Ted Spangenberg Co. v. Peoples Nat. Gas, Div. of No. NG Co., 20198.

• Decision Date: 23 March 1971
• Docket Number: No. 20198.,20198.
• Citation: 439 F.2d 1260
• Parties: TED SPANGENBERG CO., Inc., Appellant, v. PEOPLES NATURAL GAS, DIVISION OF NORTHERN NATURAL GAS COMPANY, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

439 F.2d 1260 (1971)

TED SPANGENBERG CO., Inc., Appellant, v. PEOPLES NATURAL GAS, DIVISION OF NORTHERN NATURAL GAS COMPANY, Appellee.

No. 20198.

United States Court of Appeals, Eighth Circuit.

March 23, 1971.

Raymond E. Pogge, Pogge, Root & Steege, Council Bluffs, Iowa, for appellant.

Frank W. Pechacek, Jr., Council Bluffs, Iowa, Philip J. Willson, Council Bluffs, Iowa, T. N. Wright, Omaha, Neb., for defendant-appellee.

Before VAN OOSTERHOUT and BRIGHT, Circuit Judges, and NEVILLE, District Judge.

NEVILLE, District Judge.

Appellant here, plaintiff below, asserts that the trial court in a non jury diversity case, erred in its findings of fact and conclusions of law which resulted in an order of judgment for defendant, 305 F.Supp. 1129. After a careful review of the record and the briefs of counsel, we find no error and we affirm. A somewhat detailed recital of the facts is necessary to an understanding of the issues raised.

Plaintiff-Appellant, an Oklahoma corporation engaged in the business of installing heating and air-conditioning equipment, seeks a recovery of $12,966.94 from the defendant Peoples Natural Gas, Division of Northern Natural Gas Company (Peoples), an Iowa corporation engaged primarily in the business of supplying natural gas, for the installation of gas fueled heating and air-conditioning equipment in an apartment building constructed by one Cecil R. Sullivan (not a party to this action) in Council Bluffs, Iowa.

The well written memorandum opinion of Honorable William C. Hanson, the trial judge, sets forth the evidence at some length, much of which is undisputed. Spangenberg the president and major shareholder of plaintiff testified that on previous occasions he successfully had completed installation projects for Sullivan, and that the two of them were close friends. In November or December of 1965, Spangenberg orally agreed with Sullivan for a price of $25,000 to install the temperature control system in Sullivan's Council Bluffs apartment house construction project. It had been Sullivan's original intent to install gas fueled heating equipment with an electric air conditioning system. Spangenberg commenced work under this agreement in February of 1966, and on March 9 received part payment in the amount of $9,125.

The following month, Sullivan was approached by Peoples, the projected fuel supplier for the gas equipment, with a suggestion that he change his planned air conditioning component from electricity to gas fuel, contending for the advantages of a unitary gas system — i. e., lower fuel and maintenance costs — despite an original cost increase of $6,000. Apparently from the outset, Sullivan and Peoples discussed the possibility that Peoples might finance the installation of a completely gas fueled system.

During the course of its negotiations with Sullivan Peoples' representatives were in contact with Spangenberg. Confusion surrounds the frequency and content of these discussions, there being no documentary evidence recording exactly what transpired. It is clear that sometime prior to April 22, Spangenberg attended a meeting with a Mr. Max Williams, representing Peoples, and a Mr. Fred Grasso, representing Engineered Equipment Company, the distributor of the gas air conditioning equipment which ultimately was installed. Another meeting of the parties was held in Tulsa, Oklahoma circa June 8, 1966 which was attended by a Mr. Duane Townsend the representative of Peoples and the one with whom plaintiff had the most contact.

It does not appear that any work directly attributable to the installation of the gas air conditioning system was undertaken prior to June 11, 1966. Work however had progressed by that time under the original agreement between Spangenberg and Sullivan. The duct and grill work done by L. A. King and Spangenberg was completed in April, 1969. The work done by Nelson Heating and Air Conditioning was finished and paid for by April 3, 1966. The piping installation work done by Armstrong Cork and Supply Co. and Spangenberg was largely completed by June 1, 1966. On June 10, 1966 Spangenberg received a second part payment from Sullivan in the amount of $7,500.¹

At about this time, Peoples and Sullivan reached a preliminary agreement regarding the financing of the installation of a unitary gas system. The intentions of the parties at that stage and the conditions thereof are expressed in a letter from Peoples to Sullivan dated June 8, 1966.²

