Johnson Service Co. v. Transamerica Insurance Co.
| Decision Date | 05 October 1973 |
| Docket Number | No. 73-1108.,73-1108. |
| Citation | 485 F.2d 164 |
| Parties | JOHNSON SERVICE COMPANY, Plaintiff-Appellee, v. TRANSAMERICA INSURANCE COMPANY et al., Defendants-Appellants. |
| Court | U.S. Court of Appeals — Fifth Circuit |
COPYRIGHT MATERIAL OMITTED
James R. Harris, Corpus Christi, Tex., for defendants-appellants.
J. M. Burnett, Corpus Christi, Tex., for plaintiff-appellee.
Before GOLDBERG, CLARK and RONEY, Circuit Judges.
In this diversity case defendants, Transamerica Insurance Company and Penner-Ring Co.,1 appeal from the decision of the district court for the Southern District of Texas, 349 F.Supp. 1220, awarding plaintiff, Johnson Service Company, payment on a labor and material bond furnished to the United States. Finding defendants' contentions of error below unsupported by both the facts and the applicable Texas law, we affirm.
On March 29, 1968, the Post Office Department, acting pursuant to 39 U.S.C. § 2103 et seq., publicly solicited bids for the construction and subsequent leasing to the Government of a post office building in Corpus Christi, Texas. Under the terms of the Department's advertisement, the Government agreed to convey the post office site to the successful bidder by quitclaim deed. The facility was then to be leased back to the Government for a term of 30 years, with eight 5 year renewal options. Defendant Penner-Ring submitted a bid in the form of a lease-back agreement. The bid was accepted on June 24, 1968; and, shortly thereafter, Penner-Ring executed and submitted to the Government a performance bond in the penal sum of $1,556,800 and a labor and material bond in the penal sum of $622,720 (hereinafter the "Transamerica bond"). Penner-Ring was principal on each of these bonds, the United States was obligee, and defendant Transamerica Insurance Company was designated surety. The bonds were given in accordance with the specifications of paragraph 10 of the original advertisement for bids and paragraph 1A of the agreement to lease.
Subsequently, Penner-Ring entered into a contract with Braselton Construction Company of Corpus Christi for the actual construction of the building. As part of this contractual arrangement, Braselton agreed:
"to furnish at Contractor\'s expense a properly executed performance and completion bond and labor and material payment bond . . . running in favor of Owner Penner-Ring and any party or parties designated by Owner."
In fulfillment of this obligation Braselton executed in October, 1968, a payment bond provided under Texas law by the Hardeman Act, Article 5472d, Vernon's Ann.Tex.Civ.St. (hereinafter the "Hardeman Act bond").
Braselton chose Godbe Mechanical Contractors as a major sub-contractor on the Corpus Christi project. Godbe, in turn, contracted with plaintiff, Johnson Service Company, for the installation of a "complete workable temperature control system" for the building. Plaintiff fulfilled its part of the bargain. Godbe, unfortunately for all concerned, did not. It was unable to make payment for the labor and materials furnished by plaintiff and a number of other sub-contractors.
The Post Office Department accepted the building in November, 1969, and began its occupancy the following month. On April 2, 1970, plaintiff, acting pursuant to the ninety day notice requirement of the Transamerica bond, informed defendants, as principal and surety, that there was still $26,650 owing to it for labor and material furnished Godbe. On May 27, 1970, plaintiff filed the action under review here in federal district court seeking recovery on the Transamerica labor and material bond. During the period of pre-trial discovery in the federal suit, plaintiff filed, on March 3, 1971, a petition in the 105th District Court of Nueces County, Texas, attempting to recover on the Hardeman Act bond. The state court suit proceeded more speedily than the instant case, and plaintiff received partial recompense in that litigation on November 15, 1971.2 The remainder of the monies owed plaintiff by Godbe, some $21,790, was awarded by the federal district court in its judgment entered August 2, 1972.
In attacking this subsequent federal decision, defendants raise five points, which we will treat seriatim: (1) when a Hardeman Act bond has been provided, Texas law precludes recovery against or involving the owner in any way other than by suit on that bond; (2) by proceeding to judgment in the state suit, plaintiff made an election of remedies under Texas law and cannot recover on a second bond; (3) the Transamerica bond was to be available only in the event of a Government takeover of the project; (4) plaintiff did not comply with the ninety day notice provision of the Transamerica bond; and (5) plaintiff is barred by the Texas doctrine of judicial estoppel from showing timely notice.
