HB Zachry Company v. Travelers Indemnity Company

• Decision Date: 02 May 1968
• Docket Number: No. 24576.,24576.
• Citation: 391 F.2d 43
• Parties: H. B. ZACHRY COMPANY, Appellant, v. The TRAVELERS INDEMNITY COMPANY et al., Appellees. MILES AND SONS, INC., et al., Appellants, v. H. B. ZACHRY COMPANY et al., Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

391 F.2d 43 (1968)

H. B. ZACHRY COMPANY, Appellant, v. The TRAVELERS INDEMNITY COMPANY et al., Appellees.

MILES AND SONS, INC., et al., Appellants, v. H. B. ZACHRY COMPANY et al., Appellees.

No. 24576.

United States Court of Appeals Fifth Circuit.

February 19, 1968.

Rehearing Denied May 2, 1968.

Chester H. Johnson, San Antonio, Tex., Stanley P. Wilson, Abilene, Tex., for appellants.

Gordon Johnson, San Francisco, Cal., Josh H. Groce, San Antonio, Tex., for appellees.

Before TUTTLE, GEWIN and GODBOLD, Circuit Judges.

GODBOLD, Circuit Judge:

H. B. Zachry Company was the prime contractor on construction for the United States government of Twin Buttes Dam, near San Angelo, Texas. The major work of the project was a mammoth earth-fill embankment eight miles long with a maximum height of 130 feet. To prevent erosion from wave action of impounded waters a layer of rock fragments known as "riprap" was to be furnished and placed on the upstream slope of the dam. Zachry subcontracted the riprap work to Miles-Sierra, a joint venture. Travelers Indemnity Company was surety on Miles-Sierra's performance bond.

Zachry sued Miles-Sierra and Travelers, claiming breach of the sub-contract. Miles-Sierra filed a cross-claim and third-party complaint against Zachry and its surety claiming, among other things, that Zachry failed to furnish an adequate supply of rock, meeting the specifications, to be processed into riprap by Miles-Sierra. By agreement issues of damages were severed, and only issues of liability have been determined. The district court, sitting without a jury, found that Miles-Sierra breached the contract but that Zachry was barred from recovery because without any written change order from the government contracting officer Miles-Sierra had been "called upon" to proceed to complete its work using marginal riprap material, some of which did not comply with the prime contract specific gravity requirement set out in the specifications. The court found Miles-Sierra not entitled to recover on its cross-claim and third party complaint because of its own breaches and for failure to prove its claim that the supply of rock furnished by Zachry for riprap was inadequate.

Zachry and Miles-Sierra appealed; however, Miles-Sierra does not pursue its appeal from the denial to it of affirmative relief. We reverse the denial of recovery to Zachry and remand for assessment of its damages.

Pertinent parts of the written subcontract are set out in the margin.¹ The findings of the trial court, which are amply supported by the evidence, picture Miles-Sierra's performance on the job as a total, abysmal failure.²

The unsatisfactory nature of the work which Miles-Sierra completed was in the placement of the riprap, use of too much fine material, and failure to place suitable mixtures of smaller and larger rocks that would accomplish the purpose of preventing erosion.³ At no time was any of Miles-Sierra's work rejected for failure of the riprap material to meet specific gravity requirements.

In a meeting in late March, 1961 Zachry threatened to take over the riprap work and complete it under the terms of the subcontract unless Miles-Sierra's performance improved, and prior to June 21 Zachry told the Bureau it was considering doing so. In another meeting on June 30 Zachry gave oral notice to Miles-Sierra that it proposed to take over. At that time Miles-Sierra declined to waive the five-day notice required of Zachry. See note 1, supra. Zachry gave written notice to Miles-Sierra to improve its operations within five days to the rate and quality provided by the contract. Miles-Sierra protested but moved off the job and Zachry began completing the riprap work.

The basis on which the court excused Miles-Sierra from liability for its breaches arose from the requirement of the specifications that riprap must have a specific gravity of not less than 2.45. In May and June, 1961 supervising representatives of the Bureau of Reclamation of the Department of the Interior became concerned about the specific gravity of rock being used on the project. Various tests were made and intra-Bureau consideration given to the matter. There was discussion within the Bureau, not then made known to the parties, that the required minimum of 2.45 was too high considering the large average size of the blocks into which the rock was breaking when quarried, and that considering the prevailing lithology of the limestone beds in the area relaxation of the required minimum to 2.40 seemed inevitable. On June 16 the Bureau wrote Zachry, confining placement of riprap to designated areas not the subject of heaviest potential wave action. On June 23 the Bureau sent its project engineer the following teletype:

Re conversation with F. J. Davis in your office 6-22-61. Tan to buff limestone in upper portion of quarry, rock Site No. 1, although marginal as to specific gravity, will be acceptable if properly quarried to produce proper sizes and gradation and if quality of rock continues comparable to that at present face of quarry. Chalky portions of materials should be avoided.

The engineer considered whether there should be a change order or a letter embracing the contents of the teletype, and drafted a proposed letter which was sent to his superiors for approval but not shown to be approved and never sent to Zachry. Zachry was orally notified of the teletype at once. Although Miles-Sierra denied it was orally notified the court found that it was, a finding more than adequately supported by the evidence. Neither prime nor sub was given a written change order. On June 30 the Bureau sent Zachry a letter saying:

The restriction in my letter of June 16, 1961, confining your riprap placing operations to areas below elevation 1900 and above elevation 1950, is hereby removed. Lifting of this restriction does not alter or change the provisions of Paragraphs 55 and 67⁴ of the specifications for materials and placement for riprap.

The trial court found that Miles-Sierra was "called upon" to proceed with marginal material that might have a specific gravity as low as 2.40 instead of greater than 2.45 as provided by the specifications, without issuance of a written change order authorizing the relaxation as required by the prime contract, imposing on Miles-Sierra the risk that use of marginal material might bring about rejection of the work before final acceptance. With obvious reluctance, "for this reason, and this alone," the court held Zachry could not recover.

We turn first to consideration of whether the government made it impossible for Miles-Sierra to perform its contract with Zachry. It is quite clear it did not. Had the Bureau, while leaving 2.45 in effect as the requisite minimum by reason of there being no written change order lowering it, made it impossible for Miles-Sierra to supply rock meeting that standard, supervening impossibility might have arisen. But this did not occur. Before and after June 23 Miles-Sierra was taking rock from only a 15-acre quarry and the adjacent edge of a larger site, although there was substantial larger acreage available to it. The trial judge found that approximately 50% of the core samples from the material sites made available by Zachry met specific gravity requirements and concluded that Miles-Sierra failed to prove its claim that there was an inadequate supply of specification materials; those findings are not plainly erroneous. Miles-Sierra never moved its equipment to the other locations available to it and never opened or developed them in any manner. Before and after June 23 Miles-Sierra was obligated to quarry and place rock which met the specifications and from sources found by the district court to contain materials meeting the specifications and in quantities not proved to be insufficient. At no time did the dealings concerning the tan and buff limestone in the 15-acre quarry prevent Miles-Sierra from furnishing riprap processed from stone that met the 2.45 standard. Impossibility may be something less than absolute, shading into impracticability because of extreme and unusual difficulty, expense, injury or loss, 6 Corbin, Contracts § 1325 (1962); Restatement of Contracts § 454 (1932), but the trial court rejected the contentions of Miles-Sierra that it was confined to the 15-acre quarry and that its expenses would have been increased had it expanded its quarrying operations into other areas.

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