United States Fidelity & Guaranty Co. v. Alexander

• Decision Date: 11 January 1979
• Docket Number: Civ. A. No. CV478-18.
• Parties: UNITED STATES FIDELITY & GUARANTY COMPANY, Plaintiff, v. Clifford ALEXANDER, Secretary of the United States Army, Col. Frank Walter, Contracting Officer of the Corps of Engineers, John Malo, Contracting Officer of the United States Army Infantry Center, Richard C. Solibakke, Chairman of the Armed Services Board of Contract Appeals, William H. Brasington, d/k/a Hugh Brasington, an Individual d/b/a Hugh Brasington Contracting Company, Defendants.
• Court: U.S. District Court — Southern District of Georgia

463 F. Supp. 687

UNITED STATES FIDELITY & GUARANTY COMPANY, Plaintiff, v. Clifford ALEXANDER, Secretary of the United States Army, Col. Frank Walter, Contracting Officer of the Corps of Engineers, John Malo, Contracting Officer of the United States Army Infantry Center, Richard C. Solibakke, Chairman of the Armed Services Board of Contract Appeals, William H. Brasington, d/k/a Hugh Brasington, an Individual d/b/a Hugh Brasington Contracting Company, Defendants.

Civ. A. No. CV478-18.

United States District Court, S. D. Georgia.

January 11, 1979.

C. James Jessee, Jr., and Walter H. Beckham, III, Jessee, Ritchie & Duncan, P. C., Atlanta, Ga., for plaintiff.

Allan M. Miller, Kirby & Miller, Columbus, Ga., for defendants.

THIRD OPINION

LAWRENCE, Senior District Judge.

Findings of Fact and Conclusions of Law

I. The Litigation and Issues

This is an action by a Miller Act surety seeking declaratory and injunctive relief against the Federal Defendants and the General Contractor in connection with appeals by the latter pending before Armed Services Board of Contract Appeals (ASBCA).^*

The Federal Defendants moved to dismiss and, in the alternative, for summary judgment on the ground of lack of subject-matter jurisdiction. Hugh Brasington Contracting Company under which name William H. Brasington (hereinafter "Brasington") conducted his construction business moved to dismiss for lack of jurisdiction and venue.

The motions were argued on July 8, 1978, and briefs were filed.

In an Opinion by this Court dated September 22, 1978, the Motion of the Federal Defendants was sustained and the complaint dismissed as to all of them on the ground that the review-of-agency action statute on which the jurisdiction was based (5 U.S.C. §§ 702, 704) creates no implied subject-matter jurisdiction of district courts to review administrative actions. See Califano v. Sanders, 430 U.S. 99, 106 n.6, 97 S.Ct. 980, 51 L.Ed.2d 192. The motion by Brasington to dismiss for want of subject-matter jurisdiction was overruled.

This Court reserved for future determination the issue of venue. Jurisdiction was retained as to the declaratory relief sought by United States Fidelity & Guaranty Company (hereinafter "USF&G") against Defendant Brasington in connection with the rights and obligations of the parties to the Master Surety Agreement.

Following the rendition of the Opinion of September 22, 1978, plaintiff moved for reconsideration thereof. A brief was presented in support of the motion to reconsider. By an Order dated October 31, 1978, the motion for reconsideration was denied. It was further ordered that the declaratory judgment feature of the case be peremptorily assigned for hearing on November 20, 1978. An evidentiary hearing took place at that time.

The three primary issues for decision are the following:

(1)

Does venue exist in the Southern District of Georgia as to Brasington with particular reference to the Fort Benning project in the Middle District in which the Contractor resides and where his construction business maintained headquarters?

(2)

Has Brasington consented to participation by USF&G in his pending appeals so as to give the latter standing before ASBCA under the rulings and practice of such Board which make an exception if the Contractor consents thereto?

(3)

The declaring of the respective rights and obligations of the parties under the Master Surety Agreement and the performance and payment bonds issued pursuant thereto.

II. Factual Background

On July 14, 1973, Brasington, and others, as indemnitors, executed a Master Surety Agreement with USF&G. By this Agreement, the indemnitors expressly warranted that they had a substantial, material and/or beneficial interest in the performance and fulfillment of obligations secured or to be secured by bonds issued by USF&G as surety to Hugh Brasington Contracting Company. The parties to the Agreement promised to exonerate, indemnify, and hold harmless USF&G as surety from and against any and all liabilities, losses, and expenses of whatsoever kind or nature imposed upon, sustained or incurred by USF&G by reason of its having executed, provided or procured said bonds, and principal's and indemnitors' failure to perform or comply with any of the provisions of the Agreement.

