Wright v. C. Watts and Sons Construction Co., Inc. et al

Filing 25

MEMORANDUM OPINION AND ORDER granting 24 MOTION to Dismiss and denying as moot 9 MOTION to Dismiss. Further all claims against Travelers are dismissed without prejudice. All parties to bear their own costs and fees. Signed by Honorable Robert T. Dawson on September 27, 2012. (lw)

IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
FORT SMITH DIVISION
LARRY A. WRIGHT

PLAINTIFF

v.

Case No. 2:12-2089

C. WATTS AND SONS CONSTRUCTION
CO., INC. AND TRAVELERS CASUALTY
AND SURETY COMPANY OF AMERICA

DEFENDANTS

MEMORANDUM OPINION AND ORDER
Before

the

Court

are

Defendant

Travelers

Casualty

and

Surety Company of America’s (“Travelers”) Motion to Dismiss and
Supporting Brief (Doc. 9).
Travelers has replied.

Plaintiff Wright has responded and

(Docs. 12, 14).

Following the filing of

Wright’s Amended Complaint (Doc. 3), Travelers filed a second
Motion to Dismiss, incorporating the first by reference.
24).

(Doc.

For reasons set forth herein, Travelers’ first Motion to

Dismiss (Doc. 9) is DENIED AS MOOT and Travelers’ second Motion
to Dismiss (Doc. 24) is GRANTED.
I.

Background
Wright filed a Complaint in Sebastian County Circuit Court

on March 20, 2012.

(Doc. 3).

On April 18, 2012, Defendant C.

Watts and Sons Construction Co., Inc. (“Watts and Sons”) removed
the case to federal court based on diversity jurisdiction, as
Wright

is

the

only

citizen

of

Arkansas.

Complaint was amended on September 19, 2012.

Page 1 of 10

(Doc.

1).

(Doc. 22).

The
For

purposes of this Motion, the following facts, taken from the
Amended Complaint, are assumed true and viewed in the light most
favorable to Wright.
In

2010,

Arkansas

Watts

State

and

Highway

Sons

was

awarded

Commission

to

a

contract

make

Highway 71 in Sebastian County, Arkansas.

by

improvements

the
to

The contract included

a bond that Watts and Sons executed with Travelers.

Wright owns

property adjacent to a portion of the highway that is under
construction.

On June 16, 2010, Watts and Sons contracted with

Wright to take fill material from his land and park an office
trailer on the property over a period from 1 to 18 months.

In

exchange, Watts and Sons agreed to pay Wright $5,000.00 as an
advance prior to excavation and seventy cents per cubic yard of
fill1.

Watts and Sons agreed to smoothly grade all areas it

disturbed.

By letter agreement dated July 30, 2010, Watts and

Sons acknowledged that it would also build a parking lot for
Wright on his land and that it would remove debris from and reseed grass on the area on which it would burn debris.

It also

agreed to grade and re-seed all haul roads on Wright’s property.
Wright alleges that Watts and Sons excavated outside of the
agreed

upon

property

as

area,
a

took

dumping

over
site

125,000
and

cubic

parking

1

yards,

lot

for

used

the

dozens

of

The contract specified that the “approximate amount of the material required
(common fill) is plus/minus 50,000 cubic yards” but that the amount “can be
subject to change and project requirements.” (Doc. 21, Ex. A.)

Page 2 of 10

vehicles, performed work in such a manner as to create a flood
risk from inadequate drainage and a safety risk from buried and
improperly stored debris.

Wright also alleges that Watts and

Sons has held over on the contract and failed to pay rent for
the staked property during the holdover and has not paid any
rent

for

the

property

it

used

outside

of

the

staked

area.

Finally, Wright alleges that Watts and Sons failed to build the
parking lot at the agreed-upon elevation.

The Complaint seeks

damages

and

for

requests

breach

an

of

injunction

contract,
against

trespass
Watts

and

negligence

Sons

from

and

making

further modifications to Wright’s property while litigation is
pending.
Wright

alleges

that

by

issuing

a

bond,

Travelers

has

guaranteed payment for damages caused by Watts and Sons if they
cannot pay.
Travelers has moved to dismiss the Complaint pursuant to
Fed. R. Civ. P. 12(b)(6), contending that Wright has failed to
state

a

claim

against

Travelers

upon

which

relief

can

be

granted.
II.

Standard of Review
Dismissal is proper if Plaintiffs’ complaint fails to state

a

claim

12(b)(6).

upon

which

relief

can

be

granted.

Fed.

R.

Civ.

P.

The factual allegations in the complaint must be

taken as true and construed in the light most favorable to the
Page 3 of 10

plaintiff.

Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007);

Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009).

