Smith Plumbing Co. v. Aetna Casualty & Surety Co.

COMPANY, INC., SMITH PLUMBING corporation,

Arizona dba White Moun- Supply Company, Plaintiff/Appel-

tain

lant,

AETNA CASUALTY & SURETY COM-

PANY, corporation, a Connecticut

Defendant/Appellee, dba

Apache Development Enterprise,

Defendant/Intervenor/Appellee.

No. 17691-PR. Arizona,

Supreme Court

En Banc.

May 1986. July

Reconsideration Denied

Killian, Legg, by Fischer Nicholas & Wirken, Mesa, plaintiff/ap- Charles W. pellant. Brauchli, Pinetop, for defend-

Robert C. ants/appellees.

HOLOHAN, Chief Justice. arises in this court on the This matter Surety by Casualty & Co. petition do Apache Mountain and the White Development En ing Apache business a decision of the Court terprise to review appellate court had ruled Appeals. The superior court had Co., Inc., Plumbing the claim Smith over Aetna, a corporation, against an Arizona performance bond for the surety on a Enterprise. Mountain Tribe’s (Smith Co., Plumbing v. Aetna Casu Inc. Co., Surety alty & 720 P.2d (App.1984)). granted We review to jurisdic the exercise of determine whether vio superior court this case tion sovereign immuni right of lated the Tribe’s jurisdic the exclusive ty or interfered with of the tribal court. tion

FACTS decision of necessary to the The facts dispute. In 1963 are not this case of the White Tribal Council Apaches created the White finan- Housing Authority to receive De- the United States cial assistance from Develop- Housing and Urban partment housing (HUD) to low income build Authority is an on the reservation. created the Tribe corporation necessary corporate powers granted the pur- money for the and to contract borrow housing the reserva- developing pose of the Au- ordinance In its formation tion. granted thority power initially was also in the Smith filed suit United G, D, District States Court S & obli- from suit for its waive Aetna, but the federal court gations.1 In 1968 created of subject dismissed action for lack Apache Development En- matter Smith then filed a terprise projects to undertake construction complaint superior against in the the Enterprise reservation. The is in the Authority unjust on the of basis enrich- reality development enterprise a against Authority ment and the and Aetna Apache The Hous- White Tribe. performance-payment on the bonds. ing Authority Enter- contracted with the Authority Aetna and the filed a motion to prise in hous- 1978to build four low income complaint, the dismiss which the trial court ing projects HUD financed with funds. The Enterprise denied. thereafter moved Enterprise general The was act as con- to indispens- to intervene as an the action projects. for the tractor party pursuant able to Ariz.R.Civ.P. Enter- regulations, Pursuant to HUD the A.R.S., asserting its as the principal status contractor, prise, per- general as obtained a obligation the obligor on bonds and its to formance-payment bond for each construc- indemnify Authority Aetna the any for provisions tion contract from Aetna. The judgment against obtained them. Smith oppose Enterprise’s motion, are on form doc- of the bonds standard did not the granted HUD; the trial court it. Some by months prepared they bind the uments later, completed because Smith had never Enterprise Au- surety and its Aetna to the process upon Authority, service of the projects, in the thority, as owner of the filed a Smith Notice of Dismissal to the original the The amount of contract sums. only. Authority Enterprise the Aetna and guar- the bonds contain standard conditions dismiss, then filed a motion to which the anteeing payment wages the of and materi- granted, holding trial court that it lacked projects. the almen on agencies jurisdiction over and its into a subcon- The entered and that the could not be sued “di- G, Plumbing, private D tract with S & a rectly.” Tribe, to business not connected with the appealed trial court's Smith the order supply plumbing all materials and labor dismissing against the both action Smith, housing projects. installation the Enterprise, appeal and the but on Smith Lakeside, plumbing supplier wholesale only sought relief Aetna. Conclud- Arizona, the of the res- outside boundaries ing any claim that Smith had waived of G, ervation, supplied plumbing DS & with of error in the trial court’s dismissal supplies housing projects. for the Smith Enterprise, Appeals the Court of affirmed G, open plumbing supplies D on sold to S & portion of court’s order. The that the trial months, for a number but Smith account Aetna, court reversed the dismissal rul- G, making stopped & alleges that S D ing proceed action could of 1980 payments on the account June joinder the Enterprise. Aetna without $75,000. leaving owed of over a balance APPEALS DECISION COURT materi- claims the amount due is for Smith G, housing Although granted al S & D for the in this furnished we review case concerning state and to resolve issues trib- project. ordinance, suit which provided tract to waive HUD tribes with a form from have; might the Tribe shall otherwise but which the obligations Appendix adopted I. be liable the debts or § verbatim. C.F.R. not part: pertinent Authority. tribal ordinance reads in The Tribal Ordinance No. hereby gives its irrev- Council [tribal] 16, 1963), (Jan. amended Ordinance No. 102 Authority allowing ocable consent (Feb. 2, 1977). added). V(2) (emphasis Art. name, upon corporate and be sued in its sue any ordinance, thus, Authority may, Under contract, arising obligation out claim or contract, immunity, sovereign by waive but it its and here- of its activities under this ordinance obligate pay its Tribe to debts. not Authority agree con- authorizes burdensome interfer- on tect the state “from jurisdiction, some additional comment al govern- performance of its Ap- ence with the by the other issues decided Court functions____” 72 Am.Jur.2d mental peals appropriate. Territories, States, Dependencies Appeals Aetna Originally in the Court of compensated surety of a protected only the bonds contended governmen- sovereign perform not does owner, against Authority, as the con- require protection; there- tal functions that nonperformance were not tractor’s fore, protections government needs to subject unpaid materialman. to action to the conduct its functions do not extend Citing decision in this court’s Webb Con- Furthermore, compen- surety. allow Company Company, v. Crane struction surety such as Aetna to assert sated (1938), the Court sovereign immunity and avoid principal’s so maintain Appeals held that Smith could provide payment on a bond would be to Construing the action Aetna. surety. windfall to the Centraal Stikstof per- in bonds addition to bonds Verkoopkantoor, v. Alabama N.V. State bonds, Appeals held formance the Court of 452, Department, Docks 415 F.2d 458 beneficiary who that a materialman was a Cir.1969). If Aetna were allowed this de- against maintain a direct action the could fense, it would receive valuable considera- surety using without the Tribe as a “con- compensation by tion in the form of the (149 at surety. Ariz. reach the duit” to principal, assuming pay- the risk of without 523-524). In this 548-549, P.2d at 720 principal’s in its default. the event of do not contest court, Aetna and Id.; Surety- 74 generally see Am.Jur.2d the bonds may sue on ruling that Smith the (1974). Ap- ship 256-59 The Court of §§ Review, (Petition for court appropriate in an peals refused to sanction such a result. It 2). p. stated: n argued that it is immune from surely Aetna must have been aware action entitled Smith because it is to suit, immunity principal the of its from principal’s sovereign immunity. assert its steps protect and could have taken to Appeals rejected argu- The Court of itself, requiring En- example, by the ment, approve ruling. and we its identify terprise Authority and the all suppliers subcontractors and and to ob- Generally, surety may a assert prior to final tain releases from latter any principal. defense available to its so, can- payment. Having failed to do Comm’n., Spear 114 v. Industrial Ariz. escape obligations its under the not now 601, excep (App.1977). One guise sovereign under the immu- bond principal tion to this rule is where a takes nity. advantage personal of a defense. Personal 553, ordinarily (149 528.) defenses “are of such a charac Ariz. at 720 P.2d at We chooses, principal, may agree. ter that the as he upon them or 74

