Southern Sog, Inc. v. Roland
| Decision Date | 04 May 1981 |
| Docket Number | No. 79-4013,79-4013 |
| Citation | 644 F.2d 376 |
| Parties | 28 Cont.Cas.Fed. (CCH) 81,382 SOUTHERN SOG, INC., Petitioner-Appellant, v. James S. ROLAND, Area Director of the Department of Housing and Urban Development et al., Defendants-Appellees. . Unit A |
| Court | U.S. Court of Appeals — Fifth Circuit |
Edward L. Cates, Jackson, Miss., for petitioner-appellant.
Robert E. Hauberg, U. S. Atty., L. K. Travis, Jackson, Miss., Philip P. Houle, U. S. Dept. of HUD, Atlanta, Ga., for Roland, Moize & HUD.
James W. Newman, III, W. O. Dillard, Jackson, Miss., for Ferguson.
Appeal from the United States District Court for the Southern District of Mississippi.
Before WISDOM, COLEMAN and RANDALL, Circuit Judges.
In May, 1974 the United States Department of Housing and Urban Development (hereafter "HUD"), acting under the authority of Section 221(d)(3) of the National Housing Act as amended, 12 U.S.C. § 1715l, agreed to insure loans for a low income housing project in Flora, Mississippi. The project was to be called The Pride Gardens Apartments. The project was sponsored by two non-profit organizations, Delta Real Estate Development, Inc. ("DRED"), and Mississippi Action for Community Education, Inc. ("MACE"). MACE and DRED formed a limited partnership (called "Pride Gardens, Ltd."). DRED, Inc. was the General Contractor for the project.
In November, 1974 the initial preconstruction began. Almost immediately the project began having problems with the foundation construction. Compression tests performed by Central Testing and Control, Inc. of Jackson, Mississippi, showed that the concrete poured in some of the foundations did not meet construction specifications.
Prior to February 28, 1975, L. V. Sumter was the foundation subcontractor. His services were terminated and on February 28, 1975, DRED, Inc., entered into a contract with Plaintiff-Appellant, Southern Sog, Inc., for that organization to lay foundations in the Flora Project. Southern Sog was to be paid $34,555 upon completion.
On March 25, 1975, Southern Sog contracted with J. J. Ferguson Sand and Gravel Ready Mix Hot Mix ("Ferguson") to furnish the concrete for the foundations. In its suit, Southern Sog contends that Ferguson had furnished concrete to its predecessor, L. V. Sumter, and that it would not have contracted with Ferguson had it not been strongly urged to do so by the General Contractor, DRED, Inc.
The concrete Southern Sog ordered from Ferguson was delivered by May 23, 1975. As it was laid into the foundations in the Flora project more problems arose. Unusual cracks appeared in the concrete. Central Testing and Control, Inc., sent the project architect, Charles Craig, weekly reports detailing the foundations which failed compression tests.
The litigants do not agree upon the exact date HUD or Southern Sog were each notified of the foundation problems. HUD says the architect notified it August 1, 1975, that he could not certify the project because of the foundation problems. It says that at this point, and certainly no later than the end of August, 1975, Southern Sog was told about the inadequacies of its foundation work. Southern Sog argues that since the architect was working not only for MACE and DRED but also for HUD, the government was surely notified about the foundation problems months before August 1, 1975, through the repeated reports Craig received on compression tests of the concrete. It also says it was not notified that DRED and HUD were dissatisfied with the foundation work until November, 1975, when 80 per cent of the construction was already finished, and when remedying the foundation faults would have been more expensive than would have been the case had Southern Sog been notified earlier.
Regardless of when Appellant received notification, HUD was concerned about the foundation problems and by the architect's refusal to certify the buildings, and in August, 1975 was actively seeking a solution for its dilemma. HUD says that at this point it had three options: (1) to cancel the project, (2) to force the subcontractor to redo the faulty work, or (3) to seek "creative means" of remedying future damages which the defective foundations might cause the project. To cancel the project could cost HUD as much as $1 million in loan guarantees, and would prevent the creation of much needed low income housing. To require Southern Sog or Ferguson to tear out and replace the foundation concrete (assuming it was possible) would cost at least $75,000, much more than either was to get for its contract. HUD chose the third solution, a "living" escrow of $10,000 to be held during the 40 years of the mortgage term. The escrow funds were to be disbursed only if the contractor went bankrupt or if the project foundations crumbled. HUD retained major control of the escrow account, particularly including the right to determine the occurrence of conditions which would trigger disbursement of the funds.
