Professional Documents
Culture Documents
____________________
John E. Mudd with whom Cordero, Miranda & Pinto was on brief
_____________
________________________
appellants.
Mark S. Finkelstein with whom Elizabeth D. Alvarado, Shann
____________________
______________________
_____
Martin, Finkelstein & Sayre, David P. Freedman, and O'Neill & Bor
____________________________ _________________
_____________
were on brief for appellee United Structures of America, Inc.
____________________
November 18, 1993
____________________
BREYER,
Chief Judge.
____________
The
plaintiff,
having
the
requires
bond that
federal
statute, the
Miller
270a-270b.
The
general contractor
Act,
40 U.S.C.
was
that it says it
The district
case, United
States ex
had to spend to
cure the
Ninth Circuit
Steel Constructors
v.
__________________________________________________
Avanti Steel Constructors, 750
__________________________
F.2d 759
(9th Cir.
1984),
United States
_____________
general
deductions.
a subcontractor
from
disagree
with
taking
the
such
Ninth
"offsetting"
Circuit.
We
Miller
Act
requires
general
contractors
labor and
material"
permits
to the
a
relationship
project.
40
U.S.C.
has
supplier
who
with
subcontractor
relationship . . . with
270a(a)(2).
It
"direct
contractual
but
contractual
no
to recover "judgment
for
requirements.
"Little Miller
Act" sets
projects
undertaken by
L.P.R.A.
("United"),
projects,
supplied
the Puerto
steel
Station,
Hato
projects.
the
Rey
to
work on
government.
Structures
a
of
22
America
subcontractor
The
other
Police
for
the
on
Puerto
Headquarters.
was the
general
subcontractor did
two
Rican
Defendant
contractor on
not pay
United in
scheme for
Rican
United
Engineering ("GRG")
full.
Puerto Rico's
government at
both
up a similar
plaintiff,
Naval
G.R.G.
270b(a).
47, 51.
The
Roads
Id.
___
bond for
the amounts it
approximately $105,000
believed were
still due,
United
various bills
moved
for
and receipts in
attaching
GRG
An affidavit (and
engineer, constituted
judgment,
judgment motion.
summary
GRG's only
effort to
"set
Marin's
affidavit said that GRG did not owe United any money because
(1) United engaged in a fraudulent billing practice known as
"front loading"; (2) GRG had to spend "$88,887 . . . due to"
United's "non-compliance
with
the
specifications
of
the
had to spend an
defects
additional "$107,622 .
and/or deficiencies in
. . to correct
the materials"
that United
district court
or
granted
summary judgment
in
to
to
point to,
any
specific
GRG's
"front
loading"
theory;
factual evidence
(2)
that
the
set-off defense";
irrelevant
"the right to
assert a
in support of"
had not
its allegations,
-44
"for
example,
an
affidavit
prepared
by
an
engineer
moved for
reconsideration.
It
pointed
it
provided
few
additional
documents
and
bills
The district
court,
professional
although
qualifications,
it
denied
acknowledged
the
for
reconsideration,
motion
Marin's
in privity
supplier.
Avanti, 750
______
F.2d at 762.
GRG
district
appeals,
court and
interpreted
issue.
now
claiming
the Ninth
the Miller
primarily
Circuit
Act with
that
the
have not
correctly
to the
"set-off"
regard
facts
virtually
subcontractor
identical
to
on a government
the facts
before
set of
us.
from a
general contractor
on
its Miller
Act
bond; and
the
-55
general
contractor asserted,
damages
arising
Avanti, 750
from
F.2d at 760.
"late
The
as
and
defense,
defective
claim
of
shipments."
that "a
______
set-off defense
is not available
a general
supplier]
in a Miller Act
claim in
contractor not
in privity with
[the
Id. at 762.
___
We believe it
draw, namely a
what the
or "offset"),
Black's Law
the
If Smith sues
judgment
by
Dictionary 1230
$5,000
Jones for
representing
to
Smith's
setoff.
______
reduction
or
plaintiff's
"Recoupment,"
rebate
by
claim because
the
of
-66
defendant
a
right
of
in
part
the
is "a
of
the
defendant
If
Smith sues
Jones for
Jones seeks to
$5,000 representing
Jones' expenditure
grain, or
lost value),
the
grain's
grain that
by
out Smith's
buying replacement
Jones
is
seeking
recoupment.
__________
This distinction, although
well established in
the law.
somewhat technical, is
debts
6-45, at 703
arising
from
unrelated transactions
_______________________
(footnotes omitted);
53 Cal. L. Rev.
1st.
and
out of the
Michael E.
Tigar,
Epstein
. . essential
of, and
connected with,
the transaction
Setoff
______
20
upon
or contract
Am.
Jur.
2d
See
___
-77
This
necessarily
technical
legal
reflect ordinary
terminology
usage.
After
does
all, a
not
grain
drying costs
price.
Lawyers, too,
might
fall
against the
into
this
contract
manner
of
See,
e.g., B &
L Oil,
782 F.2d at
157 ("Modern
__________
rules
of pleading
__________
have diminished
common-law
distinctions
companion,
setoff."); 20
distinctions between
longer of
. .
the
surrounding
Am.