insist not.” Am.Jur.2d argued of the Aetna also that the action (1974). may Suretyship 104 The Tribe § against plaintiff could not be maintained immunity. sovereign choose to waive surety joinder principal. without Tribe v. principal obligor Ordinarily, the P.2d 657 Shelley, 107 Ariz. in surety joined must be on a bond (1971). power Because the Tribe has the surety. against action Ariz.R.Civ.P. upon either to insist or to its sover waive 17(f), exception 16 A.R.S. The rule has an eign immunity, is considered permitting against actions a without personal defense not available to the joinder principal obligor “when surety. Surety- Tribe’s See 74 Am.Jur.2d state, beyond limits of the latter resides ship part of the state that he cannot such law____” process sovereign immunity by ordinary reached doctrine be Appeals designed pro- agree with the Court of originates policy in social Id. We prior A A’s suit in federal exception judgment intended to to & holding that the was obligor was not apply principal where the court. subject “jurisdiction for whatever rea- Also, plaintiff an Indian obtained where son, enough encompass and is broad judgment a default tribal court which, although ‘residing’ with- Enterprise, non-Indian school district located within the Arizona, be made in the state of cannot reservation, confines of the United jurisdiction the court’s because subject to Supreme States Court declared a federal (149 immunity from suit.” Ariz. at of its policy to tribal courts in deter of deference 526.) 720 P.2d at mining of their the existence and extent principal to be is shown Once National Farmers Un own 17(f), exception within an to Ariz.R.Civ.P. Company v. Crow ion Insurance plaintiff may proceed the sure U.S. -, 85 L.Ed.2d Albuquer Bank alone. First Nat’l ty Supreme Court would que Accident Insurance v. The Standard extent of tribal have the existence and Co., 81-82, Ariz. 297 P. examined neglect failing A creditor’s in the first instance the Tribal Court impair right to principal reach does not his recognized cases have often itself. Our State, surety. Kerby pursue the policy to a Congress is committed 308-09, Ariz. 157 P.2d supporting self-government right against The creditor assert policy That favors a self-determination. having action surety without taken provide whose rule that will the forum Express System, In re Yale principal. the being challenged the first jurisdiction is Inc., (2d Cir.1966); 111, ALI F.2d 114 362 and opportunity to evaluate the factual (1941). Restatement, Security 82§ challenge. legal for the bases rejected Appeals also The Court of 2454, at -, L.Ed.2d at Id. 105 at 85 S.Ct. regulations

