Wilcon, Inc. v. Travelers Indem. Co.

Citation654 F.2d 976
Decision Date20 August 1981
Docket NumberNo. 79-2888,79-2888
PartiesWILCON, INC., Plaintiff-Counterdefendant-Appellee Cross-Appellant, v. The TRAVELERS INDEMNITY COMPANY, Defendant-Counterclaimant-Appellant Cross- Appellee. . Unit A
CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)

Jones, Walker, Waechter, Poitevent, Carrere & Denegree, Herschel L. Abbott, Jr., New Orleans, La., Daniel, Coker, Horton, Bell & Dukes, John B. Clark, Jackson, Miss., for defendant-counterclaimant-appellant cross-appellee.

Young, Scanlon & Sessums, Pat H. Scanlon, Jackson, Miss., David L. Reynolds, Jackson, Miss., for plaintiff-counterdefendant-appellee cross-appellant.

Appeals from the United States District Court for the Southern District of Mississippi.

Before WISDOM, COLEMAN and RANDALL, Circuit Judges.

RANDALL, Circuit Judge:

This diversity case involves the construction of a sewage collection system for the City of Waveland, Mississippi. The litigants are Wilcon, Inc., a construction contractor that worked on the project, and The Travelers Indemnity Co., Inc. (Travelers), the surety that bonded the project. Wilcon brought this suit seeking damages from Travelers for "interference with business relations" and "abuse of process," both of which torts allegedly occurred in connection with the Waveland construction project. Travelers then sought in a counterclaim to recover the cost of completing the project, which it assumed after Wilcon's default. After a trial conducted by a magistrate, the jury found in favor of Wilcon on a general verdict and awarded $100,000 in compensatory damages and $1,500,000 in punitive damages; the jury also found in favor of Travelers on its counterclaim and awarded $1,000,000 in compensatory damages with respect thereto.

Each party now challenges the sufficiency of the evidence to support the judgment entered against it, and Travelers also challenges the sufficiency of the evidence to support the purportedly inadequate amount awarded on its counterclaim. We find that the evidence is insufficient to support the jury's verdict in favor of Wilcon, and we therefore reverse that portion of the district court's judgment entered pursuant thereto. We find that the evidence is sufficient to support the jury's verdict on Travelers' counterclaim, both as to liability and as to the amount, and we therefore affirm that portion of the judgment entered pursuant thereto.

I. THE FACTS

Wilcon, a Louisiana corporation, was from 1969 (its formation) to 1974 (the time of the events in question) a contractor specializing in underground construction; during this period Wilcon procured a number of payment and performance bonds (totalling approximately $7,500,000) from Travelers. Wilcon was and still is controlled by R. E. Wilson, its president and chief stockholder.

Howard L. Byrd, Contractor Building Services, Inc. (the Byrd Corporation) is a Mississippi corporation which at the time of these events was a contractor doing substantial underground construction work. The Byrd Corporation was and still is controlled by Howard L. Byrd, its president and chief stockholder.

In early 1972, Wilcon and the Byrd Corporation agreed to bid together on the construction of a proposed sewage collection system in Waveland, Mississippi. Although the details of their initial decision to consider a joint bid are in dispute, both parties agree that Joe Ashley, the manager of Travelers' New Orleans office, played some role in the initiation of this relationship.

In July 1972, the City of Waveland awarded the construction job to Wilcon and the Byrd Corporation, whose joint offer was found by the Mayor and Board of Aldermen of Waveland to be lowest and best bid. In August 1972, Travelers wrote both a payment and a performance bond on this project; each bond was issued to the City of Waveland in the amount of $2,284,041.30 the contract price of the successful bid.

Work began on the project in September 1972, with the Byrd Corporation responsible for construction on the east side of Waveland and Wilcon responsible for the west side of the town; Wilcon did not itself begin the job, but instead subcontracted its entire portion to Ray Gray Construction Co. (Gray), a sole proprietorship. The Byrd Corporation and Gray worked together until June 1973, when the Byrd Corporation announced that it was financially unable to complete its portion of the project or to pay its outstanding bills. Wilcon thereupon decided to assume the entire project, and hired Gray to complete the Byrd Corporation's portion as well as its own. Gray continued work until June 1974, at which point he notified Wilcon that he too was financially unable to complete the project or to pay his outstanding bills. Wilcon then commenced construction on its own, but Wilcon itself ceased work in early 1975. In March of that year, the City of Waveland terminated its contract and called upon Travelers to complete the project in accordance with its performance bond. Travelers immediately demanded performance or indemnity from Wilcon, but Wilcon refused. In April 1975 Travelers hired Wallace Industrial Constructors of Mississippi, Inc. to complete the Waveland project; this was done at a cost to Travelers (including attorneys fees and other expenses) of $1,551,976.86.

