U.S. for Use and Benefit of H & S Industries, Inc. v. F. D. Rich Co., Inc.

• Citation: 525 F.2d 760
• Decision Date: 17 November 1975
• Docket Number: Nos. 74--1670,74--1687 and 74--1700,s. 74--1670
• Parties: UNITED STATES of America for the Use and Benefit of H & S INDUSTRIES, INC., as Assignee of Cass County Stone Corp., et al., Plaintiffs-Appellants, v. F. D. RICH CO., INC., and Transamerica Insurance Co., Defendants-Appellees. UNITED STATES of America for the Use and Benefit of H & S INDUSTRIES, INC., as Assignee of Cass County Stone Corp., et al., Plaintiffs-Appellees, v. F. D. RICH CO., INC., Defendant-Appellant. F. D. RICH CO., INC., Plaintiff-Appellee, v. UNITED STATES FIDELITY & GUARANTY, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 760

525 F.2d 760

UNITED STATES of America for the Use and Benefit of H & S

INDUSTRIES, INC., as Assignee of Cass County Stone

Corp., et al., Plaintiffs-Appellants, v. F. D. RICH CO., INC., and Transamerica Insurance Co.,

Defendants-Appellees.

UNITED STATES of America for the Use and Benefit of H & S

INDUSTRIES, INC., as Assignee of Cass County Stone

Corp., et al., Plaintiffs-Appellees, v. F. D. RICH CO., INC., Defendant-Appellant.

F. D. RICH CO., INC., Plaintiff-Appellee, v. UNITED STATES FIDELITY & GUARANTY, Defendant-Appellant.

Nos. 74--1670, 74--1687 and 74--1700.

United States Court of Appeals,

Seventh Circuit.

Argued April 3, 1975.

Decided Oct. 16, 1975.

Rehearings and Rehearings En Banc

Denied Nov. 17, 1975.

George E. Buckingham, Goshen, Ind., Robert L. Miller, South Bend, Ind., for H & S Ind.

Thomas M. Shoaff and N. Reed Silliman, Fort Wayne, Ind., for F. D. Rich Co.

James W. Riley, Jr., Indianapolis, Ind., for U. S. Fidelity & Guaranty.

Before CUMMINGS and PELL, Circuit Judges, and PERRY, Senior District Judge. ^*

PELL, Circuit Judge.

The United States of America contracted with the F. D. Rich Co., Inc., (Rich) as general contractor to build a 200 family housing project at Bunker Hill (now Grissom) Air Force Base near Kokomo, Indiana. Transamerica Insurance Co. was surety of Rich for the benefit of the United States. Cass County Stone Corp. (Cass) was a subcontractor of Rich who was, inter alia, to clear and grade the site to specifications, install a storm drainage system, and prepare the ground in the form of building pads on which a foundation and a concrete slab would be poured by others. United States Fidelity and Guaranty Company (USF&G) was surety of Cass for the benefit of Rich. H & S Industries, Inc., (H & S) is the assignee of Cass of all Cass's claims against Rich. ¹

The housing project could scarcely be characterized as other than a disaster for all concerned parties. It was scheduled to be completed by July 4, 1970, but was not accepted by the government until July 27, 1973. Rich experienced a loss of over a million dollars even though the contract price was only $3,360,000. Cass abandoned the project before completing its work, alleging nonpayment of amounts due from Rich, and later filed suit against Rich for these amounts and other damages. Rich counterclaimed for damages alleging breach of the subcontract by Cass.

After a lengthy bench trial, the district court issued a thirty-one page (unpublished) memorandum carefully setting forth its findings and conclusions. It found that Cass failed to complete its work on the building pads until 292 days after the date Rich scheduled their completion. It found Rich's schedule was within its authority as provided in the contract and that the time provided was within industry standards. The court further found that the delay resulted in 292 days delay to the entire project because the building pads were on the critical path of the project; viz., no work could be done by other trades on the buildings until the ground was compacted so that concrete slabs could be poured on which the buildings would be built. The court found:

'(Cass) did not prosecute its work under the subcontract diligently and did not maintain sufficient men and equipment forces to prosecute the various segments of its work simultaneously under the subcontract irrespective of the extra work and materials required by the contractor as recited above. The subcontractor was under financed to meet its obligations under the subcontract. When one segment of its work proceeded, the other lagged, and when a shift was made to any new area of its obligations under the subcontract, it caused the preceding areas of work to dissipate or cease entirely. The subcontractor failed to complete any of its work items within the time required by the original contract schedule of which the subcontractor was fully informed at all pertinent times.'

Nevertheless the court found that Rich caused one-half (146 days) of this delay by failing to place rock on the subgrade for the road through the project to provide temporary access during construction. Placing this rock on the road would also have enabled water to drain from the construction site. A major problem throughout the construction period was pooling of water.

