Northeast Clackamas CE Co-Op. v. Continental Cas. Co.

• Decision Date: 06 April 1955
• Docket Number: No. 13740.,13740.
• Citation: 221 F.2d 329
• Parties: NORTHEAST CLACKAMAS COUNTY ELECTRIC CO-OPERATIVE, Inc., a Corporation, Appellant, v. CONTINENTAL CASUALTY COMPANY, a Corporation, and S. H. Ripp, doing business as Ripp Electric Company, Appellees. S. H. RIPP, doing business as Ripp Electric Company, Appellant, v. NORTHEAST CLACKAMAS COUNTY ELECTRIC COOPERATIVE, Inc., a Corporation, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

221 F.2d 329 (1955)

NORTHEAST CLACKAMAS COUNTY ELECTRIC CO-OPERATIVE, Inc., a Corporation, Appellant, v. CONTINENTAL CASUALTY COMPANY, a Corporation, and S. H. Ripp, doing business as Ripp Electric Company, Appellees.

S. H. RIPP, doing business as Ripp Electric Company, Appellant, v. NORTHEAST CLACKAMAS COUNTY ELECTRIC COOPERATIVE, Inc., a Corporation, Appellee.

No. 13740.

United States Court of Appeals Ninth Circuit.

April 6, 1955.

Kell & Hamilton, Raymond M. Kell, Floyd D. Hamilton, William E. Dougherty, Portland, Or., for Northeast C. C. E. Co-op., Inc.

Robert Clapperton, Portland, Or., for Ripp. Conley & Greene, James L. Conley, Portland, Or., for Continental Cas. Co.

Before HEALY and POPE, Circuit Judges, and BOLDT, District Judge.

BOLDT, District Judge.

Appellant Cooperative is an Oregon corporation; appellee Casualty company, is a Maryland corporation; and the individual party Ripp is a resident of Oregon. The parties are referred to herein as Co-op, Surety and Contractor.

Co-op issued invitations to contractors for bids on construction of about 17 miles of power transmission line partly over mountainous terrain in Clackamas County, Oregon. Much of the right-of-way of the line was heavily timbered. Originally Co-op proposed that the contract work include right-of-way clearing and the Proposal to Bidders provided exacting specifications therefor. Later Co-op decided to clear the right-of-way by its own operations leaving to the contractor only the furnishing of labor and equipment for construction of the line. Co-op was to furnish all of the materials required in the construction. At the first bid opening Contractor was present when a discussion of right-of-way clearing occurred, following which Co-op's directors passed a resolution providing "that the right-of-way for the transmission line will be cleared of trees and logs to a degree satisfactory to the Forest Service ahead of Contractor's schedule." On August 9, 1949, after three successive bid openings without letting of the contract, the offer of Contractor dated July 22, 1949 was formally accepted by Co-op. Section 3 of the contract provided that the Proposal, Notice and Instructions to Bidders and other material, including the specifications issued to bidders for right-of-way clearing, be incorporated in the contract. Surety issued the performance bond of Contractor required by the contract.

Construction commenced on August 6, 1949 and completion date was fixed at November 9, 1949. Beginning shortly after start of the work, by agreement modifying the written contract provision for monthly progress payments, such payments were made to Contractor at 15-day intervals and continued for periods to and including November 14, 1949. Payment for work performed in the 15-day period following November 14, 1949 was not made although certified for payment by Co-op's engineer.

On October 29, 1949, when only a little more than one-third of the line construction had been completed, Contractor requested a 30-day extension of completion time claiming that Co-op's delay in delivery of poles and staking sheets and in right-of-way clearance required the extension. By letter Co-op extended completion date to December 9, 1949. On December 2, 1949 Contractor requested an additional 45 days for completion of the contract work, again claiming the same delays by Co-op. The falling of trees across the right-of-way and damage to the power line caused by a wind-storm on November 26 and 27, 1949 was assigned as a further reason for the requested extension. On the date of the request Co-op's directors and engineer, Contractor and his superintendent, a representative of Surety and others attended a meeting at Co-op's office. During the meeting Co-op's officials informed Contractor that unless he agreed in writing to repair the storm damage at his own expense he would not be paid for the work which had been performed between November 15, 1949 and December 1, 1949, and his request for further extension of completion time would not be granted. Contractor refused to make the storm repairs at his own expense and demanded the progress payment then due.

On December 12, 1949 Co-op's board of directors formally denied the second extension request and the following day a letter was sent to Contractor asserting he was in contract default for failure to complete the line on time and for his refusal to repair the damage caused by the windstorm. The letter stated that the contract would be terminated unless Contractor either corrected the asserted defaults or submitted a satisfactory program therefor within 10 days. Contractor continued work until December 17, 1949 when he notified Co-op by letter of his refusal to proceed further because he had not been paid for the work performed during the last two weeks of November, and that he expected payment of the reasonable value of work done to date. The storm damage was repaired and the transmission line finally completed in August, 1950 by another contractor.