Wilcon's refusal to indemnify Travelers stems in large part from a dispute with Travelers over the form of business organization used by Wilcon and the Byrd Corporation with respect to their work on the Waveland project. Travelers contends that the two original contractors operated as a joint venture. Travelers relies for this assumption on a variety of relevant documents that read in terms of a "joint venture;" on some testimonial evidence that indicates that the parties treated the arrangement as a joint venture; and on the fact that only Wilcon and the Byrd Corporation not any separate entity formed by the two contractors complied with state contractor certification requirements. Travelers argues that as a joint venturer Wilcon is liable under a general indemnity agreement signed by Wilcon in 1970; that agreement by its own terms is applicable to all bonds issued on projects contracted by Wilcon as sole principal or as joint venturer. 1

However, Wilcon contends that the contract with the City of Waveland was held not by Wilcon and the Byrd Corporation as joint venturers, but instead by a separate corporation formed on June 1, 1972 for the sole purpose of bidding and completing the Waveland project. This new corporation was given the confusing name of "Howard L. Byrd, Contractor Building Services and Wilcon, Inc." (hereinafter the "Combined Corporation"). The Combined Corporation was originally owned in equal shares by Byrd and Wilson, but upon his default Byrd tendered all of his shares to Wilson. Wilcon argues that the Combined Corporation held the construction contract with the City of Waveland and subcontracted equal portions of the Waveland project to Wilcon and the Byrd Corporation. In circumstances like this where contractors form a new corporation to bid and complete a single project, and then subcontract the project to themselves Travelers ordinarily requires the execution by the "subcontractors" of a special indemnity agreement by which they became directly responsible to Travelers. In this case, however, Travelers failed to require the execution by Wilcon and the Byrd Corporation of such an agreement; accordingly, Wilcon has argued since its default that it has no indemnity obligation to Travelers on the Waveland project.

Travelers contends that Wilcon is liable for the completion of the Waveland project even if one assumes arguendo the validity of the Combined Corporation and its subcontracts to Wilcon and the Byrd Corporation. This contention rests on two separate theories, each of which rests in turn on disputed facts. First, Travelers argues that the Combined Corporation acted only as agent for its two purported subcontractors; according to this theory, Wilcon is a principal to the contract and therefore liable under the general indemnity agreement just as if the Combined Corporation had never been formed. Second, Travelers argues that by completing the Waveland project it became subrogated to the claims of the Combined Corporation against its own subcontractors, which of course include Wilcon. According to this theory, Travelers assumed the Combined Corporations' causes of action both for breach of contract (Wilcon breached its contract when it ceased work on the project) 2 and for contractual indemnity (Wilcon's subcontract indemnifies the Combined Corporation against negligence and guarantees against defects). 3 This final theory subrogation is treated in more detail in Part IIIA of this opinion.

Wilcon's cause of action against Travelers rests on two further areas of disputed fact. In the first place, Wilcon contends that Travelers' agents engaged in a course of conduct after Wilcon's default that prevented Wilcon from procuring payment and performance bonds from any other company. According to Wilcon, this conduct consisted of a series of conversations between certain agents of Travelers and the representatives of various bonding agencies and companies; these conversations concerned Wilcon's default on the Waveland project and Travelers' difficulty in dealing with Wilcon thereafter. Wilcon contends that Travelers' agents convinced the other agencies and companies not to bond any project for Wilcon, and that as a result of its inability to procure bonding Wilcon was forced out of business. On the basis of these assertions (most of which are disputed by Travelers), Wilcon sought compensatory and punitive damages under Mississippi law for "wrongful or malicious interference with business relations." The facts behind this claim are treated in more detail in Part IIA of this opinion.

In the second place, Wilcon seeks damages on the basis of a writ of attachment which Travelers procured with respect to a separate...

To continue reading

Request your trial
15 cases
  • Brown v. Edwards
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • 3 Enero 1984
    ...kind is present in this case. 21 Essentially the same principles are applicable under Mississippi law. See Wilcon, Inc. v. Travelers Indemnity Co., 654 F.2d 976, 983-84 (5th Cir.1981); Hyde Construction Co., Inc. v. Koehring Company, 387 F.Supp. 702, 713-14 (S.D.Miss.1974), aff'd in part, m......
  • Hayes v. Irwin
    • United States
    • U.S. District Court — Northern District of Georgia
    • 4 Junio 1982
    ...interference also encompasses interference with a prospective business relationship as well as existing ones, Wilcon, Inc. v. Travelers Indemnity Co., 654 F.2d 976 (5th Cir. 1981); Merlite Land, Sea and Sky, Inc. v. Palm Beach Properties, Inc., 426 F.2d 495 (5th Cir. 1970); the liability re......
  • Arntz Contracting Co. v. St. Paul Fire & Marine Ins. Co., A064300
    • United States
    • California Court of Appeals
    • 17 Julio 1996
    ...than truthfully report that the contractor has failed to complete a project and indemnify the surety. ( Wilcon, Inc. v. Travelers Indem. Co. (5th Cir.1981) 654 F.2d 976, 981-983.) Such information is never a secret, so the surety's disclosure breaches no confidentiality. (Cf. Tri-Growth Cen......
  • Suthoff v. Yazoo County Indus. Development Corp.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • 22 Diciembre 1983
    ...Cir.), modified sub nom., Hyde Construction Co., Inc. v. Koehring Co., 551 F.2d 73 (5th Cir.1977); See also Wilcon, Inc. v. Travelers Indem. Co., 654 F.2d 976, 983-84 (5th Cir.1981). Reviewing Mississippi's various limitations statutes, only two appear to have possible application to action......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT