Case Title: Matson, Inc. v. Lamb & Associates Packaging, Inc.

Citation: 

Docket Number: 

State: arkansas

Court: Arkansas Supreme Court

Date: 1997-06-02T00:00:00Z

Document:
MATSON, INC. v. LAMB & ASSOCIATES PACKAGING,
Inc., and Jerry Don LAMB

96-606                                             ___ S.W.2d ___

                    Supreme Court of Arkansas
                 Opinion delivered June 2, 1997



1.   Civil procedure -- intervention -- order denying is appealable. -- An
     order denying intervention is appealable.

2.   Civil procedure -- intervention -- three requirements for intervention as
     matter of right. -- Three requirements must be met for
     intervention as a matter of right: (1) a recognized interest
     in the subject matter of the primary litigation; (2) an
     interest that might be impaired by the disposition of the
     suit; and (3) an interest not adequately represented by
     existing parties.

3.   Civil procedure -- intervention -- burden to demonstrate adequacy of
     representation falls on party opposing intervention. -- The burden of
     persuasion to demonstrate adequacy of representation falls on
     the party opposing intervention.

4.   Civil procedure -- intervention -- when interest of litigant adequately
     represented. -- An interest of a litigant is adequately
     represented when it is identical to, or not significantly
     different from, that of the proposed intervenor.

5.   Civil procedure -- intervention -- party's interest in enforcing
     arbitration rights is significant factor in determining whether to allow
     intervention as of right pursuant to federal rule. -- A party's
     interest in enforcing arbitration rights has been held to be
     a significant factor in determining whether to allow
     intervention as of right pursuant to the federal intervention
     rule, which is identical to ARCP Rule 24(a).

6.   Civil procedure -- intervention -- appellant should have been allowed to
     intervene to protect its right to arbitration. -- Even though
     appellant and the insurance company from which it purchased a
     performance bond were represented by one attorney, appellee
     failed to show that the insurance company's interest was
     identical to or not significantly different from appellant's;
     although appellant and the insurance company may have had the
     same interest in disputing appellee's claim of breach of
     contract at the present stage of the proceedings, it was
     apparent that their interests would diverge if appellee were
     able to demonstrate that appellant had breached the
     construction contract at issue; it was ultimately appellant's
     conduct in performing or failing to perform the construction
     contract that was at issue, and that was a matter that
     appellee agreed to arbitrate; as the insurance company had a
     right to indemnity from appellant in the event that appellee
     recovered against the insurance company, it was clear that the
     bond company might not have the same interest in arbitration
     as appellant at the present stage of the proceeding; appellant
     should have been allowed to intervene to protect its right to
     arbitration.

7.   Principal & surety -- contractual relationship -- principal's contract and
     surety's bond construed together as one instrument. -- The terms of the
     contract of which the surety promises performance must be read
     into his own contract; the principal's contract and the bond
     or undertaking of the surety are to be construed together as
     one instrument.

8.   Principal & surety -- appellee bound by arbitration provision incorporated
     by reference in performance bond. -- Where appellee was relying on
     the construction contract to prove its breach-of-contract
     claim but seeking to avoid the arbitration provision contained
     in the same contract, and where appellee had signed the
     underlying contract containing the arbitration clause, the
     supreme court held that appellee was bound by the arbitration
     provision incorporated by reference in the performance bond.

9.   Principal & surety -- suretyship defined and discussed. -- Suretyship
     may be defined as a contractual relation whereby one person
     engages to be answerable for the debt or default of another;
     where the contract takes the form of ordinary suretyship, the
     agreement of the surety is that he will do the thing that the
     principal has undertaken.

10.  Principal & surety -- enforcement of bond provision agreeing that questions
     of breach and performance were subject to arbitration not prohibited by
     Arbitration Act. -- Where the surety bond on which appellee
     brought suit incorporated an agreement to the effect that
     questions of breach and performance were subject to
     arbitration, the supreme court concluded that the Arkansas
     Arbitration Act did not prohibit the enforcement of that
     provision.

11.  Civil procedure -- intervention -- appellant entitled to intervene with
     limiting intervention to protection of right to defend reimbursement claim
     -- reversed and remanded. -- The supreme court held that appellant
     was entitled to intervene without limiting intervention to
     protection of its right to defend a claim for reimbursement
     from the insurance company from which it had purchased the
     performance bond; the matter was reversed and remanded.


     Appeal from Pulaski Circuit Court; John Ward, Judge; reversed
and remanded. 
     Jack East III, for appellant.
     David M. Hargis, for appellee.

     David Newbern, Justice.
     Lamb & Associates Packaging, Inc., and Jerry Don Lamb
(referred to collectively as Lamb) entered an agreement with
Matson, Inc. (Matson), pursuant to which Matson constructed a
commercial building for Lamb in exchange for $789,543.  The
construction contract contained a clause requiring arbitration of
disputes relating to performance or breach of the contract.  Matson
purchased a performance bond from United States Fidelity and
Guarantee Co. (USF&G).  The bond agreement incorporated the
construction contract by reference.  Lamb sued USF&G on the bond,
alleging defects in the building and thus breach of the contract. 
Matson sought to intervene to protect its interests, including
enforcement of the arbitration clause.  
     The Trial Court allowed Matson to intervene, but only to the
extent of protecting its rights in the event a judgment were
entered against USF&G which might then claim against Matson. 
Matson appeals from the order and claims that intervention should
have been allowed for the purpose of protecting all its interests
in the contract, including its right to arbitration.  An order
denying intervention is appealable.  Ark. R. App. P. 2(a); Cupples
Farms Partnership v. Forrest City Prod. Credit Ass'n, 310 Ark. 597,