Royal School Laboratories, Inc. v. Town of Watertown

• Decision Date: 14 March 1966
• Docket Number: 29799.,Dockets 29706,104,No. 103,103
• Parties: ROYAL SCHOOL LABORATORIES, INC., Appellee, v. TOWN OF WATERTOWN and Classen P. Perkins, Appellants. TOWN OF WATERTOWN, Appellants. v. NEW ENGLAND MERCHANTS NATIONAL BANK OF BOSTON and Royal School Laboratories, Inc., Appellees.
• Court: U.S. Court of Appeals — Second Circuit

358 F.2d 813 (1966)

ROYAL SCHOOL LABORATORIES, INC., Appellee, v. TOWN OF WATERTOWN and Classen P. Perkins, Appellants.

TOWN OF WATERTOWN, Appellants. v. NEW ENGLAND MERCHANTS NATIONAL BANK OF BOSTON and Royal School Laboratories, Inc., Appellees.

Nos. 103, 104, Dockets 29706, 29799.

United States Court of Appeals Second Circuit.

Argued October 28, 1965.

Decided March 14, 1966.

Philip R. Shiff, New Haven, Conn., for appellants Town of Watertown, Classen P. Perkins.

Arnold J. Bai, Bridgeport, Conn. (David Goldstein, Robert S. Cooper), Bridgeport, Conn., for appellee Royal School Laboratories, Inc.

Donald Lee Rome, Hartford, Conn., for appellee New England Merchants Nat. Bank of Boston.

Before LUMBARD, Chief Judge, and FRIENDLY and SMITH, Circuit Judges.

FRIENDLY, Circuit Judge:

Late in 1962 Classen P. Perkins, Chairman of the School Building Committee of the Town of Watertown, signed an agreement with Twombly Associates, Inc., a Massachusetts corporation, for the furnishing and installation of science laboratory equipment and furniture for the new town high school. The total contract price was $59,628.62. Notwithstanding a statutory requirement that a bond be obtained to protect materialmen,¹ Perkins did not request and Twombly did not furnish such a bond. Thereafter Twombly engaged Royal School Laboratories, Inc., a corporation organized and having its principal place of business in Virginia, to supply equipment and furniture valued by the latter at $48,118. Royal delivered the goods, which are now in the school, but received only 10% of its bill. Twombly became insolvent and never paid the balance of $43,307. The Town admitted an obligation to pay for the material and labor but, confronted by conflicting claims of the materialman and an assignee of the contractor, refused to pay either until the dispute was resolved.

Royal thereupon sued the Town and Perkins in the District Court for Connecticut, in quasi-contract for the unpaid price of the equipment supplied, and in tort for breach of a statutory duty to secure a bond from Twombly. The assignee of Twombly, New England Merchants National Bank of Boston, sued the Town in the same court for the contract price of $59,626.62 as "justly due and owing" for work performed by the contractor.

The two actions precipitated a rain of motions. Before the New England Bank's suit was commenced, the Town and Perkins together and Perkins individually had moved to dismiss Royal's action on the merits, and Royal had moved for summary judgment against them. Thereafter the defendants filed separate motions to consolidate Royal's action with the bank's, to postpone the hearing on Royal's summary judgment motion, and for leave to deposit $58,670.55 into court on condition that they be discharged from liability to all concerned; later they counterclaimed for interpleader and filed a motion for a stay of all proceedings pending a determination of the interpleader claim. In the New England Bank suit, the Town also moved separately for consolidation and for leave to deposit, and filed a similar counterclaim for interpleader and a motion for a stay.

Judge Zampano denied the Town's claim for interpleader and granted Royal's motion for summary judgment, awarding a recovery of $43,307 in quasi-contract and tort against the Town and Perkins. 236 F.Supp. 950 (1965).² Recognizing that "initially it might appear appropriate to grant the interpleader," the judge concluded that the contentions between Royal and the defendants "present independent and distinct claims from those of the bank * * * and therefore should be determined separately." The judge ought to have followed his instinct; the claims of Royal against the defendants are not distinct from but inextricably interrelated with the New England Bank's.

