Alabama Rural Fire Ins. Co. v. Naylor

• Decision Date: 30 April 1976
• Docket Number: No. 74--4251,74--4251
• Citation: 530 F.2d 1221
• Parties: ALABAMA RURAL FIRE INSURANCE COMPANY, a corporation, Plaintiff-Appellee, v. Frank NAYLOR, Associate Administrator of the Farmers Home Administration, et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1221

530 F.2d 1221

ALABAMA RURAL FIRE INSURANCE COMPANY, a corporation, Plaintiff-Appellee, v. Frank NAYLOR, Associate Administrator of the Farmers Home

Administration, et al., Defendants-Appellants.

No. 74--4251.

United States Court of Appeals, Fifth Circuit.

April 30, 1976.

Ira De Ment, U.S. Atty., Kenneth E. Vines, Asst. U.S. Atty., Montgomery, Ala., for defendants-appellants.

Albert P. Brewer, Montgomery, Ala., for plaintiff-appellee.

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

Before GODBOLD, SIMPSON and CLARK, Circuit Judges.

SIMPSON, Circuit Judge:

This case arises from the purported award of a contract for 'backup insurance' to the appellee, Alabama Rural Fire Insurance Company (Alabama Rural), by the Farmers Home Administration (FmHA).

FmHA is an agency of the United States government authorized to provide a supplemental source of credit for farmers, rural residents and organizations. See Title 42, U.S.C., Sections 1471--1473, 1484--1487, 1490a; Title 7, U.S.C., Sections 1922, 1924(a), 1932. When credit is extended by the FmHA in the form of a loan the agency takes as security a mortgage on the real property of the borrower. As a condition to such loans the FmHA demands that the borrower maintain fire and extended coverage insurance on the mortgaged property. The FmHA encountered administrative problems in connection with the insurance requirements because many borrowers refused or neglected to maintain the agreed insurance coverage. FmHA thus found it necessary to obtain the insurance and to charge the premiums to the borrowers' loan accounts. This situation in turn necessitated that the FmHA's county supervisors spend a substantial amount of time in obtaining the insurance for borrowers. As a result the FmHA decided to change its procedures, and in 1973 requested proposals for a contract or contracts under which insurance coverage would be obtained for borrowers who after obtaining adequate insurance could not or would not maintain such insurance in force. Appellee Alabama Rural was one of four companies solicited by FmHA to submit a proposal to provide this backup insurance.

Alabama Rural Fire Insurance Company, an Alabama corporation, is a wholly owned subsidiary of the Alabama Rural Rehabilitation Corporation, a non-profit corporation. The latter corporation was organized in 1934, and entered into a liquidation agreement with the FmHA in the early 1950s pursuant to the Rural Rehabilitation Corporation Trust Liquidation Act, Title 40, U.S.C., Sections 440 et seq., Pub.L. 81--499, May 3, 1950, 64 Stat. 98--100. ¹ The liquidation agreement provided for the return to the corporation of federal assets which were to be used for rural rehabilitation purposes permissible under the corporation's charter and subject to the approval of the Secretary of Agriculture. In 1971, with the consent of the Administrator of FmHA, Alabama Rural Rehabilitation Corporation organized Alabama Rural for the purpose of selling insurance to rural residents unable to obtain insurance from regular commercial sources.

In response to the solicitation of FmHA Alabama Rural submitted a proposal to provide backup insurance for two years in fourteen states. Subsequently, appellant Nick Chiddo, a contracting officer of the FmHA, contacted Alabama Rural's chief executive officer to inquire if the corporation could provide backup insurance in all states and territories except Idaho and Puerto Rico. After negotiations an agreement was reached by Alabama Rural with Old Republic Insurance Company whereby the latter company as a reinsurer would provide coverage in all states and territories outside of Alabama except Idaho and Puerto Rico. On February 14, 1974, the FmHA accepted appellee's proposal and awarded the contract to appellee. Following the award of the contract Alabama Rural entered into discussions with the FmHA in order to work out the coordination of the project and began to incur expenses in anticipation of the implementation of the contract. ²

On May 7, 1974, Chiddo, at the instruction of appellant Naylor, directed the appellee to cease incurring expenses under the contract until further notice. By letter dated June 11, 1974, Chiddo advised appellee that the award and acceptance of the contract were rescinded because the FmHA had concluded that appellee, as a wholly owned subsidiary of the Alabama Rural Rehabilitation Corporation, did not have the authority to enter into the contract under the Rural Rehabilitation Corporation Trust Liquidation Act. At the time of the attempted rescission the parties had not entered into a formal contract.

