RP Farnsworth & Co. v. Tri-State Construction Co.

• Decision Date: 01 December 1959
• Docket Number: No. 17486.,17486.
• Citation: 271 F.2d 728
• Parties: R. P. FARNSWORTH & CO., Inc., Appellant, v. TRI-STATE CONSTRUCTION CO. et al., Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

271 F.2d 728 (1959)

R. P. FARNSWORTH & CO., Inc., Appellant, v. TRI-STATE CONSTRUCTION CO. et al., Appellees.

No. 17486.

United States Court of Appeals Fifth Circuit.

October 27, 1959.

Rehearing Denied December 1, 1959.

COPYRIGHT MATERIAL OMITTED

R. Emmett Kerrigan, Ralph L. Kaskell, Jr., New Orleans, La., Perry Brannen, Savannah, Ga., Deutsch, Kerrigan & Stiles, New Orleans, La., Brannen, Clark & Hester, Savannah, Ga., of counsel, for appellant.

John E. Simpson, Savannah, Ga. (Hitch, Miller & Beckmann, Savannah, Ga., of counsel), for American Houses, Inc.

William H. Schroder, T. M. Smith, Jr., Roy S. Drennan, Atlanta, Ga., Alex A. Lawrence, Savannah, Ga. (Troutman, Sams, Schroder & Lockerman, Atlanta, Ga., Bouhan, Lawrence, Williams & Levy, Savannah, Ga., of counsel), for Tri-State Const. Co.

Hugh M. Dorsey, Jr., Atlanta, Ga. (Crenshaw, Hansell, Ware, Brandon & Dorsey, Atlanta, Ga., of counsel), for American Surety Co.

Before RIVES, Chief Judge, and CAMERON and JONES, Circuit Judges.

RIVES, Chief Judge.

This appeal is from two judgments entered upon a jury's verdict against R. P. Farnsworth & Co., Inc.,¹ one in favor of Tri-State Construction Company² for the sum of $133,020.80, and the other in favor of American Houses, Inc.,³ for the sum of $151,142.35. The trial in the district court consumed ten full days, and the record on appeal comprises 1474 printed pages plus many original exhibits.

Farnsworth had entered into a contract with the United States for the erection of a family housing project⁴ at Fort Stewart, Georgia, under which Farnsworth would be paid a total of $6,230,100.00. This contract, dated February 27, 1957, contemplated the erection of seventy-four multiple-unit dwellings — forty of one type and thirty-four of another type. The original contract called for conventional construction, that is, construction on the site from raw materials with no prefabricated parts.

American interested Farnsworth in using American's prefabricated units, and introduced Tri-State as a local contractor experienced in installing American's prefabricated materials. The Corps of Engineers, representing the United States, agreed to the switch over from conventional to prefabrication type of construction, provided show drawings were submitted showing how this was to be accomplished and "pilot"⁵ buildings were erected.

Under date of March 18, 1957, Farnsworth and American entered into a contract designated as a "Purchase Order," whereby American would provide the carpentry materials to the job, after they had been prefabricated at its plant, at a total price of $860,178.00. As of the same date, Farnsworth and Tri-State entered into a contract whereby Tri-State was to erect the carpentry materials on the job at a price of $191,466.30. Mr. McMaster, Farnsworth's construction engineer on the job, testified that a fair approximation would be that one-fifth of the work on the job would be done by Tri-State and American and the remaining four-fifths by Farnsworth or by other subcontractors.⁶

One of the principal points of controversy is the extent, if any, of the responsibility of Tri-State for performance by American, and of American for performance by Tri-State. Farnsworth's position, with which Tri-State and American do not agree, is that the contracts between Farnsworth, Tri-State and American were integrated and complementary and that Tri-State and American together agreed to provide Farnsworth with a finished product, complete and in place, in accordance with the contract between Farnsworth and the United States. We shall hereafter revert to that phase of the controversy when we come at some length to construe the contracts.

In any event, there were never any finally approved shop drawings showing the deviations in construction made necessary because of the switch from conventional to prefabrication, nor were the pilot buildings completed in time to serve as a guide. As a consequence, and also as the result of some delay by Farnsworth in the forming and laying of the concrete slabs and foundations on which the buildings were to be assembled and erected, Tri-State performed an unusually large amount of work not contemplated at the time of its contract with Farnsworth. Ultimately, Tri-State claimed to be entitled to extra compensation in the amount of $151,341.78.

The contract between Farnsworth and Tri-State provided that, "No alterations or changes shall be made except upon contractor's (that is, Farnsworth's) written order." However, over Farnsworth's objection, Mr. Converse, Tri-State's superintendent in charge of the job, testified that, about the second week in June, Mr. McMaster, Farnsworth's construction engineer, agreed with him that Tri-State was "doing a whole lot of work that wasn't contemplated," and

"* * * in order to expedite the job with the schedule they were trying to drive at for the completion date it would be impossible to get a change order for every item that we felt was beyond our scope of work, which was a great number of them that we were called upon to do. So, in order to expedite the job, it was his suggestion that we would go ahead and complete these items of work and that we would bill American Houses for items that wasn\'t any question about American Houses accepting, but that we had only a contract with Farnsworth. We had no contract with American Houses. And that we would look to them for a settlement between Farnsworth and American Houses as to how Tri-State would get paid. In other words, we would get paid, either by American Houses or by Farnsworth."

McMaster denied having had any such conversation. Converse testified that he confirmed his claimed verbal understanding by letter dated June 14, 1957, addressed to Farnsworth, attention of McMaster, and reading:

"Gentlemen:

"In line with our recent conversation in regards to the additional work we are being required to do on above subject job. This is to advise that it is our opinion that your suggestion of completing the various items and then submitting our invoice for payment is the proper procedure.

"We realize that with the job demands it would be impracticable to clear all the items as they occur, however there will be numerous items for which we can bill American Houses direct, other items will have to be settled between yourselves and American Houses. As we have only a contract with you, it is imperative that you clear the items as early as possible.

"Yours very truly W. K. Converse Executive Vice President."

Converse testified that he delivered that letter in person by handing it to Mr. McMaster's secretary in McMaster's office. McMaster denied ever having seen the claimed letter. His secretary testified that she had no recollection of the letter having been handed to her, and that she had searched the office files for it but had been unable to find it. Mr. Thornhill, Farnsworth's job superintendent, and Mr. Horlock, Farnsworth's office engineer on the project, testified that the letter had not been called to their attention. There was evidence, also, that Tri-State presented no bill to Farnsworth covering the alleged extras until September 26, immediately after Farnsworth had first placed Tri-State in default for failure to supply sufficient workmen. Converse explained:

"Q. You did not mail copies of those work sheets to Farnsworth during May, June, July and August, isn\'t that correct? A. That\'s correct. We mailed them to American Houses in line with what they had requested, that we mail what we could to American Houses, and if they didn\'t pay it, they would see that we were paid."

Some of Converse's testimony was corroborated by Mr. Winskie, the Government's building inspector on the project:

"On several occasions we found some of the slabs were too large and had to be spliced, and so I got he and Mr. Converse together, Mr. Jack Thornhill, who was the Superintendent, I got them together, and they would agree for Mr. Converse to go ahead and fix it, and I heard Mr. Jack say on several occasions that whatever was right about it, or whatever it took to pay for it, to just go ahead and do it."

Following the first notice of default, a meeting was held in Atlanta, attended by representatives of American, by Mr. Converse, Mr. Oastler (Tri-State's president), Mr. McMaster, and Mr. Kaskell (Farnsworth's attorney). At that meeting, Tri-State presented its pay requisition No. 6 "covering items of work done under our Contract No. CFHFS-C4 and additional items of work required by you" and showing "Due this requisition — $116,560.61." There was no itemization of the "additional items of work." Farnsworth, however, at that time did not request any itemization, but refused to pay anything not called for by its written contract. Farnsworth was advised in that meeting that Tri-State was financially unable to continue with the work, "that it was impossible for us to continue unless a part or all of it was paid." The notice of default was withdrawn, and American agreed to advance Tri-State an additional $17,500.00, making the total, either paid or advanced by American to Tri-State, $38,879.86. Farnsworth's representatives said that "they would not pay a penny of it." About a week after that meeting, namely on October 4, Tri-State reached the end of its resources and ceased operations at Fort Stewart. Farnsworth completed the work to the satisfaction of the United States.

Tri-State commenced this litigation several months before Farnsworth had completed the project. Counterclaims and cross-claims ensued, followed ultimately by the trial and jury verdict and the judgments against Farnsworth.

We consider Farnsworth's "Specification of Errors" in their order.

"1. The district court erred in charging that the jury should construe and determine the legal effect of the contract documents."

The court undertook to inform counsel of its proposed instructions to the jury prior to their arguments,⁷ and then advised counsel...