Armco, Inc. v. Southern Rock, Inc.

• Decision Date: 26 December 1985
• Docket Number: No. 85-4018,85-4018
• Citation: 778 F.2d 1134
• Parties: 19 Fed. R. Evid. Serv. 1575 ARMCO, INC., Plaintiff-Third-Party Defendant-Appellee, v. SOUTHERN ROCK, INC., Defendant-Third-Party Plaintiff-Appellant. Summary Calendar.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1134

778 F.2d 1134

19 Fed. R. Evid. Serv. 1575

ARMCO, INC., Plaintiff-Third-Party Defendant-Appellee, v. SOUTHERN ROCK, INC., Defendant-Third-Party Plaintiff-Appellant.

No. 85-4018

Summary Calendar.

United States Court of Appeals Fifth Circuit.

Dec. 26, 1985.

David L. Reynolds, Jackson, Miss., for defendant-third-party plaintiff-appellant.

Watkins & Eager, P.N. Harkins, III, John L. Low, IV, Jackson, Miss., for plaintiff-third-party defendant-appellee.

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

Before POLITZ, GARWOOD and E. GRADY JOLLY, Circuit Judges.

GARWOOD, Circuit Judge:

Appellee Armco, Inc. (Armco) brought this diversity suit for declaratory judgment and damages against appellant Southern Rock, Inc. (Southern Rock) and Associated Contractors, Inc. (Associated), the two contractors who installed for the town of Richland, Mississippi, sewer pipe manufactured by and acquired from Armco, and Lester Engineering Company (Lester), the project engineer on the job, to determine fault in a dispute over malfunctioning of the sewer lines. Southern Rock filed a counterclaim against Armco for damages for breach of warranty respecting the pipe. Armco settled with Associated, and subsequently Armco's claims against Southern Rock and Lester were dismissed on summary judgment, which was affirmed by this Court. Armco, Inc. v. Southern Rock, Inc., 696 F.2d 410 (5th Cir.1983). Southern Rock then added an additional counterclaim for malicious prosecution. In the subsequent trial of Southern Rock's suit against Armco, the district court refused to submit the malicious prosecution claim to the jury, in effect granting Armco's motion for directed verdict on that claim. The jury found for Armco on Southern Rock's warranty related claims, and judgment was rendered dismissing Southern Rock's suit. Southern Rock now appeals, claiming (1) that it was entitled to a directed verdict on its malicious prosecution claim, or, in the alternative, was entitled to have that claim submitted to the jury; (2) that it was entitled to a directed verdict on liability as to at least a portion of its warranty action; (3) that Armco was wrongfully allowed to cross-examine John Rushing, president of Southern Rock, about other legal claims; and (4) that the district court's instruction to the jury describing the legal effect of this Court's prior decision was incomplete. We affirm.

Facts and Proceedings Below

In the early 1960's, plans were formulated to construct a sewer system for Richland, a suburb of Jackson, Mississippi. Richland subsequently employed Lester as its project engineer. The work was divided into three segments and bids were invited. Southern Rock was awarded the contract for one of these segments, and Associated was awarded the other two. Southern Rock subsequently subcontracted part of its segment to Associated.

Construction began in 1976. Southern Rock and Associated each decided to use Armco "truss" pipe. Southern Rock had by June of 1978 laid all of the pipe it was supposed to install, and after a preliminary clean out of the pipes no pipe failures were noted. As the project neared completion in the fall of 1978, however, leaks and other disorders began to appear. Armco initially suspected that pipe defects were the cause of the problems with the pipe Associated had installed. Armco and Associated subsequently reached an agreement as to how to provisionally pay for the pipe repairs between themselves, with Armco paying 60 percent of the repair costs and the entire cost of the new pipe, and Associated paying 40 percent of the repair costs. When Associated later fell into severe financial difficulties, Armco's percentage of the total cost of the repairs it paid, including the cost of the pipe, neared 100 percent.

At the time of the provisional accord between Armco and Associated, it was not clear exactly who was at fault, and there was much finger-pointing. Armco soon began extensive investigations in order to pinpoint the exact cause of the leaks. After the investigation was completed, Armco eventually concluded that its pipe was blameless and that faulty installation was the sole cause for the pipe's inadequate performance. Specifically, Armco found that its pipe failed in three modes, all of which were due, it concluded, to faulty contractor performance. First, Armco concluded that the "flattened inverts" (a pipe flattened out at its lowest point) were caused by the contractor's failure to place the recommended type and amount of backfill under the bottom and sides of the pipe. Second, Armco concluded that the "lumps and bumps" on or near the bottom of the pipe were due to the contractor's laying the pipe on hard clods of dirt and not providing adequate support. And last, Armco concluded that the "excessive deflection" of the pipe, in which the sides began to "overflex, collapse, and leak" because of extreme weight and pressure, was caused by inadequate backfill and compaction along the sides of the pipe. For its part, Southern Rock contends that the pipe, when repaired, worked only when it was installed in an envelope of gravel, specifications not a part of the original contract.