.
recoupment
Jur. 2d
however,
the
the
and
10 (1965)
recoupment and
circumstances,
importance of
its
("The
setoff are
no
In a few specialized
difference
takes
on
more
significance.
One
The unusual
to creditors
devices is
setoff, which
may be
who later
described
11
creditor against an
recover from
insolvent debtor
in
by a
Among these
seeking to
U.S.C.
553,
and against
-88
debtor
already
in
bankruptcy only by
11 U.S.C.
15, 6-38
362(a)(7).
to 6-44.
See
___
The
and allowing
assets for
a creditor
by the debtor,
because he
receives full
owed money to
to
value for
the debtor).
reduce his
$5,000 because of
the debt he
to
unfair advantage
3-
bankruptcy laws
of all creditors,
automatic stay,
the latter
Thus,
simply
returning to
$10,000
grain debt
to
Smith by
claim
against Smith,
even
though other
creditors
which
id.
___
6-45, at 704
the nature of
of convenience,"
a defense" and is
is "in
intended to "permit .
. .
a whole."
Rothensies
__________
-99
v. Electric Storage
_________________
Battery Co., 329 U.S. 296, 299 (1946); see also 4 Collier on
___________
________
Bankruptcy
553.03, at 553-17
debtor in
whose claim
bankruptcy
against
the
seeks to
claim).
recover from
debtor arises
out
to
a whole."
allow
Jones
claim
to dry out
896
funds subject to
F.2d 176,
recoupment
is
179
of
the
(5th
it might
setoff
______
not make
in
Smith's
recoupment.
Cir. 1990).
not expressly
same
damages simply
a creditor
So although
to
As such, when
regulated
See In re Holford,
___ ______________
This explains
by the
why
Bankruptcy
Code; some
courts even
automatic stay.
at
712 &
find recoupment
n.36.
Whether a
unaffected by
et al., supra,
_____
creditor's
the
6-45,
action against
effects on
the creditor's
to
offer
-1010
The
situation
in
recoupment.
Miller Act
seems
which
should
The
as
a whole,"
to
distinguish
40 U.S.C.
recoupment,
one
us
270b(a).
In
another
setoff
from
a supplier to
aim of
U.S. at
299, would
seem to
match
the statute's
"justly
due" a
requirement
of determining
contract price
of
the
an appropriate
goods
supplied
can
how the
possibly
"justly due"
mostly
as a
unrelated
however, we
be
Setoff,
convenient
debts.
sums
method
Since a
of
since setoff
dealing
true setoff
functions
with
is not
mutual,
before us,
not go
policies underlying
Act
materials go into
the Miller
public projects,"
Tomkins
Co.,
_____________
322
U.S.
102,
"protect[ion]"
does
not
include
supplier's underlying
know this
"is
(1944),
payments
contract does
is true because
subcontractor
107
but
to
which
the
him.
We
not entitle
this
brought by a
even
as much a
privity supplier.
Government
John C. McBride
Contracts
49.490[4], at
an out-of-
& Thomas
49-658
J. Touhey,
(1993); see,
____
(1962); United
______
States ex
rel. Acme Maintenance
Engineering Co.
_______________________________________________________
v.
of
defective
subcontractor;
failed
contractor did
not meet
workmanship
in
this
available
case
its burden of
because
proof).
existence or nonexistence of
make any
Nor
difference with
do we
against
We
do not
privity of
regard to
understand how
general
these
permitting a
general
contractor
to
reduce a
supplier's
claim
by the
-1212
amount
that
the
general
supplier's failure
to
contractor
comply
with
spent
his
remedying the
contract
750 F.2d
at
762.
On
the contrary,
somehow
But cf.
________
disallowing
neither
pointed to
United nor
any policy of
discussing it,
Miller
the
the Miller
court
Act which
We have examined
Act, and
Avanti
______
the
the legislative
cases and
treatises
point the
other way.
For
these reasons,
we conclude that
the general
is entitled to assert a
recoupment
foreseeable damages
caused by
those
-1313
United also
Little Miller
review of
should
Act (for
different.
asserted a claim
the police
station project).
note
our
Our
the result
belief
that
"compensation,"
discussed
the
Puerto
Rican
at length by the
equivalent
this case
setoff,
is
as setoff
primarily
simplification
parties.
See
___
of
itself,
a
setoff
see 31 L.P.R.A.
___
to
of
device
relations
Walla Corp. v.
___________
v. Vazquez Bruno,
_____________
inapplicable
since compensation,
allowing
between
the
like
convenient
mutually
indebted
our
interpretation of
the
law to
the
the
district
court
correctly
granted
summary
We find
no specific
facts in
GRG's opposition
to summary
-1414
summary judgment,
at least
by the
time it
denied the
motion.
The
summary
judgment
somewhat
confused
because
GRG
evidence
in
evidence when
its
record,
and
is
pieces
of
other
for reconsideration.
however,
presented some
initial opposition
it moved
should reconsider
pieces of
Under
these
parties and
raise only
respects,
the
the issue of
court
will
recoupment.
assume
that
GRG,
In all
United
is
judgment of
district court.
motion on the
based
the
district court
issue of liability,
on the principles
opinion.
So ordered.
___________
is vacated.
may
not oppose
of recoupment as
that
damages
outlined in this
-1515