Aetna’s contention that HUD (footnotes omitted) deprived jurisdiction state courts of ac Farmers, Supreme In National Court (149 553, tions on the bond. Ariz. at 720 federal district court deny did not that the 528.) P.2d at agree. We merely required the dis- jurisdiction; had it jurisdiction until trict court to withhold TRIBAL COURT JURISDICTION rule opportunity to had had the tribal court that federal Aetna and the Tribe assert Id. at jurisdiction. of upon question courts should policy requires that the state -, L.Ed.2d at 828. at 85 105 S.Ct. jurisdiction until suspend their exercise of and A & A National Farmers In its own both court has determined tribal had exercised Concrete the tribal courts referred jurisdiction. This court has been prior to judgment requires jurisdiction and rendered authority which to federal case suits. The federal of the federal court initiation litigants non-Indian to exhaust tribal juris to exercise also declined seeking in federal courts have before relief remedies sought plaintiffs non-Indian liti- diction when example, where non-Indian court. For governmental of challenge exercise trial tribal gants ignored process of and service Moun v. power over them. Hardin White of counsel and court on advice tribal (9th Tribe, 476 Cir. Apache court, 779 F.2d tain sought in federal Cir- then relief 1985) non- (Tribe legitimately exclude could upheld dismissal of Appeals of cuit Court from reservation convicted felon had “failed to Indian complaint; plaintiffs Qui residents); Snow v. court,” safety of preserve ren- exhaust their remedies tribal Nation, (9th F.2d 1319 A A nault Indian 709 & dering premature. federal review Cir.1983) (challenge tribal taxation Concrete, Mountain Inc. v. White legitimate mat Cir.1986). on reservation businesses F.2d sovereign pow self-government A ter of In A A had sued & & Concrete court). by adjudged tribal a default er best A in court had received A presence The Ninth Circuit stated in A & Con- of one of two jur Supreme has re- factors renders exercise state court crete Court “[t]he disputes involving par recognized over Indian peatedly courts have isdiction that tribal' First, infringpng] adjudicate ties invalid: “state action power disputes civil inherent right Indians to make on the of reservation affecting and non- the interests of Indians them,” Id., and be their own laws ruled upon are events occur- Indians which based at 79 S.Ct. at 3 L.Ed.2d 358 U.S. ring At 1415-1416 reservation.” second, 254; state pre-emption federal Farmers, at omitted). In National (citations Board, Navajo Ramah School authority. Concrete, Hardin, A A& the tribal Revenue, Bureau Inc. v. 458 U.S. initially jurisdiction had exercised court L.Ed.2d 1174 S.Ct. plaintiffs non-Indi- over tribe member Bracker, Apache Tribe v. White courts an defendants. Because the tribal 136, 100 S.Ct. 65 L.Ed.2d jurisdiction, already assumed the feder- had reservation, law’s Even on inter- al courts declined these cases to applied unless it interfere be would courts fere with the determination self-government dam or would with jurisdiction. extent of their right under federal law. Mescalero age proposition The cases cites for the Jones, 145, 148, Apache Tribe v. 411 U.S. suspend jurisdic- state courts that the must 114, 119 36 L.Ed.2d jurisdiction- tion in deference tribal court all common ele- al determination share a In plaintiff instituted an ment: an who Bracker, supra, suggests a bal- court. action in tribal federal interest in encour- ancing between bench, In the case at none of self-government reg- aging tribal and state parties proceedings has initiated in tribal Although pre-emption ulatory interest. There has been of trib court. no assertion begins specific with con- analysis whether It is ini question al not a action, govern given state gressional acts assumption a tribal tial ultimately amounts to whether case, By hearing court. the merits of implicated. self-government will not usurping Arizona the courts of adjudica Aetna maintains that the legitimate exercise of court asserted tribal in a case state court will have tion of this Thus, there is no need impact on White Mountain comity pro court or deference to the tribal impact treasury. Even if such an tribal cess. occur, in jurisdiction does state court does becomes, question The real thus does or violate policy frustrate federal this case in plaintiff have to file his suit tribal sovereignty? notions tribal traditional think court? We not. v. Apache Tribe White Both always appropri- court is not Tribal Lee, Bracker, su- supra, v. and Williams adjudicating on ate forum for occurrences reserva- pra, intrusions onto the involved example, land. For a tribal Bracker, In Arizo- State. tions try jurisdiction have does not criminal Department the Arizona Highway na for offenses punish non-Indians sought impose the Highway Commission Oliphant v. on reservation. committed carrier excise fuel motor tax and state’s 191, Suquamish Indian 435 U.S. logging contractor a non-Indian tax on 1011, 55 L.Ed.2d 209 S.Ct. log- by on-reservation hired hand, comprehensive Because of ging tribal courts activities. On other aspects of Indian involving disputes regulation all jurisdiction in federal cases harvesting, the ad- aris Court found parties timber non-Indian between burdensome, and without occurring ex activity ditional taxation ing from commercial regulatory terms or v. of state clusively on the reservation. Williams justification “no duties or Arizona had Lee, 3 L.Ed.2d service interest. 358 U.S. S.Ct. purchasing absence from the responsibilities respecting the reservation non-Indians Indians,” and therefore it frustrated feder- tribal seller will avoid of a con- tax____ policy by reaching onto the reservation al cededly nothing We see lawful participants to tax non-Indian in on- even in this which frustrates burden activities, creating impact reservation tax self-government, [citing Lee], Williams v. Bracker, 448 U.S. at tribe. congressional or runs afoul of enact- at 65 L.Ed.2d at 678. S.Ct. dealing with the affairs of reserva- Indians, tion ... [citation omitted] [T]o v. Lee likewise involved the Williams shops” the extent that the “smoke sell to reaching onto the reservation. A state upon validly those whom the State has trading post proprietor sued a non-Indian imposed a sales or excise tax with re- reservation Indian state court for a debt sold, spect to the articles the State allegedly owed him from sales at his store require proprietor simply to located on the reservation. A reservation the Indian reasonably expect price not and there- Indian could add the tax the sales Arizona state court because of haled into aid the State’s collection and enforce- wholly occurring on the reser- transactions ment thereof. vation; powerful had a the tribe therefore 483, 96 at 48 L.Ed.2d at Id. at S.Ct. disputes adjudicating interest be- added). (emphasis But see McClana- reservation Indians and non-Indians tween Comm’n, 411 han v. Arizona Tax State doing compari- on Indian land. In business 164, 93 S.Ct. 36 L.Ed.2d 129 son, relatively had weak interest State (1973) (Arizona jurisdiction has no to tax interjected non-Indians had them- where Navajo members resident income tribe Accord, into reservation affairs. selves income derived whol- on reservation where Tribe, 710 Navajo Babbitt Ford v. sources). ly from reservation (9th Cir.1983) (tribal court has F.2d 587 Indians, action Where state benefits repossession

