Case ID: so2d_589/html/0625-01.html
Source: Caselaw Access Project
Author: {"author": "LABORDE, Judge. KING, Judge,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

TOWN OF MELVILLE, Plaintiff-Appellee, v. SAFECO INSURANCE COMPANY OF AMERICA, Defendant-Appellant.
    No. 90-575.
    Court of Appeal of Louisiana, Third Circuit.
    Nov. 13, 1991.
    Rehearing Denied Dec. 16, 1991.
    Writ Granted Feb. 28, 1992.
    
      Morrow, Morrow, Ryan & Bassett, Jeffrey Bassett, Opelousas, for plaintiff/ap-pellee.
    Richard Mary, Baton Rouge, David Townsend, Opelousas, for defendant/appellant.
    Before FORET, LABORDE and KING, JJ.
   LABORDE, Judge.

Defendant-appellant, Safeco Insurance Company of America, appeals the granting of a motion for partial summary judgment in favor of plaintiff-appellee, the Town of Melville. This case involves a contractual dispute between the Town of Melville and Mar-Len of Louisiana, Inc. arising out of the construction of a sewage system for the town. The Town of Melville sued both Mar-Len and Safeco, Mar-Len’s surety. The contractual dispute was decided in the town’s favor as a result of arbitration, but Mar-Len refused to tender payment. The Town of Melville then moved for a partial summary judgment against Safeco based on the arbitration award. The trial court granted the motion, and Safeco now appeals. We hold that the trial court did not commit error in the granting of the motion as there was no genuine issue of material fact given that Safeco admitted liability if Mar-Len was bound to pay Melville as a result of the arbitration proceedings and then refused.

FACTS

This suit arises out of a contract entered into on May 31, 1983 between appellee, the Town of Melville (Melville), and Mar-Len of Louisiana, Inc. (Mar-Len). Mar-Len contracted to construct a sewage collection system for Melville and Safeco Insurance Company of America, the appellant, acted as Mar-Len’s surety. In August 1984, Mar-Len ceased working on the sewage system and withdrew from the job before its completion. Mar-Len then filed a demand to have the dispute between the two arbitrated pursuant to the contract terms. Melville then sued Mar-Len in district court to stop the arbitration, but Mar-Len filed an exception to the suit claiming that arbitration was mandatory. The exception was sustained and the matter proceeded to arbitration. An arbitration award was rendered in favor of Melville in the amount of $63,321.00. This award was reduced to judgment in the 19th judicial district of East Baton Rouge Parish on October 11, 1988.

During the arbitration proceedings, Melville filed a second suit against Safeco Insurance Company of America (Safeco) on the surety bond. This case remained in limbo awaiting the outcome of the arbitration proceedings. After Melville prevailed in the arbitration proceedings, it amended its petition against Safeco seeking the amount their principal, Mar-Len, was cast in judgment. Melville then filed for summary judgment against appellant arguing that the arbitration award was binding as to the surety because the surety can have no greater rights than its principal. The trial court granted a partial summary judgment finding that Safeco had no right to collaterally attack the arbitration award. Safeco now appeals this ruling asserting four assignments of error.

