
    STATE OF MISSOURI, etc. v. F. TIEDERMANN.
    
      (In the Circuit Court of the United States, Eastern District of Missouri.
    
    
      October, 1881.)
    
    1. Surety—How Far Bound by the Judgment against his Principal in a Suit to which He Is Not a Party. A party sued as surety upon a bond given to secure the faithful performance of a contract by the principal, to construct a school-house within a specified time, upon certain terms and conditions, is not bound by a judgment against his principal, in a suit to which he is not a party, establishing certain claims as mechanics’ liens upon such school-house.
    2. Same—Mechanic’s Lien—Public School Building. It having been settled by repeated decisions of the Supreme Court of Missouri, that there can be no such thing as a mechanic’s lien upon a public school building, a surety upon such a bond as the one above named may, in defending a suit upon the same, deny the validity of a judgment establishing such a lien, so far as he is concerned, such a judgment having been rendered in a suit to which he was not a party.
    3. Effect of Removal of Part of Cause from State Court—Res Adjudicata. Where suit was brought in a State Court against principal and surety upon the bond above mentioned and removed as to the surety into the Circuit Court of the United States under the act of Congress of 1866, providing for the removal of part of a cause. Held: That from the time the order of removal was made, the surety passed from the jurisdiction of the State Court and had no right to appear there any further, and is, therefore, not bound by the judgment there against the principal. A party is bound by an adjudication only where he is so far within the jurisdiction of the Court, as to be at liberty to participate in the management and control of the litigation.
    
      4. Surety—Rights of, in Settlement with the Obligee in the Bond. A surety is not bound by a settlement between his principal and the obligee of the bond, to which he has not assented; but has a right to a settlement of his liability precisely as if he had been present at such settlement, and had availed himself of all his rights and of all the defenses which the principal could have availed himself of.
    This was an action originally brought in one of the State Courts of Missouri, against Diedrich Tiedermann as principal, and Frederick Tiedermann as surety, upon a bond, conditioned that the principal should carry out in good faith the provisions of a certain contract for the building of a public school house. Frederick Tiedermann, the surety, being a citizen of the State of Illinois, applied for and obtained an order removing the cause, so far as he was concerned, from the State Court to the United States Court. Thereafter the case went to judgment as against the principal in the State Court. Among other things it was alleged that the defendants in said suit in the State Court, on the bond were liable, because the principal contractor had permitted certain liens to be established against the public school building on account of materials furnished to be used by him in the construction thereof, and had allowed judgment to go against him establishing said liens in one of the Courts of the State of Missouri. The judgments in said mechanic’s lien cases were offered as evidence against the surety in this Court. Objection being made to their admissibility, the following opinion was delivered sustaining the objection.
   McCrary, Circuit Judge:

On the question argued and submitted yesterday I am prepared to announce the conclusion reached by the Court. The liability of this defendant is that of a surety only. The contracts of sureties, as we all very well understand, are to be construed strictly in favor of the surety. The contract of this party was, in substance, that his principal should carry out, in good faith, the provisions of the contract for the building of a public school house. Briefly stated that contract was, that he would furnish the material and build the school house for $ 15,000 within a certain specified time. The present question is, whether the surety can be charged as liable, upon his contract of surety-ship, for certain claims of mechanics’ liens against the public school building, upon which suits were brought, and in which suits, judgments were rendered against the school board and against the principal, establishing the mechanics’ liens. The plaintiff pesents here the records of these judgments and offers them in evidence. The amounts paid upon these mechanics’ liens was in excess of the $ 15,000 for which the building was to have been constructed and completed. The Supreme Court of Missouri, in the other branch of this case, held, that the principal was liable on this account to refund the amount which was paid out by the board to settle these claims which are spoken of here as mechanics’ liens. It does not, however, follow that the surety is liable for that to the same extent. The Supreme Court may have held that, as against the principal, the mechanics’ liens were established by an adjudication, and that neither the board of education, nor Mr. Diedrich Tiedermann, the principal on this bond, could question the validity of those judgments; or it may have been of opinion that this was money advanced for the use and benefit of the contractor, the principal, by the school board, and that he ought to be held to refund it. However that may be, the surety was not in Court at that time, he was not a party to this proceeding by which the mechanics’ liens were established, he was not the contractor, he had not made this indebtedness, and he can only be held upon the giound that it was an indebtedness created in violation of his obligation of suretyship. This can be only held on the ground that it was a valid mechanics’ lien established upon the property, because the contractor failed to keep his contract and pay for the material that he used in the construction of the building. The law of Missouri, as established by repeated decisions, is, that there can be no such thing as a mechanics’ lien upon a public school building. That is the construction of the statute of this State repeatedly adopted by the Supreme Court of the State, and it is binding upon this Court, and it is, in our judgment, perfectly sound, independent of any adjudication. The surety here has a right to raise this question now, for it has never been raised where he was a party; he has a right to say and insist that the school board was not bound, as against him, to pay these claims for mechanics’ liens, and that if they did so, so far as he is concerned, it was a voluntary payment of a claim for which he was not liable. Of course it will not be insisted that the surety upon the bond is liable for an overpayment to the principal. The surety can only be held upon the ground, as I have already said, that this was a valid mechanics’ lien upon the school building, which the board was bound to pay for the purpose of protecting their property. As the present defendant has a'right now, for the first time, to raise the question whether this was a valid mechanics’ lien and an incumbrance upon the school building, and as he has raised it, we feel bound to hold that it was not; that the payment, so far as the surety is concerned, was a voluntary payment. The objection to this evidence must, therefore, be sustained.

