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Admiralty Construction, Inc v. Dalton

September 18, 1998


Plager, Circuit Judge, Archer, Senior Circuit Judge, *fn1 * and Rader, Circuit Judge.

The opinion of the court was delivered by: Rader, Circuit Judge

On appeal from: Armed Services Board of Contract Appeals United States Court of Appeals for the Federal Circuit

National American Insurance Company (National), the surety for Admiralty Construction, Inc.'s (Admiralty's) contract with the Department of the Navy, submitted a claim to the Armed Services Board of Contract Appeals (Board) on behalf of Admiralty. The Board dismissed National's claim because the doctrine of equitable subrogation did not allow National to pursue Admiralty's rights in that forum, particularly when Admiralty had brought its own suit on the same contract questions in the United States Court of Federal Claims. See Admiralty Constr., Inc. by Nat'l Am. Ins. Co. its Sur., ASBCA No. 48627, 96-2 BCA ¶ 28,280 (Apr. 4, 1996). Because the Board properly dismissed National's purported claim, this court affirms.


On January 7, 1992, the Department of the Navy (Navy) awarded Contract No. N62477-91-C-3067 to Admiralty. Under the contract, Admiralty agreed to construct a building at the Patuxent Naval Air Station in Maryland for $117,105. The contract set a completion date for June 20, 1992, which the parties later extended to November 19, 1992. As required in the contract, Admiralty furnished both a performance bond for $117,105 and a payment bond for $58,552.50. Admiralty acquired both bonds from National.

To acquire the bonds, Admiralty executed a General Agreement of Indemnity with National. This agreement between Admiralty and National permitted National to "exercise all rights of said Indemnitor [Admiralty], and should it [National] make any payment, [it] shall have every right and remedy of the Indemnitor for the recovery of the same." The indemnity agreement also nominated National as Admiralty's "attorney-in-fact." The Navy was not a party to this agreement.

On June 11, 1993, the Navy terminated Admiralty's contract for default. On September 8, 1993, National informed the Navy that it waived its right to take over and finish the defaulted contract. Instead, National purported to offer a replacement contractor. According to its letter, National "propose[d] that the [Navy] enter into a new contract with Bryant [Corporation] to undertake completion of the remaining work . . . . The surety providing the new bonds will be the primary surety for [t]he Bryant Corporation's work." Following this proposal, National did nothing else under its performance bond to assume or accept responsibility for the completion of the contract.

On October 25, 1993, the Navy awarded Bryant Corporation a new contract to complete the unfinished work from Admiralty's contract. Meanwhile, National received numerous claims to the payment bond funds from Admiralty's unpaid workers and suppliers. National therefore filed a third party complaint for interpleader in the United States District Court for the District of Maryland. See National Am. Ins. Co. v. Admiral Constr., Inc., No. WMN-93-2250 (D. Md. Jan. 11, 1996). After securing a judgment against Admiralty in the amount of the payment bond, see id., National paid out the full amount of the payment bond to Admiralty's creditors. Moreover, National secured a judgment for any future performance bond payments. See id.

On January 10, 1995, the Navy's contracting officer issued a final decision to Admiralty. That decision assessed Admiralty $69,785 for completion of the contract and liquidated damages. On April 14, 1995, the Board received an appeal from "Admiralty Construction, Inc., by Surety." About a month later, the same entity amended its complaint. In both of these complaints to the Board, National purported to pursue the appeal as the representative of Admiralty.

On June 27, 1995, Admiralty filed suit alone in the United States Court of Federal Claims, challenging, among other things, the contracting officer's assessment of $69,785 in excess costs and damages. On January 24, 1996, the Navy counterclaimed against Admiralty in the Court of Federal Claims for $69,785 in excess procurement costs and liquidated damages. Apparently, the suit has been stayed, pending the outcome of this appeal. See Admiralty Constr., Inc. v. United States, No. 95-428C (Fed. Cl. June 19, 1997).

Meanwhile, the Board had issued sua sponte a show cause order questioning whether Admiralty's surety had "standing to pursue Admiralty's appeal of the Government's claim." Without a showing that National truly represented Admiralty, the Board suggested that it would lack jurisdiction under the Contract Disputes Act to adjudicate this claim because National was not in privity with the Navy.

In response, National argued that its payments under the payment bond sufficed to subrogate it to the rights of Admiralty. After consideration of this argument, the Board unanimously dismissed: In short, appellant has not cited, and we have not found, any decision in which a surety, by virtue of payment under a payment bond, was held to be subrogated to a position through which it could appeal from a final decision asserting a Government claim such as the one at issue here. Similarly, we are aware of no decision bestowing such a right as the result of merely tendering a completion contractor. Accordingly, we decline to take jurisdiction here.

Admiralty Constr., Inc., ASBCA No. 48627, 96-2 BCA ΒΆ 28,280 at 141, 192-93 (citation omitted). National, still purporting to represent Admiralty, appealed to this court under the heading "Admiralty ...

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