Johns-Manville Sales Corporation, a Corporation v. Reliance Insurance Company, a Corporation

Appellant Johns-Manville Sales Corporation instituted this action in the Superior Court of Maricopa County, Arizona, to recover the sum of $15,252 from ap-pellee Standard Accident Insurance Company, now merged with and known as Reliance Insurance Company. Appellee removed the case to the United States District Court for the District of Arizona. There is no question as to jurisdiction, and the parties agree that the case must be decided under Arizona law. The question presented is whether appellant can recover on the bond issued by appellee.

One of the defendants in this action, Ellsworth H. Ewald, doing business as Ewald Contracting Company, entered into a contract in 1963 with Mountain States Telephone and Telegraph Company for the construction of manhole and transit conduit ducts in Tempe, Arizona. The contract provided that Ewald should furnish the materials necessary for the job and, in Article 11, gave the Telephone Company the right to require “a bond covering the full and faithful performance of the contract [a performance bond] and the payment of all obligations arising thereunder,” [a payment bond]; the Award of Bid Letter, incorporated into the contract, provided that…