# Appendix — United States v. Frankel > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385601_0552%3A3 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1962 - **Citation:** 371 U.S. 903 ## Text ae hr Kee APPENDIX. A. a! United States. Court of Appeals FOR siecias EIGHTH: CIRCUIT. , No 16901. ) : Phoenix Aswurence Company et. oc ae ew Yams, Appeal from the Sarat , oe \PF eHant, | United States Dis- ; pees, A eragel - -%& trict Court for the City of. Buckner, Missouri, Byron “Miscou District of Bz Crail pnd Housing and Home eo Finance Administrator, . o - > Appellees. 7 (hs 7 [July 18, 1962.) , - KS ‘Before Sanborn, Blackmun. aiid Ridge, Cireuit a. ie Sanborn, Circuit Judge. This is an appeal from a judgment for the defendants ina diversity action brought by Phoenix Assurance Com- pany of New York to obtain a judgment declaring Void a | : performance bond issued by it on April 19, 1956, to protect the City of Buckner, Missguri. against default in the com-_ _ pletion of a contract it had entered into on March 30, 1956, w ith William A. Reser, doing business as Continental Construction Company.. ‘. The contract called ‘for the suatitieasinis of a sewer system for the City at a cost of $97,036.35. By the terms _of the contract, work was to commence at a date to be specified by the City in a written notice to proceed. de-. A2: . . ‘ : livered to the contracivi, and was to be completed within - 300 days thereafter; the contractor. was to “pay the pre- vailing wage rates in this districts pertaining to the trade,” and to'furnish.a performance bond in an amount equal to the contract price, for the faithful carrying out of the con- tract and the payment of all persons performing labor or ~ furnishing. materials. - Reser procured: the performance bond from, Phoenix by paying a premium of $970.37, in consideration of which Phoenix agreed to indemnify the City for any default by ; Reser in the performance of his contract. The bond -con- tained: the following provision: ate aga “PROVIDED FURTHER, That the said ‘Surety, for valué received, hereby stipulates and agrees that no change, extension of time, alteration, or addition | - to the terms of the contract. or the work to be per- formed thereunder or in the ‘specifications accompany-/ — ing the same, shall in any wise affect its, obligation on ~ this bond and it does hereby waive notice of any change, extension of time. alteration, or addition to the terms of the contract, or to the work, or to the specifications.” On March 16, 1956, before entering into its contract ‘with Reser, the City had.made written application to the Housing and Home Finance Agency at Fort Worth, Texas, __ requesting the Agency to purchase $150,000 General Reve-. nue Bonds theretofore vated by the City for the purpose ~ of constructing the sewer system. The application was ac-| ' cepted by the Agency on July 11, 1956, and: an offer to lend the City not to exceed’ $150,000 for the project was made ‘on July. 18, 1956, by. “United States of America, Housing and Home Finance Agency, Community Facilities Com- missioner, ‘Regional Administrator.” The offer was vac- cepted by thé City on August 2, 1956. The loan agree- oa A3’ . ° ment between the Agency and ‘the City was subject to ‘various terms and conditions imposed’ by the ‘Agency, in- cluding the furnishing of copies: of various doeuments, . . such ag ordinances authorizing the issuance of the bonds, instruments relating to the pr oposed project, data as to-all . proposed wage rates, and such other data as’ “the Gov- ernment may require.” It was provided that the Govern- 2 ment should not’ be obligated to the City if it proceeded with the project without having been first advised by the Housing and Home Finance Administrator that the docu- .ments furnished were. in rn, with the conditions .. of the offer.. It was not until February | 21, 1957, that the Agency ad- vised the City that deficiencies in required_paper work. furnished by it had been cofrected and-that it was au- — thorized .to issue a notice to Reser to’ proceed with the work. Notice to proceed was given to Reser on February - - - 23, 1957, specifying February 25, 1957, as the ¢ommence-/ -ment date, and December 30, 1957, as the completion