is that by the operation of the compulsory counterclaim rule the counterclaim became part of the issues in the Georgia proceeding and therefore it was adjudicated there and it was res judicata in the subsequent Tennessee case.

William J. Brennan, Jr.:

[Inaudible]

Edward Gallagher:

In — Pickard got two verdicts, one in Georgia and one in Tennessee.

William J. Brennan, Jr.:

Now, the Court — and your argument is that [Inaudible]

Edward Gallagher:

Well, I say, if Your Honor please, the matter —

William J. Brennan, Jr.:

[Inaudible]

Edward Gallagher:

Primarily.

Yes, sir.

William J. Brennan, Jr.:

It could have been [Inaudible]

Edward Gallagher:

I say that by operation of the Rule, it necessarily became part of the issues in Georgia, yes sir, yes sir.

William J. Brennan, Jr.:

[Inaudible]

Edward Gallagher:

No, sir.

But I think the basic and cardinal principle of res judicata is that it doesn’t have to be actually proved but should have improved.

So that we say that the —

Is that an action brought in finding [Inaudible]

Edward Gallagher:

No, sir.

It has not.

And Georgia the — the sequence of events was that the case was tried, the plaintiff Pickard obtained the verdict.

There was a motion for a verdict not — a judgment notwithstanding the verdict.

There was also a judgment for a new trial and both the main case and the counterclaim.

The Court in Georgia granted after a reasonable length of time, granted the motion to set aside the verdict which it did.

And it held in abeyance any action on the motion for a new trial.

Just within the last few weeks it has granted the motion for a new trial on the counterclaim.

Perhaps they haven’t got any question to be adjudicated?

Edward Gallagher:

Not in Georgia, no, sir.

Or in Tennessee?

Edward Gallagher:

Well, in Tennessee —

And [Inaudible] adjudicated because of Rule 13.

Edward Gallagher:

Yes, Your Honor.

I think that is a fine distinction.

Yes, sir.

Well, (Voice Overlap) quite different.

Edward Gallagher:

Yes, sir, there is.

And we are not relying on the doctrine of res judicata except —

[Inaudible]

Edward Gallagher:

No, sir.

We’re not relying in either one of those.

What are you relying on?

Hugo L. Black:

[Inaudible]

Edward Gallagher:

Yes, sir.

Arthur J. Goldberg:

Is your position that this [Inaudible]

Edward Gallagher:

No, sir.

Arthur J. Goldberg:

[Inaudible]

Edward Gallagher:

Well, I say yes, Your Honor.

As a matter of law it has been passed upon in the Georgia case.

Arthur J. Goldberg:

[Inaudible]

Edward Gallagher:

In a Georgia case as a matter of law.

Arthur J. Goldberg:

[Inaudible]

Edward Gallagher:

Yes, sir.

I have made — I should probably have qualified my reply by saying this that, in our opinion and in our position is that the matter was passed upon during the trial, the initial trial of the Georgia case but — and was adjudicated there for purposes of the later Tennessee case.

But by the recent action of the Court in granting a new trial on the counterclaim, now they have another bite at the apple in Georgia.

Arthur J. Goldberg:

[Inaudible]

Edward Gallagher:

Where we’ve said it always belonged in the first place.

Yes sir.

William J. Brennan, Jr.:

[Inaudible]

Hugo L. Black:

In your judgment do you cover that?

Edward Gallagher:

Yes, Your Honor.

And I’d like to say a word about that.

There has been some remark right — during this argument about the impossibility of collecting on the counterclaim judgment if one is secured.

I think the implication is that the — that my client is insolvent.

There’s nothing whatever in this record about the solvency of Mr. Pickard.

It was never an issue, he is not a bankrupt.

He has never been a receivership.

There is nothing in this record regarding his financial condition.

Hugo L. Black:

So what did (Voice Overlap) —

Edward Gallagher:

So that —

Hugo L. Black:

— trial down there then?

Edward Gallagher:

I —

Hugo L. Black:

Well, I take it your client wanted to try it there —

Edward Gallagher:

I —

Hugo L. Black:

— instead of in Tennessee?