It was further insisted that the surety as well as the principal was bound by the judgment of the State Court, rendered against the principal after the removal of the cause, so far as the surety was concerned, into this Court. Upon this branch of the case the following opinion was delivered:

McCrary, Circuit Judge:

Upon reflection I am very clearly of the opinion that this defendant, as surety on the bond, has a right to a settlement of his liability upon his bond under the contract, and is entitled to whatever right he would have had if he had been present at a settlement under the contract at the time that the building was delivered over, or at any other time. The rights that his principal had against this plaintiff under the contract he has a right to avail himself of as a defense in this case, the same as if he had been present and had insisted upon all his rights at such a settlement. The ruling, therefore, that has already been made in the case is conclusive of this question. The payment of the mechanics’ lien claims was outside of and beyond the contract Perhaps as between the plaintiff here and the principal on the bond, the plaintiff could pay those claims and charge them to the principal in their settlement with him. At all events, after there was a judgment upon them that concluded them both, they had a right to act upon the hypothesis that they were valid and that the board was bound to pay them; but we have found upon investigation that they were not valid claims, and that their payment did not bind this defendant as surety; I think, therefore, that the objection to the evidence now offeied must be sustained.

The plaintiff offered to prove the settlement made between it and the principal, whereby he was charged with the mechanics’ lien claims above mentioned. This evidence was objected to on behalf of the defendant, and the objection sustained, the ruling of the Court being announced as follows:

It will be unnecessary to go into a discussion of the long line of cases upon the general subject of res. adjudicata, as to how far parties and privies are bound by the judgments of Courts of general jurisdiction, because this case is one of a class of its own and stands by itself. The act of Congress provides, or did provide—for I think that act is now repealed by the later act on the subject, and I am very glad that it is—for splitting a case in the State Court, and bringing so much of it as constitutes a controversy between citizens of different States in the Federal Courts. Under that act so much of this controversy as is between the plaintiff and the suiety upon the bond has been brought here, while so much of it as is between the plaintiff and the principal upon the bond remained in the State Court, and has been tried there. The fundamental principle of this subject is, that a party is bound by an adjudication only where he is, so far, at least, within the jurisdiction of the Court as to be heard in the course of the litigation; he must be a party to the suit or proceeding in such sense as to have a right to appear there, to make motions to the Court, to introduce testimony, to cross-examine witnesses, and to take an appeal. Those are the rights which, generally, a party must have in order to be bound by an adjudication. Now, we must assume that this case was properly removed, as I have before said in considering some preliminary questions, and, assuming that, we are bound to say that after removal, the moment the order of removal was made, this defendant passed from the jurisdiction of the State Court. He had no right to appear there any further, he had no power to introduce testimony, to make motions, to be heard, or to take an appeal. Besides, as counsel have suggested, the whole purpose of the removal act of 1866 would be defeated by the construction which is contended for by the counsel for the plaintiff If the party who brings a part of a case into this Court, for the purpose of litigating it here, is bound, nevertheless, by the litigation in the State Court, from which he removed it, against some other party, and we are bound by the judgment there, then it follows, of course, that there is no litigation here, and the party who removes the case here does not have any benefit of the removal. It is one of the difficulties which grows out of that very anomalous statute providing for splitting up cases. The best we can do, I think, is to say that the party, having a right to come here, has a right to be heard here upon the merits of his controversy. The adjudication of the State Court, I think is admissible for one purpose, and that is to show the amount of the recovery, in order that the surety may not, in any event, be held for more than the principal; but for the purpose of concluding the defendant upon any other issue, we think it is not admissible.  