A complaint

should not be dismissed for failure to state a claim unless Ait
appears beyond doubt that the plaintiff can prove no set of
facts in support of his claim which would entitle him to relief.@
Thomas W. Garland, Inc. v. City of St. Louis, 596 F.2d 784 (8th
Cir. 1979).
III. Discussion
At

issue

is

the

Arkansas

State

Highway

Commission

bond

which lists Travelers as surety and Watts and Sons as principal.
Wright did not attach a copy to his complaint, but Travelers
included

a

copy

as

Exhibit

A

incorporated supporting brief.

to

its

motion

(Doc. 9).

to

dismiss

and

The bond is unsealed,

undated and contains only the signature of a representative of
“Licensed Agent, State of Arkansas.”

It is in the amount of

$9,035,798.51, which is stated to be 80% of the contract amount.
The

bond

is

entitled

“Statutory

Payment

Bond”,

secures

unpaid claims for materials, labor and supplies used in the
course of the work, and by its terms was executed pursuant to
Arkansas
Arkansas,

Code

Annotated

special

bond

§

18-44-503

statutes

have

and

§

been

22-9-401.
passed

In

because

contractors cannot create a lien against a public property when
working for a public entity.

The first act was passed in 1911,

and is codified under the Mechanic’s and Materialmen’s Liens
Page 4 of 10

section of the Code.
in

the

Public

The second act was passed in 1929 and is

Property/Public

Works

section

of

the

Code.

Section 18-44-503 provides that in all contracts over $20,000
for public construction projects, the contractor must furnish a
bond, and that all persons who have a claim against the bond may
bring an action against the surety.
that

all

surety

bonds

required

Section 22-9-401 provides

by

state

agencies

for

the

construction of public works “shall be liable on all claims for
labor and materials entering into the construction, or necessary
or incident to or used in the course of construction, of the
public improvements.”

(Emphasis added.)

The Arkansas Supreme Court has noted that § 22-9-401 cannot
be reasonably interpreted to require protection for claims based
on negligence.
Little

Rock

United States Fidelity and Guaranty Company v.
Quarry

Company,

Inc.,

309

Ark.

269,

272

(1992)(statute contains considerable language defining the scope
of claims for labor and materials).
against

Travelers

that

involve

Therefore, Wright’s claims
Watts

negligence must fail as a matter of law.
Wright’s

trespass

claims;

they

are

not

and

Sons’

alleged

The same is true for
within

the

scope

of

protection afforded by the legislature to furnishers of labor
and materials used in or incident to the construction of public
works.

Page 5 of 10

This leaves Wright’s breach of contract claims.
enumerated

allegations

fall

into

two

categories.

The ten
The

first

consists of claims that Watts and Sons generally abused Wright’s
property by excavating outside of the agreed upon area, taking
water without authorization, using it as a dumping site, storage
and equipment parking lot and failing to build the parking area
Wright requested and which was made a part of the contract.

The

second includes Wright’s claims that Watts and Sons took over
125,000 cubic yards of fill material and in addition, has held
over on the contract and failed to pay rent for property used
outside the staked areas.
The statute requiring the giving of a bond by contractors
was intended to protect those providing labor and materials used
in

construction.

Bonds

given

under

it

must

be

construed

liberally in order to effectuate the purpose of the legislature.
Detroit Fidelity & Sur. Co. v. Yaffe Iron & Metal Co., 184 Ark.
1095 (1932)(pipe purchased by appellee was necessary to and was
used

in

the

construction,

even

though

the

pipe

was

not

incorporated into and did not become a part of the construction
itself.)
which

Yaffe was decided with reference to Act 368 of 1929,

guaranteed

payment

of

legitimate

claims

for

all

items

incident and contingent to the work, specifically,
[A]ll claims for labor, material, camp equipment, fuel
including oil and gasoline, food for men and feed for
animals, labor and material expended in making repairs
Page 6 of 10

on machinery or equipment used in connection with the
construction of said public buildings or works
aforesaid, lumber and material used in making forms
and supports and all other supplies or things entering
into the construction, or necessary or incident
thereto or used in the course of construction of said
public buildings or public works; said bonds shall
also be liable for rentals on machinery, equipment,
mules and horses used in the construction of said
public buildings or public works....
Section 22-9-401, which had its genesis in Act 368, speaks in
similar terms:
(b) Claims for labor and materials shall include, but
not be limited to, fuel oil, gasoline, camp equipment,
food for workers, feed for animals, premiums for bonds
and liability and worker’s compensation insurance,
rentals on machinery, equipment, and draft animals,
and
taxes
or
payments
due
the
State
of
Arkansas...which shall have arisen on account of, or
in connection with, wages earned by workers on the
project covered by the bond.
Although the language in the two statutes is not identical,
each limits its application to persons who actually performed
labor or services, or furnished equipment or materials to the
project.

