Morgan v. Thomas

• Decision Date: 03 November 1970
• Docket Number: Civ. A. No. 4622.
• Citation: 321 F. Supp. 565
• Parties: E. E. MORGAN, Petitioner, v. Fred THOMAS, Sheriff of Hinds County, Mississippi, or Any Other Officer of the State of Mississippi, Respondents, United States Fidelity and Guaranty Company, Intervenor.
• Court: U.S. District Court — Southern District of Mississippi

321 F. Supp. 565

E. E. MORGAN, Petitioner, v. Fred THOMAS, Sheriff of Hinds County, Mississippi, or Any Other Officer of the State of Mississippi, Respondents, United States Fidelity and Guaranty Company, Intervenor.

Civ. A. No. 4622.

United States District Court, S. D. Mississippi, Jackson Division.

November 3, 1970.

COPYRIGHT MATERIAL OMITTED

Vardaman S. Dunn, Jackson, Miss., for petitioner.

William A. Allain, Asst. Atty. Gen., of the State of Mississippi, Jackson, Miss., Joe A. Covington, Snow, Covington, Temple & Watts, Meridian, Miss., George H. Butler, Roger C. Landrum, Butler, Snow, O'Mara, Stevens & Cannada, Jackson, Miss., for respondents and for respondents intervenor.

NIXON, District Judge.

MEMORANDUM OPINION.

This marks the premiere federal appearance of this extended and protracted litigation in the Mississippi State Courts arising out of a business relationship between the petitioner, E. E. Morgan, and the intervenor, United States Fidelity & Guaranty Company (hereinafter called U.S.F. & G.). In view of the fact that their protracted legal pugilism will hereinafter be discussed in more detail, this Court will briefly state the nature thereof in order to bring the case sub judice into proper perspective. Morgan, an experienced contractor, who had large financial resources and was experienced in financing other transactions, in 1958 entered into a written partnership agreement with R. W. Hyde, Jr., also an experienced contractor who had been in the construction business since 1947, which enabled Hyde to secure the necessary financing to obtain payment and performance bonds for additional construction contracts which he desired. This partnership agreement covered bid jobs, and a separate agreement was entered into relative to negotiated jobs. Under this agreement, Morgan was to receive two and one-half percent commissions for signing applications for the bonds as indemnitor or guarantor. A copy of these agreements was furnished to U.S.F. & G. which had executed payment and performance bonds for and on behalf of Hyde, and thereafter, U.S.F. & G. executed additional payment and performance bonds for Morgan and Hyde totalling several million dollars. These bonds were issued in the name of Hyde or corporations controlled by him. Morgan signed the applications for bid job bonds individually and as co-partner, and where the jobs were negotiated, he signed the applications as indemnitor. Pursuant to these agreements of indemnity, U.S.F. & G. bound itself as surety on at least twelve different "constructions bonds".

The principals on twelve surety bonds defaulted, and various creditors filed suits on the bonds against U.S.F. & G. for labor and materials furnished in the performance of the contracts. U.S.F. & G. called upon the principals to defend these suits, but they failed to do so, and as a result, numerous judgments were rendered against U.S.F. & G., all of which it paid. Morgan was a principal and indemnitor on all of these construction bonds.

Consequently, after U.S.F. & G. had been compelled to pay the above judgments and related expenses, it sued Morgan, Hyde, and certain corporate defendants for reimbursement, indemnity, exoneration and specific performance.

Without now detailing the various state actions which have culminated in the filing of this Petition for Habeas Corpus, suffice it to say that the petition alleges that the decree of the Chancery Court of the First Judicial District of Hinds County adjudging him to be in civil contempt for failing to comply with its mandatory injunction to furnish a financial statement to U.S.F. & G. as required by the bond applications executed by him and to state under oath the identity, status and location of all his assets, would deny him his constitutional rights under the Fifth and Fourteenth Amendments of the Constitution of the United States. He therefore prayed that a Writ of Habeas Corpus be granted and that he be released from the custody of the Respondent Sheriff of Hinds County or any other officer of the State of Mississippi in whose custody he has allegedly been committed, either upon his own recognizance or upon such bond and conditions the Court may impose; that the respondents be required to answer and make a return in due course and abide the further orders of this Court in relation to the detention of petitioner; that this Court conduct a hearing on the merits of this petition and that upon the hearing he be finally and permanently released and discharged; and that pending the hearing this Court stay any proceeding against him in the Courts of the State of Mississippi except to allow him to file and prosecute an appeal from the civil contempt adjudication to the Mississippi Supreme Court.

