Contractors Equip. Maintenance v. Bechtel Hanford, 06-35310.

• Decision Date: 24 January 2008
• Docket Number: No. 06-35310.,06-35310.
• Citation: 514 F.3d 899
• Parties: CONTRACTORS EQUIPMENT MAINTENANCE CO., INC., a Washington corporation, for the use and benefit of the UNITED STATES of America, Plaintiff, and United Coastal Insurance Company, Appellant, v. BECHTEL HANFORD, INC., a corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

514 F.3d 899

CONTRACTORS EQUIPMENT MAINTENANCE CO., INC., a Washington corporation, for the use and benefit of the UNITED STATES of America, Plaintiff, and United Coastal Insurance Company, Appellant, v. BECHTEL HANFORD, INC., a corporation, Defendant-Appellee.

No. 06-35310.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted October 16, 2007.

Filed January 24, 2008.

Marilyn S. Klinger (argued) and Hall R. Marston, Gerald D. Kim, Sedgwick, Detert, Moran & Arnold LLP, Los Angeles, CA, for the appellant.

Michael P. Grace (argued) and David C. Groff, Marisa M. Bavand, Linda Y. Chu, Groff Murphy Trachtenberg & Everard, PLLC, Seattle; WA, for the defendant-appellee.

Appeal from the United States District Court for the Eastern District of Washington; Robert H. Whaley, Chief District Judge, Presiding. D.C. No. CV-02-05006-RHW.

Before: RICHARD D. CUDAHY,^* STEPHEN REINHARDT, and RICHARD A. PAEZ, Circuit Judges.

CUDAHY, Circuit Judge:

United Coastal Insurance Company (UCIC) appeals the district court's order granting Bechtel Hanford, Inc.'s (Bechtel's) motion for judgment on a supersedeas bond. Bechtel was awarded a judgment in 2004 against Acstar Insurance Co. (Acstar) and P.W. Stephens Contractors, Inc. (PWS). Acstar obtained a supersedeas bond from UCIC and appealed the judgment against it. After we affirmed in part and reversed in part, Bechtel moved to collect the entire 2004 judgment from UCIC. The district court concluded that the supersedeas bond covered the judgment against both Acstar and PWS and granted Bechtel's motion, ordering UCIC to pay the entire underlying judgment. On appeal, UCIC claims that the bond secured only Bechtel's judgment against Acstar. We have jurisdiction under 28 U.S.C. § 1291. We agree with UCIC that the bond secures only Acstar's obligations on the underlying judgment and therefore reverse. Because. Acstar's liability has been satisfied, we direct entry of judgment in favor of UCIC.

FACTUAL AND PROCEDURAL BACKGROUND

This case is the product of a breach of contract dispute in an environmental remediation project. Bechtel contracted with the United States Department of Energy (DOE) to perform environmental clean-up work at the Hanford Nuclear Reservation in Washington.¹ PWS entered a subcontract with Bechtel to work under Bechtel's prime contract with DOE and obtained a performance bond from Acstar. When PWS defaulted on the subcontract, Contractors Equipment Maintenance Company, Inc., a second-tier subcontractor, sued Bechtel, PWS and Acstar. Bechtel subsequently filed cross-claims against PWS and Acstar. On March 23, 2004, the district court awarded Bechtel $282,611 against PWS for its breach of contract and the same amount against Acstar on its performance bond. The district court also found Acstar and PWS jointly and severally liable for $296,554 in attorney's fees, 835,844.09 in costs and expenses and $95,989.35 in prejudgment interest, and awarded Bechtel post judgment interest as provided by law.

On April 22, 2004, Acstar and PWS filed a Notice of Appeal, which stated that:

Defendants Acstar Insurance Company and P.W. Stephens Contractors, Inc. appeal to the United States Court of Appeals for the Ninth Circuit the judgment entered by the United States District Court, Eastern District of Washington, on March 23, 2004

....

Pursuant to Fed.R.Civ.P. 62(d), Acstar obtained a supersedeas bond from UCIC to stay the judgment.² Whether that bond secures the judgment against Acstar alone or against both Acstar and PWS is the issue presented here. A Notice of Filing Undertaking to Stay Enforcement of Money Judgment Pending Appeal was filed on June 9, 2004 and the supersedeas bond was attached as Exhibit 1 to the filing. The notice provided:

[A]n undertaking is being filed on behalf of Defendant Acstar Insurance Co., the original of which is attached hereto as Exhibit 1, to stay the money Judgment for Bechtel Hanford, Inc. against P.W. Stephens Contractors, Acstar Insurance Co. and Contractor's [sic] Equipment Maintenance Co. entered by the Court on May 23, 2004.

On appeal, Acstar challenged the district court's award of damages as well as attorney's fees, costs and prejudgment interest. We affirmed the judgment against Acstar on its performance bond but vacated the award of attorney's fees, costs and interest. We also determined that as the prevailing party, Bechtel was entitled to costs under Fed.R.Civ.P. 54(d). Contractors Equip. Maint. Co. v. Bechtel Hanford, Inc., 150 Fed.Appx. 585 (9th Cir.2005). PWS did not challenge the judgment against it and remained liable for its breach of contract damages as well as fees, costs and prejudgment interest.