jurisdiction over on reserva- The Ninth different result occurs. Circuit purchased of motor vehicles off reser- tion may apply their has held that states work- members). vation tribe terri- compensation ers’ laws to all federal Apache Tribe v. Brack- tory Begay state boundaries. within non-Indian er and v. Lee involved Williams Corporation, 682 F.2d Kerr-McGee regulatory judicial commercial and intru- Cir.1982) (construing 40 U.S.C. territory. activity As the sion into Indian 290). their by Indians Claims question moves off the reservation employers the exercise of non-Indian “and regulatory governmental inter- State’s not, over such claims does pro- dramatically, and federal est increases minimally, infringe upon or frustrate even sovereignty lessens. tectiveness of Indian (citations self-government.” Id. Village Egan, Kake v. Organized of 562, 571, omitted) 7 L.Ed.2d 573 82 S.Ct. U.S. has Supreme Court The United States (1962). example, in Moe v. For Confeder- im- Mexico could not Tribes, held that while New Kootenai ated Salish & by a (1976), personalty tax on attached pose an a use 48 L.Ed.2d 96 96 S.Ct. land it federal shop proprietor ciga- sold tribe to off-reservation Indian smoke impose leased, legitimately in an the state could Indians and non-Indians rettes to both receipts tax on nondiscriminatory gross interspersed reservation and non- area of ciga- operated there. taxation of resort the tribe land. While the ski reservation Tribe, patrons of the reserva- 411 U.S. to Indian rettes sold Mescalero S.Ct., (1973). impermissible, “Absent 36 L.Ed.2d tion store was Indi- contrary, the express federal law to the Indian requirement that State’s [t]he beyond boundaries going reservation ans validly imposed collect a tax tribal seller subject to nondis- generally been held have burden de- is a minimal on non-Indians applicable otherwise criminatory state law in its the likelihood that signed to avoid 148-49, Financing Act of ry for the Indian to all Id. citizens of the State.” at declares, (Public 93-262) 36 L.Ed.2d at 119. Law at No. capital credit resources neces- case,

In the present the Tribe has [t]he development of their sary for Indian own reached the reserva outside bounds the operated federally- purchase supplies tion to resources and Indian-owned housing project. adequate. -funded sanctioned and is nowhere near small business Concrete, A Unlike the contractors in A & Lacking capital, they must rely their own supra, and Co. v. Fort Belk Yet, R.J. Williams private money the markets. on Auth., nap 719 F.2d Cir. Housing practically closed these resources are 1983), engaged Smith in no on-reservation individuals them. tribes and Indian not installation. Smith did conduct his categorized poor credit risks in been business on the reservation. Under the private reasons often the market for be- Moe, Begay and rationale of Mescalero consequence, yond their As a control. reaching Apache, supra, the Tribe’s out all, credit, private only if available at outside the confines reservation high so available at interest rates as to engage activity—without in commercial prohibitive. reaching concomitant non-Indians— Cong. Ad.News 1974 U.S.Code & proper makes this a instance of nondiscrim part Congress’ As efforts aid inatory adjudication of a contract claim has development, in Indian authorized the courts of this state. housing HUD to disburse funds to housing income authorities lower FEDERAL POLICY projects. When C.F.R. § this The courts of funding housing lower income construction not, to, they nor desire exercise authori do projects, promotes HUD Indian businesses ty Enabling over Both the an Indian tribe. Housing by requiring Authorities to (36 567) Act and the Arizona U.S. Stat hiring of Indian-owned commer- favor (Ariz. 4) art 20 Constitution Const. clear § enterprises organizations. 24 cial or tribal ly forbid such assertion housing For the C.F.R. 905.106 § Aetna, however, contends an action case, Authority did projects con- an it is effect indirect action commercial ven- tract with Indian-owned Tribe, impermissible with ture, Enterprise. allowing party effect of the successful generally reach resources. See concerning regulations The HUD lower Shelley, Tribe v. housing include income Indian also certain supra; Morgan v. Colorado River Indian Housing protections for Indian Authorities the construction hous- which commission Aet ignores This contention nature of instance, production ing projects. For na’s with thé in this suretyship Authority chose here dictated method situation, origin in deliberate feder and its regulations under HUD “contrac- policies. al provide assurance required tor shall be percent performance and in the form of 100 acknowledged Congress repeatedly has bonds, percentage or a lesser achieving eco- Indians face obstacles approved by HUD.” 24 security other self-sufficiency. development nomic 905.203(c) (1905), (emphasis add- of C.F.R. example, For the United States House ed).2 requirement pro- thus suretyship Report legislative histo- Representatives housing regulations housing pro- A 1979 revision of Indian 2. The Method” "Conventional only insignificantly suretyship re- percent performance-pay- altered requires 100 a duction 805.203(c) contractor, quirement § 24 C.F.R. under former while the “Turn- of the bond percent (1985), of 100 Turnkey” in the form key” permit "assurance methods and "Modified bonds, performance payment or other se- and Authority require a Alterna- such bond. the tively, Authority to HUD, curity approved such as letter may act as contractor. itself 10,160 (1976). Fed.Reg. 41 credit or escrow." 24 C.F.R. 905.203 § 532 housing authority by assuring Apache