ASSIGNMENTS OF ERROR NUMBERS ONE AND TWO

Safeco’s first and second assignments of error assert that the trial court erred by finding that it was attempting to collaterally attack the arbitration award between Melville and Mar-Len when it attempted to assert a personal defense that it was entitled to a pro tanto release of their obligation as a result of overpayment or premature payments on the original contract by Melville to Mar-Len. Louisiana lav/ does provide that a surety is entitled to a pro tanto release of its obligation as a result of an owner’s premature release of a retainage prejudicing the surety. State v. Wilco Construction Company, Inc., 393 So.2d 885 (La.App. 4th Cir.1981) amended, 393 So.2d 1150 (La.App. 4th Cir.1981), writ denied, 400 So.2d 905 (La.1981). However, we found nothing in the record of this appeal indicating that any such overpayment took place. During the hearing on the motion for summary judgment and in the appellant brief, Safeco’s counsel claims that such evidence can be found in a supporting affidavit of a David Boudreaux, however, no such affidavit is present in the record. Without any proof of overpayment or prepayment, Safeco has no defense to assert. Because the trial court was not confronted with any such proof, it viewed Safeco’s actions as a collateral attack on the arbitration award. Given the contents of the record, this court cannot say that this was an erroneous conclusion. Furthermore, it was not error for the trial court to disallow Safeco an opportunity to attack the arbitration award casting Mar-Len in damages in favor of Melville. By attempting to obtain a pro tanto release of the arbitration award, Safeco is attempting to modify the award. Louisiana’s arbitration law La.R.S. (9:4201-9:4217) states that an arbitration award may only be modified by a party to the arbitration. See La.R.S. 9:4211. Safeco was not a party to the arbitration proceedings conducted between Melville and Mar-Len. Accordingly, Louisiana law does not permit it to seek modification of the arbitration award. Additionally, even if Safeco had the right to attack the judgment, an arbitration award may be challenged only on the grounds specified in the statute. Firmin v. Garber, 353 So.2d 975 (La.1977). La.R.S. 9:4211 states the only grounds upon which an arbitration award may be modified. Assuming ar-guendo, that Safeco had the right to attack the judgment, it has not asserted a reason enumerated in the statute as grounds for modification. Therefore, appellant’s first and second assignments of error lack merit.

ASSIGNMENT OF ERROR NUMBER THREE

Safeco also contends that the trial court erred by disallowing Safeco to assert rescission of the contract based on error of cause. The record contains no evidence that there are grounds for rescission of the principal obligation. In fact, Mar-Len, in its demand for arbitration, alleges that Melville breached its contractual obligation to Mar-Len and sought a rescission of the contract as well as damages. Melville then asserted a counterclaim alleging the same grounds against Mar-Len. We were not provided with a copy of the arbitration transcript in the record submitted for this appeal. However, if grounds for a rescission truly existed, it is plausible and probable that this issue was resolved during the arbitration proceedings in Melville’s favor. This is especially true in light of the fact that both Mar-Len and Safeco were represented by the same attorney during these proceedings. Had Mar-Len’s attorney truly believed there were grounds for rescinding the contract, he would have asserted those grounds during the arbitration proceedings in order to support his client’s case. The record does not contain anything more than the arbitration award. Since Mar-Len lost during these proceedings, it is likely that the rescission issue was unsuccessfully argued on Mar-Len’s behalf. It is reasonable to assume Mar-Len asserted all of its defenses at the arbitration proceedings and lost. Therefore, we find no merit in Safeco’s contention that it was error for the trial court to disallow Safeco the right to assert rescission of the contract based on error of cause.

ASSIGNMENT OF ERROR NUMBER FOUR

Safeco’s fourth assignment of error asserts that the trial court erred in finding no material fact at issue in this case and granting Melville’s motion for a partial summary judgment. In this case, Safeco contracted to be Mar-Len’s surety. Former La.C.C. art. 3035 (the law in effect at the inception of the contract) provided that suretyship is an accessory promise by which a person binds himself for another already bound, and agrees with the contractor to satisfy the obligation of the debt- or if he does not. Suretyship is merely an agreement by which one person promises to pay another’s obligation should he fail to do so. If the principal debtor must pay the obligation and does not, his surety is bound to fulfill the obligation. Thus, Safeco, was contractually bound to fulfill Mar-Len’s obligation if Mar-Len failed to do so. Mar-Len refused to pay the amount of the judgment confirmed from the arbitration award, and Melville properly sought this amount from Mar-Len’s surety, Safeco.

The issue of who was liable for breach of the principal obligation was resolved by arbitration. The arbitration award held Mar-Len liable. Safeco admitted in its memorandum in support of its exception of prematurity that they would be obligated to pay any claims against Mar-Len for breach of contract if there was a determination that Mar-Len breached the principal obligation and if Mar-Len failed to pay the claim. In its exception, Safeco stated:

“As can be seen in the current suit, Melville alleges the same claims, i.e., breach of contract by Mar-Len. These claims are arbitral under the contract. Safeco is not obligated to pay any such claims by Melville unless and until there is a final determination that Mar-Len in fact breached the contract, and then only if Mar-Len does not pay, the condition of the bonds being such.”

During the arbitration proceedings, Mar-Len was found to have breached the contract. Additionally, they refused to pay Melville. In as much as Safeco has admitted liability should these two events occur, there is no genuine issue of material fact present in this case. La.C.C.P. art. 966 provides that a motion for summary judgment shall be rendered when there is no genuine issue as to material fact. Therefore, the trial court did not err in granting Melville’s motion for partial summary judgment.

