Spang Indus., Inc., Ft. Pitt Bridge Div. v. Aetna Casualty & Surety Co.

• Citation: 512 F.2d 365
• Decision Date: 26 February 1975
• Docket Number: D,No. 193,193
• Parties: SPANG INDUSTRIES, INC., FORT PITT BRIDGE DIVISION, a corporation, Plaintiff- Appellant, v. The AETNA CASUALTY AND SURETY CO., a corporation, Defendant-Appellee. TORRINGTON CONSTRUCTION CO., INC., Plaintiff-Appellee, v. SPANG INDUSTRIES, INC., FORT PITT BRIDGE DIVISION, a corporation, Defendant-Third-Party Plaintiff-Appellant, v. SYRACUSE RIGGING CO., INC., Third-Party Defendant. ocket 74-1232.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Page 365

512 F.2d 365

SPANG INDUSTRIES, INC., FORT PITT BRIDGE DIVISION, a corporation, Plaintiff- Appellant, v. The AETNA CASUALTY AND SURETY CO., a corporation,

Defendant-Appellee.

TORRINGTON CONSTRUCTION CO., INC., Plaintiff-Appellee, v. SPANG INDUSTRIES, INC., FORT PITT BRIDGE DIVISION, a corporation, Defendant-Third-Party Plaintiff-Appellant, v. SYRACUSE RIGGING CO., INC., Third-Party Defendant.

No. 193, Docket 74-1232.

United States Court of Appeals, Second Circuit.

Argued Jan. 20, 1975.

Decided Feb. 26, 1975.

William T. Marsh, Butler, Pa. (McNamee, Lochner, Titus & Williams, Albany, N. Y., Earl H. Gallup, Jr., Albany, N. Y., on the brief), for plaintiff-appellant.

Homer E. Peters, Albany, N. Y. (McClung, Peters & Simon, Albany, N. Y., Livingston T. Coulter, Albany, N. Y., of counsel), for defendants-appellees.

Before WATERMAN, HAYS and MULLIGAN, Circuit Judges.

MULLIGAN, Circuit Judge:

Torrington Construction Co., Inc. (Torrington), a Connecticut corporation, was the successful bidder with the New York State Department of Transportation for a highway reconstruction contract covering 4.47 miles of road in Washington County, New York. Before submitting its bid, Torrington received an oral quotation from Spang Industries, Inc., Fort Pitt Bridge Division (Fort Pitt), a Pennsylvania corporation, for the fabrication, furnishing and erection of some 240 tons of structural steel at a unit price of 27.5 cents per pound; the steel was to be utilized to construct a 270 foot long, double span bridge over the Battenkill River as part of the highway reconstruction. The quotation was confirmed in a letter from Fort Pitt to Torrington dated September 5, 1969, which stated in part: "Delivery to be mutually agreed upon." On November 3, 1969, Torrington, in response to a request from Fort Pitt, advised that its requirements for delivery and erection of the steel would be later June, 1970. On November 12, 1969, Fort Pitt notified Torrington that it was tentatively scheduling delivery in accordance with these requirements. On January 7, 1970, Fort Pitt wrote to Torrington asking if the June, 1970 erection date was still valid; Torrington responded affirmatively on January 13, 1970. However, on January 29, 1970, Fort Pitt advised that it was engaged in an extensive expansion program and that "(d)ue to unforeseen delays caused by weather, deliveries from suppliers, etc., it is our opinion that the June date cannot be met." On February 2, 1970, Torrington sent a letter requesting that Fort Pitt give a delivery date and, receiving no response, wrote again on May 12, 1970 requesting a written confirmation of the date of delivery and threatening to cancel out if the date was not reasonably close to the originally scheduled date. On May 20, 1970, Fort Pitt responded and promised that the structural steel would be shipped early in August, 1970.

Although some 25 tons of small steel parts were shipped on August 21, 1970, the first girders and other heavy structural steel were not shipped until August 24, 26, 27, 31 and September 2 and 4, 1970. Fort Pitt had subcontracted the unloading and erection of the steel to Syracuse Rigging Co. but neglected to advise it of the August 21st shipment. The steel began to arrive at the railhead in Shushan, New York about September 1st and the railroad demanded immediate unloading. Torrington was therefore compelled to do the unloading itself until Syracuse Rigging arrived on September 8, 1970. Not until September 16 was there enough steel delivered to the job site to permit Syracuse to commence erection. The work was completed on October 8, 1970 and the bridge was ready to receive its concrete deck on October 28, 1970. Because of contract specifications set by the State requiring that concrete be poured at temperatures of 40o Fahrenheit and above, Torrington had to get special permission from the State's supervising engineer to pour the concrete on October 28, 1970, when the temperature was at 32o .

Since the job site was in northern New York near the Vermont border and the danger of freezing temperatures was imminent, the pouring of the concrete was performed on a crash basis in one day, until 1 a. m. the following morning, which entailed extra costs for Torrington in the form of overtime pay, extra equipment and the protection of the concrete during the pouring process.