After our decision, Bechtel moved to recover the 2004 judgment from UCIC pursuant to the supersedeas bond. The district court granted Bechtel's motion and entered judgment in favor of Bechtel. After the court's decision, Acstar paid Bechtel its portion of the 2004 judgment and Bechtel acknowledged that the payment satisfied Acstar's own obligation under the judgment. On appeal from the district court's judgment, UCIC contends that the supersedeas bond covered only Acstar's liability and that UCIC is not liable for the outstanding obligations of PWS, which is the only portion of the 2004 judgment that remains unsatisfied.

STANDARD OF REVIEW

We review a decision to execute a bond de novo. Nintendo of Am., Inc. v. Lewis Galoob Toys, Inc., 16 F.3d 1032, 1036 (9th Cir.1994). A supersedeas bond is a contract. Nat'l Bank of Wash. v. Equity Investors, 86 Wash.2d 545, 546 P.2d 440, 444 (1976) (en banc). Hence, we apply contract review principles and review de novo the district court's interpretation of the bond. Confederated Tribes of Siletz Indians v. Oregon, 143 F.3d 481, 484 (9th Cir.1998).

DISCUSSION

State law governs the interpretation of surety bonds. See Mai Steel Serv., Inc. v. Blake Constr. Co., 981 F.2d 414, 420 (9th Cir.1992). In Washington, surety contracts are subject to the rules governing simple contracts, Nat'l Bank of Wash., 546 P.2d at 444, and "the touchstone of the interpretation of contracts is the intent of the parties." Scott Galvanizing, Inc. v. Nw. EnviroServices, Inc., 120 Wash.2d 573, 844 P.2d 428, 432 (1993) (en banc). Washington follows the objective manifestation theory of contracts under which a court focuses on the "objective manifestations of the agreement, rather than on the unexpressed subjective intent of the parties" to ascertain intent. Hearst Commc'ns, Inc. v. Seattle. Times Co., 154 Wash.2d 493, 115 P.3d 262, 267 (2005) (en banc). See also Allstate Ins. Co. v. Peasley, 131 Wash.2d 420, 932 P.2d 1244, 1246 (1997) (en banc) (noting that if "the language in an insurance policy is clear and unambiguous, the court must enforce it as written and cannot modify the contract or create ambiguity where none exists"). In interpreting surety contracts, like other contracts, courts focus on the language of the agreement. See King Equip. Co. v. R.N. & L. Corp., 1 Wash.App. 487, 462 P.2d 973, 975 (Ct.App.1969) ("[T]he liability of a surety is measured by the terms of his agreement.").

Where the meaning of specific contractual terms is unclear, a court may consider extrinsic evidence, such as "(1), the subject matter and objective of the contract, (2) all the circumstances surrounding the making of the contract, (3) the subsequent acts and conduct of the parties, and (4) the reasonableness of respective interpretations urged by the parties." Hearst, 115 P.3d at 266 (citing Berg v. Hudesman, 115 Wash.2d 657, 667, 801 P.2d 222 (1990) (en banc)). While extrinsic evidence may be used to ascertain the meaning of particular words in a contract, it is not to be used to "`show an intention independent of the instrument' or to `vary, contradict or modify the written word.'" Id. at 267, (quoting Hollis v. Garwall, Inc., 137 Wash.2d 683, 695-96, 974 P.2d 836 (1999) (en banc)). "[T]he subjective intent of the parties is generally irrelevant if the intent can be determined from the actual words used." Id.

The starting point of our analysis, therefore, is the language of the bond. We turn to the supersedeas bond, which provides:

[W]e, Defendant/Appellant Acstar Insurance Co. ("Acstar"), an entity incorporated in the State of New York, as Principal and ____, an entity incorporated in the State of ____, as Surety, are held and firmly bound to Defendant Bechtel Hanford, Inc., Appellee under this instrument, for the purpose of satisfying the Money Judgment, plus any costs, fees, and statutory interest in the above-captioned case, in the amount of, and not to exceed, One Million Four Hundred Twenty One Thousand Nine Hundred Ninety Six Dollars and Eighty Cents ($1,421,996.80), we bind ourselves, our successors and assigns, jointly and severally.

WHEREAS, on the 23rd day of March 2004, in the above-captioned matter, Defendant Bechtel Hanford was awarded judgment against Acstar and Defendant P.W. Stephens Contractors in the total amount of $710,998.40;

WHEREAS, Acstar has filed a Notice of Appeal sufficient to appeal that judgment, among other orders of the trial court, to the United States Court of Appeals for the Ninth Circuit;

NOW, THEREFORE, the condition of this obligation is such that if Acstar shall pay all costs, fees, disbursements and judgments incurred by reason of said appeal proceeding, then this obligation shall be null and void and released, but otherwise to remain in full force and effect, provided, however, that the maximum liability for the Surety shall not exceed the sum of $1,066,497.65.³

In a surety contract, the surety agrees to answer for the debts of the principal. 74 Arn.Jur.2d Suretyship § 3 (1974). If the contract names a particular principal, the surety's obligations are limited to those of the named principal. See, e.g., State ex rel. Reitmeier v. Oakley, 129 Wash. 553, 225 P. 425, 428 (1924). The bond at issue here clearly names only Acstar as the principal and Acstar alone...