Safeco also raises the issue of whether an arbitration award against a contractor is res judicata as to the surety’s liability to the owner on a Public Work’s Contract. This issue is moot given that Safeco admitted liability as Mar-Len’s surety should Mar-Len be held by the arbitrators to have breached its contract with Melville.

DECREE

The decision of the trial court is affirmed. All costs of this appeal are assessed against Safeco.

AFFIRMED.

KING, J., dissents for the written reasons assigned.

KING, Judge,

dissenting.

I respectfully dissent.

The dispute between the Town of Melville (hereinafter Town) and Mar-Len of Louisiana, Inc. (hereinafter Mar-Len) and between the Town and Mar-Len’s surety, Safeco Insurance Company of America (hereinafter Safeco), involve different issues of fact and law.

The majority holds that the trial court was correct in finding that Safeco was attempting to collaterally attack the arbitration award between the Town and Mar-Len when Safeco attempted, in this litigation, to assert a defense that it was entitled to a pro-tanto release of its obligation to pay, as a surety, because of an overpayment or premature payments on the original contract between the Town and Mar-Len. Safeco was not a party to the arbitration proceeding. The record clearly reflects that the arbitration award, confirmed by court judgment, was in favor of the Town and against Mar-Len. This litigation is by the Town against Safeco. Safeco does not attempt to collaterally attack the arbitration award for a money judgment in favor of the Town against Mar-Len but is only .contesting execution of that same money judgment against it as surety for Mar-Len. Safeco is entitled to assert all defenses which are personal to it against the Town when the Town attempts to obtain a money judgment against Safeco for the amount of the arbitration award against Mar-Len. The surety is not making a collateral attack on the judgment against the surety’s principal when it attempts to show that its own liability on its contract of suretyship does not extend to payment of the judgment which a judgment creditor of the surety’s principal seeks to enforce against the surety. Safeco is not precluded from raising defenses personal to it which were not at issue between the Town and Mar-Len in the arbitration or in the suit which confirmed the arbitration award. A judgment against a principal is not conclusive proof that the contract of suretyship binds the surety to pay the judgment against the surety’s principal.

The majority next disposes of Safeco’s contention that the trial court erred by not permitting Safeco to assert rescission of the contract between the Town and Mar-Len, based on error of cause, because the record contains no evidence that there are grounds for rescission of the principal obligation. This appeal arises out of a Motion for Summary Judgment and, as the majority notes, we were not provided in the record submitted for this appeal with a copy of the transcript of the arbitration between the Town and Mar-Len. Despite this fact the majority then speculates, without any evidence in the record before us, as to what was plausible and probable concerning the resolution of this same issue during the arbitration proceedings. I do not agree that this argument should be disposed of on this appeal on the basis of pure speculation where there is no evidence in the record to even support such speculation.

The majority also finds that the trial court did not err in finding no material issues of fact in this case and in granting the Town’s Motion for a Partial Summary Judgment on the basis of loose language contained in a memorandum of law, filed earlier by Safeco in the trial court in support of its exception of prematurity in this suit, which language stated that Safeco would be obligated to pay any claims against Mar-Len for breach of contract with the Town, if there was a determination that its principal, Mar-Len, breached its contract with the Town. While it is correct that this language appears in the memorandum of law, filed by the attorney for Safeco, this statement is neither a judicial admission nor a stipulated fact in this case. For this reason I do not believe that the majority is correct in disposing of this assignment of error on the basis of a statement in a brief. Safeco also raises the res nova issue of whether an arbitration award against a contractor is res judicata to the surety’s liability to the owner where there is a public work contract. The majority does not address this issue and disposes of it on the basis of the same statement made in the brief filed in the trial court. I do not believe that it is proper to dispose of issues on trial or appeal solely on the basis of statements made in a brief filed with the court, since a case can only be disposed of on the basis of evidence in the record.

For these reasons, I respectfully dissent from the majority’s affirmation of the trial court’s granting of the Town’s Motion for Summary Judgment rendering a partial summary judgment for money against Safeco. I would reverse the trial court’s judgment and remand the matter to the trial court for further proceedings.