Am. Fidelity Fire Ins. Co. v. Construcciones Werl, Inc.

• Decision Date: 26 November 1975
• Docket Number: Civ. No. 576/1973.
• Citation: 407 F. Supp. 164
• Parties: AMERICAN FIDELITY FIRE INSURANCE COMPANY, Plaintiff, v. CONSTRUCCIONES WERL, INC., et al., Defendants.
• Court: U.S. District Court — Virgin Islands

407 F. Supp. 164

AMERICAN FIDELITY FIRE INSURANCE COMPANY, Plaintiff, v. CONSTRUCCIONES WERL, INC., et al., Defendants.

Civ. No. 576/1973.

District Court, Virgin Islands, D. St. Croix.

November 26, 1975.

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William T. Holmes, Christiansted, St. Croix, V. I., Leo H. Hirsch, Jr., New York City, for Am. Fidelity Fire Ins. Co.

Feuerzeig & Zebedee, John A. Zebedee, Charlotte Amalie, St. Thomas, V. I., for Construcciones Werl, Inc.

Julio A. Brady, U. S. Atty., Charlotte Amalie, St. Thomas, V. I., for Dept. of Housing and Urban Development.

Robert H. Ruskin, Christiansted, St. Croix, V. I., for Puerto Rico Line, Ltd. Muller & Mintz, P. A., Joseph A. Caldwell, Miami, Fla., for Napoleon Steel Contractor, Inc.

Nichols & Silverlight, Irwin J. Silverlight, Christiansted, St. Croix, V. I., for Tropic Plumbing, Inc.

Controlled Concrete Products, Inc., pro se.

Rosskopf & Dema, John K. Dema, Christiansted, St. Croix, V. I., for Charles Tait, Trustee for Quantum Development Corp.

Daniel W. Ambrose, Charlotte Amalie, St. Thomas, V. I., for Virgin Islands Foundation for Housing and Economic Development.

William W. Bailey, Charlotte Amalie, St. Thomas, V. I., for Universal Leaf Tobacco Co., Inc.

Warner Alexander, Christiansted, St. Croix, V. I., for Berens Mortgage Bankers, Inc.

MEMORANDUM OPINION AND ORDER

WARREN H. YOUNG, District Judge.

Plaintiff American Fidelity Fire Insurance Company (hereinafter "AFFIC" or "surety") has moved this Court pursuant to Fed.R.Civ.P. 56 for an order compelling defendant Carla A. Hills, Secretary of Housing and Urban Development (hereinafter "HUD"), to pay some $220,268.00 in retainages, allegedly owing on the "Thomasville" Project, into court. Defendant HUD, in addition to opposing the granting of AFFIC's motion, has moved for a dismissal of plaintiff's complaint pursuant to Fed.R.Civ.P. 12(b)(1) and 12(b)(2). Finally, defendant Construcciones Werl, Inc. (hereinafter "WERL") has also moved for an order of dismissal alleging, like HUD, that this is not a proper interpleader action.

I BACKGROUND FACTS

The history of this litigation is rather long and complex. Back in December of 1971, plaintiff AFFIC, a New York bonding company, became a surety on two federally subsidized housing projects¹ in the Virgin Islands the construction contracts for which had been awarded to Quantum Development Corporation (hereinafter "QUANTUM" or "CONTRACTOR") by the Virgin Islands Foundation for Housing and Economic Development (hereinafter "FOUNDATION" or "MORTGAGOR") by issuing payment and performance bonds. The furnishing of such bonds, in satisfaction of the requirements of the Miller Act, 49 Stat. 793 (1935), as amended 40 U.S.C. ?? 270a-e (1970), is standard practice when awarding construction contracts for public buildings to private contractors. The payment bond guarantees that any materialmen or subcontractors remaining unpaid by the general contractor will be remunerated by his surety up to a certain amount (in this instance, $387,500.00 at each project) while the performance bond assures the owner and his mortgagee that in the event that the general contractor defaults before completing the project, they will be saved harmless up to a contractually prescribed monetary limit (also $387,500.00 per project in this situation).

Forming the predicate for this litigation, QUANTUM, the general contractor, ran into financial difficulties and filed for an arrangement under Chapter XI of the Bankruptcy Act, 11 U.S.C. ? 701 et seq., on June 30, 1972. Thereafter, on November 30, 1973, it was adjudged a bankrupt. As part of the denouement of the bankruptcy hearings, the referee entered an order on August 24, 1972 requesting the surety to fulfill the requirements and obligations expressed in the construction contracts for the housing projects. AFFIC thereupon entered into two separate contracts with defendant WERL regarding completion of the "Thomasville" project ?€” which completion was allegedly effectuated in June of 1973. Since that time, AFFIC has attempted to obtain first from the original mortgagee, Berens Mortgage Bankers, Inc. (hereinafter "BERENS" or "MORTGAGEE"), and then from its assignee (HUD), some $220,268.00 in retainages in order to apply these unpaid sums towards the substantial losses which it suffered in fulfilling its role as surety.