Edward Gallagher:

The reason, if Your Honor please, is this.

There has never been a defense to the Tennessee claim as indicated by the verdict of the jury in Tennessee which was for the plaintiff.

The only defense that could be created was by splitting off a piece of this Georgia counterclaim, they left most of there but they split off the item that’s now before Your Honors.

Why, to create a defense for the Tennessee case that otherwise did not exist.

If it weren’t for splitting off, this piece of the counterclaim from Georgia bringing it to Tennessee, the Tennessee suit was indefensible.

The jury held for us in Tennessee, it was only by the action of the judge in Tennessee.

And by reason of his legal conception of what the counterclaim rule required that the verdict of Tennessee was nullified.

But to answer Mr. Justice Black’s question, the reason they did not want to litigate this particular item in Georgia is because they thought they could use it to better advantage in Tennessee.

And I may say this, if Your Honor please, that that is the very verbatim testimony of counsel for the petitioner here.

He testified in this case and he testified that the reason — that the piece was split off from Georgia to be used in Tennessee is because he as a lawyer thought that would’ve — it would be to his better advantage to use in Tennessee as a defense.

So that’s the answer —

William O. Douglas:

Well, that’s immaterial on the onset, it’s rightfully there.

Edward Gallagher:

Yes Your Honor, that’s correct, but may I just say this?

Edward Gallagher:

If you — if the wording of the rule, the language of the rule itself is examined, it completely supports the position of the respondent here.

The Rule says that the pleading must state as a counterclaim, any claim which the pleader has at the time that the counterclaim asserted.

In other words, the Rule says that the date of decision or the date on which the application of the counterclaim rule applies is the date on which the first complaint is filed.

So that (Voice Overlap) —

But it was — it was your action, it was your judgment rightly or wrongly that instead of pursuing on everything down in Georgia because of the provisions of the Miller Act you better break up your cause of action or you though you might have to break them up under the Miller Act and bring your certain suit in Tennessee.

Edward Gallagher:

Yes, Your Honor this — the Miller Act’s —

Well, you — you were the man — you were the people who were fragmentizing this situation —

Edward Gallagher:

Yes, but —

— rather than the other side.

Edward Gallagher:

Yes, but only because we were statutorily bound to it.

Exactly.

Edward Gallagher:

In other words — the statute said that — the stat — the Miller Act says that the suit shall be brought in the federal district where the work is performed —

I’m not blaming you on this —

Edward Gallagher:

Yes.

Potter Stewart:

I am just suggesting that that was the situation.

Edward Gallagher:

Yes, sir.

But if may say this Your Honor that’s makes no difference about the application of the Rule in this case because the application of the rule had been determined as of the date of the filling of the Georgia complaint and so —

It has some bearing as to whether this situation is — fits within the Rule because the purpose of the Rule is surely to prevent fragment —

Edward Gallagher:

Yes, Your Honor.

— fragmentization.

Edward Gallagher:

Certainly.

Yes, Your Honor.

That’s right.

It has that bearing.

Edward Gallagher:

Yes, sir.

Earl Warren:

Well, if you’re obliged under the Miller Act to bring your action in Tennessee was the defendant not advised also to set up any counterclaim he have on that work in Tennessee?

Edward Gallagher:

No, Your Honor.

For this reason that if the Tennessee contract had been left in the Georgia proceeding.

In other words, the operation of the Rule had been exhausted at the time that the suit was moved to Tennessee and at the time that the Tennessee suit came along.

The operation of the Rule is exhausted as of the date on which the first complaint is filed. Whatever the situation is there then, that’s when it’s determined.

Edward Gallagher:

In other words, if the counterclaim was in existence on the date that the Georgia complaint was filed as it was and if the counterclaim had a logical relationship to the Georgia contract which it did then the rule, then the claim was compulsory in Georgia.

Now, let me say one thing about whether or not it had a logical relationship —

William J. Brennan, Jr.:

May I ask you.

I gather [Inaudible] —

Edward Gallagher:

Yes, sir.

