Capital Dredge and Dock Corp. v. City of Detroit, 84-1173

• Decision Date: 19 March 1986
• Docket Number: No. 84-1173,84-1173
• Citation: 800 F.2d 525
• Parties: CAPITAL DREDGE AND DOCK CORPORATION, an Ohio corporation, Plaintiff-Appellant, v. CITY OF DETROIT, a municipal corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 525

800 F.2d 525

CAPITAL DREDGE AND DOCK CORPORATION, an Ohio corporation, Plaintiff-Appellant, v. CITY OF DETROIT, a municipal corporation, Defendant-Appellee.

No. 84-1173.

United States Court of Appeals, Sixth Circuit.

Argued Jan. 13, 1986.

Decided March 19, 1986.

E. Michael Morris, C. William Garratt & Associates, Bloomfield Hills, Mich. (C. William Garratt, argued), for plaintiff-appellant.

Eric L. Clay, Helen Francine Strong (City of Det.), Strong, Lewis, White, & Clay, Detroit, Mich. (Harold D. Pope, argued), for defendant-appellee.

Before MERRITT and WELLFORD, Circuit Judges, and EDWARDS, Senior Circuit Judge.

MERRITT, Circuit Judge.

Plaintiff-appellant Capital Dredge & Dock Corp. Dredge appeals a District Court order granting partial summary judgment against Capital Dredge in its suit against defendant-appellee City of Detroit, Michigan and a subsequent order dismissing, under rule 12(b)(6) of the Federal Rules of Civil Procedure, a related suit against the city. The District Court ruled that some of Capital Dredge's claims against the city were barred by an express release executed by Capital Dredge and by the statute of limitations. We affirm the District Court on the question of express release, but we reach no holding on the statute of limitations question.

I. FACTS

In the late 1960s, the City of Detroit undertook the Lake Huron Station Raw Water Intake Project to bring fresh water from the lake to the city. The project involved construction of a water intake "crib" in 100 feet of water more than six miles off shore and a tunnel beneath the lake-bed through which water was to flow from the intake point to the shoreline, from where it was to be piped to Detroit. On June 7, 1971, Detroit and the Indian River Construction Company entered into a contract under which Indian River was to be the general contractor for the project (except that the tunnel was to be built by a different contractor). On that same date, Indian River subcontracted part of the work to Capital Dredge (who in turn entered into agreements with other subcontractors).

On December 11, 1971, there was an explosion in the tunnel. It caused the injury and death of several workers, significant property damage, and a lengthy shutdown of work on the project. All parties involved in the project blamed each other for the explosion. Certain actions arising out of the explosion were filed against Capital Dredge, which hired an attorney, one Alteri, to defend it against these claims.

On January 22, 1973, Detroit and Indian River amended their contract. By this amendment, they increased the amount of compensation due Indian River, extended the time in which the project was to be completed, and preserved certain claims for extra work performed. On December 11, 1974, Capital Dredge filed an action against Detroit seeking damages for impairment of its bonding capacity and diminishment of its reputation resulting from the city's alleged responsibility for the explosion. On May 15, 1974, Detroit and Indian River again amended their contract. Again they increased the amount of compensation, extended the time, and preserved extra work claims. On this same day, Indian River's contract with the city was assigned to Capital Dredge so that Capital Dredge became the general contractor on the project.

In June 1976, the defendants against whom claims arising from the tunnel explosion had been asserted (including both Capital Dredge and the city) agreed to settle all claims against each other for indemnification and contribution in wrongful death and personal injury cases arising out of the explosion. They negotiated and drafted a settlement document entitled "Minutes of Settlement." Alteri, who represented Capital Dredge in the settlement process, signed this document on June 30, 1976. The City of Detroit has asserted that paragraph two of this document constitutes a release of some of Capital Dredge's claims against Detroit, which Capital Dredge had advanced in the case at bar. This provision of the Minutes of Settlement is quoted below.

On February 27, 1980, Capital Dredge filed a diversity action against Detroit (the "1980 action"). The complaint had four counts. Count I covered the period from December 11, 1971 (the date of the explosion) to May 15, 1974 (the date the contract was assigned to Capital Dredge). It sought damages for delay and costs attributable to extra work not included in the general contract, all of which resulted from the tunnel explosion. Count II covered the period from May 15, 1974 through the end of 1974. It sought damages for the expenses of extra work required by Detroit but not included in the general contract. Count III covered the period from 1975 through completion of the project in 1976. It sought damages for delay and expenses of extra work required by Detroit but not included in the general contract. Count IV sought recovery of the unpaid balance on the general contract remaining after completion of the project.

