Tri-State Insurance Company v. United States

Decision Date19 February 1965
Docket NumberNo. 17651.,17651.
Citation340 F.2d 542
PartiesTRI-STATE INSURANCE COMPANY, Appellant, v. UNITED STATES of America, Appellee.
CourtU.S. Court of Appeals — Eighth Circuit

Richard A. Williams, of Wright, Lindsey, Jennings Lester & Shults, Little Rock, Ark., made argument for appellant and filed brief.

Richard N. Countiss, Atty., Lands Div., Dept. of Justice, Washington, D. C., made argument for appellee and filed brief with Ramsey Clark, Asst. Atty. Gen., Roger P. Marquis and John J. Schimmenti, Attys., Dept. of Justice, Washington, D. C., Charles M. Conway, U.S. Atty., and E. A. Riddle, Asst. U. S. Atty., Fort Smith, Ark.

Before VAN OOSTERHOUT and MEHAFFY, Circuit Judges, and DELEHANT, District Judge.

MEHAFFY, Circuit Judge.

Appellee, the United States, brought this suit against The Baptist Golden Age Home, Capital Construction Company, Inc., and appellant, Tri-State Insurance Company, the surety of Capital under a construction contract. The injury complained of was damage to United States land sustained when the lateral support thereto was removed by Capital in the course of excavation pursuant to performance of a building contract on adjoining land belonging to defendant Baptist.

The District Court ruled Baptist immune by reason of its charitable crasis, but ruled Capital and Tri-State absolutely liable submitting to the jury only the question of damages. The jury returned a verdict against Capital and Tri-State, jointly and severally, in the sum of $5566.00. Tri-State has appealed, and we are concerned here only with Tri-State's liability under its bond.

Section 1345, Title 28 U.S.C.A., vests federal district courts with original jurisdiction in all such civil actions commenced by the United States Government.

The facts may be briefly stated. On July 15, 1960, Capital entered into a building contract with Baptist, an eleemosynary institution, for construction of an addition to the latter's home for retired members in Hot Springs. On that same date, appellant Tri-State, as surety, executed a performance and indemnity bond whereby appellant and Capital were bound unto Baptist and the mortgage lender in the amount of the building contract.1

The plans and specifications of the architect employed by Baptist required Capital to excavate and level the rear of Baptist's upward sloping property to within six inches of the adjoining land owned and operated as a national park by the United States Government, and to erect a concrete retaining wall eighteen feet high to provide lateral support for the embankment approximately twenty-three feet high created by the excavation.

To allow for the footing of the wall, a space of six feet was left between the wall and the embankment. Although the plans and specifications called for this area ultimately to be filled with soil and rock, the architect supervising the job instructed the contractor not to backfill for twenty-eight days after the concrete had been poured for the retaining wall in order to allow the concrete to cure. The architect and contractor discussed the possibility of shoring the embankment during the interim, but they were unable to determine any practical method due to the height of the embankment and the narrow, intervening corridor behind the wall within which any supporting materials would have had to be placed.

After a period of heavy rainfall and before the concrete had cured, a landslide occurred on December 5, 1960. This caused the national park embankment to slough off, slide into and fill two-thirds of the area behind the wall which was ruptured upon impact.

Subsequently, in August of 1961, the contractor defaulted on the job. Thereupon the appellant assumed completion of the construction, and ultimately the Federal Housing Administration which had insured the work authorized payment of the contract costs.

At the outset, we recognize that federal jurisdiction based on 28 U.S.C.A. § 1345 renders inapplicable the rule of Erie R. R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) which requires adherence to the appropriate substantive law of a particular state in a diversity of citizenship case. National Bank of Eastern Arkansas v. General Mills, Inc., 283 F.2d 574, 576 (8th Cir. 1960).

Appellant submits that the District Court erred in denying its motion for a directed verdict because no cause of action existed in favor of appellee against appellant either on its bond executed for the exclusive protection of Baptist, the mortgage lender, laborers and materialmen or by legislative grace under an independent statutory right.