William J. Brennan, Jr.:

— had the Georgia complaint [Inaudible] —

Edward Gallagher:

Yes.

William J. Brennan, Jr.:

— has concluded [Inaudible]?

Edward Gallagher:

Yes, sir.

William J. Brennan, Jr.:

But you’d still be taking [Inaudible]?

Edward Gallagher:

Oh, yes, sir, absolutely, yes, sir.

Now, let me say this about the logical relationship.

There was a $139,000 involved here, that was the total debt.

There was one supplier who supplied both the Georgia contract and the Tennessee contract.

The total outstanding debt was a $139,000.

The 104,000 of that was owed in Georgia not Tennessee, in Georgia, 34 in Tennessee so that the — it will — that by far the largest proportion of the debt was it — that was settled was incurred under the Georgia contract.

This was natural because the contract in Georgia was $513,000.

The contract in Tennessee was $50,000.

The percentages, in other words, that were settled, this — the percentages that were settled by this payment of this counterclaim by him of $35,000 was 75 in Georgia, 25 in Tennessee —

[Inaudible]

Edward Gallagher:

— so that there is every logical reason why this thing should be looked — litigated in Georgia.

But I thought the record tended to indicate that when they came to settle —

Edward Gallagher:

Yes, sir.

— that they didn’t dispute the Tennessee —

Edward Gallagher:

Yes, sir, that’s correct.

— Tennessee situation —

Edward Gallagher:

Yes, sir.

— but they did dispute the Georgia —

Edward Gallagher:

Yes, sir.

— situation and the total amount paid was just a little more than what was due under the Tennessee situation and stated in dispute.

Edward Gallagher:

It’s true.

That’s true.

Therefore, I should think the practicality of the situation would operate in favor of Tennessee rather than against Georgia, if you’re arguing that?

Edward Gallagher:

The thing is though if Your Honor please, there was nothing in the rule that says that the existence of a dispute or the non-existence of a dispute —

I see.

Edward Gallagher:

— alters the normal application of the Rule.

Aren’t they?

Edward Gallagher:

It does not make an exception —

I brought —

Edward Gallagher:

— for disputed claims.

I brought this up only because —

Edward Gallagher:

Yes sir.

— it was your suggestion that since most of this was allocate — allocable to Georgia —

Edward Gallagher:

Yes, sir.

And Georgia was the natural place to assert it, [Inaudible]

Edward Gallagher:

Well, it is true that they say that they disputed the Georgia part of the claim.

But the — as — according to our view of the case that is not important because the Rule makes no exception for disputed claims.

Every claim is disputed, it’s a characteristic of a claim to have a dispute.

In the Eastport case that the Second Circuit decided recently, that’s cited in the Sixth Circuit opinion, there was a very serious and bitter dispute involved there.

Hugo L. Black:

Would it be an impermissible interpretation of the Rule to say that the counterclaim can always be treated so long as it has not been adjudicated in our aid after the adjudication, in other words, it’s never been satisfied?

Edward Gallagher:

Well, counterclaim as Your Honor knows is compulsory and permissive (Voice Overlap) —

Hugo L. Black:

I understand that —

Edward Gallagher:

Yes.

Hugo L. Black:

I understand that but in some instances, courts have said that although two courts have jurisdiction of a matter, the one that the first acts on it shall be accepted as final.

What would be wrong with that interpretation of this Rule?

Edward Gallagher:

Oh, I think that would be in line with the proper interpretation of the Rule, namely that the Georgia Court first had jurisdiction of this (Voice Overlap) —

Hugo L. Black:

I’m not talking about which one has — first has jurisdiction.

I’m talking about so long as the claim is outstanding and not satisfied.

Edward Gallagher:

Oh, well then, on that, if Your Honor please, it’s the wording of the Rule.

The Rule says, that the counterclaim shall be compulsory in the suit where the first responsive pleading is served.

Edward Gallagher:

So that under the Rule, the Court that had the duty to pass on would be the Court in which the first suit was instituted on where the first responsive pleading was served.

Hugo L. Black:

Well, that’s of course literally — that is correct.

