Industrial Constructors Corp. v. U.S. Bureau of Reclamation, 92-2200

• Decision Date: 02 February 1994
• Docket Number: No. 92-2200,92-2200
• Parties: INDUSTRIAL CONSTRUCTORS CORPORATION; Paul Powers, individually, and as shareholder and officer of Industrial Constructors Corporation; Wayne Elledge, individually, and as shareholder and officer of Industrial Constructors Corporation; Janet Hall, individually, and as shareholder and officer of Industrial Constructors Corporation; James Schuemacher, individually, and as shareholder and officer of Industrial Constructors Corporation; Betty Powers, individually, and as shareholder and officer of Industrial Constructors Corporation, Plaintiffs-Appellants, v. The UNITED STATES BUREAU OF RECLAMATION, an agency of the United States of America; Lindell H. Elfrink, individually; Bill Frazer, individually; Michael T. Voth, individually, Defendants-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 963

15 F.3d 963

INDUSTRIAL CONSTRUCTORS CORPORATION; Paul Powers individually, and as shareholder and officer of Industrial Constructors Corporation; Wayne Elledge, individually, and as shareholder and officer of Industrial Constructors Corporation; Janet Hall, individually, and as shareholder and officer of Industrial Constructors Corporation; James Schuemacher, individually, and as shareholder and officer of Industrial Constructors Corporation; Betty Powers individually, and as shareholder and officer of Industrial Constructors Corporation, Plaintiffs-Appellants, v. The UNITED STATES BUREAU OF RECLAMATION, an agency of the United States of America; Lindell H. Elfrink individually; Bill Frazer individually; Michael T. Voth, individually, Defendants-Appellees.

No. 92-2200.

United States Court of Appeals, Tenth Circuit.

Feb. 2, 1994.

S. Austin Johnson, Albuquerque, New Mexico, for Plaintiffs-Appellants.

John W. Zavitz, Assistant United States Attorney (Don J. Svet, United States Attorney, with him on the brief), Albuquerque, New Mexico, for Defendants-Appellees.

Before BALDOCK, McWILLIAMS and BRORBY, Circuit Judges.

BALDOCK, Circuit Judge.

Plaintiffs Industrial Constructors Corporation ("ICC") and its shareholders and officers appeal the district court's dismissal pursuant to Fed.R.Civ.P. 12(b)(6) of their claims as time-barred. We have jurisdiction under 28 U.S.C. Sec. 1291, and we affirm.

Plaintiffs alleged the following facts in their complaint and in the documents attached to their complaint, and we presume these facts are true in reviewing a motion to dismiss. See Settles v. Golden Rule Ins. Co., 927 F.2d 505, 507 (10th Cir.1991) (complaint allegations are presumed true in reviewing the granting of a motion to dismiss); see also Hall v. Bellmon, 935 F.2d 1106, 1112 (10th Cir.1991) (written documents attached to the complaint are exhibits and are considered part of the complaint for consideration in a rule 12(b)(6) dismissal). In August 1983 in the state of New Mexico, ICC entered into a $2.3 million contract with the Bureau of Reclamation ("BOR") to install 22.4 miles of underground pipeline and recompact soil in the San Luis Valley Project near Alamosa, Colorado. Defendant Michael T. Voth was the BOR contracting officer and Defendant Lindell H. Elfrink was the BOR project engineer on the contract. Defendant Bill Frazer was the construction division manager in the engineering and research center in Denver for the BOR.

Early in the project, ICC became aware that performance according to contract specifications would be very difficult because the type of pipeline construction dictated by the contract could not be performed on the type of soil located at the contract site. On October 7, 1983, ICC met with a representative from the BOR engineering and research center to discuss the problems with the construction method. On October 10, 1983, ICC requested by letter that the BOR allow ICC to use another construction method more compatible with the job site. The BOR informed ICC that if it could meet the contract's requirements using another method, the new method would receive consideration. On October 13, 1983, ICC experimented with another construction method at the job site and submitted the results to the BOR for consideration. Upon testing the method, the BOR discovered that the new method met essentially all contract requirements. On October 28, 1983, the BOR engineering and research center sent a memorandum to Defendants Voth and Elfrink, making it plain that the method specified in the contract was not to be treated as mandatory as long as the performance objectives of the contract could be reached. Defendant Elfrink, with the knowledge of Defendant Voth, deliberately withheld the results of the BOR tests and the information contained in the October 28, 1983 memorandum from ICC, and on December 8, 1983, Defendant Elfrink, on behalf of the BOR, officially refused ICC's request to use the new method of construction, stating that the portions of the contract designating the construction method were mandatory.

