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Manway Construction Co. v. Housing Authority

decided: July 11, 1983.


Appeal from a civil contempt order entered in the District of Connecticut, Thomas F. Murphy, District Judge, holding Hartford National Bank & Trust Co. in contempt for its failure to pay interest to the Housing Authority of the City of Hartford on a certificate of deposit.

Kaufman, Timbers and Newman, Circuit Judges.

Author: Per Curiam

Hartford National Bank & Trust Co. (Bank) appeals from an order entered in a post-judgment proceeding in the District of Connecticut, Thomas F. Murphy, District Judge, adjudging the Bank in civil contempt for its failure to pay certain sums of money to appellee Housing Authority of the City of Hartford (Authority). The district court held the Bank in contempt from the bench on July 20, 1982, followed by written findings of fact, conclusions of law, and an order filed August 9. The Bank filed its notice of appeal on August 17. On August 19 the district court granted a stay of the contempt order pending disposition of the appeal. We hold that the district court lacked jurisdiction over the Authority's claims against the Bank. We vacate the contempt order.


Manway Construction Company (Manway) and Damar Construction Company (Damar) contracted in 1968 with the Authority to build a housing development in Hartford. Once construction had begun, disputes arose between the parties to the contract concerning such matters as the progress of the project and the quality of the work. To resolve these disputes, the parties entered into a supplemental agreement on October 23, 1970. Pursuant to this agreement the completion schedule was amended and the contractors agreed to undertake certain corrective work. As security for their satisfactory performance, Manway and Damar agreed to purchase a certificate of deposit in the amount of $100,000 to be held in the name of the Authority until March 31, 1971. At the expiration of that period, it was agreed that the funds would either be returned to the contractors or be turned over to the Authority, depending on whether Manway and Damar had satisfied their obligations.

On October 26, 1970, Manway and Damar purchased the requisite certificate of deposit from the Bank. This certificate carried an interest rate of 6.75% per annum and a maturation date of March 31, 1971. On January 6, 1971, the uneasy truce that had been negotiated the previous October erupted again into open dispute. Manway and Damar commenced an action against the Authority in the District of Connecticut for breach of contract. The $100,000 certificate of deposit, held by the Bank in the name of the Authority, was garnished by plaintiffs.*fn1

After the certificate matured on March 31, the Bank did not reinvest the funds. Instead, it awaited notification from the parties. For almost five years the Bank received no instructions regarding reinvestment or disposition of the proceeds. In December 1975, Manway and Damar inquired of the Bank as to the steps necessary for reinvestment of the funds while the breach of contract action proceeded. On January 8, 1976, the Authority requested that the Bank reinvest the funds in a 90-day certificate and that it continue to reinvest (or "roll over") the funds until further notice. The Bank complied with this request. The funds were reinvested continuously from January 1976 on.

On August 17, 1981, judgment was entered by the District court in favor of the Authority against Manway and Damar in the breach of contract action. The Bank was ordered, pursuant to that judgment, to deliver to the Authority a certificate of deposit in amount of $100,000. Manway and Damar appealed to our Court from the judgment against them. We affirmed by an order entered April 13, 1982. 697 F.2d 293.

Once the judgment had been affirmed, the Authority demanded payment of the certificate of deposit and all interest that had accrued thereon -- a total of $190,256.06. Since the judgment by its terms made no reference to accrued interest, the Bank contacted the construction companies. Manway and Damar disputed the Authority's claim to the interest. They took the position that, since they originally had purchased the certificate, the interest belonged to them. Since the proper disposition of the accrued interest was unclear, the Bank informed the Authority that it would turn over the undisputed amount owed the $100,000 -- pending clarification of its obligation regarding the accrued interest. The Authority refused to accept the proffered $100,000. Subsequently it filed a motion to cite the Bank for contempt on the ground that failure to turn over the accrued interest constituted disobedience of the court's judgment.

At the contempt hearing on July 13, 1982, the Bank attempted to file a motion for clarification of the court's August 17, 1981 judgment insofar as it concerned accrued interest. The court declined to entertain the motion. The Authority thereupon presented a previously unconsidered claim against the Bank -- for damages equal to the interest that would have been earned had the principal been properly reinvested from April 1971 to January 1976. Counsel for the Authority informed the court, however, that this latter claim for failure to reinvest would be pursued in a separate state court action. The hearing was continued until July 20 so that the Bank might obtain releases from various possible claimants to the accrued interest.

At the resumed hearing on July 20, the Authority, contrary to its representations at the July 13 hearing, pressed its claim for damages due to the failure to reinvest from 1971 to 1976, together with its claim for the interest actually accrued. The Bank moved to dismiss the Authority's claims for lack of federal jurisdiction, asserting that they constituted a separate action unrelated to the original dispute and for which there was no separate jurisdictional basis. The court denied this motion.

The parties at the July 20 hearing then addressed the merits, after which the court held the Bank in contempt as stated above and ordered that it pay interest at an annual rate of 16%.

The written order subsequently entered on August 9 provided that the Bank, in order to purge itself of contempt, was required to pay interest on the sum of $102,925.00 -- the sum that had not been reinvested -- for the period from April 1, 1971 to January 7, 1976 at an annual rate of 16%, plus interest on the aggregate sum of $190,256.06 for the period from July 1 to July 20, 1982 ...

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