Brinderson-Newberg Joint Venture v. Pacific Erectors, Inc., BRINDERSON-NEWBERG
| Citation | 971 F.2d 272 |
| Decision Date | 22 October 1992 |
| Docket Number | 90-55376 and 90-55378,90-55374,Nos. 90-55308,BRINDERSON-NEWBERG,90-55372,s. 90-55308 |
| Parties | 38 Cont.Cas.Fed. (CCH) P 76,379 JOINT VENTURE; Brinderson Corporation; Gust K. Newberg Corporation; Frank J. Loscavio; Brinderson Constructors, Inc., Plaintiffs - counter - defendants - Appellants, v. PACIFIC ERECTORS, INC.; Hartford Accident & Indemnity Company, Defendants-counter-claimants-Appellees.JOINT VENTURE; Brinderson Corporation; Gust K. Newberg Corporation; Frank J. Loscavio; Brinderson Constructors, Inc., Plaintiffs - counter - defendants - Appellees, v. PACIFIC ERECTORS, INC.; Defendant-counter-claimant, and Hartford Accident & Indemnity Company, Defendant-counter-claimant-Appellant.JOINT VENTURE; Brinderson Corporation; Gust K. Newberg Corporation; Frank J. Loscavio; Brinderson Constructors, Inc., Plaintiffs - counter - defendants - Appellees, v. PACIFIC ERECTORS, INC.; Defendant-counter-claimant, Appellant, and Hartford Accident & Indemnity Company, Defendant-counter-claimant. |
| Court | United States Courts of Appeals. United States Court of Appeals (9th Circuit) |
John D. Alkire, Perkins Coie, Michael Himes, Seattle, Wash., for appellants Brinderson-Newberg Joint Venture, Brinderson Corp., Gust K. Newberg Corp., Frank J. Loscavio, and Brinderson Constructors, Inc.
William B. Moore and Arnold R. Hedeen, Ferguson & Burdell, Seattle, Wash. for appellee Pacific Erectors, Inc. and William I. Chertok, Bryan Cave, Santa Monica, Cal., for appellee Hartford Acc. and Indem. Co.
Appeal from the United States District Court for the Central District of California.
Before POOLE, WIGGINS, and LEAVY, Circuit Judges.
OVERVIEW
This appeal stems from a contract dispute between a general contractor, Brinderson-Newberg Joint Venture (Brinderson), a subcontractor, Pacific Erectors (Pacific), and the bonding company that issued Pacific's performance bond, Hartford Accident & Indemnity Company (Hartford). Brinderson appeals the district court's denial of Brinderson's motions for a directed verdict and for JNOV. Brinderson argues that a directed verdict or JNOV was necessary because the jury verdicts on Brinderson's contract claim and Pacific's fraud claim were dependent on inadmissible parol evidence. Brinderson also appeals the directed verdict eliminating Brinderson's bad faith claim against Hartford, and Hartford cross-appeals the district court's grant of summary judgment in favor of Brinderson on Hartford's fraud and misrepresentation claims and an adverse directed verdict on Hartford's implied covenant tort claim.
The district court had diversity jurisdiction over this contract dispute under 28 U.S.C. § 1332 (1988). A timely notice of appeal was filed after the entry of judgment, and this court has jurisdiction pursuant to 28 U.S.C. § 1291 (1988).
In May 1985, the United States Navy awarded Brinderson a contract to construct a coal-fired power plant at the Puget Sound Naval Shipyard in Bremerton, Washington. In June 1985, Brinderson entered into negotiations with Pacific, one of the subcontractors who had submitted a low bid for certain erection work. Part of these negotiations focused on the erection of the Flue Gas System (FGS), a large pollution control system. As part of its $1.54 million pre-contract bid, Pacific offered to erect the support steel for the FGS for $257,000. Brinderson, however, wanted Pacific to erect the large steel FGS components along with the support steel.
The negotiations between Brinderson and Pacific took place in three meetings, the first in late June 1985, the second on July 29, 1985, and the third on August 16, 1985. Many of the relevant facts concerning the negotiations are disputed. Brinderson claims that Pacific agreed to erect the FGS as part of an agreement to increase Pacific's scope of work and bid price. Although Pacific admits that the scope of its work and the corresponding contract price were increased as part of the negotiations, 1 it emphatically denies that the FGS components were included in the agreement. Pacific alleges that Brinderson never indicated that the FGS components were to be erected by Pacific and that Brinderson only asked that Pacific "pick and set" the FGS components.
