Blair v. United States

• Decision Date: 13 March 1945
• Docket Number: No. 12871,12875.,12871
• Citation: 147 F.2d 840
• Parties: BLAIR et al. v. UNITED STATES, for Use and Benefit of GREGORY-HOGAN et al. UNITED STATES, for Use and Benefit of GREGORY-HOGAN et al. v. BLAIR et al.
• Court: U.S. Court of Appeals — Eighth Circuit

147 F.2d 840 (1945)

BLAIR et al. v. UNITED STATES, for Use and Benefit of GREGORY-HOGAN et al. UNITED STATES, for Use and Benefit of GREGORY-HOGAN et al. v. BLAIR et al.

Nos. 12871, 12875.

Circuit Court of Appeals, Eighth Circuit.

February 5, 1945.

As Modified February 23, 1945.

Rehearing Granted March 13, 1945.

Henry Donham, of Little Rock, Ark. (Martin K. Fulk and Pat Mehaffy, both of Little Rock, Ark., on the brief), for United States of America, for use and Benefit of Gregory-Hogan, composed of Ben M. Hogan et al.

J. W. Barron, of Little Rock, Ark. (Ernest P. Rogers, of Atlanta, Ga., on the brief), for A. Farnell Blair and United States Guarantee Company.

Before GARDNER, WOODROUGH, and JOHNSEN, Circuit Judges.

GARDNER, Circuit Judge.

This was an action brought by Gregory-Hogan, a co-partnership, against A. Farnell Blair, to recover $140,255.37, alleged to be due for materials furnished, work performed and for damages sustained in the performance of certain contracts between Gregory-Hogan and A. Farnell Blair for paving and surfacing certain roads and parking places in an armored division camp constructed near the City of Fort Smith, Arkansas. Blair entered into a contract with the United States for the construction of the camp and then entered into three so-called sub-contracts with Gregory-Hogan. The United States Guarantee Company executed a performance bond for Blair and for that reason was joined as defendant.

The action was brought in the name of the United States for the use and benefit of Gregory-Hogan, under the provisions of the Miller Act, Title 40 U.S.C.A. §§ 270a and 270b. The claims for which recovery was sought were set out in paragraphs 5 to 12 of the complaint. However, claims alleged in paragraphs 7 and 8 of the complaint were settled before the entry of judgment and the claims affected by the judgment are those alleged in paragraphs 5, 6, 9, 10, 11 and 12 of the complaint. Sketchily described they are as follows: Paragraph 5, for an alleged balance due for materials furnished and labor performed under the original contracts, in the nature of an action for an accounting, in the sum of $59,494.22; Paragraph 6, for an alleged balance due for overtime under supplemental contract referred to in the record as "Speed-up Agreement," in the amount of $15,667.58; Paragraph 9, for damages on account of delay in furnishing sub-grade, in the amount of $22,652.50; Paragraph 10, for rental of additional equipment necessitated by delay in providing sub-grade and on account of "Speed-up Agreement," in the amount of $5,796.75; Paragraph 11, for alleged damages for breach of the so-called asphalt contract, in the amount of $30,000; Paragraph 12, for costs of overhaul of asphalt on account of "Speed-up Agreement" and breach of the asphalt contract, in the amount of $2,570.75.

The case was tried to the court without a jury, resulting in findings in favor of plaintiffs on paragraphs 5, 6, 10 and 11 of the complaint, and in favor of defendants on paragraphs 9 and 12 of the complaint. The court assessed the entire damages at $106,378.97, with interest from September 3, 1942 at 6 per cent per annum. At the beginning of the trial on October 11, 1943, counsel for defendants asked leave to amend their answer so as to plead as an offset to the admitted balance due, a claim for liquidated damages assessed by the government against plaintiffs' work under the subcontracts. The application was denied. Both parties have appealed. Subsequent to the trial, and under an agreement that the payment should be credited as a partial payment on the judgment without prejudice to the rights of either party on appeal, defendants paid the sum of $34,843.96. They have therefore paid the balance due on the account as found by the trial court, with the exception of two items which will hereafter be considered.

Seeking reversal, defendants contend: (1) A paving deduction of $345.58 was erroneously denied by the court; (2) the court erred in refusing to permit the amendment of defendants' answer so as to plead an offset of liquidated damages; (3) there is no basis for recovery under the "Speed-up Agreement"; (4) there is no liability for reduction of the amount of asphalt required; (5) interest was improperly allowed on the unliquidated damages.

