Southern Roofing & Petroleum Co. v. Aetna Insurance Co.

• Decision Date: 08 October 1968
• Docket Number: Civ. A. No. 6244.
• Citation: 293 F. Supp. 725
• Parties: SOUTHERN ROOFING & PETROLEUM COMPANY, Inc. v. AETNA INSURANCE COMPANY and Acme Roofing & Sheet Metal Company.
• Court: U.S. District Court — Eastern District of Tennessee

293 F. Supp. 725

SOUTHERN ROOFING & PETROLEUM COMPANY, Inc. v. AETNA INSURANCE COMPANY and Acme Roofing & Sheet Metal Company.

Civ. A. No. 6244.

United States District Court E. D. Tennessee, N. D.

October 8, 1968.

COPYRIGHT MATERIAL OMITTED

Robert F. Worthington, Jr., Robert L. Crossley, Baker, Worthington, Barnett & Crossley, Knoxville. Tenn.. for plaintiff.

Robert S. Young, McCampbell, Young & Bartlett, Knoxville, Tenn., for defendants.

OPINION

ROBERT L. TAYLOR, Chief Judge.

This case involves a subcontract for repair of roofs at the Loring Air Force Base in the State of Maine. For convenience plaintiff, Southern Roofing & Petroleum Company, Inc., will be referred to as Southern, the defendant, Acme Roofing & Sheet Metal Company, as Acme, and its bondsman, Aetna Insurance Company, as Aetna. Southern's bid for roof work was accepted by the Government at a price of around $825,000.00. The prime contract was executed sometime in February, 1967 and covered about 100 houses.

Soon after the contract was obtained, Southern sought to subcontract all of the work to two sub-contractors. Southern's president and chief stockholder, Douglas, phoned Traskos of Acme in Hartford, Connecticut, and explained the matter to him and asked him if he was interested in doing part of the work under a subcontract. Traskos advised that the matter would be given consideration. Later Traskos phoned Douglas that his company would do the work for $173,000.00 in round figures. Prior to the submission of the figure of $173,000.00 Traskos had given what was described as a "ball park figure." When the real figure of $173,000.00 was given Douglas argued about the amount, claiming that it was too large but finally accepted it. Accordingly, on the 4th day of April, 1967, a subcontract was entered into between Acme and Southern.

In the course of events, a Mr. Walter Smith of Southern talked with Mr. Traskos of Acme in Hartford and at that time gave him some cost figures on some of the materials that were to be used on the project.

Upon the basis that Smith made material misrepresentations of fact to Traskos, Acme seeks to be relieved of the obligations under the contract upon the ground of fraudulent misrepresentations. In order to be successful in cancelling the subcontract, the burden of proof is upon Acme to establish the following elements:

1. That a misrepresentation of fact was made by Smith;

2. That the alleged misrepresentation was a material one;

3. That it was made with knowledge of its falsity or as being of Smith's knowledge when he only believed it to be true or that Smith was reckless in this as to whether it was true or false;

4. Smith must have made the misrepresentations to induce Acme to rely upon it;

5. Acme must have believed it and relied upon it, Acme must have been warranted in doing so and,

6. Finally, the statements must be such as to result in damage to Acme.

The most that Smith did on the occasion in question was to deliver some price quotations on gravel to Mr. Traskos, and the Court is unable to find from the evidence that Smith made any false misrepresentations to Traskos with regard to the project either intentionally or unintentionally. The charge of fraud, in the opinion of the Court, has not been established by the evidence and the Court thus finds that Acme's contentions on this subject are untenable. See 166 A.L.R. p. 938, et seq.; Am.Jur.2d, Building and Construction Contracts, Sec. 106; Emmerson v. Hutchinson, 63 Ill. App. 203; 17 C.J.S. Contracts § 157; Bolan v. Caballero, 220 Tenn. 318, 417 S.W.2d 538 (1967); Sec. 476, Restatement of the Law of Contracts.

Acme contends further that the contract is nonenforceable because under its terms the prime contractor, Southern, was to cooperate with Acme in the operation of the work on the project and that Acme breached this provision. Acme contends that Mr. Douglas failed to cooperate in securing appropriate materials for the job and put obstructions in Acme's way in trying to do the job.

In that connection, Acme contends that Douglas demanded that its representatives do the impossible, namely, build the roofs without available gravel.