On June 11, Spangenberg received specifications regarding the installation of the two Arkla chiller units to be used in the gas air conditioning system from the manufacturer's representative Engineered Equipment Company. On June 14 and 15, Peoples ordered the above mentioned equipment in its own name, although delivery and payment were not made until August 10, 1966. Spangenberg was requested by Peoples to produce his own drawings relating to installation of the gas equipment, and to supply Peoples with a list of his materials, suppliers, and sub-contractors. Spangenberg submitted a second revised list of labor and materials to Peoples on July 29, 1966, in which the total price for installation is stated to be $40,864. The cost increase over the $25,000 estimate in Spangenberg's original agreement with Sullivan is due in part to the changeover from electric to gas air conditioning, but further reflects the addition of 4 basement apartments and additional heating for other basement apartments and additional heating for other basement and hallway areas. In the latter part of August, 1966, Peoples requested and received confirmation of Spangenberg's revised charges from several of his subcontractors.

Spangenberg testified that at the time he submitted the lists of labor and materials he made inquiry to Mr. Townsend regarding the financing of the project. There is substantial dispute as to the nature of the oral representations made by Mr. Townsend but on August 4, 1966, Spangenberg received a letter from Peoples containing a written expression of Peoples' intent.³ At the time of the receipt of this letter or within a few days thereafter all but $90 of the work to be performed by Spangenberg had been completed.⁴

On October 17, 1966 after the gas facilities had been installed and tested, Peoples and Sullivan entered into formal agreements which the trial court found in effect crystallized these parties' intentions as originally expressed in the June 8, 1966 letter. At this time four instruments were executed by Peoples and Sullivan: an agreement, a promissory note, a security agreement and a gas sales contract. The agreement, which contains Peoples undertaking with regard to financing, makes Peoples' liability contingent upon Sullivan's obtaining certain disclaimers.⁵

First Federal Savings and Loan Association of Council Bluffs, Iowa, the primary lending institution and holder of Sullivan's $450,000 note and mortgage on the apartment house, refused after the execution of the October 17th agreement to execute the desired disclaimer and in fact in the late fall of 1966 began foreclosure proceedings. Sometime in October 1966, a creditors meeting was held at the offices of First Federal Savings and Loan Association in Council Bluffs, which meeting was attended by Spangenberg, Sullivan, and a Mr. Zimmerman as a representative of Peoples. Spangenberg's name did not appear on a list of creditors presented at this meeting, and Sullivan told Spangenberg that the reason for the omission was that Peoples would pay him directly.

On April 26, 1967, First Federal Savings and Loan Association obtained a judgment and decree of foreclosure declaring its mortgage lien on Sullivan's apartment to be paramount and superior to the liens of both plaintiff Spangenberg and defendant Peoples, as well as liens of all other creditors. On February 23, 1968, Peoples obtained a judgment against Sullivan based upon Sullivan's promissory note executed as part of the October 17 agreement. On March 3, 1968, by agreement between Spangenberg and Sullivan, a judgment in favor of Spangenberg for $16,098.47 was entered against Sullivan. The last two judgments in favor of plaintiff Spangenberg and defendant Peoples remain unsatisfied so far as appears from the record.

Spangenberg commenced the present diversity action to recover $12,966.94 the alleged balance due for installation of the gas heating and cooling equipment. The issues raised at trial and on this appeal, involve the nature and extent of Peoples agreement or agreements and whether, on any of several theories, such constitute an obligation to pay for the balance of installation of the heating and cooling equipment.

Plaintiff-appellant Spangenberg's first theory is that it is entitled to recover as a third party creditor beneficiary under a contract between Peoples and Sullivan. In disposing of this theory, the District Court found as a matter of law that under the Peoples-Sullivan agreement Peoples' liability to Sullivan to pay the cost of installation was contingent upon conditions never fulfilled by Sullivan, i. e., the obtaining of the disclaimers from First Federal Savings and Loan Association and others. Presuming that plaintiff is a third-party creditor beneficiary, the trial court correctly held that its rights under the Peoples-Sullivan contract were no greater than those of Sullivan, and that he, Sullivan was precluded by failure of conditions from enforcing the contract. Olney v. Hutt, 251 Iowa 1379, 105 N.W.2d 515 (1960); Coen & Conway v. Scott County Savings Bank, 205 Iowa 483, 218 N.W. 325 (1928); Iowa Home Mutual Cas. Co. v. Farmers Mutual Hail Ins. Co., 247 Iowa 183, 73 N.W.2d 22 (1955).

It is not now suggested that the law of Iowa permits the rights of a third-party beneficiary to rise above those of the original promisee, Sullivan. Rather, plaintiff-appellant contends (1) that the uncontested evidence submitted at the trial below does not support the court's ruling that the...