In addition to actively pursuing first BERENS and then HUD, plaintiff AFFIC apparently also attempted some "self-help" cost-cutting measures of its own for on September 11, 1973, defendant WERL filed suit in the Superior Court of Puerto Rico, District of San Juan, alleging that AFFIC owed it in excess of $80,000.00 for its part in finishing the "Thomasville" project after QUANTUM's default. This filing, it may be assumed, was the catalyst precipitating AFFIC's own breach of contract action against WERL which was filed in this Court on November 15, 1973. Following some intricate procedural jockeying in which AFFIC sought to amend its complaint in order to sound in rule interpleader and WERL moved to dismiss the suit for AFFIC's failure to state a compulsory counterclaim, I allowed AFFIC to amend in view of the possibility that the retainages in question might be subject to multiple adverse claims, denied WERL's Fed.R.Civ.P. 13(a) motion, and stayed the Puerto Rican action while enjoining all interpleader defendants from instituting, maintaining, or prosecuting any suit at law or in equity against AFFIC with respect to the Thomasville retainages. (See Memorandum Opinion and Order filed by this Court on December 18, 1974.)

Ten months have come and gone and the parties are before this Court again. The procedural posture of this litigation has changed in the interim and several parties have been added or dropped. But the basic issues, like "Old Man River", just keep rolling along.

It should be apparent that in developing a matter for trial, some time needs be expended in clarification and crystallization of the disputed points. Admittedly, the period of gestation for this stage of preparation will vary depending, among other factors, upon the number of parties to the lawsuit and the complexity of the issues. But at some ill-defined mark on the time-space continuum, the scales of justice are thrown out of equilibrium when delay and obfuscation are allowed to run unchecked. Justice is poorly served when unnecessary parties are required to needlessly participate ad infinitum and/or non-related claims are forced into juxtaposition with each other. And without expressly declaring that such a point has been reached here, it would be dishonest if the Court did not admit that this factor has played some role in its ruling on the submitted motions.

II WERL'S MOTION TO DISMISS

On December 18, 1974 I entered an order restraining WERL from maintaining its breach of contract action against AFFIC in the Superior Court of Puerto Rico. In order to arrive at that decision, the Court first found that it was entertaining a Rule 22 interpleader action. Then, having determined the nature of the action before it, the Court buttressed its granting of a preliminary injunction by declaring it to be "necessary in aid of jurisdiction". I ruled the interpleader action would lose a great deal of its effectiveness if AFFIC were forced to defend, in several jurisdictions, multiple actions all arising out of the same transaction. Both judicial economy and the effective resolution of all claims emanating from the "Thomasville" default led me to believe that all parties asserting a colorable claim to the retainages in question should be compelled to appear before this Court.

Shortly thereafter, WERL filed a motion for reconsideration in which it asked me to vacate the aforementioned order and to dismiss the interpleader action as against it. At that time, WERL argued that the funds which AFFIC allegedly owed to it arose out of their post-bankruptcy contract and not from any pre-bankruptcy transactions. Accordingly, it was not claiming under either the original QUANTUM contract or under the payment or performance bonds executed by AFFIC pursuant to its role as surety. Moreover, mention was also made of the fact that AFFIC had been actively participating in the Puerto Rican suit. Therefore, WERL asserted that it was not a proper interpleader defendant and consequently the Puerto Rican action should be allowed to continue.

Upon hearing oral argument and reviewing the submitted briefs, this Court decided to reaffirm its earlier position and accordingly denied WERL's motion for reconsideration and dismissal. I wrote that the preliminary injunction was only a tentative measure, "essentially insuring that a future determination that Construcciones WERL, Inc. is a proper interpleader-defendant in the instant action would not be rendered meaningless by a prior judgment by the Puerto Rican Court. If, on the other hand, WERL is hereafter determined to be an improper interpleader-defendant, the preliminary stay may be vacated, thereby permitting a continuance of the Puerto Rican action". (See Memorandum Opinion and Order filed on February 6, 1975.)

Now WERL is before the Court again with essentially a repetition of its earlier motion for dismissal of the interpleader action. However, for reasons appearing infra, I feel compelled to consider the motion de novo.

Rule 22 is one of two types of interpleader actions which Title 28 of the United States Code authorizes. Both are equitable devices designed to insure that an organization or individual faced with the possibility of conflicting claims of liability can secure a determination concerning its or his liability-in-fact as between the competing complainants. As Moore states:

Interpleader is a procedural device which enables a person holding money or property, in the typical case conceded to belong in whole or in part to another, to

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