The Chief Judge of this District by Order of March 9, 1970, ordered the release of the petitioner on his tendering an appearance bond in the penalty of $100.00, which was subsequently tendered and approved, and further order that pending the final hearing and decision on the merits of this case by the undersigned, the petitioner shall not be detained in custody and that all proceedings, orders, and decrees against the petitioner in the Courts of the State of Mississippi shall be stayed and suspended except that an appeal to the Supreme Court of Mississippi from the Order of the Chancery Court in Cause No. 71194 thereof may be filed, prosecuted, and defended, until further orders of this Court.

The Respondents, Fred Thomas, Sheriff of Hinds County, Mississippi, and D. C. Yearwood, a Deputy Sheriff, who allegedly arrested and took Morgan into custody pursuant to the Order of Contempt of the Chancery Court, filed their answer and return herein contesting the allegations of the petitioner and praying for a dismissal of the Writ of Habeas Corpus, setting forth grounds in support thereof.

Subsequently, this Court granted the petition of U.S.F. & G. to intervene herein which it did by filing an answer and return almost identical to that filed by the respondents. Subsequently, the respondents and the intervenor were granted leave to and did amend their answers and returns, alleging that subsequent to the filing of their original answers that the petitioner had perfected an appeal to the Supreme Court of the State of Mississippi from the subject civil contempt decree of March 9, 1970, and therefore allege that under the provisions of Title 28, U.S.C., Section 2254(b) and (c) petitioner is not entitled to maintain the present action because he has not exhausted his available state remedies.

In order to fully understand the contentions here in dispute, it is necessary to detail the background events leading up to the filing of the Petition for Citation for Contempt in the Chancery Court of Hinds County,¹ which subsequently resulted in the filing of this action.

U.S.F. & G. paid the previously discussed claims for labor and materials which were reduced to judgments against it, after notice to Hyde and Morgan. It then filed suit against Hyde, Morgan, and several corporations owned or controlled by each, asking for injunctive relief, specific performance, marshalling of assets, a money judgment or decree for its losses on the bonds, insurance premiums on certain insurance policies and attorneys' fees. After a lengthy hearing, the Chancery Court rejected Morgan's defense which attacked the validity of the bond applications on the grounds of (1) constructive fraud or fraud in law, (2) lack of consideration, and (3) that if any liability existed it was secondary to that of U.S.F. & G. assumed without their indemnification.

After a lengthy hearing, the Court rendered a decree awarding a money judgment in favor of U.S.F. & G. against Morgan for the sum of $2,642,568.35 plus the sum of $201,393.76 for insurance premiums. The decree also awarded a joint and several judgment against each of the defendant corporations in the sum of $377,124.99. The liability of Hyde and the corporations under his control was fixed, and a money judgment was awarded against them for an amount in excess of the judgment against Morgan. U.S. F. & G. was awarded $125,000.00 attorneys' fees against Morgan.

This decree was appealed only by Morgan and his corporations to the Mississippi Supreme Court, which affirmed the lower court.²

On September 3, 1965, U.S.F. & G. wrote Morgan a letter referring to the above decree and the provisions of a surety bond application executed in connection with a sewerage construction contract for the City of Shively, Kentucky, demanding and requesting that within ten days Morgan furnish U.S.F. & G. a financial statement showing his current financial condition, as he agreed to do by the terms of the application. In the meantime, Morgan had perfected an appeal without supersedeas from the foregoing decree, which was subsequently affirmed by the Mississippi Supreme Court. A petition for issuance of a Civil Contempt citation was filed by U.S.F. & G. with the Hinds County Chancery Court, setting forth the fact that Morgan did not furnish the required financial statement and did not comply with the above decree which had not been superseded. This citation was issued and served upon one of Morgan's attorneys, but neither he nor Morgan appeared in response thereto, and a decree pro confesso was rendered.

On November 12, 1965, a decree was entered in which Morgan was adjudged guilty of contempt for failure to furnish U.S.F. & G. the above requested financial statement, and the sheriff was commanded to take Morgan into his custody and commit him to jail until he purged himself of contempt. After the entry of this decree, Morgan perfected an appeal with supersedeas to the Mississippi Supreme Court, which reversed the decree and dismissed the contempt proceedings.³ In reversing the lower court, the Mississippi Supreme Court found that the Chancery Court decree, which Morgan had failed to comply with, was insufficient to support the charge of contempt because...