daté. - Work on the project apparently actually began. fod al 26, 1957. ‘No funds were made available to the City until April 24, 1957, when an: advance of $67 630.68 was au- _ thorized by the Agency pending. delivery of the, City’s ; Revenue Bonds. ~The advance was. conditioned upon the procurement of\a new performance bond or the furnishing of an opinion- by the City Attorney that the bond of. _ Phoenix. was a valid and binding obligation. The advance . Was actually made on June 18, 1957. . ee The controversy as to the liability of Phoenix as surety. on its. performance bond iff suit arose late i in 1956. Phoenix had declined .a request to rewrite the bond on a standard form of the Housing and Home Finance Agency. The Ad- e* _ministrator of that Agency\had been advised on December | _ 14, 1956. by counsel for Phoenix that it considered that it - ° . \ | Sos aie had “éxecuted no bonds for the performance of any al- " leged contract between the City of Buckner, Missouri, and . ‘ William Reser d/b/a the Continental Construction Com- ~ a parly.” The City contended that the bond in suit was valid and binding. and so advised Phoenix and the Administrator. ~ Reser—who, in the perfermnarice of his contract, was employing union labor and paying union wages—had a dispute with the union and “quit the job.” . The City, un- . dér dat@fef September 26, 1957, gave notice of. default to _ _Reser.. Notice of termination of his contract was) dated October 23, 1957. The City, by letter of that date, re- |. ° quested Phoenix to take over and complete Reser’s con- tract, which it did not do. The grounds for asking. that the wend in suit be de- — clared void are summarized in the amended complaint of _ Phoenix ( naming as a party defendant: the “Housing ‘and ' Home Finance Administrator, 2511 Federal Office Build- ing, Kansas City, Missouri”) as follows: “That. because ‘of. the. City’s inability to pore" the contract at the time of making; its unreasonable . delay in notifying the defendant Reser to proceed on . the .contract for over eleven®months; the defendant. Reser’s assignments to creditors; and the substantial . . change in the prices of materials, labor and supplies; _the Housing and Home Finance Administrator’s. con- trac@@FA 11-55-K was a new contract that abrogated ° the terms of the original contract [between the City . - and Reser] and thereby relieved.the plaintiff surety ‘of any obligation onthe original bond; the’ plaintiff . _ surety executed no bonds for the Housing and Home Finance Administrator; the original contract was re- - scinded by the execution of the’ new Housing and . Home Finance Administrator's contract; the original : contract has been breached by the C:ty and the Hous- ing and Home Finance Administrator and the plain- tiff’s bond is null and void." S ~The Ci ty a sserted that the bond was valid, and counter- . ~ elaimet hs damages af vat 472. 53, allegedly Caused | by bears 3 S. default. . - : ‘ Byron B. Crail, who had rendered serv ices. to Reser’ in. connection with his partial performance of the sewer con- tract, for which Crail had not been paid by Reser, inter- vened and: filed a counterclaim. 3 7 PaaS The Housing and: Home Finance Administrator denied the allegations of the amended complaint, and asserted that fie-had not properly been served with ‘summons and had no real interest in the outcome of tke litigation. He asked that as to him the amended complaint be dismissed. . The action was tried to the District Court: ‘without a _ jury. The court determined (1) that the bond was valid: . (2) that the City was entitled to ‘recover $30, 180.73. from Phoenix, and that Reser was liable to Phoenix | ‘for that amount; (3) that Crail was entitled to recover from Phoe- nix and Reser $1,355.05, -with Reser liable .to Phoenix therefor; (4) that no statutory penalty or attorney’s fees - against Phoenix shauld be allowed; and (5): that the ac-°~ tion as against the Housing and Home Finance Adminis- ° trator be dismissed. From the —? fadgment this ap- peal was taken. - The judgment te wacemeartly’ bina si ‘ determina: ‘tion by the District Court. that; under applicable Missouri — law, the performance bond in suit was:and continued to be a valid obligation—despite ‘the ‘facts (1) that at the time ‘the City contracted with Reser it did not have sufficient we funds to complete the project; (2) that the City was uh- able for nearly eleven months.to give Reser notice to pro- ‘ceed with the work; (3) that; in order to obtain the neces- : sary funds from the Housing and Home Finance Agency — to carry out the project, it was necessary for the City to . conform to certain requirements not specified in its con- foe 5 ~s oak tS elle tract of March - 30° 1956, with Reser; and (4) that Reser .