182 F.3d 1284 (11th Cir. 1999), American Mfg. Mut. Ins. v Tison Hog Market

Citation:182 F.3d 1284
Party Name:AMERICAN MANUFACTURING MUTUAL INSURANCE COMPANY, Plaintiff-Counter-Claimant-Defendant-Appellee, v. TISON HOG MARKET, INC., THOMAS T. IRVIN, Commissioner of Agriculture for the State of Georgia as Trustee for any and all claimants under bonds issued for Thurstan D. Paulk, Jr. d.b.a. Paulk Livestock Co., and Coffee County Stockyard, Inc., Defendants-
Case Date:August 03, 1999
Court:United States Courts of Appeals, Court of Appeals for the Eleventh Circuit
 
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Page 1284

182 F.3d 1284 (11th Cir. 1999)

AMERICAN MANUFACTURING MUTUAL INSURANCE COMPANY,

Plaintiff-Counter-Claimant-Defendant-Appellee,

v.

TISON HOG MARKET, INC., THOMAS T. IRVIN, Commissioner of

Agriculture for the State of Georgia as Trustee for any and all claimants

under bonds issued for Thurstan D. Paulk, Jr. d.b.a. Paulk Livestock Co.,

and Coffee County Stockyard, Inc., Defendants-Appellants,

GAINESVILLE LIVESTOCK MARKET INC., MADISON HOG

MARKET, INC., d.b.a. Townsend Livestock Market, et al.,

Defendants-Counter-Claimants-Appellants.

United States Court of Appeals, Eleventh Circuit

August 3, 1999

Page 1285

Appeals from the United States District Court for the Southern District of Georgia D. C. Docket No. CV 595-86

Page 1286

Before COX, Circuit Judge, FAY, Senior Circuit Judge, and NANGLE[*], Senior District Judge.

COX, Circuit Judge:

Plaintiff American Manufacturing Mutual Insurance Company ("American") filed this action seeking a declaratory judgment that it was not liable to the defendant creditors on two surety bonds. The district court entered summary judgment in American's favor and the defendants appeal. For the reasons that follow, we vacate and remand.

I. Background

The Packers and Stockyards Act of 1921, 7 U.S.C. § 181 et seq., (the "PSA") and its implementing regulations require that every livestock dealer execute and maintain a reasonable bond to secure the performance of its obligations. See 7 U.S.C. § 204; 9 C.F.R. § 201.29. The PSA's bonding requirement was designed "to safeguard the farmers and ranchers who produce cattle against the losses they would suffer if they sold their livestock to insolvent or defaulting purchasers." Travelers Indem. Co. v. Manley Cattle Co., 553 F.2d 943, 945 (5th Cir. 1977) (citations omitted).

Two livestock dealers, Thurston Paulk, d/b/a Paulk Livestock Company ("Paulk Livestock"), and Coffee County Stockyard, Incorporated ("Coffee County Livestock"), applied to American to serve as a surety and issue bonds for them to meet the PSA's requirements.1 The applications for both bonds contained agreements to indemnify American for any losses that it might incur as a result of their issuance. The principal on the first bond was Thurston Paulk, d/b/a Paulk Livestock. The application was signed by Thurston Paulk in his role as the sole proprietor of Paulk Livestock. The indemnification agreement contained the purported signatures of Thurston Paulk, Betty Paulk, and a witness. The principal on the second bond was Coffee County Livestock. The application contained the signature of Thurston Paulk in his role as president of Coffee County Livestock. The indemnification agreement contained the purported signatures of Thurston Paulk, Betty Paulk, Ashley Paulk, and a witness. American relied upon the information contained in the forms and the alleged genuineness of the signatures in making the decision to issue the bonds.

After the bonds were issued, Paulk Livestock and Coffee County Livestock purchased numerous hogs from defendants Tison Hog Market, Inc.; Gainesville Livestock Market, Inc.; Madison Hog Market, Inc., d/b/a Townsend Livestock Market; South Carolina Farm Bureau Marketing Association; and Georgia Farm Bureau Marketing Association, Inc. When the defendant hog sellers did not receive payment for the hogs, they made claims against the surety bonds for the purchase money that they were due. Defendant Thomas T. Irvin, Commissioner of the Department of Agriculture for the State of Georgia, was the trustee for the bonds. In his role as trustee, he notified American of the claims being made on the bonds by the livestock sellers.

American conducted an investigation and learned that the bonds' indemnification agreements contained forged signatures. In particular, American discovered evidence suggesting that: (1) Ashley Paulk had not signed or authorized anyone to sign his name to the Coffee County Livestock bond indemnification agreement; and (2) Betty Paulk had not signed or

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authorized anyone to sign her name to either bond's indemnification agreement. American claimed that it would not have issued the bonds had it known that Betty and Ashley Paulk had not agreed to indemnify it, and it declared the bonds rescinded and returned all the premiums.

American then brought this action seeking a declaratory judgment relieving it from liability to the defendants on the ground that the bonds were void ab initio under Georgia insurance law due to the fraudulent and material misrepresentations of the bonds' principals. American argued that the principals had forged the signatures of Betty and Ashley Paulk on the indemnification agreements in order to induce it into issuing the bond. The defendants answered and counterclaimed seeking judgment for the amount due them on the bonds. They argued that Georgia insurance law did not apply to the surety contracts at issue in this case and that under both federal and Georgia surety law, American was still liable on the bonds.

Cross motions for summary judgment were filed. The...

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