Home Insurance v. Ballenger Corp.

74 F.R.D. 93
CourtDistrict Court, N.D. Georgia
DecidedFebruary 25, 1977
DocketCiv. A. No. C76-472A
StatusPublished
Cited by37 cases

This text of 74 F.R.D. 93 (Home Insurance v. Ballenger Corp.) is published on Counsel Stack Legal Research, covering District Court, N.D. Georgia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Home Insurance v. Ballenger Corp., 74 F.R.D. 93 (N.D. Ga. 1977).

Opinion

MOYE, District Judge.

ORDER OF COURT

This is a diversity action arising out of alleged fraudulent inducement in connection with a subcontract performance bond and a subcontract labor and material bond.

The facts are as follows: In April 1972, Ballenger Corporation (formerly known as Ranger Construction Company, hereinafter referred to as Ballenger) entered into a contract with the State of Georgia by which Ballenger agreed to act as the prime contractor for the construction of a medical building. In May 1972, Ballenger entered into a subcontract with Dresco Corporation (Dresco). Robert F. Sasser, Sasser & Company, Inc. (Sassers), and Robert L. Buffing-ton (Buffington) were alleged silent joint venturers with Dresco on the subcontract, and apparently so indicated. Dresco was required under the terms of the subcontract to furnish Ballenger with payment and performance bonds. The Home Insurance Company (Home) became the surety on these bonds; Dresco was named as principal and Ballenger was named as obligee. The payment and performance bonds were to bond the performance by Dresco of the subcontract with Ballenger. In connection with the payment and performance bonds, Home required the Dresco-Sasser-Buffing-ton alleged joint venture (hereinafter referred to as Dresco or Sasser) to execute an indemnity and guaranty agreement in Home’s favor. Under the terms of that agreement, Dresco agreed to indemnify Home against any loss which it might sustain as a result of issuing the payment and performance bonds.

Subsequent to the execution of the subcontract, the joint venturers commenced performance. Work pursuant to the subcontract with Ballenger continued until September 1975. By letter from Dresco Mechanical Contractors, Inc., the subcontractor voluntarily placed itself in default and requested its bonding company, Home, to take appropriate remedial action. Thereafter Home became actively involved in the completion of portions of the work pursuant to the subcontract entered into by Ballen-ger and Dresco. Home used the personnel of its principal, the Dresco-Sasser-Buffing-ton joint venture, in attempting to complete performance. Both Home and Ballenger expended certain sums of money in pursuit of this goal. In March 1976, Home ceased work.

The instant action was instituted by the plaintiff, Home, when it filed its complaint against Ballenger on March 11, 1976. Home alleges that it had been discharged, without its'knowledge, on the construction contract and performance bonds, upon which defendant Ballenger was named as obligee. Home contends that Ballenger defrauded Home causing it to expend funds under the bonds subsequent to discharge, and seeks recovery of those funds.

Defendant Ballenger answered and counterclaimed against Home. Ballenger’s counterclaim alleges that Home has not been discharged from its obligations under the bonds and has failed to honor those allegations; the counterclaim is for breach of the surety bonds.

On June 1,1976, plaintiff Home answered Ballenger’s counterclaim and, as counterclaim-defendant, Home filed a third-party complaint against Dresco, Sassers, and Buffington. The substance of the third-party complaint is that if Home, counterclaim-defendant, is liable to Ballenger, counterclaimant, it is solely in its capacity as surety and that the third-party defendants, Dresco, Sassers, and Buffington agreed to indemnify Home for any loss under the payment and performance bonds.

Ballenger, as counterclaimant, seeks to amend its counterclaim to assert a claim against the third-party defendants implead-ed by counterclaim-defendant Home, for breach .of the subcontract agreement.

The case is presently before the Court on the following motions: (1) plaintiff Home’s motion to strike defendant Ballenger’s first amendment to its counterclaim and claim against third-party defendants; (2) two motions of third-party defendants Sassers to strike and to dismiss defendant Ballenger’s [96]*96amended counterclaim against third-party defendants; (3) two motions of third-party defendant Buffington to dismiss defendant Ballenger’s amended counterclaim against third-party defendants; (4) two motions of third-party defendant Dresco to dismiss defendant Ballenger’s amended counterclaim against third-party defendants; (5) defendant Ballenger’s motion to amend its counterclaim; (6) defendant Ballenger’s motion to compel the production of documents; and (7) third-party defendants Sassers’ motion to compel answers to interrogatories.

Motions to Strike and Dismiss Ballenger’s Proposed Amended Counterclaim Against Third-Party Defendants

The first wave of motions to dismiss brought by the various third-party defendants and by Home are grounded on Ballenger’s failure to comply with Fed.R.Civ.P. 15(a) by filing the amended counterclaim without leave of court. These motions are hereby ORDERED DENIED. Although such action by Ballenger was clearly in violation of Rule 15(a), Ballenger has since refiled its proposed amended counterclaim with a motion to allow it filed as amended. Accordingly, the Court considers the issues of noncompliance with Rule 15(a) as moot and will consider the merits of the more substantive second wave of motions to dismiss brought by the third-party defendants.

The issue before the Court is whether Ballenger, as counterclaimant, may file a claim against the third-party defendants, impleaded by the counterclaim defendant Home, without an independent jurisdictional base. It is undisputed that Ballenger is a citizen of Georgia as are the third-party defendants and, therefore, that there is no diversity of citizenship as between them.

The precise procedural posture of the instant action is unique; neither the parties nor the Court have found a case directly on point. However, third-party practice has elicited much analysis by the courts and an examination of decisions regarding other types of claims in a third-party setting is helpful to understanding the instant situation.

Under Fed.R.Civ.P. 14 it is clear that ancillary jurisdiction supports a third-party complaint and that jurisdictional grounds independent from the main action are not necessary. See Revere Copper & Brass, Inc. v. Aetna Casualty and Surety Co., 426 F.2d 709 (5th Cir. 1970). The question which has generated wide judicial attention has been whether a plaintiff may assert a claim against a third-party defendant already impleaded absent independent jurisdictional grounds. Third-party defendants in the instant action contend that the unanimous rule is that such a claim is not allowed and cite 3 Moore’s Federal Practice ¶ 14.27[1] and the cases cited therein as authority. Third-party defendants further allege that this “unanimous” rule is dispositive of the issue before the Court.

The authority supporting third-party defendants’ position is not quite as unanimous as they assert. There is a definite majority and minority opinion and, although the very clear majority opinion is that a claim by a plaintiff against a third-party defendant must be supported by independent jurisdiction, there is a persuasive minority position to the contrary, which, incidentally, is strongly supported by Professor Moore in his treatise cited by the third-party defendants. See 3 Moore’s

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Bluebook (online)
74 F.R.D. 93, Counsel Stack Legal Research, https://law.counselstack.com/opinion/home-insurance-v-ballenger-corp-gand-1977.