Arkansas’ statute is based on similar language within

The Miller Act, which identifies those who may sue on a payment
bond as “Every person who has furnished labor or material in the
prosecution of the work provided for a contract for which a
payment bond is furnished....”
Unfortunately,
Miller

Act”

neither
defines

The

40 U.S.C. § 3133(b)(1)(2006).

Miller

Act

“materials.”

nor

Under

Arkansas’
any

“Little

definition

of

“materials”, Wright’s first category of claims for misuse of his

Page 7 of 10

property must fail.
negligence

and

These allegations are a restatement of his

trespass

claims,

which

are

in

the

nature

of

damage to property, not payment for use of materials.
The second category requires a deeper inquiry.

It involves

Wright’s allegations that Watts and Sons (1) took over 125,000
cubic yards of dirt from his land and (2) failed to pay rent for
the property it used outside the agreed-upon area.
The

contract

provides

that

Watts

and

Sons

pay

Wright

seventy cents per cubic yard for fill material. Although the
stated

quantity

of

fill

expected

to

be

required

by

the

construction was 50,000 cubic yards, the contract clearly states
that

the

amount

requirements.

can

be

subject

to

change

and

project

Even the broadest interpretation of Arkansas Code

Annotated § 22-9-401 does not support Wright’s claim that the
surety

bond

covers

damages

from

taking

too

much

material,

especially when there are no allegations that the material was
not paid for at the contract rate, which is the essence of the
payment bond requirement.
This leaves Wright’s claims that Watts and Sons failed to
pay

rent

for

land

it

used

outside

of

the

agreed-upon

area.

Arkansas Code Annotated § 18-44-147 defines “material supplier”
as “any person who supplies materials, goods, fixtures, or any
other tangible item to the contractor.”

Page 8 of 10

The Court can find no instance, nor has Wright pointed to
any, in which a court in Arkansas has found rental of real
property itself or damage to rented real property to be within
the scope of any labor and materials payment bond.

Under the

state statute, “materials” have been found to include items such
as tools (National Sur. Corp. v. Ideal Lumber Co., 249 Ark. 545
(1970)), pipes (Yaffe Iron & Metal, 184 Ark. 1095 (1932)), road
materials (Little Rock Quarry, 309 Ark. 269 (1992)), and asphalt
(State ex rel. Berry Asphalt Co. v. Western Sur. Co., 223 Ark.
344 (1954)).

Leased materials that have been recognized as

subject to the bond under The Miller Act or Arkansas law have
included trucks supplied to a subcontractor to haul materials
(Basich Bros. Const. Co. v. U.S., for Use of Turner, 159 F.2d
182 (9th Cir. 1946)), tractors used on a dam project (Roane v.
U.S. Fidelity & Guaranty Co., 378 F.2d 40 (10th Cir. 1967)),
earth-compacting machine (Arnold v. Koehring Co., 242 Ark. 415
(1967)), dirt-moving equipment used in constructing improvements
to a municipal airport (Continental Cas. Co. v. Clarence L. Boyd
Co., 140 F.2d 115 (10th Cir. 1944)), cars, track and equipment
used in work on a naval training station (Illinois Sur. Co. v.
John

Davis

Co.,

244

U.S.

376

(1917)),

plaster

planks

and

scaffolding planks furnished to a subcontractor (United States,
for Use and Benefit of P.A. Bourquin & Co. v. Chester Const.

Page 9 of 10

Co., 104 F.2d 648 (2d Cir. 1939)), and construction equipment
(National Sur. Corp v. Edison, 240 Ark. 641 (1966)).
Despite a liberal reading, alleged unpaid rent for use of
real property in a state construction project does not appear to
fall

within

the

broad

scope

of

“materials”

covered

by

the

Contractor’s Bonds statute.
While Wright’s claims against Watts and Sons may or may not
stand, Wright has failed to state a claim for which relief can
be granted against Travelers.

In the absence of any statement

that

materials

labor

was

performed

or

furnished

for

which

payment has not been made, Plaintiff’s claims against Travelers
are dismissed.
IV.

Conclusion
For

the

reasons

set

out

herein,

Travelers’

Motion

to

Dismiss (Doc. 9) is DENIED AS MOOT and its Motion to Dismiss
(Doc.

24)

is

GRANTED.

All

DISMISSED without prejudice.

claims

against

Travelers

are

All parties are to bear their own

costs and fees.
IT IS SO ORDERED this 27th day of September, 2012.

/s/ Robert T. Dawson
Honorable Robert T. Dawson
United States District Judge

Page 10 of 10