State Highway Commission v. Kansas City Bridge Co.

• Decision Date: 13 February 1936
• Docket Number: No. 10419.,10419.
• Citation: 81 F.2d 689
• Parties: STATE HIGHWAY COMMISSION in ARKANSAS et al. v. KANSAS CITY BRIDGE CO.
• Court: U.S. Court of Appeals — Eighth Circuit

81 F.2d 689 (1936)

STATE HIGHWAY COMMISSION in ARKANSAS et al. v. KANSAS CITY BRIDGE CO.^*

No. 10419.

Circuit Court of Appeals, Eighth Circuit.

February 13, 1936.

Walter L. Pope and Leffel Gentry, both of Little Rock, Ark. (Carl E. Bailey, Atty. Gen. of Arkansas, on the brief), for appellants.

J. F. Loughborough, of Little Rock, Ark., and Richard S. Righter, of Kansas City, Mo., for appellee.

Before STONE, SANBORN, and BOOTH, Circuit Judges.

SANBORN, Circuit Judge.

The Kansas City Bridge Company, a Missouri corporation, brought this suit against the state highway commission of Arkansas and its members, for the purpose of securing a judgment for $100,000 and interest under a contract for extra compensation for work done and materials furnished in the erection and completion of a highway toll bridge across the Red river on state highway No. 2 near Garland City, Ark. The sole ground of federal jurisdiction was diversity of citizenship. The commission moved to dismiss on the ground that the suit was against the state of Arkansas, of which the court lacked jurisdiction under the Eleventh Amendment to the Constitution of the United States, and that diversity of citizenship did not exist. This motion was denied. The suit was tried as an equity case, and a decree was entered in favor of the bridge company and against the commission for $100,000 and interest. The jurisdiction of the court below is challenged.

Unless that court had jurisdiction, it would serve no useful purpose to set forth in detail the facts out of which the controversy arose, or the conflicting claims of the parties. The bridge company makes no claim that the individual defendants, members of the commission, are in any way liable to it, nor does it claim that the commission has any funds, or property out of which the judgment would be collectible. It does claim that, under its contract with the commission for additional compensation, the commission recognized the company's right to be paid $100,000 for extra work in reconstructing the bridge, after a portion of it had been wrecked by persons unknown, and that, while its contract with the commission provided for the payment of the extra compensation from tolls to be collected in the future, it is because of changed conditions, entitled to a judgment against the commission which can be made the basis for the issuance by the refunding board of the state of Arkansas of funding notes pursuant to Act No. 11 of the 2d Extraordinary Session of the General Assembly of the state of Arkansas 1934, approved February 14, 1934, p. 28, which, by its terms, makes the judicial determination of the validity of a claim conclusive on the board.

At the time the suit below was tried and the decree entered, the rule in Arkansas was that the highway commission was an entity subject to suit. Arkansas State Highway Commission v. Dodge, 181 Ark. 539, 26 S.W.(2d) 879; Baer v. Arkansas State Highway Commission, 185 Ark. 590, 48 S.W.(2d) 842; Arkansas State Highway Commission v. Dodge, 186 Ark. 640, 55 S. W.(2d) 71. After the decree was entered, the Supreme Court of Arkansas, in the case of Arkansas State Highway Commission v. Nelson Bros., 87 S.W.(2d) 394, overruling all of its former opinions to the contrary, held that the commission was an agency of the state performing governmental functions; that a suit against it was a suit against the state; and that, under the Constitution of Arkansas, the state could not consent to be sued.

The question of jurisdiction of the federal court of a similar suit was presented to and passed upon by this court in Utah Construction Co. v. State Highway Commission of Wyoming, 23 F.(2d) 638. There, as here, the suit was against a highway commission to recover a money judgment for increased compensation for highway construction. It was conceded in that case, as in this, that the commission had nothing from which the judgment could be paid, and that no recovery could be had from the members of the commission. This court held that the commission might be sued as an entity distinct from the state itself, and that the trial court had jurisdiction because of diverse citizenship. On certiorari, the Supreme Court reversed (State Highway Commission of Wyoming v. Utah Construction Co., 278 U.S. 194, 199, 49 S. Ct. 104, 106, 73 L.Ed. 262) and held that the federal court had no jurisdiction, saying:

"It seems to us sufficiently clear that the suit is, in effect, against the state of Wyoming. The contract for the construction of the work in question was between the Utah Construction Company and the state. The state acting through the highway commission, as it might through any officer, became a party to the original agreement and obligated herself thereby. Neither the commission nor any of its members assumed any direct or personal responsibility. The supplemental agreement was not intended to impose liability where there was none before. Its purpose, considering the changed circumstances, was to modify in the ways specified what the original parties had undertaken to do. The commission was but the arm or alter ego of the state, with no funds or ability to respond in damages. There is no claim that the members of the commission are personally liable."

The bridge company does not contend that the case at bar can be distinguished from the Wyoming Case because of any difference in the character and function of the Arkansas commission, but contends that the contract which the Wyoming commission made, by its express terms, showed that it was made for the state by the commission, while in the case at bar the contract, by its terms, was that of the Arkansas commission itself.

This distinction, we think, is one of form, rather than of substance. That under the laws of Arkansas the commission is a state agency performing governmental functions with respect to the construction and maintenance of state highways and state highway bridges is not disputed. That it was acting as such agency in entering into the contract which is the basis of this suit is likewise undisputed. The revenues available for meeting obligations incurred by that commission were state...