Neither Southern Sog nor Ferguson were included in the discussions concerning the escrow agreement. Of course, they did not sign the escrow agreement. HUD says in requiring the escrow account it did not specify that the money should come from funds due Southern Sog. The record shows that HUD was given some notice that the $10,000 would come from a source other than the non-profit organizations with which it had been dealing. In a letter to James Roland, area director of HUD, dated August 25, 1975, Charles Bannerman, President of MACE explained the probable source of the escrow funds: "... the owner 1 must look to the sub-contractor 2 and the sub-contractor must look to the supplier. 3 "
In anticipation of the escrow agreement DRED, Inc., had withheld $10,000 4 it owed Southern Sog. Contending that Ferguson's concrete was defective, Southern Sog withheld what it owed for the concrete.
The escrow agreement was executed May 5, 1977, after almost two years of discussions.
Of all the unpaid parties Ferguson acted first to get its money. On February 25, 1977, it sued Southern Sog on an open account, claiming $10,566.16 plus expenses. The suit was filed in the Circuit Court of the First Judicial District of Hinds County, Mississippi.
Southern Sog vigorously defended the Ferguson suit, filing an answer, affirmative defenses and a counterclaim. On January 6, 1978, it notified all participants to the escrow agreement that unless they released the $10,000 and indemnified Southern Sog against the suit by Ferguson they would be subject to a lawsuit.
On April 26, 1979, Southern Sog filed suit in federal district court against HUD, Ferguson, DRED, MACE, and Pride Gardens, Ltd. It also named as defendants James S. Roland, Area Director of HUD and Jerry D. Moize, Area Counsel of HUD. In the suit it sought to recover the $10,000 in the HUD escrow account. It sought $10,566.16 actual damages from Roland, Moize, DRED or MACE, and $1 million punitive damages from Roland and Moize. Finally it asked for an injunction staying prosecution of Ferguson's actions in state court, and an award of $100,995.29 against Ferguson for malicious prosecution. Southern Sog laid jurisdiction for these claims in 12 U.S.C. § 1701 et seq. 28 U.S.C. § 1331, and 28 U.S.C. § 2201-2202.
Southern Sog did not get very far in federal district court. The court dismissed Ferguson as a party to the suit, holding that Mississippi substantive law does not allow an action for malicious prosecution except where the prosecution ends in favor of the defendant. See Grenada Bank v. Petty, 174 Miss. 415, 164 So. 316, 318 (1935). Southern Sog has withdrawn its appeal on this point, and we, therefore, do not consider it.
All other defendants filed motions to dismiss for lack of jurisdiction or alternatively for summary judgment under Rule 56 5 of the Federal Rules of Civil Procedure. The court agreed that it had no jurisdiction in the action against HUD and dismissed all defendants without prejudice. In its Opinion dated November 13, 1979, The District Court stated
Three days later, realizing that it had erred in stating that the suit was initially filed in state court, The District Court amended the Opinion, eliminating the quoted paragraph and substituting a statement that the federal court had no jurisdiction against Moize, Roland, HUD or the United States. It further stated, ...
To continue reading
Request your trial
-
Johnson v. SECRETARY OF/AND US DEPT. OF HOUSING
...pursuant to 28 U.S.C. § 1331(a) (1976).22Industrial Indem., Inc. v. Landrieu, supra, 615 F.2d at 647; Southern Sog, Inc. v. Roland, 644 F.2d 376, 379-80 (5th Cir. 1981); Trans-Bay Engineers and Builders, Inc. v. Hills, 179 U.S.App.D.C. 184, 551 F.2d 370, 377 (D.C.Cir.1976). Contra, Marcus G......
-
Belle Co. v. U.S. Army Corps of Eng'rs
...plaintiff cited provided waiver of immunity) (citing Boehms v. Crowell, 139 F.3d 452, 462–63 (5th Cir.1998); S. Sog, Inc. v. Roland, 644 F.2d 376, 380 (5th Cir. Unit A May 1981)).5 In neither its complaint nor its briefs on appeal does Belle cite a statutory waiver of sovereign immunity for......
-
Smart v. U.S. Dep't of Veteran Affairs
...one against the government. See Kentucky v. Graham, 473 U.S. 159, 166, 105 S.Ct. 3099, 87 L.Ed.2d 114 (1985); Southern Sog, Inc. v. Roland, 644 F.2d 376, 380 (5th Cir.1981) (citing Unimex, Inc. v. United States, 594 F.2d 1060, 1061 (5th Cir.1979)). These claims are thus regarded as having b......
-
Austral Oil Co., Inc. v. National Park Service, Civ. A. No. 3:97-CV-0058-H.
...within the scope of his official employment. The claims against him are therefore claims against the sovereign. Southern Sog, Inc. v. Roland, 644 F.2d 376, 380 (5th Cir.1981); Unimex Inc. v. HUD, 594 F.2d 1060, 1061-62 (5th Cir.1979). Accordingly, the Court's analysis as to the NPS applies ......