Texas Tunneling Company v. City of Chattanooga, Tennessee

• Decision Date: 24 March 1964
• Docket Number: 15076.,No. 15075,15075
• Citation: 329 F.2d 402
• Parties: TEXAS TUNNELING COMPANY, Plaintiff-Appellee and Cross-Appellant, v. CITY OF CHATTANOOGA, TENNESSEE, Defendant-Appellee, William A. Havens, Alfred W. Burger, Harry H. Moseley, Jasper W. Avery, Frank S. Palocsay and Edward S. Ordway, d/b/a Havens and Emerson, Defendants-Appellants and Cross-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

329 F.2d 402 (1964)

TEXAS TUNNELING COMPANY, Plaintiff-Appellee and Cross-Appellant, v. CITY OF CHATTANOOGA, TENNESSEE, Defendant-Appellee, William A. Havens, Alfred W. Burger, Harry H. Moseley, Jasper W. Avery, Frank S. Palocsay and Edward S. Ordway, d/b/a Havens and Emerson, Defendants-Appellants and Cross-Appellees.

Nos. 15075, 15076.

United States Court of Appeals Sixth Circuit.

March 24, 1964.

Robert L. McMurray, Chattanooga, Tenn., Donald L. Halladay, Chattanooga, Tenn., on brief; Noone, Moseley & Noone, Chattanooga, Tenn., of counsel, for Texas Tunneling Co.

W. A. Wilkerson, Chattanooga, Tenn., Wilkerson & Abshire, Chattanooga, Tenn., of counsel, for Havens and Emerson.

Ellis K. Meacham, Chattanooga, Tenn., Anderson, Meacham & Barger, Chattanooga, Tenn., for City of Chattanooga, Tenn.

Before CECIL and O'SULLIVAN, Circuit Judges, and McALLISTER, Senior Circuit Judge.

O'SULLIVAN, Circuit Judge.

This case involves an appeal by defendant-appellant, Havens and Emerson, from a judgment for plaintiff-appellee, Texas Tunneling Company. The action is for damages resulting from an alleged negligent misrepresentation in the furnishing of an engineering survey, which plaintiff claimed to have relied upon to its detriment. The survey was used by plaintiff in negotiating a subcontract for digging a tunnel as a part of the work involved in the construction of an interceptor sewer by the City of Chattanooga, Tennessee. Also involved is plaintiff's cross-appeal from dismissal of its complaint against the City of Chattanooga, a co-defendant in the action and plaintiff's cross-appeal asserting that its judgment was for an inadequate amount.

The case was tried to the District Judge, whose opinion is reported as Texas Tunneling Co. v. City of Chattanooga, 204 F.Supp. 821 (E.D.Tenn.1962). We affirm dismissal of the complaint as to the City of Chattanooga on the District Judge's opinion. We express our agreement with his method of calculating damages, but our finding of no liability makes consideration of damages unnecessary. Since the District Judge's opinion comprehensively sets out the facts of the case, we will discuss them only to the extent necessary for exposition of our view of the applicable law. Defendant, City of Chattanooga, having been dismissed, we will refer to appellants, William A. Havens, et al. d/b/a Havens and Emerson, as the defendant.

In planning for the construction of the interceptor sewer, the City of Chattanooga, employed several engineering firms to make the studies, designs, and reports necessary to carry out the project. Included in this work was the designing of a tunnel through a hill known as Stringer's Ridge. This work was done by defendant, Havens and Emerson. Also employed by the City was the engineering firm of Law-Barrow-Agee, whose function was to make test borings in the area of Stringer's Ridge to determine the subsurface conditions of the hill through which the tunnel was to be dug. Cores containing samples of the subsurface material were recovered in the test boring.

At the conclusion of the Law-Barrow-Agee test borings, the findings thereof were compiled in a report made by Law-Barrow to defendant, Havens and Emerson. This report is identified as Exhibit 6. Based upon the information given in this Exhibit 6, defendant, in July 1955, prepared a summary report to the City entitled, "Test Borings Stringer's Ridge Sewer Tunnel Boring Logs," which is identified in the record as Exhibit 4.