On June 20, 1974, Alabama Rural filed its complaint in the district court, seeking a declaratory judgment and an injunction restraining the appellants and FmHA from (i) rescinding the contract, (ii) inviting and soliciting new bids for the insurance, and (iii) revealing the appellee's unique and original plan for implementing said insurance. The complaint was amended to assert jurisdiction under the Administrative Procedure Act (APA), Title 5, U.S.C., Sections 701--706, and the Declaratory Judgment Act, Title 28, U.S.C., Sections 2201, 2202. The appellants on July 24, 1974, moved to dismiss the action on the grounds that it was an unconsented to suit against the United States barred by sovereign immunity, that the Tucker Act, Title 28, U.S.C., Section 1491, provided appellee an adequate remedy for damages, and that the FmHA was a nonsuable entity. The district court on July 31, 1974, denied the motion to dismiss finding jurisdiction under the APA because the appellee lacked any other adequate remedy. Further, the district court, relying on the decisions in Scanwell Laboratories, Inc. v. Shaffer, 1970, 137 U.S.App.D.C. 371, 424 F.2d 859 and Estrada v. Ahrens, 5 Cir. 1961, 296 F.2d 690, held that the APA constituted a waiver of sovereign immunity. The court dismissed the FmHA as a defendant because it is not a suable entity.

After a bench trial on the merits, the district court found that the rescission by the appellants in their official capacities was in excess of their statutory authority and illegal, and that a valid contract existed between Alabama Rural and the FmHA. Based on these findings the court on October 25, 1974, entered its injunctive order, restraining the appellants in their official capacities from failing to perform the contract.

Alabama Rural on November 26, 1974, notified appellants of its readiness to begin performance of the contract. The appellants then moved the district court on December 9, 1974, for a stay of the judgment; this motion was denied on December 19, 1974. A notice of appeal from the October 25, 1974 injunction was filed by the appellants on December 18, 1974, and this court on January 16, 1974, granted the appellants' motion for a stay pending appeal. The district court meanwhile, on December 30, 1974, issued a show cause order on appellee's motion directing the appellants to appear on January 21, 1975, and show cause why they should not be held in contempt for failure to comply with the court's judgment. After this court's stay pending appeal, the appellants moved the district court to vacate or continue the show cause order, which motion was denied by the court below on January 20, 1975. After hearing, the district court on January 22, 1975, found the appellants guilty of a civil contempt because of their failure to comply with its injunction for a period beginning December 1, 1974, through January 16, 1975 (the date of our stay). The appellants were fined $600.00 payable to Alabama Rural as compensation for expenses and losses caused by the contempt. The appellants promptly filed notice of appeal from the contempt judgment. We must dispose therefore of both the appeal from the injunctive order of October 25, 1974, and the appeal from the January 22, 1975 contempt judgment. We vacate both the orders of the district court, and remand the cause for dismissal for lack of jurisdiction.

The applicability of the doctrine of sovereign immunity is to be determined, not by the party named as defendant, but by the result of the judgment or decree which may be entered. Larson v. Domestic & Foreign Commerce Corp., 1949, 337 U.S. 682, 687 n. 6, 69 S.Ct. 1457, 1460, 93 L.Ed. 1628, 1634; Louisiana v. McAdoo, 1914, 234 U.S. 627, 629, 34 S.Ct. 938, 939, 58 L.Ed. 1506, 1507; New Mexico v. Backer, 10 Cir. 1952, 199 F.2d 426. Concisely stated the general rule is that a suit is barred by the doctrine 'if 'the judgment sought would expend itself on the public treasury or domain, or interfere with the public administration,' . . . or if the effect of the judgment would be 'to restrain the Government from acting, or to compel it to act." Dugan v. Rank, 1963, 372 U.S. 609, 620, 83 S.Ct. 999, 1006, 10 L.Ed.2d 15, 23; see Hawaii v. Gordon, 1963, 373 U.S. 57, 83 S.Ct. 1052, 10 L.Ed.2d 191; Malone v. Bowdoin, 1962, 369 U.S. 643, 82 S.Ct. 980, 8 L.Ed.2d 168; Larson v. Domestic & Foreign Commerce Corp., supra; see also Adams v. Nagle, 1938, 303 U.S. 532, 58 S.Ct. 687, 82 L.Ed. 999. Irrespective of the terminology employed by Alabama Rural the object of the instant suit is clearly to compel the appellants in their official capacities to specifically perform a contract. Because the appellants can comply with the judgment of the district court only in their capacities as agents of the United States, the judgment in reality compels the United States to perform the subject contract, restrains it from rescinding the award of the contract, and requires it to pay out money, in the form of insurance premiums, in the performance of the contract. Manifestly this meets the tests for determining whether the United States is an indispensable party to this action, and, thus, whether suit was initially barred by the doctrine of sovereign immunity. In order to prevail on this appeal Alabama Rural must demonstrate that this suit falls...