In 1961 the Texas legislature extensively amended the Mechanics' and Materialmen's Lien Act3, creating what is popularly known as the Hardeman Act. Among the many changes made was the addition of Article 5472d. This new statute provides for the filing of a bond by the prime contractor on a construction site, which bond will then stand in lieu of any liens on the property that would otherwise be available under Texas law to sub-contractors who had furnished labor or materials for the project. Such a payment bond has long been required in Texas of any prime contractor involved in building for the State or its agencies. See Article 5160, V.A.T.S. Through suits on the bond, rather than through the perfection of liens on public facilities, materialmen are protected, work on state projects is made attractive and secure, and the State is guaranteed unencumbered occupancy and use of essential projects.
Article 5472d extended this regime from the public into the private sector. For the protection of materialmen, definite standards were established in the form, filing, and amount of these private construction bonds. See Article 5472d(1)-(3). For the protection of prime contractors and their sureties, detailed and highly technical notice requirements were promulgated. See Article 5472d(4). For the protection of owners, persons in the position of defendant Penner-Ring, the legislature provided Section 7 of the new act.
Defendants call upon us to validate their interpretation of this provision. Simply put, it is their contention that Section 7 creates an absolute bar to any other method of collection by a materialman against or involving the owner once a Hardeman Act bond has been posted. Defendants argue that Section 7 goes beyond providing an optional shelter for owners, to the point of disabling them, and their sureties, from making voluntary, contractual efforts to afford materialmen additional protection. Under such a reading of the Texas law, the Transamerica bond becomes a legal nullity in the State, since no suits could have been brought under its provisions after the filing of the Hardeman Act bond.
Neither this Court nor the parties have discovered any state decisions addressed directly to the effect of Section 7 on the freedom of an owner to contract for additional liability. As nearly as we can determine, this is a matter of first impression; and this Court, ever mindful of Erie's teaching, must be particularly careful to consider itself in both spirit and substance a court of the state. For though we are without direct authority on the point in question here, the legislative and judicial tribunals of Texas have provided three inconclusive but illuminating beacons to light our Erie way, (1) the direction of the Supreme Court of Texas on the purpose of the 1961 amendments and the spirit in which they are to be interpreted; (2) the use of language in the statute itself; and (3) state court opinions in cases involving other sections of the Hardeman Act.
The Supreme Court of Texas has indicated that the 1961 amendments to the lien statutes were designed to remove technical obstacles to recovery by subcontractors and materialmen. Addressing itself to an owner's argument that Article 5469 of the Act should be interpreted to deny relief that would have been available under the old law, the Court said:
To continue reading
Request your trial
-
In re Steeley
...judicial proceedings." Chrysler Credit Corp. v. Rebhan, 842 F.2d 1257, 1261 (11th Cir.1988), quoting, Johnson Service Co. v. Transamerica Insurance Co., 485 F.2d 164, 174 (5th Cir.1973). "The doctrine is designed to prevent parties from making a mockery of justice by inconsistent pleadings.......
-
In re Baldwin
...manipulation[;]" this type of purposeful manipulation of the judicial process is lacking in this case. Johnson Service Co. v. Transamerica Ins. Co., 485 F.2d 164, 175 (5th Cir.1973);12 see also Barger, 348 F.3d at 1294-97. Thus, judicial estoppel does not C. Equitable Estoppel Under the doc......
-
In Re Airadigm Communications Inc.
...no “reasonable justification” for the change in its litigating position. Thore, 466 F.3d at 185; see also Johnson Serv. Co. v. Transamerica Ins. Co., 485 F.2d 164, 175 (5th Cir.1973) (reasoning that estoppel is appropriate for “cold manipulation and not an unthinking or confused blunder”). ......
-
Marshall v. Honeywell Tech. Sys. Inc.
...not unthinking or confused blunder.” Konstantinidis v. Chen , 626 F.2d 933, 939 (D.C. Cir. 1980) (quoting Johnson Serv. Co. v. Transamerica Ins. Co. , 485 F.2d 164, 175 (5th Cir. 1973) ). The Supreme Court likewise instructs that judicial estoppel “may be [in]appropriate” when a party's pas......
-
Employer Responses
...1995). The vice which judicial estoppel prevents is the cold manipulation of the courts. Johnson Service Co. v. Transamerica Ins. Co ., 485 F.2d 164, 175 (5th Cir. 1973). “It is inappropriate, therefore, to apply the doctrine when a party’s prior position was based on inadvertence or mistak......
-
Trial Practice and Procedure - John O'shea Sullivan and Ashby L. Kent
...be 'cold manipulation and not an unthinking or confused blunder.'" Id. at 1345 n.7 (quoting Johnson Serv. Co. v. Transamerica Ins. Co., 485 F.2d 164, 175 (5th Cir. 1973)). 221. Id. at 1345 (citing Burnes, 291 F.3d at 1286). 222. Id. [T]here is no question that, due to RFC's filing, all of t......