As to recovery in quasi-contract, the Connecticut decisions do say, as the judge noted, that while no valid contract can be made without furnishing the required bond, City of Norwalk v. Daniele, 143 Conn. 85, 89, 119 A.2d 732, 735-736 (1955), a contractor who has failed in this respect may recover in quantum meruit for the reasonable value of goods and services retained by a municipality. Vito v. Town of Simsbury, 87 Conn. 261, 87 A. 722 (1913); Loomis v. Fifth School District, 109 Conn. 700, 145 A. 571 (1929); Leverty & Hurley Co. v. City of Danbury, 7 Conn.Sup. 125 (Super.Ct. 1959). But no Connecticut decision cited to us deals with the question whether such a claim for unjust enrichment can be asserted by a materialman as distinguished from a contractor. To decide that issue in favor of the materialman in a suit to which the assignee of the contractor is not a party leaves the Town exposed to the very possibility of double liability which interpleader is designed to prevent; nothing could be more palpably unjust than to permit two recoveries against it for the same enrichment.

The desirability of interpleader is not negatived by the presence of Royal's alternative claim in tort, disposition of which not only poses the same threat of double payment by the Town but involves serious danger of a federal court's misinterpreting the state law on sovereign immunity. No Connecticut decision clearly supports, although none clearly opposes, the finding of tort liability reached by the district judge. The general rule in Connecticut and elsewhere is that, except as provided by statute, municipal corporations are not liable for tortious conduct in the exercise of "governmental" functions, including the establishment and maintenance of schools. See Lambert v. City of New Haven, 129 Conn. 647, 649, 30 A.2d 923, 925 (1943); Jabs v. Town of Burlington, 23 Conn.Sup. 158, 159-160, 178 A.2d 280, 281 (Super. Ct.1962); 2 Harper & James, Torts § 29.6 at 1620, 1623-24 (1956); Prosser, Torts § 125 at 1004-1007 (3d ed. 1964). Quite apart from the possible bearing of that general principle, the district judge conceded that a majority of courts have held that a municipality is not liable in tort to subcontractors or materialmen for failure to obtain a payment bond required by statute. See, e. g., E. I. DuPont de Nemours & Co. v. City of Glenwood Springs, 19 F.2d 225 (8 Cir. 1927); Robbins v. City of Sheffield, 237 Ala. 674, 188 So. 874 (1939); Newt Olson Lumber Co. v. School District, etc., 83 Colo. 272, 263 P. 723 (1928); Szilagyi v. City of Bethlehem, 312 Pa. 260, 167 A. 782 (1933); Annot., 64 A.L.R. 679 (1929); but see Northwest Steel Co. v. School District, etc., 76 Or. 321, 148 P. 1134, L.R.A.1915 F, 629 (1915); Cowin & Co. v. City of Merrill, 202 Wis. 614, 233 N.W. 561 (1930). He concluded, however, that probable adoption of the minority rule by Connecticut was indicated by the language, although admittedly not the decision, in Leger v. Kelley, 142 Conn. 585, 116 A.2d 429 (1955). We have no confidence that this is so. In the Leger case, the official violated a prohibition of the statute, whereas here the Town and Perkins simply failed to require Twombly to carry out its own statutory duty; whether this difference is or is not significant, see 3 Davis, Administrative Law Treatise § 25.14 (1958), can be determined with assurance only by the Connecticut courts. And whether a municipal official would be held individually liable for failing to insist upon a statutory bond, as found by the district judge, is a matter of first impression in Connecticut better left to state tribunals in a jurisdiction that has recognized "the broad trend of all American law in recent decades * * * toward increased liability of governmental units and decreased liability of public officers and employees." 3 Davis, supra, § 25.17 at 119 (1965 pocket part). See Conn.Gen.Stat. §§ 4-165, 7-465; An Act Concerning Assumption of Liability for Employees, 32 Conn.B.J. 180 (1958).

It is true that a federal court generally is not allowed to shirk the determination of unsettled...