- was in financial difficulties growing out of other construc, tion contracts at the time he was notified to sven td ‘The judgment represents the prediction or forecast a ’ an experienced Missouri federal trial judge as to what the Supreme Court of that state would probably hold, were it called uporgifo decide a similar case. Homolla v. Gluck, 8 Cir., 248 F.2d 731, 734. Unless. it is demonstrable that his conclusion was not a permissible one becaiise induced ' ~py a clear misconception or misapplication of Missouri . _- law, there ean‘be no reversal. Burkhardt v. Bates, 8 Cir., 296 F.2d 315, 316 and cases cited. ‘The burden’ of demon- | stration is ‘on the appellant and is a heavy. one, Western Casualty & Surety Co..v. Coleman, 8 Gir, 186 F.2d 40, 43; ee _ Village of Brooten v.. Cudahy Packing ew 8 Cer. — F.2d 284, 288:289. - Phoenix’ was a com nsated surety. : “One who - gages in the business of insurance for compensation may properly ‘be held more rigidly to his obligation to indemnify * the insured than one ‘whose suretyship is an undertaking ' uncompensated and casual.”» Chapman v. Hoage, 296 U:S. 526, 531; State ex rel..Hardy v. Farris, 226 Mo. App. 1007, 1014, 47 'S.W.2d_ 198, 201. See, also, 50 Am. ee ship, § $ 320, 321. - . “8 < There is no merit in the contention of Phoenix that. be- cause the City did not, at the time it: contracted with Reser for the construction of the sewer system, have the funds on hand to complete’ the project, ‘the performance bond. in suit was invalid. The City,/in, order to finance the proj- .-- ect, had authorized. the issuance of bonds, and had applied — - to. the Housing and Home Finance Agency. for their pur- chase. -Neither Reser nof his ‘surety could shave had any pers illusions about how the * have believed, that. it / ject was to be financed or could’ . as to be an immediate “cash and * ca A7 “carry” operation, t sogengite ‘the performance bond was — invalid at the tir of ity execution, a return.or tender pack -of the completely Barsatee> premium would be a prerequisite to the mamtenance -of this ‘action. Goffe. v. National Surety Co., oA Mo. 140, 150-151, 9 S.W.2d 929, 933. : of Phadiin contefids that it was materiallyaprejudiced ‘by’. v the long delay of the City in giving notice to Reser to pro- ~ - ceed with the wor k—this because prices of material and labor had increased] ‘substantially in “the. intefval; thus imposing upon Phoenix a ‘greater risk ‘than it was: orig. ‘inally intended to bear—sand that’ the provision in the bond - that.no. change, extension .of time, alteration or addition . to.the terms of Reser’s contract should dffect the obliga- tion of the surety, is, for. some reason, not apparent ts, inapplicable under the facts of this case. The general rule relative to extension of time is stated - in 50 Am. Jur., Suretyship, $+322, as follows: “In. sinnedaaiten with the rule that a,surety com-: -.pany can be relieved from its obligation for neg . ship only where a departure from the contract ° shown to be a material variance, it is held that an ex: “tension of time will not relieve a. surety company on’ a bond unless the extension exceeds the tiie limited in the bond for bringing suit thereon, or unless the surety. “company is thereby made.-to suffer. material harm; and that there will be no presumption: of injury un- ~ less injurv is alleged and. proved.” See, also, State ex rel. Hardy v. Farris, supra, ‘pages 1013- . 