698 F.2d 1115 (11th Cir. 1983), 80-7926, Eagerton v. Valuations, Inc.

Docket Nº:80-7926.
Citation:698 F.2d 1115
Party Name:Ralph P. EAGERTON, etc., et al., Plaintiffs-Appellees, v. VALUATIONS, INC., and United States Fidelity & Guaranty Company, Defendants-Appellants.
Case Date:February 22, 1983
Court:United States Courts of Appeals, Court of Appeals for the Eleventh Circuit
 
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Page 1115

698 F.2d 1115 (11th Cir. 1983)

Ralph P. EAGERTON, etc., et al., Plaintiffs-Appellees,

v.

VALUATIONS, INC., and United States Fidelity & Guaranty

Company, Defendants-Appellants.

No. 80-7926.

United States Court of Appeals, Eleventh Circuit

February 22, 1983

Page 1116

Capell, Howard, Knabe & Cobbs, P.A., James R. Seale, Montgomery, Ala., for defendants-appellants.

Phillip C. Davis, Ron Bowden, Asst. Attys. Gen., Dept. of Revenue, Montgomery, Ala., Michael Smith, Eutaw, Ala., for plaintiffs-appellees.

Appeal from the United States District Court for the Middle District of Alabama.

Before HILL and VANCE, Circuit Judges, and TUTTLE, Senior Circuit Judge.

JAMES C. HILL, Circuit Judge:

This is a contract dispute between state and county agencies and a real estate appraisal firm and its surety. 1 The parties involved are non-diverse and no federal question is presented. Prior to trial, plaintiffs alleged that the case was properly in federal court as an "ancillary" action to Weissinger v. Boswell, 330 F.Supp. 615 (M.D.Ala.1971). The district court exercised jurisdiction and awarded plaintiffs $296,488.10 in damages for the appraisal firm's breach of contract. The defendants did not question the court's jurisdiction, nor did they raise the issue on appeal. A member of this panel raised the question of subject matter jurisdiction at oral argument, and the parties were requested to file supplemental briefs on the issue. Having considered the question thoroughly, we conclude that the district court did not have subject matter jurisdiction to hear this case under the doctrine of ancillary jurisdiction.

I.

In Weissinger, a three judge district court determined that Alabama's ad valorem property tax was unconstitutional because corporate property was assessed at a substantially higher percentage of fair market value than other property in the state. The court therefore ordered that the property be reassessed to attain the proper equalization. 2 Pursuant to this order, the Alabama Legislature passed an act requiring the reappraisal of all property within the state for ad valorem tax purposes within two years of the Act's effective date of

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January 9, 1972. 3 To implement the legislature's command, plaintiffs Hale and Greene Counties separately contracted with Valuations, Inc. to perform the necessary property reappraisal. These contracts were uniform documents approved by the state. In accordance with the terms of the contracts, United States Fidelity & Guaranty Company ("U.S.F. & G.") executed separate performance and payment bonds to guarantee completion of Valuations' undertaking in each of the counties. Valuations, in turn, subcontracted all of the mapping and appraisal duties to Allied Appraisal Company and subcontracted all necessary aerial photography work to Tobin Research, Inc.

The contract originally called for Valuations to submit invoices on a monthly basis to the Commissioner of Revenue who would then approve or disapprove the charges. Upon this approval, the county then would disburse the payments quarterly, but would withhold a ten percent retainage to be paid upon satisfactory completion of the project. At Valuations' request, county payments became a monthly practice so that subcontractors could be paid promptly for their services.

The Hale County contract was scheduled to be completed on June 1, 1975. On or about May 1, 1975, however, work reached a standstill because of payment disputes among the subcontractors. On May 11, 1975, the Commissioner of Revenue approved an invoice for the period of September 30, 1974, through May 1, 1975, and sent the approval to the county for payment June 9, 1975. The invoice was received by the chairman of the Hale County Commission who decided on his own not to make payment because of the standstill. Upon this refusal, the state sent Valuations a default notice on June 17, 1975, and allowed Valuations ten days to provide a firm schedule for completion. By then, however, Valuations had closed its offices in the area. The contract was between 50 and 80 percent completed when the work stopped.

The Greene County contract was to be completed by July 31, 1976. On July 30, 1975, the state sent Valuations notice that there was substantial evidence that progress was insufficient to complete the required work by the date of completion. 4 Again Valuations was given ten days to provide a firm completion schedule. Instead, Valuations responded by shutting down its operations in Greene County on or about September 1, 1975. A formal declaration of default was conveyed to Valuations on September 17, 1975. On September 8, 1975, however, the Commissioner of Revenue received an invoice from Valuations covering the period December 1, 1974 through July 31, 1975. The invoice was approved and forwarded to the county on September 15, 1975. The then Acting County Attorney individually refused to make payment. The Greene County contract was between 20 and 40 percent completed upon its termination by the state.

In 1977, both projects were relet to another appraisal company at a higher price than the original contract with Valuations. Plaintiffs then initiated this action against Valuations and U.S.F. & G. for the full penal sums on each of the bonds on January 14, 1977. The district court found that Valuations breached both contracts by failing to respond to the notices of default with a firm schedule for completion. The court also found, however, that the individual county officials, who withheld payment from Valuations on state approved invoices, acted without proper authority. Nevertheless, neither improper withholding constituted a breach of the contract by the counties because Valuations, by an established course of dealings, indicated its assent to accept payments one to three months after

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submission of the invoice. The counties, therefore, were not in arrears when the contracts were formally revoked, and Valuations thus was unjustified in failing to perform the remaining work. The total cost of completion, which was the amount paid to Valuations and to...

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