The city moved for summary judgment, and on October 2, 1981, the District Court granted the city's motion as to all of count I and parts of the second and third counts. Judge Joiner of the United States District Court for the Eastern District of Michigan held that Capital Dredge had released all the claims in count I and some of the claims in counts II and III by executing the Minutes of Settlement. The District Court further held that the claims stated in count I were not contract claims but were either tort claims, governed by Michigan's three-year statute of limitations, Mich.Comp.Laws Ann. Sec. 27A.5805, or claims in "other personal actions," governed by a six-year statute of limitations, Sec. 600.5813. Reasoning that under either section the cause of action would have accrued on the date of the explosion, December 11, 1971, the District Court held that the count I claims, which were filed more than eight years after the explosion, were barred by the statute of limitations.

On November 12, 1981, Capital Dredge moved the District Court to reconsider its opinion or to allow it to amend its complaint. The District Court slightly modified its holding on the release issue as discussed below, but the court otherwise refused to reconsider its opinion and to allow Capital Dredge to amend its complaint.

On June 30, 1982, in an apparent effort to avoid the statute of limitations question, Capital Dredge filed another diversity action against Detroit (the "1982 action"). In this action Capital Dredge asserted unspecified extra work claims but this time clarified that its claims were brought under Capital Dredge's contract and were not tort claims. On August 29, 1983, the District Court granted the city's motion under rule 12(b)(6) and dismissed this action "for reasons stated by the Court on the record." Despite its dismissal, this action was consolidated with the 1980 action. In October 1983, just before Capital Dredge's surviving claims from the 1980 action were scheduled to go to trial, Capital Dredge and Detroit settled all the remaining claims.

II. RELEASE

The dispute concerning Capital Dredge's alleged release of certain claims against the city revolves around paragraph two of the Minutes of Settlement, which provides:

It is agreed by and between the signatories hereto that Capital Dredge and Dock Corporation will dismiss with prejudice a certain suit pending against the City of Detroit in the United States District Court entitled Capital Dredge and Dock Corporation, et al. v. City of Detroit, et al, being Case No. 472-944, preserving claims by Capital against the City of Detroit for extra work and delays not previously compensated for and arising solely out of a certain Change Order to Amendment # 2 to Contract LH-6D dated May 13, 1975. ¹

Case No. 472-944 to which this provision refers is Capital Dredge's bonding capacity and reputation suit filed December 11, 1974.

The District Court held that this provision would support only one interpretation, that being that Capital Dredge released all extra work claims that were not for work done pursuant to the change order referred to in paragraph two. The Change Order stated:

Remove remaining sheet piling and template spouds during the 1975 construction season by means of additional excavation of frozen material on the lake bottom and use of a barge mounted 700 ton A-frame and hydraulic trip jar or other suitable means. In areas of over excavation place stone fill to restore to proper grade. Modify temporary intakes. All work to be as described in our letter of July 2, 1975.

REASON FOR CHANGE: The lake bottom did not thaw as rapidly as anticipated thus requiring extraordinary means of piling removal in order to complete the work during the 1975 construction season. These changes to result in an increase in the contract sum on a cost plus limited amount basis not to exceed $225,000.

On this ground, the District Court held that Capital Dredge had released all of the claims in Count I of its 1980 complaint and some of the claims in both counts II and III.

Capital Dredge argues that the provision is ambiguous and, therefore, that under Michigan's parol evidence rule the District Court should have considered extrinsic evidence to ascertain the parties' intended meaning in executing the provision in question. Capital Dredge also asserts that Alteri, who negotiated the Minutes of Settlement on behalf of Capital Dredge, had no authority to release any of Capital Dredge's extra work claims. On this point, the District Court ruled that Capital Dredge had ratified its release in the Minutes of Settlement by failing to disavow Alteri's authority or otherwise challenge the Minutes of Settlement for four years after their execution.

A. Extrinsic Evidence

As noted above, Capital Dredge argues that the Minutes of Settlement should be interpreted in light of extrinsic evidence of the parties' intent. The city asserts that the District Court allowed Capital...