Black Lake Pipe Line Co. v. Union Const. Co., Inc.

• Decision Date: 19 May 1976
• Docket Number: No. B--5285,B--5285
• Citation: 538 S.W.2d 80
• Parties: BLACK LAKE PIPE LINE COMPANY, Petitioners, v. UNION CONSTRUCTION COMPANY, INC., et al., Respondents.
• Court: Texas Supreme Court

Page 80

538 S.W.2d 80

BLACK LAKE PIPE LINE COMPANY, Petitioners, v. UNION CONSTRUCTION COMPANY, INC., et al., Respondents.

No. B--5285.

Supreme Court of Texas.

May 19, 1976.

Rehearing Denied June 16, 1976.

Meredith & Donnell, M. W. Meredith, Jr., and Finley L. Edmonds, Corpus Christi, for petitioners.

Mahoney, Shaffer, Hatch & Layton, Lee Mahoney, Corpus Christi, McMahon, Smart, Wilson, Surovik & Shuttle, Stanley P. Wilson, Abilene, for respondents.

SAM D. JOHNSON, Justice.

Union Construction Company, Inc., Mobile Pipe Constructors, Inc., and Dillingham Corporation brought this action against Black Lake Pipe Line Company to recover for extra work performed during the construction of a pipeline for Black Lake. The trial court rendered judgment on a jury verdict for Union Construction Company in the principal amount of $160,096.61, and for Mobile Pipe Constructors, Inc. and Dillingham Corporation in the principal amount of $95,428.50. The court of civil appeals affirmed, holding that the plaintiffs were entitled to recover upon the theory of Quantum meruit. 520 S.W.2d 486. We reverse and render in part and reverse and remand in part.

On January 4, 1967 Mobile Pipe Constructors, Inc. and Dillingham Corporation, joint venturers known as Mobile Pipe-Dillingham (MPD), and Black Lake executed a prime contract that provided for the construction of a 125-mile pipeline 8 5/8 inches in diameter beginning in Natchitoches Parish, Louisiana and extending to a point in Hardin County, Texas. The agreement contemplated that a new device known as a mobile pipe mill, owned by Mobile Pipe Constructors, Inc., would be employed to lay the pipe. The pipe mill was a large vehicle on caterpillar treads that moved slowly down the right-of-way fabricating pipe in 1,000-to 1,500-foot lengths from rolls of flat steel. If the mobile pipe mill performed on schedule, the completion date of the pipeline as determined by the contract was April 15, 1967. If the pipe mill did not perform properly, however, MPD was allowed a 'reasonable period of time, but no later than June 15, 1967,' to complete construction of the pipeline utilizing commercial mill pipe and conventional pipeline construction techniques. Contemporaneously with the execution of the prime contract, MPD subcontracted to McCathern, Inc. substantially all of the work under the prime contract with the exception of the operation of the pipe mill and the fabrication of the pipe. Subsequent to the execution of these contracts, work thereunder was begun.

Due to mechanical problems with the pipe mill and impediments created by the swamps and timberland through which the pipeline right-of-way passed, MPD failed to complete the project by April 15, 1967. Pursuant to the agreement, the completion date was then extended to June 15, 1967. In May 1967 the use of the pipe mill was discontinued. Shortly thereafter a dispute arose between MPD and McCathern, Inc. causing McCathern to withdraw from the job. Black Lake then notified MPD that it would terminate the agreement and employ another contractor unless MPD engaged a new subcontractor to proceed with the pipeline construction. Black Lake further offered to extend the completion date of the pipeline to August 1, 1967 if MPD engaged a new subcontractor.

On June 19, 1967 MPD entered into an agreement with Union Construction Company that provided for the construction by August 1, 1967 of a 67-mile stretch of the pipeline. The agreement between MPD and Union incorporated most of the provisions of the prime contract, and Union was responsible for all phases of construction on the 67-mile stretch of the pipeline. Meanwhile, MPD continued working toward completion of the remainder of the pipeline with its own crew. After Union began work on the project additional delays were encountered. MPD then sought and obtained from Black Lake an agreement extending the completion date from August 1, 1967 to August 15, 1967 plus a reasonable time for right-of-way cleanup work. It was not until November 28, 1967 that the cleanup work was finally completed to Black Lake's satisfaction.

The parties agree that Union and MPD have completed and have been paid for the work called for by the terms, plans, and specifications of their contracts. This lawsuit stems from a dispute among the parties regarding extra work.