In paragraph 5 of their complaint, plaintiffs claimed to have earned under the sub-contracts, $872,146.07, and that they had been paid $812,651.85, leaving a balance of $59,494.22. Embodied in this amount was a claim for $9,709.94 for expense in opening an additional gravel pit in order to expedite the work. This item was contested by defendants. They also claimed to be entitled to a credit on the account for items aggregating $20,708.31, of which $10,000, in round numbers, represented liquidated damages collected from Blair by the government on plaintiffs' work. The balance represented back charges and paving rejections. On this paragraph 5 the court found in favor of the plaintiffs in the amount of $45,204.72, and of this amount, as above noted, defendants have since the entry of judgment paid $34,843.96, so that the amount in controversy recovered under paragraph 5 of this complaint, is $10,360.76.

The area engineer made a deduction of $345.58 against prime contractor Blair for the cost of replacing some pavement. As to this item the court found that the defect in the paving was due to a failure of a sub-grade which had been constructed by another contractor and hence was not chargeable to plaintiffs. This finding is sustained by ample evidence. Manifestly, plaintiffs could not be held liable for a failure of the paving caused by the faulty work of another contractor. Expressions in their contract in the nature of guaranties of their work must be limited to defects for which they are responsible.

The other substantial item arising under paragraph 5 of the complaint was that involving a claim for liquidated damages. At the beginning of the trial on October 11, 1943, counsel for defendants asked leave to amend their answer so as to plead an offset of $10,015.18 for liquidated damages assessed by the government against plaintiffs' work under the sub-contract. Counsel for defendants had notified counsel for plaintiffs on October 5, 1943, that such an amendment would be tendered and written notice was given on October 6th. Counsel for plaintiffs, however, objected to the allowance of the amendment on the ground of surprise. Rule 15(a) of the Rules of Civil Procedure, 28 U.S.C.A. following section 723c, provides for amendments as a matter of course at any time before a responsive pleading is served, or if the pleading is one to which no responsive pleading is permitted and the action has not been placed upon the trial calendar, one may so amend as of course within twenty days after it is served. Other amendments to pleadings may be allowed only by leave of court or by written consent of the adverse party. Each of the three contracts involved contains the following:

"Liquidated damages for delay in completion applicable to the Contractor are also applicable to the Sub-Contractor in the event of delays caused by the Sub-Contractor."

Where the opposing party will not be prejudiced, amendments to pleadings should be liberally allowed. We so held even before the adoption of the Rules of Civil Procedure. Schulenberg v. Norton, 8 Cir., 49 F.2d 578. Before amendment defendants' answer did not suggest a liability on the part of plaintiffs for liquidated damages on account of delay. Such an allegation would undoubtedly raise new questions, both of law and fact. The action was commenced March 3, 1943. Answer was filed July 15, 1943, three months before the trial began. In these circumstances the trial court might well have concluded that it would be unfair to permit the amendment and force plaintiffs to trial on the new issue thus tendered. The application was addressed to the judicial discretion of the court and in the absence of an abuse of such discretion the ruling will not be reversed on appeal. Schulenberg v. Norton, supra; Wittmayer v. United States, 9 Cir., 118 F.2d 808. There was here no abuse of discretion. The question of liquidated damages was therefore not before the trial court, nor may we here consider it.

The court permitted plaintiffs to recover under the so-called "Speed-up Agreement," and this is here urged as error. Completion date under the contract between Blair and the government was March 24, 1942. Excessive rains fell in October, 1941, to such an extent as to cause the government to extend the completion date to April 11, 1942. On February 7, 1942, Blair agreed to complete the work under his contract by March 26, 1942, with the exception of the asphalt work. A written supplemental contract was accordingly entered into between Blair and the government on February 7, 1942. Article II of this supplemental agreement is as follows:

"In consideration of the advanced completion date as provided in Article I, hereof, the Government will, in addition to the original contract price, reimburse the contractor for additional costs incurred on or after January 23, 1942, resulting from the reduction in time for completion of work under the contract. Such reimbursements to the contractor will be made on the basis of expenditures approved by the Contracting Officer."

On February 27, 1942, Blair sent plaintiffs a copy of the supplemental agreement, and his letter of transmittal, among other things, said:

"I am also attaching hereto an exact copy of `Supplemental Agreement' which myself and Bonding Company have been requested to execute, and which in effect, withdraws the 17 day extension of time, and in consideration of that, commits the Government to pay extra compensation for additional costs due to speeding up completion date to March 26th. All subcontractors on this project have been fully aware for the past several weeks that the two aforementioned Change Orders were in...