tects the Mountain Indian Tribe v. Shel- completion project. protects ley, supra. recognized It also HUD nevertheless parties suppliers. that both Indian and non-Indian the sub-contractors and housing construction contracts would en- recognize they While the need for Indian gage readily more those contracts with development, Congress business and HUD protection performance-payment aware of the doctrine of tribal are also well assuring project completion bonds both and immunity. example, regula- For in HUD’s payment of subcontractors and material- promulgating Housing Author- tions men. ities, provides a form tribal tribes with light policy goals In of the set Con- a “sue and be ordinance which includes gress development for Indian economic and 905, Appen- 24 provision. sued” C.F.R. § encouraging in- construction of lower V(2); Apache I Mountain dix Art. White 1437, housing come under 42 U.S.C. we 1963), § (Jan. 16, No. 47 Tribal Ordinance encourage conclude that HUD intended to (Feb. 2, 1977).3 amended No. 102 Ordinance building and non-Indian subcontractors sovereign immunity explicit This waiver of suppliers to do business with Indians Housing facilitates Authorities interaction federally- providing bonding protection on suppliers; as with non-Indian creditors Otherwise, housing projects. financed rule, goods to sell businesses hesitate perform- no there would be reason they they know lack to extend credit when payment ance and bonds. legal recourse should contracts be breach- immunity generally causes busi- ed. Tribal Further, nothing in the there that deal with the tribes to “do so at nesses complex regulations by and detailed HUD great Unique financial risk.” v. Gila S. housing subject on this of Indian which Pima-Maricopa Indian Communi- River suppliers suggests that or subcontractors 378, 386, P.2d 1384 ty, 138 Ariz. 674 any specific court to enforce are limited to (App.1983). the con claims the bond. On their regulations trary, “the sue and be sued” bonding requires or alternative as- HUD suggest Housing Authorities for Indian building Indian surance of all contractors those, policy who in that it is federal Housing Au- housing projects and Public faith, supply goods or services to good suretyship require- thority projects. The protec the same project should have such an authorization to waive sov- ment is not dealing persons rights as similar tion and immunity “sue and sued” ereign like the private sector. creating provision enacted in Authority Enterprise, Housing as an Authority.4 The White Mountain is, course, longer party suit in this agency, remains immune from no En- general is the Congressional or tribal consent. action. The contractor without tribe; neverthe- terprise, agency Fidelity States & United States United 506, 512, less, required to furnish Co., agency 60 S.Ct. was 309 U.S. Guaranty subcon- (1940); protection for the bond L.Ed. 899 municipalities may "Although per- charities and explained requirement of 100 4. HUD has by purchasing performance for con- from suit bonds waive their cent ventional method Indian Public development by damages project liability subject non- insurance and be Authorities, designed Housing coverage, pur the insurance the extent of protect interest.” 24 C.F.R. "to the Federal waive has not been held to chase of insurance 60,837 (1980). 941.102(a) (1985); Fed.Reg. Note, § immunity.” In Tribal Defense of state, county, Housing Authorities are Public Sovereign Immunity, HARV.L.REV. public municipal governmental bod- other or Haldane, P.2d Atkinson v. develop operate low-in- ies authorized (Alaska 1977) (waiver "should be im [not] housing. 24 C.F.R. 941.103 come protect plied was intended to from an act which resources”); Graves v. White however, obligate Authority, cannot (App.1977), case, the White In this Tribe for its own debts. denied, rt. Authority Housing is not a ce L.Ed.2d 776 party. usurping legitimate ex- be suppliers of materials for the result “will not tractors and jurisdiction and does required of ercise” of tribal court project the same as that self-government.” pol- with tribal private contractor. We find no federal not “interfere P.2d at 504. Ariz. at icy requires actions on such bonds which brought in tribal or federal court. We this remarkable conclu- The court reaches policy magic that federal allows the mate- by engaging believe in a shadow show sion in bring an action on the bond rialman the ultimate facts and which misconstrues long surety. court As as state The case barely mentions the real issue. attempt court does not to assert the state single, simple principle: boils down Tribe, jurisdiction over the there is no viola- a tribe have an where both a state and infringe- policy against of the matter, tion adjudicating a civil interest upon self-government. tribal It is strong policy in of self- federal favor certainly possible, if Smith recovers government requires the tribal court to de- bond, may that at some future date termine in the first instance whether it has indemnity agreement be able to enforce its jurisdiction. National Farmers Union In- — Tribe;5 with the If the Tribe or the Enter- Indians, surance Tribe Co. Crow agreed prise has to waive its -, -, Smith, paid suit Aetna for amounts L.Ed.2d 818 agreement beyond the is a matter consideration this court. The case be- THE FACTS fore this court is one of a non-Indian mate- majority The tells us that this is not a suing surety rialman a non-Indian on a “interjected case non-Indians have where bond, performance-payment on which the themselves into reservation affairs.” 149 beneficiary. materialman is an intended is, Ariz. at 720 P.2d at 505. It plaintiff We conclude that the action majority says, case of “the reach- Tribe infringe policy does not violate federal ing out outside the confines of the reserva- upon self-government. The decision engage activity— tion to commercial Appeals approved the Court of as reaching in non- without the concomitant supplemented by opinion, judg- this and the Indians.” 149 Ariz. at 720 P.2d at 506. superior dismissing ment of the incorrectly The characterized the court has action is reversed with are, They simply, facts. that a ultimate complaint. directions to reinstate the The owner, authority, engaged a tribal dismissal of the action the Enter- enterprise prime to act as contractor prise is affirmed. housing Indian the construction of an country Indian use.1 project in Indian CAMERON,JJ., HAYS concur. plumbing fixtures knowingly Plaintiff sold FELDMAN, Justice, dissenting obligated them to a to install subcontractor I dissent. country. project in an Indian Indian majority today participate in an under- effect holds that Plaintiff chose to taking involving Indian liability an Indian tribe to a credi- Indians and an arguably indi- tor of its subcontractor be determined tribe. Plaintiffs conduct clearly opinion quite in state court. The holds that the cates that it knew what organization Apache part governmental of the 5. White Mountain Civil Code Tribe Apache 21.1 Jurisdiction Tribe v. Tribe. Cf. Shelley, S. Ariz. 480 P.2d 654 Court of the Tribal Apache Pima-Maricopa Unique, Tribe shall over all Ltd. v. Gila River (App. civil suits an Indian Community, wherein or member Ariz. the White Mountain or the White 1983). and cannot Its assets are tribal resources party Tribe is ... Shelley, supra; be reached suit in state cotut. Morgan Unique, supra; v. Colorado River S. 1. The which entered into the con- Ariz. P.2d 421 subcontractor, tract with the non-Indian Plumbing, GS & D entity, is not a distinct but is rather professes chose not to sue the court not to know—that ultimate Plaintiff non-Indian paid, not subcontractor for those invoices security supplied for material and, instead, brought the action job payment consisted of a bond on which Thus, indemnitee. Tribe’s principal obligor Enterprise, was the out”; did not “reach this is a case of agency. “reaching in”. R.J. Williams Co. v. Cf. majority pretends that the sale Authority, 719 Belknap Housing Fort plaintiff from to the the fixtures subcon- (fact (9th Cir.1983) that con F.2d open simple tractor was a transaction on housing to be built on the tract involved (149Ariz. at account between non-Indians. reservation, occupied by to be reservation 505.) Not so. Evidenc- 720 P.2d at paid agency repre members and knowledge plumbing ing plaintiffs that its senting the tribe established the reserva be installed in an Indian fixtures were to dispute), tion as the locus of the contract project country in are the facts that Indian — U.S. -, denied, 105 S.Ct. cert. plaintiff signed lien waivers and entered 87 L.Ed.2d 612 Agreement” and a into both a “Joint Check it, Agreement” “Direct Check between Con-