1014 of* 226° Mo. App., pages | 200-201 of 47 S.W.2d; Hig- : ' gins oh rage ¢ v. Massachusetts Bonding & Insurance Co., — «DC. 112 E. Supp. 399, 393, It was the obligation of ce to protect the City from any default by Reser in the performance of “his contrac and not ‘the. ‘obligation. of thé City. to protect Phoehix against loss on account of* _& ‘ ° ‘ mh . ‘ > P a > a its assumption of a risk for which it was paid and which turned, out badly because of Reser’s. lack of financial re- _ sponsibility, and inability to complete’ his undertaking. .While it cannot, of course, be said with certainty that. " the Supreme Court of Missouri would agree with the re- sult reached by the trial judge, the question whether the performance bond in suit was invaljdated, under. Missouri law, for any of the reasons given by Phoenix is one of those doubtful and debatable questions of local lawsas to which this Court is justified in accepting, and will accept, — _the views of thé trial judge.. See National Bellas Hess, . Inc., v. Kalis, 8 Cir., 191 F.2d 739, 741, cert. denied 342 ° U.S. 933. a ee The contention of Phoenix that it is ent#led to visit its misfortune upon the Housing and Home Administrator has. too inadequate a base to merit discussion. Assuming: that he was properly served with process, his relation to the City was onjy that of a lender of Government funds anda purchaser of the City’s Revenue Bonds. «The claim : against him was properly. dismissed. _ As to damages, we think.that the amount determined __ by the trial judge is not without sufficient evidentiary sup- port.. sient aa 7 We find in the record on appeal no warrant for holding | that the: trial judge either misconceived or misapplied ap- plicable Missouri law in entering the judgment appealed ‘from. Cf. Phoenix Assurance Company of ‘New York v. tude i City, 8 Cir., 296 F.2d 787. os ie The judgment: is affirmed. “A true copy..+ 9° | - « Attest: : Clerk, U.S. Court. of Appeals, Eighth Circuit 4 e \ APPENDIX B._ Judgment. United States Court of Appeals FOR THE EIGHTH CIRCUIT. - No. 16,901. September Term, 1961. Phoenix Assurance Conipany of. New York, Appellant, | Pn: VS. ; City of Buckner, Missouri, Byron B. Crail and Housing ‘and Home Finance Administrator. ‘ Appeal from the United States District Court for the Western District of Missouri. This catise Came on to’ be. heard on the record from the United States District Court for the Western District of Missouri, and was argued by counsel. . On Consideration Whereof, it s now here ordered and adjudged by. this Court, that the.judgment of the said Dis- .triet Court, in this cause, be, and the ‘same is hereby, af-' firmed. ; e ; ae - July 18, 1962. Approved for the Céurt: par Clerk, U. S. Court of Appeals. for the Eighth Circuit. Al0 APPENDIX ‘C. "Statutes, 42 US.C. § 1494. Functions, powers and duties of Admin- 7 * istrator; administrative. expenses. | ‘In the performance of, and. with respect to, the func- tions, powers, and duties vested in him by this chapter the Administrator: shall (in addition*to any authority other- wise vested in him) have the functions, powers, and du- ties set forth in section 1749a of Title 12, excépt subsection (c) (2) of such section. Aug. 11, 1955, c. 783, Title I, ar a 69 Stat. 644. _ . 28 U.S.C. § 2679. Exclusiveness of remedy. The authority of any federal agency to gue and be sued in its own name shall not be construed to authorize suits against such federal agency on claims which are . cognizable under section 1346 (b) of this title, and the remedies provided by this title in such cases shall be ex- clusive. June 25, 1948, c. 646, 62 Stat. 984. 28 us® § 2680. Exceptions. - The provisions of this chapter and section 1346 (b) of this title shall not apply. to— (h)- Any claim | arising outor ** * interference with > contract rights. June 25, 1948, c. 646, 62 Stat. 984, amended July, 16, 1949, c. 340, 63 Stat. 444. 6 12 U.S.C. § 1749a. Powers and duties of Administrator_— ° Preparation and submission of budget: maintenance of accounts. All (c) In the siiinadianiie of, and with respect. to, the functions, powers, and duties vested in him by this sub- chapter, the Administrator, notw ithstanding the provisions : . of any other law, may— (3) sue and be sued; .. . Apr. 20, 1950, c. 94, Title IV, § 402, 64 Stat. 78; 1953 Reorg. Plan No. 1, § 5; eff. Apr. 11, 1953, 18 F.R. 2053, 67 Stat. 631. , . * i ——— ————_ — --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385601_0552%3A3. Public record. Not legal advice.