## Facts

- Three individuals held two Navajo Reservation mining leases subject to federal control and Interior Department approval for any transfer.
- One lessee, Horace Ray Redington, agreed to assign his lease interests to Vanadium Corporation of America for $13,000, expressly “subject only” to approval by the Secretary of the Interior.
- The contract provided that if the Secretary did not approve the assignments, Redington would repay the $13,000 and the agreement would be canceled.
- Redington obtained a surety bond from Fidelity & Deposit Company of Maryland securing repayment of the $13,000 if the Secretary did not approve.
- The Secretary ultimately did not approve the assignments.
- Vanadium sued the surety (and, after intervention, Redington) to recover the $13,000; defendants asserted defenses that Vanadium failed to provide the cooperation required to obtain approval.
- A jury returned a verdict for defendants; the district court upheld the defenses as legally sufficient, and Vanadium appealed.

## Issues

1. Whether defenses alleging the buyer’s failure to provide legally required cooperation in seeking governmental approval can bar recovery of a deposit promised to be refunded if approval is denied.
2. Whether the “prevention/hindrance” doctrine applies where a party seeks to recover based on the nonoccurrence of a condition (government approval) it allegedly helped cause.
3. Whether the surety may invoke defenses available to the principal to defeat liability on a bond securing the principal’s conditional refund obligation.

## Decision

- The Second Circuit affirmed the judgment for defendants.
- The court held the asserted defenses were legally sufficient and were properly submitted to the jury.
- The court sustained the defense verdict because the buyer’s lack of required cooperation could excuse the principal’s refund obligation and therefore defeat the surety’s liability.

## Legal Principles

- When a contract’s completion depends on governmental approval, the party seeking completion (or seeking to enforce consequences of nonapproval) has an implied duty to provide cooperation reasonably required by the governing legal and administrative process.
- A party may not obtain the benefit of a condition’s failure when its own conduct materially contributes to, or prevents, the condition’s occurrence.
- A surety’s liability on a performance/refund bond is generally coextensive with the principal’s obligation; defenses that defeat the principal’s duty likewise defeat the surety’s duty.

## Conclusion

Because the jury could find that Vanadium failed to provide cooperation required to obtain Interior Department approval, Vanadium was barred from recovering the $13,000 based on the denial of approval, and neither Redington nor the surety was liable under the refund provision and bond.


Vanadium Corp. of Am. v. Fid. & Deposit Co. of Md., 159 F.2d 105 (2d Cir. 1947)