subcontractor and the General THE ISSUE tractor, Apache Develop- lengthy opinion, In its which various Also, agency. Enterprise, a tribal disappear like legal principles appear and interrogatories it its answers to claimed pea, majority only proverbial Enterprise. While have a contract with the upon the real issue when it states touches most, all, paid for if not of the fixtures not analysis ultimately preemption that “a ... doc- sold before execution of these were self-govern- to whether amounts uments, provide certainly the documents implicated.” ment is 149 Ariz. at plaintiff was aware some evidence that That, fact, is all P.2d at 504. that this of the circumstances. majority applied If had case is about. analysis would have preemption such Further, a firm it is safe to assume that reached the correct result. describes itself as a vendor which Pinetop- plumbing fixtures” in “wholesale sovereignty is not Although their abso Lakeside, 2,335 metropolis people lute, separate people Indian tribes remain a reservation, edge would have power make and enforce with the $300,- the destination for very known well regulat own courts substantive law their Certainly, fixtures. the sale 000 worth of ing matters which concern the tribe is an unusual of 300 sinks and toilet bowls geographical territory. occur within Nevertheless, lack- in such a town. event Lee, 223, 79 358 U.S. See Williams evidence, majority prefers to ing as- 269, 272, 3 R.J. S.Ct. L.Ed.2d simple transaction that this was a sume Belknap Housing v. Fort Williams Co. non-Indians, unaware of con- between sovereign Authority, supra. Tribes (149 nection with Indian affairs. Ariz. at civil over power to exercise 506.) majority’s 720 P.2d at “who enter consensual non-Indians [into] did not conduct busi- members, that “Smith statement relationships tribe or its with the gross specula- contracts, on the reservation” dealing, ness through commercial does not indicate where leases, tion. The record arrangements.” Montana or other delivery 544, 565, was States, sale was made or whether 450 U.S. v. United indi- 1245, 1258, The record made to the reservation. L.Ed.2d 493 S.Ct. little, decided very “appropriate since the case was forums cates courts are the Tribal show, disputes It does how- adjudication on motion to dismiss. exclusive for the ever, personal property majority plaintiff’s affecting important invoices that a and non-Indians.” agen- of both Indians directly to the tribal interests were submitted Martinez, 436 U.S. Pueblo v. Santa Clara cy paid directly it. 1670, 1681, L.Ed.2d 106 conflicts between state court and tribal See, e.g., United States Court, Superior supra; v. Santa Clara Having jurisdiction failed civil to assume Martinez, supra; Pueblo v. R.J. Williams over Indian and their members as tribes Belknap Housing Authority, v. Fort Co. 83-280, 6, permitted under Pub.L. 67 § supra; Navajo Babbitt Ford v. only power Arizona limited Stat. has (9th Cir.1983). Tribe, 710 F.2d 587 In con- determine matters to a tribe is a which sidering a similar to matter the one before party or in which it has an interest. See court, Ap- this the Ninth Circuit Court of COHEN, generally F. HANDBOOK OF peals question the observed that of wheth- LAW, 6, C(3)(a) FEDERAL INDIAN ch. § particular jurisdic- er a assertion of state (1982 ed.); Lee, supra. at 362 Williams v. self-govern- infringe upon tion will Any attempt jurisdiction state to assert generally ment arises in one of two situa- closely over a tribe or its interests must be tions: Superi scrutinized. See United States Court, First, P.2d 658 if a state or federal court resolves or dispute province which was within the nonjudi- of the tribal courts or of other determining The test for whether the institutions, law-applying cial that jurisdiction exercise its in Indian impinge upon court would the tribe’s matters was articulated the United right adjudicate arising controversies Lee, Supreme States Court Williams v. Second, dispute it. within the case, if itself In supra. operator a non-Indian question pro- validity calls into the general Navajo of a store on the priety fairly an act attributable to brought against Reservation suit Indians governmental body, the tribe as a goods state court to collect for sold on directly self-government is drawn into Supreme credit. Court held that controversy. can be no doubt that to allow the [t]here Belknap v. Fort Hous- exercise of state here R.J. Williams Co. would (citations ing Authority, 719 F.2d at 983 authority undermine the the tribal omitted; emphasis supplied); Mon- courts over Reservation see also affairs 564-65, States, infringe hence would 450 U.S. at right on the tana v. United Thus, govern question Indians to It is im- 101 at 1257-58. themselves. S.Ct. general operator] material dispute store Smith here is whether between [the dispute is not an Indian. He was on the Reser- and Aetna is a which involves or vation and the transaction with an Indian fairly determines “an act attributable place there. took The cases in this Court governmental body.” the tribe as consistently guarded authority governments of Indian over their reser- THE TRIBE’S INVOLVEMENT vations____ If power is to be taken judgment against If Smith obtains a Aet- them, away Congress from it is for to do na, surety, the latter has a claim for it. against indemnification and reimbursement (citations 358 U.S. at at 272 S.Ct. Enterprise. right of indemnifica- omitted, Thus, emphasis supplied). presumably an indemnifi- tion comes from jurisdictional test resolves con Williams agreement cation between by providing authority flicts that a state’s agreement part of this Aetna. That is not self-government stops where tribal would record, I do although it is referred to. not Mojave be affected. Fort Tribe v. See speculate to its if there as contents. Even Bernardino, 543 F.2d County San gives a agreement, no hornbook law were (9th Cir.1976), denied, 430 cert. U.S. right against of reimbursement 97 S.Ct. 52 L.Ed.2d 377 principal obligor. of Se- Restatement words, curity judg- In consistently applied the other Courts have Wil- “infringement” provide Aetna will Aetna with liams v. Lee test resolve project country, claim for reimbursement from the Enter- in Indian Smith should part sup- prise, which is of the Tribe and entering have been well aware that he was ported by treasury. the tribal relationship into a commercial on a tribal project so that tribal courts would have addition, In resolution in state adverse power authority to exercise civil over it. defenses exist to Smith’s court whatever judicata Tribe, claim will be res See Merrion v. Jicarilla and will collaterally estop 130, 144-45, 894, 905-06, principal obligor. prin This is because a Hardin v. Moun L.Ed.2d 21 obligor by judg cipal ordinarily bound tain 779 F.2d surety, ment rendered and col Cir.1985). Nevertheless, Smith could still raising laterally estopped from defenses avoided in tribal court. It jurisdiction by which have asserted and deter been subcontractor; could have sued the certain See surety. mined A. account, ly, open brought a debt action on STEARNS, THE LAW OF SURETYSHIP by a non-Indian materialman a non- 1973); Farmers 11.43 at 525-26 ed. subcontractor, properly belongs in Company Vag Arizona v. Insurance of However, state court. Smith instead sued nozzi, 443, 446, 138 P.2d 706 Ariz. Aetna, surety, the Tribe’s in an action on Fidelity United States & Guaran payment project bond for a tribal ty Company Lumber Seed & Alfalfa country. if Even that action was Company, 297 P. pragmatic necessity, the result of re sult is the same. When Smith sued the party responsible Because the ultimate surety, directly ultimately Tribe’s it payment for of the claims in this case is the implicated the Tribe as the ultimate source Tribe, adjudication of the state court na- payment judgment of the of the it which liability ture and extent of the of the Concrete, in state court. A A& sought surety actually adjudicates na- Tribe’s Tribe, Inc. v. White Mountain liability. ture and of the extent Tribe’s (9th Cir., 1986), petition cert. F.2d 1411 for Thus, taking by jurisdiction of the claim — denied, -, Aetna, filed Smith our courts L.Ed.2d 659. effectively compel agencies will litigate in state court all issues which deter- Because the action concludes tribal de- mine nature and amount of the Tribe’s source of fenses and because the ultimate liability ultimate the materialman’s any judgment may of which Smith therefore, impossible, claim. It is to avoid Tribe, get against Aetna is the the latter’s assumption jur- of conclusion that state right self-government implicated infringed upon right isdiction the Tribe’s court, brought in tribal the action should be self-government. Having failed even to jurisdiction adjudicate if it has to hear and point, majority discuss this ends its Any jurisdiction such an action. lack of sentence it characterizes too soon when law, not result from state or federal would this as a case “of a non-Indian materialman repeatedly “Supreme since the Court has suing surety perform- a non-Indian on a recognized courts have inherent that tribal Ariz. at ance-payment bond.” 149 affecting adjudicate disputes power to civil Actually, is a case in at 508. P.2d the interests of Indians non-Indians suing a non-Indian materialman is a which occurring on upon are based events which non-Indian bond obtain Id. at 1415. There the reservation.” judgment which the Indian tribe itself might lack of because be some pay. ultimately must of the but provisions the laws PLAINTIFF’S CONSENSUAL INVOLVE- instructed that the existence we have been THE TRIBE