After the second meeting, Brinderson drafted a contract reflecting the parties' agreement and sent a copy to Pacific for review. Article 1(e)I.A., section 15603 of the contract required Pacific to "erect complete" the FGS equipment. Article 33, paragraph 16 of the contract stated that Pacific "shall erect complete the Government Furnished Flue Gas System including Bag Houses, Scrubbers, I.D. Fans, Breeching and Dampers, Steel Gratings and appurtenances to make a complete installation." Pacific reviewed these provisions along with the other parts of the contract in preparation for the final negotiations and signing of the contract on August 16, 1985. Hartford also reviewed the contract and issued a performance bond for Pacific on August 13, 1985.
At the August 16 meeting, Pacific and Brinderson reviewed the contract line by line and negotiated a number of changes or clarifications concerning Pacific's scope of work. Both parties remember that Pacific requested that Brinderson change article 1(e)I.A. section 15603 and article 33, paragraph 16 to limit Pacific's work on the FGS components to picks and sets. Brinderson contends that it refused to make the change because it expected Pacific to erect the components and that Pacific agreed to erect the FGS components. Pacific and Hartford contend that no change was made because Brinderson assured Pacific that the language only required picks and sets for the FGS components and that article 1(a) limited the scope of work to jobs that Pacific customarily performed. According to Pacific and Hartford, Brinderson claimed that it just did not want to take the time to write the pick and set agreement into the contract. Pacific signed the contract at the end of the August 16 meeting. Pacific admits that it understood the effect of the integration clause in the contract and that the contract was a completely integrated agreement.
Brinderson and Pacific performed under the contract until the summer of 1986, when a dispute arose concerning the erection of the FGS components. Brinderson claimed that Pacific was required to erect the components under the contract. Pacific Brinderson made a claim on the performance bond on September 22, 1986. Hartford made a limited investigation of Brinderson's claim, determined that a genuine issue existed concerning the interpretation of the contract, and refused to pay Brinderson's claim on the bond until liability was established. The dispute eventually resulted in Brinderson's contract claims against Pacific and Hartford, Pacific's fraud claim against Brinderson, Hartford's fraud and implied covenant tort claims against Brinderson, and Brinderson's claim that Hartford conducted its investigation in bad faith. 2 At trial, the district court allowed the jury to hear Pacific's allegations that Brinderson promised to interpret the contract to limit Pacific's work to picks and sets on the FGS. Brinderson objected to this evidence, arguing that it violated the parol evidence rule.
contended that it was only required to pick and set the components while Brinderson erected the components. Brinderson points out that Pacific started to erect the FGS components and then suddenly stopped, suggesting that Pacific knew it was obligated to erect the FGS components. There is some evidence, however, tending to show that Pacific performed part of the disputed work on the assumption that Brinderson would pay extra work compensation for erecting the FGS components
The primary issue in this appeal is the admission of parol evidence over the objections of Brinderson. The most important and prejudicial parol evidence is Pacific's allegation that Brinderson made an oral promise to interpret the contract in a way that limited Pacific's obligations under the contract. This parol evidence was used to support both (1) Pacific's defense to Brinderson's contract claim and (2) Pacific's fraud claim against Brinderson. The contract provides, and the parties agree, that California law governs the parties' claims. Brinderson argues that California law on the parol evidence rule required the exclusion of the parol evidence and that the district court erred in allowing the jury to consider the parol evidence. As is explained in more detail below, the determinative issue underlying both the contract and fraud claims is the same: Whether the contract itself is reasonably susceptible of Pacific's proffered interpretation of the agreement.
The contract required Pacific to "erect complete" the FGS. Pacific interpreted the phrases "erect complete" and "make a complete installation" to mean that the contract required Pacific to complete the structural and miscellaneous steel, such as steel gratings and appurtenances, but required only pick and sets for the components of the FGS. Under Pacific's understanding, Pacific only had to complete the work to the extent that it had customarily completed similar work as a subcontractor. In other words, Pacific was required to "erect complete" only a portion of the FGS, not the entire system.
To advance its interpretation of the contract, Pacific introduced parol evidence at trial alleging that, before the contract was signed, Brinderson orally assured Pacific that the phrases "erect complete" and "make a complete installation" only meant that Pacific had to complete the structural and miscellaneous steel work for the FGS. Brinderson denies making such representations and contends it was clear that Pacific was required to erect and install the entire FGS. Brinderson argues that the district...
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