Co-op's complaint against Surety only, claiming damages for Contractor's alleged failure of contract performance, was filed in the federal district court in December, 1950, diversity jurisdiction under 28 U.S.C. § 1332 being asserted. Surety moved the court for leave to bring in Contractor as a third party defendant under Fed.Rules Civ.Proc. Rule 14, 28 U.S.C. and Contractor moved for leave under F.R.C.P. Rule 24 to intervene and to file a complaint in intervention claiming recovery against Co-op on quantum meruit for work performed on the transmission line. The motion of Contractor was granted.

Nonjury trial resulted in entry of findings, conclusions and a judgment dismissing Co-op's complaint and awarding recovery on Contractor's complaint against Co-op in the sum of $17,209.92, with costs. In substance, the district court found and held that the delay in Contractor's performance of the contract work was due to the failure and neglect of Co-op in breach of the contract to clear the right-of-way in a timely and proper manner.

On appeal Co-op contends: (1) that the district court was without jurisdiction to hear and determine Contractor's claim against Co-op because of nondiversity of citizenship between them; and (2) that the district court erred in finding Co-op responsible for Contractor's delay in performance and in failing to apply contract provisions concerning the effect of delay.

Co-op had the right to sue Surety on the performance bond without joining Contractor as a party defendant, the obligations of the bond being joint and several. The federal district court had jurisdiction of the action under 28 U.S.C. § 1332 by reason of the amount in controversy and the diversity of citizenship of the parties. Contractor was not a necessary or indispensable party to the action as originally commenced; accordingly his subsequent appearance in the cause by intervention did not divest federal jurisdiction theretofore established and properly invoked by Co-op. "Jurisdiction once acquired on that (diversity) ground is not divested by a subsequent change in the citizenship of the parties." Wichita R. & Light Co. v. Public Utilities Commission, 260 U.S. 48, 54, 43 S.Ct. 51, 53, 67 L.Ed. 124. Jurisdiction on diversity grounds existing at the commencement of an action is not divested by a subsequent reduction of the amount in controversy below the jurisdictional minimum. St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 58 S.Ct. 586, 82 L.Ed. 845. If the voluntary action of the original parties in eliminating as between themselves either diversity of citizenship or jurisdictional amount in controversy does not destroy diversity jurisdiction previously established, certainly established jurisdiction will not be divested by the intervention of a dispensable party of the same citizenship as the original plaintiff, if such intervention be without collusion and authorized by procedural rules.

In a case almost exactly apposite in facts and procedure to the present case, United States, for Use and for Benefit of Foster Wheeler Corp. v. American Surety Co., 2 Cir., 1944, 142 F.2d 726, 728, the Second Circuit said:

"Atlantic was properly allowed to intervene in the suit. It would have been bound by a judgment against the surety entered after it had received due notice of the suit, and it was entitled to an opportunity to defend that action. Washington Gaslight Co. v. District of Columbia, 161 U.S. 316, 329, 330, 16 S.Ct. 564, 40 L.Ed. 712; Kramer v. Morgan, 2 Cir., 85 F.2d 96. The counterclaim it filed against the plaintiff was likewise properly allowed although there was no diversity of citizenship to support jurisdiction. It was based on an alleged breach of the same contract on which the plaintiff sued. Although the intervenor could not have sued the plaintiff in the first instance on that contract in a federal court, yet when the plaintiff sued upon it under the Miller Act and the intervenor became a party to that suit no additional ground of jurisdiction was needed to support the counterclaim. Moore v. New York Cotton Exchange, 270 U.S. 593, 46 S.Ct. 367, 70 L.Ed. 750, 45 A.L.R. 1370. Of course the propriety of such orders as these would hardly have been questioned had they been made after the Federal Rules of Civil Procedure took effect. Rules 13(a) and 24(a), F.R.C.P., 28 U.S. C.A. following section 723c."

In another closely similar case, Virginia Electric & Power Co. v. Carolina Peanut Co., 4 Cir., 1951, 186 F.2d 816, 821, 32 A.L.R.2d 234 the Fourth Circuit said:

"Permitting intervention after federal jurisdiction has attached by an insurer which is a resident of the same state as defendant will not defeat the jurisdiction. The rule applicable was thus stated by Chief Justice Taft in Wichita R. & Light Co. v. Public Utilities Comm., 260 U.S. 48, 54, 43 S.Ct. 51, 53, 67 L.Ed. 124: `Jurisdiction once acquired on that ground is not divested by a subsequent change in the

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