MENT WITH jurisdiction is “an and extent of tribal court conducted in examination which should be By providing materials to be used Court it- installation in a tribal the first instance the Tribal subcontractor National Farmers eign immunity. self.” Id. National Farmers Un- (quoting Cf. Co., supra. If Tribe Indi- Insurance ion Insurance Co. v. Crow Union time, ans, the defense at then supra). Interpretation of the tribal does assert truly one in which the responsibilities the action becomes code is one may court, not involved and be Belknap, Fort F.2d at tribal interests are proceed in state court. any attempt by any other court allowed to jurisdictional question for determine the severely infringe upon the the Tribe would MATERIALMEN PROTECTION OF “right adjudicate controversies” Tribe’s argues by requiring that majority id.; Na- on the reservation. See arising construction obli- surety for the Tribe’s Co., su- Farmers Insurance tional Union Congress protect mate- gations, intended

pra. 149 Ariz. at rialmen such as Smith. becomes P.2d at 507. This is true but DEFERENCE; OF SUSPENSION majority’s implicit as- only relevant STATE PROCEEDINGS sumption non-Indian materialmen will majority argues adjudication in than in protected less state court not affect the Tribe since supported is not state court. This attitude right sovereign may assert its policy. Congress’ decision to law attempts if to obtain in- and Aetna when require payment bond is no more than a demnification or reimbursement action bonds were neces- conclusion 533, 720 149 Ariz. at Tribe. sary protect materialmen argument only partly P.2d at 508. This is sovereign immunity from suit. It tribes’ right. assert If the Tribe does not implicit exception to the not create an does sovereign immunity, claim of then it will congressional judicial pol- longstanding compelled by application of the have been favoring jurisdiction by authoriz- icy estoppel to doctrine of collateral submit liability ing materialmen to establish tribal amount adjudication of the nature and Although majority evi- in state courts. and all defenses thereto of Smith’s claim that non-Indians be treat- dently fears court, right to have state when it had a court, it articulates no unfairly ed If those issues determined in tribal court. doubt, in apprehension. No grounds for its that, it forced to it wishes to avoid will be may have past some Indians the distant sovereign immunity the defense of assert unfairly in court. The treated been adversely surety, its thus to the claim of to those opinion is a throwback majority affecting ability its to do business times. in the future. make such contracts course, always possible that the Of GORDON, V.C.J., concurs in Justice sovereign may eventually assert dissent. Feldman’s or that the tribal immunity2 as a defense case. decline courts will militates possibilities these

Neither of juris- deferring preemptive to the Although, as of the tribal court.

diction ante

noted at exami- 720 P.2d at occur jurisdiction should

nation of tribal court, no need to there is

first may simply be the state action. It

dismiss abeyance until it is determined

held in jurisdiction and that court has

the tribal the defense of sover- has waived assump- indulge agreement. I will majority did cation that the assumes tion. sovereign the indemnifi- not waive

Case Details

Case Name: Smith Plumbing Co. v. Aetna Casualty & Surety Co.

Court Name: Arizona Supreme Court

Date Published: May 28, 1986

Citation: 720 P.2d 499

Docket Number: 17691-PR

Court Abbreviation: Ariz.