Town of Melville v. Safeco Insurance Co. of America
Docket: No. 90-575
Court: Louisiana Court of Appeal; November 12, 1991; Louisiana; State Appellate Court
Defendant-appellant Safeco Insurance Company of America appeals a partial summary judgment granted in favor of plaintiff-appellee, the Town of Melville, in a contractual dispute stemming from a sewage system construction contract with Mar-Len of Louisiana, Inc. The Town sued both Mar-Len and Safeco, the surety, after Mar-Len failed to fulfill its contractual obligations and refused to pay following an arbitration ruling that awarded Melville $63,321.00. The arbitration, which Mar-Len initiated after ceasing work, was upheld by the trial court, and Melville subsequently sought partial summary judgment against Safeco, asserting that the arbitration award was binding on the surety. The court granted this motion, stating that Safeco admitted liability contingent upon Mar-Len’s obligation to pay. Safeco now contends that the trial court erred by interpreting its defense as a collateral attack on the arbitration award when it argued for a pro tanto release due to alleged overpayments made by Melville to Mar-Len. However, the record does not support any evidence of such overpayment.
Safeco's counsel claims evidence supporting its position exists in an affidavit from David Boudreaux, but no such affidavit is in the record. Without evidence of overpayment or prepayment, Safeco lacks a defense. The trial court viewed Safeco’s actions as a collateral attack on the arbitration award, a conclusion this court deems not erroneous. The trial court correctly denied Safeco's attempt to contest the arbitration award favoring Melville, as under Louisiana law (La.R.S. 9:4201-9:4217), only parties to the arbitration can modify an award, and Safeco was not a party. Even if it had the right to challenge, it failed to assert any statutory grounds for modification as outlined in La.R.S. 9:4211, rendering Safeco’s first two assignments of error meritless.
In its third assignment of error, Safeco argues that the trial court erred by not allowing it to claim rescission of the contract based on error of cause. However, the record lacks evidence supporting grounds for rescission. Mar-Len sought rescission against Melville in arbitration, and since both were represented by the same attorney, it is likely that the issue was raised and resolved unfavorably for Mar-Len. The absence of substantial evidence in the record indicates no merit in Safeco's argument regarding rescission.
In the fourth assignment of error, Safeco contends the trial court erred by finding no material fact at issue and granting Melville's motion for partial summary judgment. Safeco acted as Mar-Len’s surety, and under former La.C.C. art. 3035, suretyship involves a promise to fulfill another's obligation if they fail.
A surety, Safeco, is contractually obligated to fulfill the obligations of the principal debtor, Mar-Len, if Mar-Len fails to do so. Mar-Len did not pay the judgment from an arbitration award confirming its liability, leading Melville to seek payment from Safeco. The arbitration determined Mar-Len was liable for breach of contract. Safeco acknowledged in its exception of prematurity that it would be required to pay claims against Mar-Len if it was found to have breached the contract and failed to pay. Safeco argued that Melville's claims were subject to arbitration and that they were not liable until a final determination of Mar-Len's breach and non-payment occurred. Since the arbitration concluded that Mar-Len breached the contract and did not pay Melville, Safeco's admission of liability eliminated any genuine issue of material fact. Consequently, the trial court properly granted Melville's motion for partial summary judgment. Safeco's argument regarding the res judicata effect of the arbitration award on its liability is moot due to its admission of liability. The trial court's decision was affirmed, and all appeal costs were assigned to Safeco. Judge King dissented with written reasons.