On May 30, 1975, USF&G became surety for the principal, Brasington, on a performance bond and labor and material bond in the amount of $2,500,000 in favor of the United States as obligee. The contract involved Barracks Modernization at Hunter Army Air Field, Savannah. The General Contractor was declared in default on December 3, 1976, and his right to proceed under such contract was terminated for default on May 27, 1977.

On June 17, 1975, plaintiff executed as surety for Brasington similar bonds in the amount of $1,059,339 relating to a Barracks Modernization project at Fort Stewart near Savannah. The contract in question became in default and Brasington's right to proceed was terminated by the Government on November 3, 1976.

On March 14, 1975, USF&G became surety on bonds in the amount of $1,955,709 in favor of the United States as obligee. The contract with Brasington was in connection with rehabilitation of various buildings at Fort Benning, Georgia. The job was completed by Brasington. Under the three bonds referred to USF&G paid various sums to contractors, sub-contractors and materialmen in Miller Act suits and claims. The amounts expended by the Surety to date in paying claims arising under the defaulted projects are:

                Fort Benning Project            $  122,516.20
                Fort Stewart Project               442,955.26
                Hunter Army Air Field Project    1,244,606.00
                                                _____________
                                TOTAL           $1,810,077.46
                

In the matter of the default on the Fort Stewart job, USF&G delivered to the Government its check for $99,376.00 representing the difference between Brasington's contract price and the amount required for completion of the defaulted work. The surety reserved the right to appeal any disputes pending at the time of default as well as the declaration of default by the contracting officer.

In the case of the Hunter Army Air Field contract, the Government selected the completion Contractor with the assistance of the surety. However, USF&G declined to pay the difference required for the completion of the job. The amount claimed by the Government is $684,146.49. Payment thereof has been demanded and has been refused by the surety.

All of the Miller Act claims have not been settled by the Surety. Further payments will be involved.

Administrative claims against the United States were filed by Brasington in excess of $6,000,000. A bankruptcy proceeding was brought by the Contractor in the Middle District of Georgia seeking a voluntary arrangement under Chapter XI. In the schedule of assets were listed his claims against the Government arising out of the defaults on the three jobs. Brasington evaluated same at $6,416,000. The proceedings brought under Chapter XI were dismissed by the bankruptcy judge.

In the litigation in this Court, USF&G seeks a declaration of its rights under the Master Surety Agreement between it and Brasington. It provides in part that "Surety is authorized and empowered to assert, pursue and prosecute, in its discretion, and at the expense of UNDERSIGNED (in the name of PRINCIPAL, or in the name of SURETY), all claim(s) of PRINCIPAL arising or growing out of contract(s) and work done thereunder secured by BOND(S) against ... any person, government, governmental agency ..." Ex. A of Complaint, VI(B)(b).

By separate letters dated December 28, 1977, USF&G notified each of the Federal Defendants pursuant to the terms of the Master Surety Agreement, and in accordance with applicable State and Federal law, that as of that date, it was asserting its rights in that it thereby demanded that it be allowed to assert, pursue and prosecute, either in its own name or in the name of the principal, any and all claims of the principal arising or growing out of work done under the contracts referred to.

By a letter dated January 16, 1978 Defendant Brasington informed the ASBCA that "Hugh Brasington, d/b/a Hugh Brasington Contracting Company, does not consent to USF&G or their attorney, C. James Jessee, Jr., singularly or individually, collectively or jointly, to prosecute any appeals . . ."

The administrative decisions of the ASBCA foreclose any right of appeal of the claims by USF&G except with the consent thereto by the contractor.¹ In light of Defendant Brasington's letter of January 16, 1978, the ASBCA notified USF&G by letter dated January 24, 1978, that its request to prosecute the claims of the principal was denied.

In the litigation in this Court, USF&G seeks a declaration of its rights as to each contract under State, Federal and common law, and under the terms of the Master Surety Agreement herein above referred to.

III. The Venue Question

As to the Hunter Field and Fort Stewart projects no problem of venue exists. While Brasington resides in the Middle District, those two contracts involved construction on sites in the Southern District of Georgia. The bonds were received, opened and awarded here. The alleged defaults by Brasington occurred in this District. He was declared in default by the Corps of Engineers which has its headquarters at Savannah. The performance and payment bonds on which USF&G was surety covered the two projects referred to.

Under 28 U.S.C. § 1391(a), "claims" means the aggregate of operative facts giving rise to rights enforceable in the courts. Maney v. Ratcliff, 399 F.Supp. 760 (E.D., Wis.). It has been held that the claim must be deemed to have arisen in the district where the contacts are most significant. Ghazoul v. International Management Services, Inc., 398 F.Supp. 307 (S.D., N.Y.). A balancing process of weighing contacts with the forum district has been suggested as the proper test for determining...