Globe Construction Co. v. Oklahoma City Housing Authority

571 F.2d 1140, 15 Collier Bankr. Cas. 2d 757, 1978 U.S. App. LEXIS 13070
CourtCourt of Appeals for the Tenth Circuit
DecidedJanuary 13, 1978
DocketNos. 75-1464 to 75-1467, 75-1469 to 75-1472, 75-1475, 75-1479 and 75-1480
StatusPublished
Cited by27 cases

This text of 571 F.2d 1140 (Globe Construction Co. v. Oklahoma City Housing Authority) is published on Counsel Stack Legal Research, covering Court of Appeals for the Tenth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Globe Construction Co. v. Oklahoma City Housing Authority, 571 F.2d 1140, 15 Collier Bankr. Cas. 2d 757, 1978 U.S. App. LEXIS 13070 (10th Cir. 1978).

Opinion

McWILLIAMS, Circuit Judge.

This controversy arises out of a construction contract that went awry. Globe Construction Company, a Colorado corporation, entered into a contract with the Oklahoma City Housing Authority, a public corporate body organized under the laws of Oklahoma, to perform certain rehabilitation work on the Will Rogers Low Rental Housing Project in Oklahoma City, Oklahoma. General Insurance Company, as surety, executed a performance bond on behalf of Globe. Various subcontractors were employed by Globe.

The prime contract called for job completion within 180 days. The Authority determined to its satisfaction that there had been a failure by Globe to make timely performance, and accordingly the Authority terminated its contract with Globe, and completed the work itself. Invoking diversity jurisdiction, Globe then brought suit in the United States District Court for the Western District of Oklahoma against the Authority based on what it alleged was a wrongful termination of the contract between the parties. Numerous subcontractors were also named by Globe as parties defendant, Globe alleging that these subcontractors had failed to perform. The Authority and the named subcontractors in turn asserted counterclaims against Globe.

During the course of the Oklahoma federal court proceedings, Globe filed for Chapter XI arrangement proceedings under the Bankruptcy Act in Colorado. Globe’s surety on the performance bond, the General Insurance Company, was then joined as a party in the Oklahoma proceeding. Trial of this case was to the court, sitting without a jury, and culminated in a detailed, 17-page memorandum opinion. In general, the trial judge held adversely as to General Insurance on any claims asserted by it, on behalf of Globe, against the Authority or any of the named subcontractors. Concerning the defendants’ counterclaims, the trial court held for the counterclaimants and against General Insurance. One defendant-counterclaimant, Ray Davis, doing business as Pioneer Floor Company, was also awarded judgment against Globe.

Eleven notices of appeal were filed, each seeking review of the judgment as entered by the trial court. Nine of the notices of appeal were filed by General Insurance and two by Globe. We shall first consider the nine appeals of General Insurance.

Nos. 75-1464, 75-1465, 75-1466, 75-1467, 75-1469, 75-1470, 75-1471, 75-1472, and 75-1475

The nine appeals discussed here concern General Insurance and its dispute with the Authority and some eight of the subcontractors. As indicated, the trial judge dismissed the claims asserted by General Insurance, on behalf of Globe, against the Authority and the subcontractors, and at the same time awarded the Authority and the subcontractors substantial damages, and attorney’s fees, against General Insurance, based on the obligation which General Insurance assumed when, as surety, it issued Globe a performance bond. Many of the matters raised by General Insurance on appeal concern what we deem to be questions of fact which were resolved by the trial judge on the basis of conflicting evidence. For example, such matters as fraud in the inducement; waiver of such fraud; latent conditions, defective plans, timely performance; substantial performance; waiver of any right to terminate; reasonable attorney’s fees are in reality factual issues, not legal issues. It is of course axiomatic that resolution by a trial judge of controverted issues of fact are not to be overturned by an appellate court unless they are clearly erroneous. In the instant case the trial judge’s critical findings of fact are not, in our view, clearly erroneous. On the contrary, the court’s findings are [1143]*1143supported by the record and accordingly on appeal must be accepted.

Two matters urged by General Insurance merit brief comment. As mentioned above, after Globe instituted the present action against the Authority and the named subcontractors, Globe filed for Chapter XI arrangement proceedings under the Bankruptcy Act in Colorado. The bankruptcy referee thereafter entered an order staying all proceedings against Globe and its surety, General Insurance. The federal district court in Oklahoma ignored this stay order and, after hearing, entered judgment against both Globe and General Insurance. Consideration of the judgments thus entered against Globe will be deferred for the moment. Speaking now only as to the judgments entered against General Insurance, the surety, General argues that because of the pending bankruptcy proceedings involving Globe in Colorado, the federal court in Oklahoma should not have continued to proceed as to the surety, General Insurance, nor should it have entered judgment against General based on the latter’s performance bond. Under the circumstances, we do not agree.

A primary purpose of the Bankruptcy Act is to place the property of the debtor under the control of the bankruptcy court. To protect its jurisdiction the bankruptcy court may enjoin suits against the debtor or involving the debtor’s property in another court. Texaco, Inc. v. Liberty National Bank & Trust Company of Oklahoma City, 464 F.2d 389 (10th Cir. 1972). However, the instant case, insofar as it relates to General Insurance, is not a proceeding against Globe nor does it concern any property belonging to Globe. The claim by the Authority and the various subcontractors against General Insurance was based on the obligation assumed by General Insurance under the terms and provisions of the performance bond. The liability of General, as surety, is joint and several to the liability of the principal, Globe. The power of a bankruptcy court to enjoin in personam suits is confined to suits against the debtor, and there is no jurisdiction to enjoin a suit brought to enforce the personal liability of a guarantor of bonds secured by a mortgage upon property owned by the debtor. 8 Collier on Bankruptcy 13.22, at 250 (14th ed. 1976). See also, Loyd v. Stewart & Nuss, Inc., 327 F.2d 642 (9th Cir. 1964). For cases holding that a court of bankruptcy is without jurisdiction to enjoin proceedings where creditors of the bankrupt institute proceedings against the surety of the bankrupt, see Jaquith v. Rowley, 188 U.S. 620, 23 S.Ct. 369, 47 L.Ed. 620 (1903) and Brown v. Four-in-One Coal Co., 286 F. 512 (6th Cir. 1923), cert. denied, 262 U.S. 749, 43 S.Ct. 524, 67 L.Ed. 1213 (1923). See also Metcalf v. Barker, 187 U.S. 165, 23 S.Ct. 67, 47 L.Ed. 122 (1902) and Linstroth Wagon Co. v. Ballew, 149 F. 960 (5th Cir. 1907).

As indicated, the trial judge permitted the Oklahoma proceedings to continue against both Globe and General after being advised of the institution of bankruptcy proceedings involving Globe in Colorado. Judgments were initially entered against both Globe and General. Subsequently, however, the Authority became convinced that its judgment against Globe was invalid, because such had been entered during the pendency of the bankruptcy proceedings. During the process of Globe’s appeal, Globe and the Authority executed a release of the judgment.

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Bluebook (online)
571 F.2d 1140, 15 Collier Bankr. Cas. 2d 757, 1978 U.S. App. LEXIS 13070, Counsel Stack Legal Research, https://law.counselstack.com/opinion/globe-construction-co-v-oklahoma-city-housing-authority-ca10-1978.