IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 96-50570
MARSHALL CONTRACTORS, INC.,
Plaintiff-Appellant,
versus
AMWEST SURETY INSURANCE COMPANY,
Defendant-Appellee.
Appeal from the United States District Court
For the Western District of Texas, Austin Division
(A-95-CV-145)
April 24, 1997
Before REYNALDO G. GARZA, HIGGINBOTHAM, and JONES, Circuit Judges.
PER CURIAM:*
This case presents the remnants of a dispute over construction
at the University of Texas’s Balcones Research Center. Marshall
Contractors was the general contractor for the construction of a
high-tech “clean room” for scientific research. Marshall
subcontracted work on “high-purity piping” to Integrated Gas
Systems. It paid monthly requisitions as requested by IGS from the
spring of 1992 until the end of the year, and IGS used these funds
*
Pursuant to Local Rule 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in Local Rule 47.5.4.
to pay its suppliers. But in January of 1993, IGS refused to pay
a $76,674.60 bill to one of its suppliers, SnyderGeneral, because
of Snyder’s inadequate work. Marshall initially told IGS that it
was going to pay Snyder directly and deduct the amount from the
next month’s requisition payment to IGS. But then Marshall decided
to withhold the entire $259,224 in IGS’s February requisition and
to demand that IGS settle its dispute with Snyder. IGS never
resolved its dispute, never received the February requisition from
Marshall, abandoned the project on February 25, and eventually went
out of business. Marshall signed up a new subcontractor and
finished the project.
IGS sued Marshall and Marshall’s surety, Aetna. Marshall
counterclaimed and brought in IGS’s surety, Amwest, as a third-
party defendant. The jury found that IGS breached the Marshall-IGS
contract and that Marshall did not breach it. But it also found
that IGS’s breach caused no damages to Marshall. The district
court entered a take-nothing judgment against IGS.
This case between Marshall and Amwest remains because the
district court severed it from the original lawsuit when Marshall
tried to amend its complaint to add bad-faith and tortious-
interference claims against Amwest. Amwest issued a performance
bond and a payment bond in August of 1992 to guarantee that IGS
would pay its subcontractors and suppliers and generally perform
its obligations to Marshall. The contract between Marshall and IGS
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included a provision — paragraph 8.4 — that Marshall claims created
a duty of good faith on the part of Amwest:
In the event that any action, suit, proceeding, claim
or demand is made against the Contractor, its surety,
officers, directors, agents, representatives,
employees, successors or assigns against which the
Subcontractor has herein agreed to indemnify the
Contractor, then the Contractor may withhold from any
payment due or hereafter to become due to the
Subcontractor hereunder, an amount sufficient in its
sole judgement [sic] to protect and indemnify it from
such action, suit, proceeding, claim or demand,
together with legal fees and disbursements. . . . The
Contractor will release any payments due to the
Subcontractor upon receipt of written acknowledgment of
the action, suit, proceeding, claim or demand from the
Subcontractor’s Surety stating its intention to
indemnify the Contractor and protect the Contractor as
set forth above.
According to Marshall, it learned in February of 1993 that IGS had
failed to pay several suppliers. It notified Amwest, which
acknowledged IGS’s outstanding debts. Amwest did not provide
assurances of payment to Marshall, so Marshall refused to pay IGS.
After IGS abandoned the project, Marshall requested Amwest to
arrange for substitute performance, but Amwest refused. Instead,
Amwest helped contest Marshall’s suit by paying IGS’s attorneys’
fees. The district court granted summary judgment to Amwest on both
the bad-faith and the tortious-interference claims.
We agree with the district court that Marshall has not created
a genuine issue of material fact on its bad-faith claim. In Great
American Ins. Co. v. North Austin Mun. Utility Dist. #1, 908 S.W.2d
415, 418-20 (Tex. 1995), the Texas Supreme Court established the
general rule that sureties do not owe a duty of good faith and fair
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dealing to their bond obligees. The Great American court rested
much of its reasoning on the existence of Tex. Bus. & Com. Code
§ 34.02, which permits sureties to require an obligee to sue on the
contract before claiming payment from the surety. This feature of
a suretyship relationship makes it different from the relationship
between insurer and insured. “The derivative nature of a surety’s
liability and its right to rely upon the defenses of its principal
compel the conclusion that a surety, like its principal, should be
entitled to test the merits of an obligee’s claim without the
imposition of extracontractual duties to the bond obligee.” 908
S.W.2d at 420. We followed the Great American rule in Tacon
Mechanical Contractors v. Aetna Cas. & Sur. Co., 65 F.3d 486, 488
(5th Cir. 1995). In the absence of a contractual relationship
creating a duty of good faith and fair dealing, these cases control
the outcome here.
Marshall attempts to distinguish this case from Great American
by arguing that paragraph 8.4 of the Marshall-IGS contract,
incorporated into the suretyship agreement, imposes special duties
on Amwest. But the language in paragraph 8.4, as modified by the
Marshall-IGS subcontract, imposes a duty on Marshall, not on
Amwest. It states that Marshall must release payments to IGS if
Amwest declares that it will indemnify Marshall. It does not
require Amwest to make such a declaration.
Marshall states repeatedly that there is something “predatory”
about the fact that Amwest funded IGS’s suit against Marshall. In
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the absence of a duty of good faith and fair dealing, however, we
cannot say that Amwest did anything wrong. Although unsuccessful,
IGS’s suit survived summary judgment. And Amwest, as it turns out,
had good reason not to pay Marshall: the jury found that Marshall
had no damages from IGS’s breach of contract. The suretyship
agreement gave Amwest the obligation to pay on IGS’s behalf once
Marshall established liability. Under Texas law, it did not
prevent Amwest from supporting litigation that could — and did —
establish that IGS was not liable after all. Cf. L&A Contracting
Co. v. Southern Concrete Services, 17 F.3d 106, 111 (5th Cir. 1994)
(Florida law) (“After a declaration of default, the relationship
changes dramatically, and the surety owes immediate duties to the
obligee.”).
Marshall’s claim for tortious interference with the Marshall-
IGS subcontract fares no better than its claim for bad faith. In
Tacon Mechanical, we held that, after Great American, bond obligees
may not sue their sureties for tortious interference when the claim
“merely reiterates the bad faith claim.” 65 F.3d at 488. We also
noted that “there is no Texas authority applying a tortious
interference claim in a surety context.” Id. Marshall’s theory is
different from the theory in Tacon Mechanical because Amwest
allegedly helped fund IGS’s litigation with Marshall.
Nevertheless, the tortious-interference claim is really nothing
more than a recapitulation of the good-faith claim in a different
key, and Tacon Mechanical understands Texas law to forbid that.
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Furthermore, because Great American establishes a contract theory
as the only way a bond obligee can recover from a surety that fails
to pay, Marshall must look beyond the contract to find a tort duty
on which to ground its tort theory. Texas law does not impose an
abstract tort duty not to harm one party in litigation by
contributing money to its opponent.
AFFIRMED.
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