The failure of defendant to include in its summary (Exhibit 4) information about core recoveries contained in the Law-Barrow report is the conduct which plaintiff here claims as the tort committed against it. The omitted information was the percentage of core recoveries made by Law-Barrow at points identified as Test Bore 31 and Test Bore 32. In all other respects, defendants report Exhibit 4 was a correct transcription and diagram of the data that Law-Barrow reported to it. The District Judge so found. Defendant admitted that the omission was a mistake and was the consequence of an error committed by one of its draftsmen. The District Judge's view of this omission was as follows:

"The only conclusion the Court can draw from the record in this case is that by oversight or at most simple and unintentional carelessness, one of the defendants\' draftsmen, who was never identified, failed to include the percentage of core recovery on Exhibit No. 4, although this information was contained in the Law-Barrow-Agee Test Boring Record, Exhibit No. 6, from which he obtained his information. Likewise, by unintentional oversight this omission was not noticed by other members of the defendants\' firm, and the drawing was delivered to the City with this information omitted. The defendants had no knowledge of this omission until it was called to their attention by the filing of this lawsuit long after the alleged loss by the plaintiff. If this action is based upon a fraudulent or intentional tort, it is the opinion of the Court that it should be dismissed." (204 F.Supp. 826, 827)

The foregoing Exhibit 4, as well as other engineering data, such as surveys, drawings, and specifications were all lodged with the City Engineer and made available for contractors bidding on the construction contract for the interceptor sewer. Plaintiff's asserted cause of action is grounded in the claim that, as a subcontractor for digging the tunnel, it was misled by the omission in Exhibit 4 as to the character of the ground through which it had to dig; that, as a consequence, it underestimated its costs in negotiating its subcontract and suffered a substantial loss in fulfilling the contract. Plaintiff claims that knowledge of core recoveries, both as to their existence and their extent, is of substantial value to one estimating the cost of tunneling through the ground in which the test borings had been made. There was evidence to sustain plaintiff's claim in this regard. While there were no contractual relations between defendant and the general contractor, or between defendant and the plaintiff subcontractor, it is clear that defendant knew that its survey and report would be made available to, and examined by, those who were to bid on the work involved. Exhibit 4, however, had, on its face, a note reading as follows:

"This information is furnished for the convenience of bidders and is not a part of contract 15. This information is not guaranteed and any bid submitted must be based on the bidders own investigations and determinations."

Like language of warning was contained in the general contract, but plaintiff's witnesses testified that such caveats are generally ignored by contractors who customarily rely on the information notwithstanding the warnings. The general contract contained the following:

"3. Examination of Documents and Site of Work:

"Bidders are advised that the plans, specifications, estimates, addenda and bulletins of the Engineer shall constitute all the information which the City will furnish. * * * Bidders are required, prior to submitting any proposal * * * to examine carefully all estimates open for examination and all plans on file in the Engineer\'s office. * * * Bidders shall rely exclusively upon their own estimates, investigation and other data which are necessary for full and complete information upon which the proposal may be based.

"11. Borings

"(a) Borings along the line of the proposed sewer have been made for the use of the Engineer in determining the approximate extent of rock.

"(b) The City does not warrant or guarantee the accuracy of any information, including ground water levels, or samples which it may have obtained from borings or otherwise as to kind or condition of the materials to be excavated. (Emphasis supplied)

"(c) If the bidder wishes to obtain additional information as to soil conditions, the City will afford him an opportunity, at his own expense, to make additional borings on the site.

"(d) Data on borings are shown on a drawing that is available for general information only. This drawing is not a part of the Contract Documents."

It was shown that drillers making test bores generally use two types of drills — a diamond core drill for boring through rock, and a "fishtail" drill for lighter material. Cores are more likely to be recovered when a diamond drill is used than when the fishtail variety is employed. Plaintiff and its witnesses stated that in addition to knowledge as to the existence of core recoveries, it is important to a contractor to know where diamond drills were used and helpful to inspect any core recoveries that were obtained. Daily logs of the work done by the Law-Barrow drillers did show that diamond drills were used to some extent at Test Bores 31 and 32. However, in making the final report on its work (Exhibit 6), Law-Barrow failed to show all of the places where it had done diamond core drilling. Havens and Emerson's accused report (Exhibit 4) was taken from the Law-Barrow Exhibit 6 and faithfully reported and diagrammed all of the information concerning diamond core drilling that was shown on Exhibit 6. The District Judge held that defendant was entitled to rely on the Law-Barrow report (Exhibit 6) and could not be charged with omissions originating therein. Both Exhibit 4 and Exhibit 6 set forth diagrammatically and with descriptive language the character of the subsurface material that would be encountered at various points in digging the tunnel.

The charges of the plaintiff against the City and against Havens and Emerson were summarized by the District Judge under four headings: (1) Omission from Exhibit 4 of the fact that diamond core drilling was done at Test Bores 31 and 32; (2) Omission from Exhibit 4 of the percentage of core recoveries; (3) Failure to mention the retention and availability of core samples recovered, and (4) Omission of information contained in the original Law-Barrow field reports which, if included in Exhibit 4, would...