In July, 1971, Fort Pitt instituted an action against Aetna Casualty and Surety Co., which had posted a general contractor's labor and material bond, in the United States District Court for the Western District of Pennsylvania, seeking to recover the balance due on the subcontract, which at that point was $72,247.37 with interest . Thereafter in 1972 Torrington made two further payments totalling $48,983.92. That action was transferred pursuant to 28 U.S.C. § 1406(a) to the United States District Court for the Northern District of New York by order dated December 9, 1971. In the interim, Torrington had commenced suit in New York Supreme Court, Washington County, seeking damages in the sum of $23,290.81 alleged to be caused by Fort Pitt's delay in furnishing the steel. Fort Pitt then removed the case to the United States District Court for the Nothern District of New York (where the two cases were consolidated), and counterclaimed for the balance due on the contract. From May 29, to 31, 1973, the cases were tried without a jury before Hon. James S. Holden, Chief Judge of the United States District Court for the District of Vermont, who was sitting by designation. On September 12, 1973, Judge Holden filed his findings of fact and conclusions of law in which he held that Fort Pitt had breached its contract by its delayed delivery and that Torrington was entitled to damages in the amount of $7,653.57. He further held that Fort Pitt was entitled to recover from Torrington on the counterclaim the sum of $23,290.12, which was the balance due on its contract price plus interest, less the $7,653.57 damages sustained by Torrington. He directed that judgment be entered for Fort Pitt against Torrington and Aetna on their joint and several liability for $15,636.55 with interest from November 12, 1970. ¹

Fort Pitt on this appeal does not take issue with any of the findings of fact of the court below but contends that the recovery by Torrington of its increased expenses constitutes special damages which were not reasonably within the contemplation of the parties when they entered into the contract.

I

While the damages awarded Torrington are relatively modest ($7,653.57) in comparison with the subcontract price ($132,274.37), Fort Pitt urges that an affirmance of the award will do violence to the rule of Hadley v. Baxendale, 156 Eng.Rep. 145 (Ex. 1854), and create a precedent which will have a severe impact on the business of all subcontractors and suppliers.

While it is evident that the function of the award of damages for a breach of contract is to put the plaintiff in the same position he would have been in had there been no breach, Hadley v. Baxendale limits the recovery to those injuries which the parties could reasonably have anticipated at the time the contract was entered into. If the damages suffered do not usually flow from the breach, then it must be established that the special circumstances giving rise to them should reasonably have been anticipated at the time the contract was made. ²

There can be no question but that Hadley v. Baxendale represents the law in New York and in the United States generally. E. g., Hughes Tool Co. v. United Artists Corp., 279 App.Div. 417, 110 N.Y.S .2d 383 (1st Dep't 1952), aff'd, 304 N.Y. 942, 110 N.E.2d 884 (1953); J. Calamari & J. Perillo, Contracts 329 (1970); C. McCormick, Damages § 138 (1935); 11 S. Williston, Contracts § 1356 (3d ed (W. Jaeger) 1968); Restatement of Contracts § 330 (1932). There is no dispute between the parties on this appeal as to the continuing viability of Hadley v. Baxendale and its formulation of the rule respecting special damages, and this court has no intention of challenging or questioning its principles, which Chief Judge Cardozo characterized to be, at least in some applicaion, "tantamount to a rule of property," Kerr S. S. Co. v. Radio Corporation of America, 245 N.Y. 284, 291, 157 N.E. 140, 142 (1927).

The gist of Fort Pitt's argument is that, when it entered into the subcontract to fabricate, furnish and erect the steel in September, 1969, it had received a copy of the specifications which indicated that the total work was to be completed by December 15, 1971. It could not reasonably have anticipated that Torrington would so expedite the work (which was accepted by the State on January 21, 1971) that steel delivery would be called for in 1970 rather than 1971. Whatever knowledge Fort Pitt received after the contract was entered into, it argues, cannot expand its liability, since it is essential under Hadley v. Baxendale and its Yankee progeny that the notice of the facts which would give rise to special damages in case of breach be given at or before the time the contract was made. The principle urged cannot be disputed. Czarnikow-Rionda Co. v. Federal Sugar Refining Co., 255 N.Y. 33, 41, 173 N.E. 913, 915 (19301; 11 S. Williston, supra, § 1357; Restatement, supra, § 330. We do not, however, agree that any violence to the doctrine was done here.

Fort Pitt also knew from the same specifications that Torrington was to commence the work on October 1, 1969. The Fort Pitt letter of September 5, 1969, which constitutes the agreement between the parties, specifically provides: "Delivery to be mutually agreed upon." On November 3, 1969, Torrington, responding to Fort Pitt's inquiry, gave "late June 1970" as its required delivery date and, on November 12, 1969, Fort Pitt stated that it was tentatively scheduling delivery for that time. Thus, at the time when the parties, pursuant to their initial agreement, fixed the date for performance which is...