In January 1984, ICC submitted an informal written claim to the BOR alleging substantial damages resulting from their inability to reach performance objectives using the construction method required by the contract specifications. At a series of meetings held in February, March, and April of 1984, ICC and its representatives sought to persuade the BOR to grant a change order which would relieve ICC of compliance with the construction method requirement. The existence of the October 28, 1983 memorandum from the BOR engineering and research center, which stated that the construction method specified in the contract was not mandatory, was not revealed to ICC at any of these meetings. In fact, Defendant Voth represented to ICC that he needed to obtain information from the engineering and research center before he could change the mandatory nature of the construction method. At the March 1984 meeting, Defendant Voth indicated to ICC that relief from the construction method requirement would not be granted unless ICC agreed to give up any claims it might have against the BOR. On April 17, 1984, Defendant Voth sent this proposal to ICC in writing, and on April 30, 1984, ICC wrote Defendant Voth, emphasizing ICC's unwillingness to give up its claims, but agreeing that if granted relief from the construction method requirements, such relief would not be construed by ICC as an admission by the BOR that its construction method was defective. On May 16, 1984, Defendant Voth responded to ICC, stating that no relief from the construction method requirements would be granted absent a formal release of all claims and threatening to terminate ICC for default and failure to adhere to the contested contract requirements.

In May and June of 1984, ICC continued its attempt to find a way to use the construction method specified in the contract, even consulting and cooperating with an inspector recommended by the BOR who had experience with the contract-specified construction technique. Despite these attempts, the construction method continued to produce inconsistent results, and ICC's progress toward contract completion was exceedingly slow, causing ICC to continue to suffer severe cash flow problems.

In July 1984, the BOR issued an invitation for bids on another phase of the project, listing a different and more readily performable construction method. Thus, at the same time the BOR was imposing an impractical construction method on ICC, it was eliminating the requirement for other contractors on the same project.

In early August 1984, due to its financial circumstances, ICC was forced to abandon the contract. At that time, ICC notified the BOR of its intent to abandon and its claim that the BOR had materially breached its contract with ICC. Thereafter, the BOR terminated ICC's contract on the grounds of default.

As a result of the BOR's default determination, Fireman's Fund Insurance Company ("Fireman's Fund"), who was ICC's surety on the BOR project, entered into a takeover agreement with the BOR, whereby Fireman's Fund agreed to take over responsibility for completing ICC's contract. The takeover agreement specified that should litigation or settlement determine that the BOR's termination for default was improper, the BOR must reimburse Fireman's Fund for any actual costs and expenses in excess of the payments received under the takeover agreement.

When Fireman's Fund requested that the BOR allow contract completion without adherence to the contract's construction method requirement, Defendant Elfrink rejected the request. However, when the president of the completion contractor, who was hired by Fireman's Fund to complete ICC's contract, made the same request, the BOR formally approved a change in construction method. This approval was made by letters dated November 28, 1984 and February 26, 1985.

On November 20, 1984, ICC submitted its certified claim to the BOR, alleging that the default termination was improper, the contract specifications were defective and impracticable, differing site conditions existed, the BOR had breached the contract, and ICC was entitled to recover for the breach. On March 18, 1985, Defendant Voth denied ICC's claim, except to the extent that he found that the contract documents gave misleading indications that adequate select material would be available at the project site, and awarded ICC $32,104.80 for its expenditures on purchasing and hauling the select materials. ICC appealed Defendant Voth's decision to the United States Claims Court.

By letter dated November 5, 1985, Fireman's Fund submitted a certified claim to Defendant Voth, seeking to recover costs in excess of $2 million, alleging that the BOR's default termination of ICC was improper and that pursuant to its rights under the takeover agreement, Fireman's Fund was entitled to its costs to complete the project. Defendant Voth denied this claim on January 31, 1986, and Fireman's Fund appealed to the United States Claims Court. This appeal was consolidated with ICC's Claims Court appeal.

In June of 1988, during the Claims Court discovery process, ICC learned that agents of the BOR had concealed the October 28, 1983 memorandum which gave ICC permission to change from the contract's construction method to a more practicable method. Later in the discovery process, on November 12, 1989, ICC found out that the results of the October 13, 1983 test of their alternative method had been favorable.

At the conclusion of the Claims Court proceeding, the court found that the soil's impermeability at the site was the essential cause of ICC's inability to utilize the contract's construction method and that the contract's construction method was commercially impracticable and unreasonable. The court further found that the BOR's site specifications were defective and that ICC could have performed the contract...