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November 17, 1965


The opinion of the court was delivered by: John E. Miller, Chief Judge.

Plaintiff's motion for summary judgment filed October 7, 1965, under Rule 56, Fed.R.Civ.P., defendant's response thereto, filed October 25, 1965, and the motion of defendant for continuance filed October 25, 1965, are before the court.

The case was duly removed on June 10, 1965, to this court from the Circuit Court within and for Washington County, Arkansas, on the grounds of diversity and amount involved. The existence of diversity of citizenship of the parties and the presence of an amount in controversy in excess of $10,000.00, exclusive of interest and costs, give the court jurisdiction. Since jurisdiction is based upon diversity the substantive law of Arkansas determines the rights of the parties.

On the day the case was removed the defendant filed its motion to strike the allegations of the complaint seeking recovery of a penalty of twelve percent and a reasonable attorney's fee. The motion was denied on June 15, 1965. On June 22, 1965, the court, on motion of defendant, extended its time to July 3 to answer or otherwise plead. Answer was filed July 3, 1965, in which defendant did not deny that the construction contracts were entered into by Washington County and the Arkansas State Highway Commission and that the statutory bonds were executed by defendant as alleged in the complaint. Neither did the defendant deny that the material in the amounts and of the value as alleged by plaintiff was furnished.

On October 6, 1965, the defendant filed a motion to remand which was denied October 11, 1965.

In the motion for continuance the defendant, inter alia, alleged:

    "That this case is set for trial on Monday,
  November 8, 1965, and a complete audit of the
  records of Washington County, Arkansas, has not
  been completed. That until such audit is
  completed the amount of moneys available for
  payment of the plaintiff's claim and other claims
  cannot be determined. It is very probable after
  said audit is completed that there will be no
  liability on this defendant, there being
  sufficient moneys in the Washington County
  treasury to pay the claim of the plaintiff."

In view of the conclusion of the court on the motion for summary judgment, it is unnecessary to set forth other allegations contained in the motion for continuance.

For some time prior to the filing of the motion for summary judgment the case had been set for trial on its merits. On October 26, the day after defendant filed its response to the motion for summary judgment, the court by letter requested counsel for the parties to submit briefs on certain issues, i.e., (1) whether or not payment to the Arkansas State Highway Commission is a condition precedent to the payment of other claims, (2) whether or not Amendment 10 of the Arkansas Constitution, which is the basis of the Washington County Court's order of March 4, 1965, extends to the defendant, and (3) were the contracts between the Arkansas State Highway Commission and Washington County made at such a time as to be void or voidable, and, if void, is that a defense available to the defendant.

Most excellent briefs have been received covering not only the questions stated above, but other incidental contentions of the parties. Upon receipt of the briefs it became apparent that the court would be unable to thoroughly consider and dispose of the pending motions prior to the fixed trial date, and on November 5 an order was entered striking the cause from the trial calendar of November 8 "subject to a later setting."

The court has examined the pleadings with their exhibits, the admissions contained in the answer and motions, the affidavits and the entire court file, and is of the opinion that there is no genuine issue as to any material fact.

The defendant on its brief makes three contentions which the court believes should be considered in the order made. The first contention is that payment to the Arkansas State Highway Commission is a condition precedent to the payment of other claims.

On or about March 20, 1964, Washington County, as contractor, entered into a written contract with the Arkansas State Highway Commission for the construction of a road project, Job No. C-72-47, Federal Aid Project S-1192(1). On the same date Washington County, as principal, and the defendant as surety executed and filed a statutory performance bond as required by Ark.Stat.Ann., Secs. 14-604, 14-606, (1956 Repl.). The plaintiff sold to Washington County the necessary materials for the performance of the contract and delivered the material to the job site, and they were used by the contractor in the construction of the road.

The same procedure was followed in the construction of Job No. C-72-48, Federal Aid Project S-1194(1) under contract of July 20, 1964, and Job No. C-72-49, Federal Aid Project S-1195(1) under contract of April 27, 1964. The balance due on C-72-47 is $5,194.54; on C-72-48, $4,512.97; and on C-72-49, $824.29, or a total of $10,531.80 due plaintiff on the three contracts. Each of the bonds contains the following provisions:

    "Unpaid claims for material, labor and supplies
  entered into contingent and incident to the
  construction of said work or used in the course
  of performance of the work, shall have a right of
  action on this bond, but payments thereon shall
  be postponed until all claims of the Arkansas
  State Highway Commission hereon have been paid in
    "The Surety Company hereon further agrees to
  pay all claims to which the said Contractor is
  liable under the provisions of Act 82 of the Acts
  of 1935, and Acts Amendatory thereof, except that
  nothing in this Bond shall be construed as
  assuming liability for the purchase price of any
  major equipment under what is commonly called a
  Sales Rental Agreement."

The statutory provisions applicable to the first contention of defendant are:

Ark.Stat.Ann., Sec. 76-217 (1957 Repl.)

    "* * * Every contractor for work in excess of
  one thousand dollars ($1,000.00) shall be
  required to furnish a bond to be approved by a
  majority of the State Highway Commission in an
  amount at least equal to the amount of such
  contract, conditioned as the commission may
  require. Such bonds shall also be liable for
  material, labor, supplies, and expenses used in
  or incident to the work, including that which may
  become due to subcontractors, for which an action
  may be maintained on the bond by the parties to
  whom such payments may be due * * *."

Ark.Stat.Ann., Sec. 14-604 (1965 Supp.)

Ark.Stat.Ann., See. 14-606 (1965 Supp.)

    "The liability imposed by Section 2 [ยง 14-604] of
  Act 261 of 1953 (as amended by Section 4 of this
  Act) on any bond furnished by a public works
  contractor shall be deemed an integral part of such
  bond whether or not such liability is explicitly
  set out, or assumed, therein; provided, however,
  that no action shall be brought on such bond after
  six [6] ...

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