Armco finished its testing in May 1980 and found its pipe blameless. Shortly thereafter, on July 29, 1980, Armco filed suit for declaratory relief and damages against Associated, Southern Rock, and Lester. Armco specifically sought reimbursement of the money which it had previously spent in repairing the pipe. Pursuant to its earlier accord with Associated, on January 28, 1981, Armco made a final payment to Associated of $34,581.47, raising its total expenditures for repairs to over $1.6 million, and Armco sought this amount. Recovery from each defendant was sought "for that portion of the [sums expended by Armco] ... which the Court finds to be attributable to the wrongful conduct of" each particular defendant. Armco and Associated then settled their differences.

The district court, on motion for summary judgment, dismissed Armco's suit against Southern Rock and Lester. The court held that Armco could not recover from Southern Rock or Lester the amounts it had previously paid out because under Mississippi law Armco had legally "volunteered" the payments. We affirmed, holding that "conscious ignorance of the facts necessary to decide who was liable for the sewer repairs" was no ground for exception from the rule that one who makes voluntary payment cannot seek indemnification therefor. Armco, Inc. v. Southern Rock, Inc., 696 F.2d at 413. However, neither our opinion nor the district court's grant of summary judgment determined who was at fault with respect to the malfunctioning of the sewer lines.

After the filing of Armco's original suit, Southern Rock counterclaimed for $500,000, of which $186,000 was claimed as actual repair expenses, and the remainder as delay damages. After our affirmance of the district court's summary judgment against Armco, Southern Rock added a counterclaim for malicious prosecution. A jury trial was subsequently held. The district court, in effect granting Armco's motion for directed verdict on that claim made at the close of all the evidence, declined to submit the malicious prosecution claim to the jury. The jury was instructed, however, on Southern Rock's breach of warranty and related claims. A general verdict was returned in favor of Armco, Southern Rock brings this appeal from the judgment dismissing its suit.

Discussion

Malicious Prosecution

Southern Rock's first contention is that the district court below erred in denying its motion for a directed verdict, and in granting Armco's motion, on the malicious prosecution claim. We first observe that under Mississippi law, which concededly governs this diversity action, the requirements for a successful claim of malicious prosecution are:

"(1) The institution or continuation of original judicial proceedings, either criminal or civil ... [here the proceeding is civil]; (2) by, or at the instance of the defendants; (3) the termination of such proceeding in plaintiff's favor; (4) malice in instituting the proceeding; (5) want of probable cause for the proceedings; and (6) the suffering of damages as a result of the action or prosecution complained of." Harvill v. Tabor, 240 Miss. 750, 128 So.2d 863, 864 (1961) This action exists to promote "freedom from unjustifiable and unreasonable litigation." 1 F. Harper and F. James, The Law of Torts Sec. 4.2 at 301 (1956).

We hold that Southern Rock failed to establish its malicious prosecution claim against Armco because it did not show that Armco's initial suit against it lacked probable cause, a prerequisite to recovery. See Harvill, 128 So.2d at 864. In Harvill, the Mississippi Supreme Court stated that for probable cause to exist in a malicious prosecution claim "there must be a concurrence of (1) an honest belief in the guilt of the person accused, and (2) reasonable grounds for such belief." Id. at 865. Harvill, as the opinion makes clear, was concerned with a previous criminal prosecution. However, if the initial wrongful proceeding is civil, as here, the standards for probable cause are more flexible, for the initial suit can be based on facts whose "existence is not certain but [which] he [the initial claimant] believes that he can establish ... to the satisfaction of court and jury." Restatement (Second) of Torts Sec. 675 comment d (1976). The Restatement further explains:

"In a word, the initiator of private civil proceedings need not have the same degree of certainty as to the relevant facts that is required of a private prosecutor of criminal proceedings. In many cases civil proceedings, to be effective, must be begun before all of the relevant facts can be ascertained to a reasonable degree of certainty." Id.

Essentially the same rule is stated in Prosser and Keeton on the Law Torts Sec. 120 at 893 (5th ed.) (1984). Although we have found no...