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Employers Insurance of Wausau v. United States

June 14, 1985

EMPLOYERS INSURANCE OF WAUSAU, APPELLANT
v.
THE UNITED STATES, APPELLEE; ARROWHEAD TIMBER COMPANY, APPELLANT V. THE UNITED STATES, APPELLEE



Appealed from United States Claims Court.

Markey, Chief Judge, Rich, Circuit Judge, and Nichols, Senior Circuit Judge.

Nichols

NICHOLS, Senior Circuit Judge.

These consolidated appeals seek our review of a judgment of the Claims Court, unreported, which grants defendant's motion for summary judgment and dismisses both cases. While we cannot agree with all the reasoning of the Claims Court, as delivered orally from the bench, we conclude that the court reached the right result, and therefore we affirm.

Facts

Arrowhead Timber Company (Arrowhead) entered into a contract with the Forest Service, United States Government, to cut and remove timber in Mt. Hood National Forest. It was referred to as the "Camas" sale and was one of several between the same parties. By such a contract, the contractor is to cut and remove the designated timber, which becomes its property to process or resell, and is to make payments at rates agreed upon. To secure its performance, the contractor makes advance deposits and besides is required to furnish a surety company performance bond. Employers Mutual Liability Insurance Company of Wisconsin*fn* (Employers) posted its bond in the final sum of $139,000, conditioned upon proper performance by Arrowhead. Arrowhead commenced to cut timber in May 1975, but in August 1975, the Forest Service suspended operation because of failure to make all the required payments. In August 1975 it made its first demand upon Employers. Arrowhead was notified it was in breach, and on December 2, 1975, that the contract was cancelled.

On December 31, 1975, the government sued Arrowhead, other timber companies, and Employers in the United States District Court for the District of Oregon on account of various breaches, and claiming money damages of $595,928 as well as foreclosure of timber that had been cut and was still in defendant's possession. This suit related only to timber actually cut. Employers counterclaimed, but Arrowhead did not. On October 6, 1976, the suit was dismissed with prejudice upon stipulation that it had been settled.

By June 26, 1976, the Forest Service had resold the uncut timber realizing a loss apparently additional to the one already sued on and not covered in the settlement of the suit. Efforts to collect this continued after the settlement and only on November 5, 1981, did the Forest Service made a formal demand upon Employers in the amount of $139,000, stating, however, that the full loss on the uncut timber was $144,678.51. The Service said:

If we do not receive payment or a reasonable explanation for a delay in payment by November 20, 1981, we will ask our Office of General Counsel to request the Treasury Department to remove the name of Employers Insurance of Wausau from their Circular 570, the list of approved sureties for Government contracts. * * *

Interest charges at 1.53 percent per month were also threatened.

Employers responded on November 9 with a check for $139,000 marked --

Full and final settlement of all claims under bond for Arrowhead Timber Company for the Camas Timber Sale, contract 03313-8 * * *.

The Service notified the United States Attorney recommending he not file a complaint seeking recovery of the remaining $5,678.51 of the government claim, and this apparently ended government collection efforts relating to the Camas tract.

The collapse of Employers' resistance is explained by it as due to duress from the threat to remove Employers from the approved list. It says it was vulnerable to this threat because of an effort by a "hearing officer" in another case that was pending at the same time to have Employers ...


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