MPD officially notified Black Lake as early as October 23, 1967 of its intent to file extra work claims. Both MPD and Union presented their claims to Black Lake in March of 1968. Black Lake rejected the claims and this litigation ensued. Union, seeking a total recovery of $298,255.99, filed suit against Black Lake and MPD alleging that it was required to perform a considerable amount of additional or extra work in order to obtain approval and acceptance of its work by Black Lake Pipe Line Company. MPD answered and filed a cross claim against Black Lake alleging that Black Lake required them to perform work in excess of that required by the contract and claiming damages in the amount of $346,966.56.

The items of extra work complained of by Union and the respective jury awards for such items were as follows:

1. Excessive work performed in uncovering, for additional inspection, pipe which had already been placed in the pipeline ditch with the approval of Black Lake, $3,120.31;

2. Additional costs resulting from the requirements by Black Lake that inside air clamps rather than conventional outside clamps be employed in the pipe alignment operation, $3,547.95;

3. Additional costs resulting from the requirements made during the course of the work that Union add a second spread of men and equipment, $109,415.50;

4. Additional costs resulting from the firing of Black Lake of a welder-employee of Union (no award was made for this item of extra work because the jury failed to find that the firing of the welder caused an increase in Union's cost of performing the work);

5. Excessive work performed in moving and returning equipment and personnel to and from construction locations caused by the failure of Black Lake to keep available the line pipe that it was obligated to furnish, $6,388.85;

6. Excessive work performed in the removal of stumps, brush, tree limbs, and other debris from off-right-of-way areas, $12,862.94;

7. Excessive work performed in reworking the crown over portions of the pipeline ditch, $6,833.75;

8. Excessive work performed in the cleanup operations on the right-of-way, $10,722.40;

9. Excessive work performed in the construction of terraces across the pipeline ditch to direct the flow of water into natural drainage courses, $5,893.51;

10. Excessive work performed in disking pastureland, $1,311.40.

The items of extra work complained of by MPD and the respective jury awards for such items were as follows:

11. Excessive work performed in the cleanup operations on the right-of-way, $32,244.75;

12. Excessive work performed in the construction of terraces across the pipeline right-of-way to direct the flow of water into natural drainage courses, $39,410.25;

13. Excessive work performed in the removal of stumps, brush, tree limbs, and other debris from off-right-of-way areas, $22,200.50;

14. Excessive dredging at the tailrace of the Toledo Bend Dam, $1,573.00;

15. Additional cost caused by laying more line river pipe at river crossings than was required by the contract specifications (no award was made for this item of extra work because the jury failed to find that Black Lake required the work or received any benefit therefrom).

Although Union was not a party to the prime contract with Black Lake, Union alleged in its petition that it had a direct contractual relationship with Black Lake and that throughout construction of the pipeline Black Lake's representatives on the job directed and supervised Union's employees in the performance of their work. Union further stated that in order to obtain Black Lake's approval and acceptance of the work it was required to perform services and furnish materials over and above the requirements of the plans and specifications for the job. Union alleged that the interpretation of the contract specifications by Black Lake's representatives was unreasonable, arbitrary, and capricious. The legal theories upon which Union sought to impose liability upon Black Lake were (1) express contract, (2) Quantum meruit, (3) economic duress or business compulsion, and (4) contract interference.

In answer to Union's petition MPD alleged that all work for which Union sought recovery was ordered and required by Black Lake and that all damages sustained by Union were the consequences of Black Lake's actions. MPD's cross claim against Black Lake closely paralleled the grounds stated in Union's petition. In answer to Union's petition and MPD's cross claim Black Lake set up several defenses, including (1) that Union and MPD failed to comply with the method of submitting extra work claims provided for in the contract, (2) that the decisions of the inspectors on the job were final and conclusive as to whether the work was satisfactorily performed, (3) that Union lacked privity of contract, (4) that the contractors waived any right to claim compensation for the extra work, and (5) that neither Union nor MPD performed any work over and above that required by their contracts.

One hundred fifty-three special issues were submitted to the jury. It is undisputed that the jury answers to the special issues preclude a recovery by Union for extra work caused by the firing of its welder (item 4) and by MPD for extra work involved in the laying of line river pipe (item 15). The special issues concerning extra work were submitted in clusters; most of the extra work clusters inquired (a) whether the extra work was required by Black Lake, (b) whether Black Lake refused its approval of the project unless the extra work was performed, (c) whether such refusal was arbitrary and capricious, ¹ (d) whether in performing the extra work the...