Edward Gallagher:

Yes, sir.

Hugo L. Black:

Maybe logically it’s correct and — but maybe in here in writing this Rule even lawyers have failed to write one in such a way that it will do what the Rule is supposed to do, achieve the end of justice.

Edward Gallagher:

Well, if may say so Your Honor, I think that the fundamental philosophy of the Rule was to hold the parties where they are found when the first litigation is instituted so that it will not be a considerable copying, the filing of a new suit or the withholding of a counterclaim and so forth.

They would produce unnecessary added litigation so the —

Hugo L. Black:

Well, basically at the bottom is the idea that the man has a counterclaim he’ll have an opportunity to enforce it somewhere during the time they — before its [Inaudible]

Edward Gallagher:

Yes, Your Honor.

Arthur J. Goldberg:

Mr. Gallagher, you’ve cited Rule 13 (a) but Rule 1 said that its construing the rule, and that was construed [Inaudible] determination of that reaction.

Were there any objections to this case which were both involved in [Inaudible] that the adjudication was a substantive point, right or wrong?

In some form preceding that, it ought to be a final decision, do you agree with that?

Edward Gallagher:

Yes, sir, yes, sir.

I think they’re entitled to have an adjudication in accordance with the rules.

I say that that the — the effort on their part to transfer the adjudication of this particular counterclaim to Tennessee instead of leaving it in Georgia where the bulk of the debt arose in the Georgia case would be unfair to the respondent and would be in an illogical move because that both of the charge was — that gave right to this $35,000 arose out of the Georgia contract.

And the — and Rule 13 (a) says that, if it arises out of the — if it arises out of the transaction it’s compulsory.

Well, 75% of this transaction arose out of Georgia.

Arthur J. Goldberg:

[Inaudible]

Edward Gallagher:

Yes, sir.

And also in addition, if Your Honor please, the suggestion contained in your question that they still haven’t acted to the windward.

They’ve got a — this very same counterclaim now pending, currently pending in Georgia which has already reached the pretrial stage in Georgia.

Earl Warren:

Mr. Harbison, I think you have two minutes, if it will serve any purpose to you?

William Harbison:

Yes sir, if the Court please, I would like to make this statement.

Rule 8 (a) in addition to Rule 1 which Justice Goldberg mentioned talks about payments as a premature defense.

We are not seeking a judgment against Mr. Pickard, if the Court please but we are strongly resisting getting one against us.

We have paid this money for debts that he says are valid.

If the Court please, he had this check in his file in the Georgia case.

He put on sworn testimony in the Georgia case.

He did not list this check as a payment made on his behalf in Georgia neither did we, if the Court please and if the Court please, we think that it would be highly inequitable.

The Georgia case took a week to try it in order for us to get credit for this thing.

We’ve got to show it was a valid claim on a valid debt or reasonably required payment.

William Harbison:

And we think we have done that in the Tennessee case where it belonged, if the Court please, because those were the facts under which the payment was made and that’s been found concurrently by two courts.

There’s no dispute in that facts underlying that, if the Court please.

William J. Brennan, Jr.:

[Inaudible]

William Harbison:

Exactly.

If the Court please, we have admitted owing that up there and he certified that he owed that much than —

[Inaudible]

William Harbison:

— 34,520.

He also certified he owed a 104,000 in Georgia but Atlas said, they didn’t agree to any that, if the Court please, and the record so showed.

They didn’t admit any validity to this Georgia indebtedness.

They claimed we have been billed twice.

We hadn’t got credits for payment made down there and we denied owing anything and obviously when they took 35, if the Court please, we found they’ve been just about correct in that.

How much is he suing in the Court in Tennessee?

William Harbison:

If the Court please, he sued to try to rescind and sue — try to rescind the contract and sue for one merit but the trial court clearly could not do that and he is confined to the contract price in Tennessee and there’s no appeal from that here.

Now, if we are allowed the $34,000 payment as credit in Tennessee, we have overpaid them and the whole litigation will be [Inaudible]

Earl Warren:

Very well.

William Harbison:

Thank you sir.