The evidence shows that Douglas was at the job site almost continuously from the time the work was started, that he consulted with Mr. Napolitano (Acme's superintendent on the job) from time to time about his needs, particularly the gravel which appeared to have been needed most. Douglas assisted or tried to assist Napolitano in getting the gravel; he caused tests to be made along with Cyr, who was Government engineer on the job. There is testimony to the effect that he spent one half day at a particular time in assisting Napolitano in getting a truck. It is true that he pressed Napolitano to get on the job and to get it done so as to avoid the penalty prescribed in the prime contract. This he had a right to do as the prime contractor so long as he was reasonable.

The Court must conclude that the subcontract cannot be voided by Acme on the ground that Southern failed to cooperate in the work under the contract.

Acme further contends that gravel and gravel stops were not available and that was the reason it could not continue with the work.

It is fair to conclude from the evidence in this record that Napolitano did have trouble in procuring the gravel and gravel stops when he first entered on the job, but that was not the fault of Southern. Acme had a duty of its own to look out for the materials before entering into the subcontract, or if not before, soon afterwards in order to properly prepare to get the work done. One of the important facts that negatives the contention of Traskos that Smith misrepresented facts to him about the gravel was that sometime after he had the conversation with Smith his partner, Napolitano, met with Cyr and others on what has been referred to by the witnesses as a pre-construction conference at which time Cyr asked Napolitano if gravel was available. The reply was he hadn't done anything about the gravel and that it was not available. If Smith had obtained contracts for the gravel as contended by Acme, it is not reasonable to believe that Napolitano would have told Cyr that he had not made any arrangement for the gravel at that late date.

The question arises also whether gravel could have been obtained when Napolitano entered on the job with some six men. The proof is that there was approximately 150 tons of gravel at the job site which has been referred to as the Trombley gravel. Much has been said about whether that gravel met Government specifications.

The proof shows and the Court finds that Cyr, the chief engineer on the job, approved the Trombley gravel for the job. Douglas swears positively that it was used on the job. But aside from the Trombley gravel, there was gravel available from the McKay Rock Products, Inc. As evidence that gravel was available, Douglas purchased it and used it after he assumed the obligation under the contract. Napolitano and Traskos state that although the gravel may have been available it was not available when Napolitano entered on the work. In the opinion of the Court that cannot be charged as a fault to Southern. Acme had a duty to exercise reasonable effort to procure the gravel.

In the opinion of the Court, and the Court finds, that there was no legal justification for Acme's abandonment of the project and its non-performance of the subcontract, and that when its representatives abandoned the job the subcontract was breached and Acme and its bondsman are liable for whatever damages were in the contemplation of the parties. Dubois v. Gentry, 182 Tenn. 103, 184 S.W.2d 369 (1945); Wilson v. Page, 45 Tenn.App. 475, 325 S.W.2d 294 (1958).

Southern claims the following items of damages: Materials in the amount of $108,312.03. That item is not in dispute and is allowable.

Labor, $90,816.92. That item is in dispute. Southern filed claim relating to that item with the Armed Services Board of Contract Appeals which is now pending.

In that complaint, Southern asserted that "The specifications, at TP 5-06a(4) (a), require application of slag or gravel in quantities of 300 pounds per 100 square feet of roof surface. When Appellant began performance of the contract, the Project Engineer compelled Appellant to apply 400 pounds of gravel per 100 square feet of roof surface instead of 300 pounds. Appellant alleges that the specifications erred in this respect by omission of the figure `400' opposite the phrase `roofing gravel.' Appellant alleges that this requirement by the Project Engineer, at variance with the specifications, unavoidably increased the Appellant's cost of materials and labor for gravel application by 33 1/3 %. Appellant's study indicates the additional cost for labor and materials occasioned by the increased requirement from 300 pounds to 400 pounds was $2.00 per 100 square feet, or a total of $18,800." Thus, Southern contends that it did $18,800.00 work on the project which was not covered by the contract and the Government is liable for it. If the Government is liable for it the subcontractor would not be liable. If the subcontractor had performed the work it could have required the Government to reimburse it to the extent of $18,800.00, if Southern is right in its contention before the Board. Acme is therefore entitled to a credit under this item of $18,800.00. Traskos testified that this expense of putting 400 pounds of gravel per one hundred square feet of roof surface instead of 300 pounds was outside of the subcontract work.

A portion of that $18,800.00 represents labor, a comparatively small portion represented materials. On that portion that represents labor, Acme is entitled to an additional credit of 20% since about 20% is added on to the labor cost for workmen's compensation insurance, Government insurance and other items.

Acme is entitled to another $6,000.00 reduction on that item because that represented work which...