American States Insurance Company, Plaintiff-appellee, v. Raymond Prozzillo, Jess Borowski, Betty Gill, John Carson,marion County, West Virginia, Defendants-appellants, v. Internal Revenue Service, Third Party Defendant.american States Insurance Company, Plaintiff-appellant, v. Raymond Prozzillo, Jess Borowski, Betty Gill, John Carson,marion County, West Virginia, Defendants-appellees, v. Internal Revenue Service, Third Party Defendant, 881 F.2d 1069 (4th Cir. 1989)

American States Insurance Company was the surety on construction bonds filed on behalf of Arthur H. Stover, doing business as P & S Coal Construction Company. The construction company had agreed to do site work on a county construction project in Marion County, West Virginia. The bonds secured the construction company's performance and payment.

The construction company defaulted in its performance, and the appropriate officials of Marion County were informed that American States had received an assignment by the construction company of all balances and retainages by county officials for the account of the construction company.

Thereafter, the Internal Revenue Service purported to levy upon those funds as the property of the construction company for some $17,000 in taxes due by the construction company. The county paid over the funds to the Internal Revenue Service. In addition, it paid to itself $3,000 to reimburse itself for claimed extra expense to which it had been put.

The insurance company brought this action to recover the full amount of the retained funds that became due upon completion of the contract.

Marion County admitted the facts. It made no claim that it was entitled to pay itself the $3,000, but it did insist that it was entitled to deduct the amount it had paid to the Internal Revenue Service. It treated the claim of the insurance company as no more than a competing claim upon the fund. It took the position that it had no defense to the claim of the United States. In doing so it completely ignored the assignment of the construction company to the insurance company of all the construction company's interest in the funds withheld by Marion County.

There is no merit in the county's appeal. Summary judgment for the plaintiff was properly entered. The county knew of the assignment by the construction company to the insurance company and had no right to treat the retained funds as property of the construction company subject to its command and to the levy of the United States.

In addition to its contract claims, the insurance company alleged a violation of Sec. 1983. It claimed a deprivation of its property without due process of law and done under the color of state law. It alleged the Sec. 1983 claim in an attempt to obtain an award of attorney's fees under 42 U.S.C. § 1988.

The district judge denied the Sec. 1983 claim upon the ground that the county's diversion of funds did not amount to a constitutional tort. Whether or not the district court was right on that score, an award of attorney's fees under Sec. 1988 is clearly discretionary. Whether or not the district court had the power to award such fees, it clearly had the discretionary right to decline to award them.

We therefore find no merit in the plaintiff's cross appeal dealing with the Sec. 1983 claim.

AFFIRMED.