We have examined the cited authority, as well as the jurisprudence generally, and conclude that a fair interpretation of appellant's liability on the bond as written would limit its coverage to those beneficiaries specifically enumerated and should not be extended to afford protection to such a claimant as appellee who seeks to recover damages from the surety for the tortious injury to its land.

In general, a surety is liable to third persons only when his obligation to the principal obligor contains a promise which may be reasonably and clearly interpreted for the claimant's benefit. Employers' Liability Assur. Corp. v. A. W. Johnson Co., 234 Ark. 806, 354 S.W.2d 733 (1962); Restatement, Security § 166, Comment at at 462 (1941); 17 Am.Jur. 2d Contracts, § 304 at 730 (1964).

In City of University City ex rel. and to use of Mackey v. Frank Miceli & Sons Realty & Building Co., 347 S.W.2d 131 (Sup.Ct.Mo.1961), a similar question arose with respect to a surety's liability to landowners not a party to a statutory bond given a contractor to protect a municipality against noncompletion of a contract for the improvement of a subdivision. The contractor defaulted on its contract with the city to pave a drainage ditch which caused portions of the landowners' lots to wash away. The court held that because the plain terms of the bond indemnified and secured only to the city the actual construction of the improvement, neither the bond nor the contract it secured could be reasonably intended to be construed to protect such third persons as adjoining landowners against either torts or breach of contract. The court also noted that in the absence of specific agreement the bond and ordinances involved were not substitutes for public liability insurance covering the contractor's tort liability to the landowners or other third persons.

A like result was reached in John L. Roper Lumber Co. v. Lawson, 195 N.C. 840, 143 S.E. 847 (1928). In this suit, the surety agreed to indemnify a state highway commission against "any expense incurred...

To continue reading

Request your trial
18 cases
  • Fort Bragg Unified Sch. Dist. v. Solano Cnty. Roofing, Inc.
    • United States
    • California Court of Appeals
    • May 25, 2011
    ...parties, not contract default claims by the obligee of the bond. (See, e.g., Tri–State Insurance Company v. United States (8th Cir.1965) 340 F.2d 542( Tri–State ); see also State Hwy. Administration v. Transamer. Ins. Co. (1976) 278 Md. 690, 706–707 & fn. 11, 367 A.2d 509, 519 [explaining T......
  • United States v. Williams, 29674.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • May 13, 1971
    ...adherence to the appropriate substantive law of a particular state in diversity cases becomes inapposite. Tri-State Insurance Co. v. United States, 8 Cir. 1965, 340 F.2d 542, 544; see United States v. Standard Oil Co. of Cal., 1947, 332 U.S. 301, 306-310, 67 S. Ct. 1604, 91 L.Ed. 2067. Neve......
  • State Highway Administration v. Transamerica Ins. Co., 76
    • United States
    • Court of Appeals of Maryland
    • December 8, 1976
    ...87 S.W.2d 248 (1935); City of University City v. Frank Miceli & Sons R. & B. Co., 347 S.W.2d 131 (Mo.1961); Tri-State Insurance Company v. United States, 340 F.2d 542 (8th Cir. 1965); John L. Roper Lumber Co. v. Lawson, 195 N.C. 840, 143 S.E. 847 (1928); National Surety Co. of New York v. U......
  • Paige Int'l, Inc. v. XL Specialty Ins. Co., Civil Action No. 14–1244 (JEB)
    • United States
    • United States District Courts. United States District Court (Columbia)
    • July 28, 2017
    ...in analyzing this Payment Bond. See 3 Bruner & O'Connor, Construction Law § 8:15 ; see also Tri–State Ins. Co. v. United States, 340 F.2d 542, 544 (8th Cir. 1965) ("In general, a surety is liable to third persons only when his obligation to the principal obligor contains a promise which may......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT