Montgomery Ward & Co. v. Robert Cagle Building Co.

• Decision Date: 15 March 1967
• Docket Number: 63-H-638.,Civ. A. No. 63-H-622
• Parties: MONTGOMERY WARD & COMPANY, Inc., Plaintiff, v. ROBERT CAGLE BUILDING COMPANY et al., Defendants.
• Court: U.S. District Court — Southern District of Texas

265 F. Supp. 469

MONTGOMERY WARD & COMPANY, Inc., Plaintiff, v. ROBERT CAGLE BUILDING COMPANY et al., Defendants.

Civ. A. Nos. 63-H-622, 63-H-638.

United States District Court S. D. Texas, Houston Division.

March 15, 1967.

Baker, Botts, Shepherd & Coates, Houston, Tex., Ralph S. Carrigan, Houston, Tex., for plaintiff.

Fulbright, Crooker, Freeman, Bates & Jaworski, Houston, Tex., Kraft W. Eidman and M. W. Parse, Jr., Houston, Tex., for defendants.

INGRAHAM, District Judge.

MEMORANDUM:

The defendants, Robert E. Cagle, Harry W. Cagle and the Robert Cagle Building Company (hereinafter Cagle), have moved for partial summary judgment against the plaintiff, Montgomery Ward & Company, Inc. (hereinafter Ward). The motion will be denied.

In 1962 Cagle embarked upon a $1,000,000 apartment building project. It was Cagle's purpose to sell the complex to investors when completed. On September 19, 1962, Ward made eight contracts with Cagle to perform approximately one-third of the work on the apartments. The contracts called for Ward to complete its work by April 19, 1963. Ward did not substantially complete its work until July, 1963. Ward seeks the full amount due it under the contracts; Cagle claims the right to recoup the damages caused it by Ward's delay from the amount due Ward under the contracts. Cagle contends in its present motion that it is entitled to recoup damages as a matter of law and that the only question for trial is the amount of damages caused by Ward's delay.¹

The contracts between Cagle and Ward incorporated by reference a set of provisions referred to as the Standard American Institute of Architects Form of General Conditions. Article 18 (hereinafter "A.I.A. Article 18") of these conditions provided that any delays encountered and requests for time extensions must be communicated by Ward to the architect in writing. It is undisputed that Ward never gave written or oral notice of any delays nor sought time extensions from the architect or Cagle. Because of Ward's failure to comply with A.I.A. Article 18, Cagle contends that as a matter of law Ward can now make no defense of its delay, regardless of what other facts may be present.

Ward has advanced three arguments to defeat Cagle's motion:

1. That Texas courts have not yet enforced a notice provision such as the one contained in A.I.A. Article 18.

2. That Cagle waived the notice provision of A.I.A. Article 18 by failing to operate the project in the manner contemplated by the contract, particularly by failing to use a supervising architect on the job.

3. That Cagle waived the completion date by making contracts with other subcontractors calling for later completion dates.

I.

Jurisdiction in this case is based on diversity of citizenship. Texas law controls all substantive issues. Erie Ry. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Ward resists Cagle's motion by claiming that Texas courts have not enforced notice clauses such as A.I.A. Article 18.

If Ward seeks to show that Texas courts will not enforce notice provisions, then it overstates its position. That Texas courts will enforce such provisions is made clear in a quotation cited in Ward's brief:

"We do not doubt that the provisions in the contract requiring Contractors to give written notice of claims for extras and time extensions are valid." Housing Authority of City of Dallas v. Hubbell, 325 S.W.2d 880, 900 (Tex. Civ.App.1959), err. ref. n. r. e.

Ward argues that this language is formal and without significance in that every Texas decision has sought and found some basis on which to avoid enforcing such a provision. Ward supposes this to be because such provisions are unjust; Cagle argues that they are obviously beneficial to both parties.

This court is not concerned with the wisdom or justice of the provisions contracted to by private parties such as Cagle and Ward, nor have the Texas courts expressed any such concern. No Texas court has indicated that it was looking for some basis to avoid enforcement of a notice provision. Lacking such a pronouncement, this court will not embark upon a search for some basis to avoid enforcing a notice provision. If Ward wishes to avoid "the imposition of such unjust notice provisions", then it should not contract to them.

II.

While this court believes the notice provision of the contract capable of being valid and enforceable, it is open to Ward to establish that Cagle waived the provision or the completion date. Cagle first asserts that as a matter of procedure Ward cannot raise these grounds at this stage in the proceedings. This court will grant Ward's motion for leave to file additional pleadings raising these grounds and order the pleadings filed.

Cagle's objection is that Rule 8(c), F.R.Civ.P., requires that waiver be specifically pleaded as an affirmative defense. Because Ward did not raise waiver in the initial pleadings in 1963, Cagle argues that the defense of waiver has been waived under Rule 12(h), F.R.C.P. Cagle further points to an interrogatory it served on Ward in May 1964. It inquired as to what affirmative defenses Ward might rely upon. Ward's answer did not mention waiver.

The principal defect with Cagle's objection is that Ward is the plaintiff in this suit. On November 21, 1963, Cagle sued Ward in a Texas court. On November 27, 1963, Ward sued Cagle in this court. Ward removed the first action to this court where the two actions were consolidated. The consolidated action bears the style and number of Ward's suit and retained Ward as plaintiff with Cagle's express approval. Cagle's claim for recoupment is a part of its defense; Ward's claim of waiver is in answer to that defense. Rules 8(c) and 12(h) have no application.

While this court does not deem further pleading necessary, it will exercise its discretion to permit Ward to file its "Answer to Third Defense of Robert Cagle Building Company". If Cagle's objections are valid, this further pleading cures any defects.

Rule 15(a), F.R.C.P., provides that:

"* * * a party may amend his pleading only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires."

The Supreme Court has explained the provisions as follows:

"Rule 15(a) declares that leave to amend `shall be freely given when justice so requires'; this mandate is to be heeded. See generally, 3 Moore, Federal Practice (2d ed. 1948), ¶¶ 15.08, 15.10. If the underlying facts or circumstances relied upon by a plaintiff may be a proper subject of relief, he ought to be afforded an opportunity to test his claim on the merits. In the absence of any apparent or declared reason—such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc.—the leave sought should, as the rules require, be `freely given.'" Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L. Ed.2d 222 (1962).

Cagle's claim of prejudice is that the other subcontractors with whom it agreed to later completion dates are no longer available to testify. However, Ward could not have pleaded Cagle's other contracts in 1963, or raised them in its answers to interrogatories in 1964, because it did not know of them at those dates. Ward later learned of them through discovery methods. Cagle cannot claim surprise, for it has been in sole possession of the information from this lawsuit's inception. That Ward did not also know is not due to lack of diligence, bad faith, or dilatory motive.

Ward has known from the beginning that Cagle had no supervising architect on the job, but injecting this issue at this point will not cause prejudice and does not result from the factors mentioned in the Foman case.

Ward's two waiver arguments are properly before the court.

III.

Article 18 of the A.I.A. form contract provides as follows:

"If the Contractor be delayed at any time in the progress of the work by any act or neglect of the Owner or the Architect, or of any employee of either, or by any separate Contractor employed by the Owner, or by changes ordered in the work, or by strikes, lockouts, fire, unusual delay in transportation, unavoidable casualties or any causes beyond the Contractor's control, or by delay authorized by the Architect pending arbitration, or by any cause which the Architect shall decide to justify the delay, then the time of completion shall be extended for such reasonable time as the Architect may decide.

"No such extension shall be made for delay occurring more than seven days before claim therefor is made in writing to the Architect. In the case of a continuing cause of delay, only one claim is necessary." (Emphasis supplied.)

Article 18 of the main contract between the parties (not the A.I.A. form contract incorporated by reference) provides for a supervising architect:

"The architect shall have general supervision of the work. He has authority to stop the work if necessary to insure its proper execution. He shall certify to the owner when payments under the contract are due and the amounts to be paid. He shall make decisions on all claims of the owner or contractor. All his decisions are subject to arbitration."

Ward alleges that there was no supervising architect on the job. Cagle argues it makes no difference, for an architect designed the project, his name was known to Ward, and A.I.A. Article 18 requires that he be given notice of delays. Ward claims that Cagle's failure to use a supervising...