In accordance with these findings, damages were awarded against Cass and its surety for causing 146 days delay to Rich. Damages were also awarded against Cass for certain payments made to Cass and to Cass subcontractors who had not been paid, for payments made to Cass subcontractors to complete subcontract work, and for deficiencies charged by the government against Rich. Cass was allowed to set off the cost of repairing damages by Rich to Cass's work and payment for work requested by Rich which was in addition to the work indicated in the subcontract. The details of these awards are set out in the first column of figures of Schedule A appended to this opinion.

Following entry of judgment and amendment to that judgment, USF&G and H & S for the benefit of Cass appealed; Rich cross-appealed.

I. Propriety of Cross-Appeal

Cass, by motion, requested Rich's cross-appeal be dismissed on the grounds that Rich had accepted benefits of the judgment in its favor. Following entry of the judgment, counsel for each party signed an agreement entitled 'Waiver of Costs and Limited Waiver of Interest.' Cass now alleges that the attorney who signed the agreement was not authorized to do so and that this attorney no longer represents Cass. The attorney who signed the agreement had been Cass's attorney at trial. We need not decide whether this attorney had actual or apparent authority to bind Cass or whether his lack of authority affects the validity of the agreement as it applies to Rich because of our interpretation of the agreement.

The parties first dispute whether federal law or Indiana law should be applied to determine Rich's right of appeal. Cass argues that Indiana law should be applied relying generally on Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Also in Moser v. Buskirk, 452 F.2d 147 (7th Cir. 1971), this court accepted and commented favorably on a stipulation of counsel in a diversity case which followed Indiana law and indicated that acceptance of benefits of a judgment precludes an appeal. There is no indication in Moser that the question of which law to apply was argued or considered. It is by no means certain that this is the law of Indiana today. ²

In Dorin v. Equitable Life Assurance Society, 382 F.2d 73 (7th Cir. 1967), this court was faced with a clear issue of whether Erie controlled a question which was closely analogous to the one at bar. In Dorin, a cross-appeal was filed after remittitur was accepted. Under the circumstances of that case, Illinois law would have allowed the appeal but federal law would not. Relying on Hanna v. Plumer, 380 U.S. 460, 468, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965), this court held that the aims of Erie--discouragement of forum shopping and avoidance of inequitable administration of the laws--would not be served by applying state law to a problem of procedure which would arise, if at all, after completion of trial. The same rationale applies in this case, and we therefore hold that federal law applies.

In United States v. Hougham, 364 U.S. 310, 81 S.Ct. 13, 5 L.Ed.2d 8 (1960), the Supreme Court stated:

'It is a generally accepted rule of law that where a judgment is appealed on the ground that damages awarded are inadequate, acceptance of payment of the amount of the unsatisfactory judgment does not, standing alone, amount to an accord and satisfaction of the entire claim.' Id. at 312, 81 S.Ct. at 16.

Cass argues that the preclusion rule still has vitality and attempts to distinguish Hougham on the grounds that in the case before us the acceptance did not stand alone. The Ninth Circuit correctly states current law in Hawaiian Paradise Park Corp. v. Friendly Broadcasting Co. Inc., 414 F.2d 750 (9th Cir. 1969):

'(W)hen a party accepts the benefits of a judgment under circumstances which indicate an intention to finally compromise and settle a disputed claim, an appeal may be foreclosed. In such a case, it is '* * * the mutual manifestation of an intention to bring the litigation to a definite conclusion upon a basis acceptable to all parties' which bars a subsequent appeal, and not the fact, standing alone, that benefits under the judgment were accepted. Gadsden v. Fripp, 4 Cir., 330 F.2d 545, 548.' Id. at 752.

A similar rule is advocated in 9 Moore's Federal Practice $203.06 at 719 (1973).

By its terms, the agreement in this case waived taxable costs and post-judgment interest after April 24, 1974, if a specified amount was paid prior to May 5, 1974. It has not been demonstrated that the agreement and payment thereunder was anything other than what it purported to be, i.e., a device whereby one who was then obligated under a judgment would be payment of the amount of the judgment avoid the payment of the costs which would be taxed on the judgment plus stopping the accruing of interest on a judgment which both the payor and the payee contemplated appealing, and did in fact appeal. We find no basis in the record for considering this not unusual arrangement to be a final compromise and settlement of claims which obviously were still in dispute. ³ The motion to dismiss Rich's appeal is denied.

II. Verbal Exchanges with Counsel

Appellants urge that the district court judge committed error or abused his discretion in three instances during the trial and therefore that a new trial should be ordered. In these instances, it is asserted either the trial judge talked counsel out of objections to evidence, which may or may not have been technically correct but for which he saw no strategic purpose, or he insistently encouraged stipulations on issues which he did not consider seriously in dispute.

A jurisprudential...