City of Devils Lake v. St. Paul Fire & Marine

• Decision Date: 30 September 1980
• Docket Number: Civ. No. A78-2072.
• Citation: 497 F. Supp. 595
• Parties: The CITY OF DEVILS LAKE, a Municipal Corporation, Plaintiff, v. ST. PAUL FIRE & MARINE INSURANCE COMPANY, a Foreign Corporation, and Koehnlein, Lightowler, Johnson, Inc., a corporation, Defendants. KOEHNLEIN, LIGHTOWLER, JOHNSON, INC., a corporation, Third Party Plaintiff, v. BARBAROSSA AND SONS, INCORPORATED, Third Party Defendant.
• Court: U.S. District Court — District of South Dakota

497 F. Supp. 595

The CITY OF DEVILS LAKE, a Municipal Corporation, Plaintiff, v. ST. PAUL FIRE & MARINE INSURANCE COMPANY, a Foreign Corporation, and Koehnlein, Lightowler, Johnson, Inc., a corporation, Defendants.

KOEHNLEIN, LIGHTOWLER, JOHNSON, INC., a corporation, Third Party Plaintiff, v. BARBAROSSA AND SONS, INCORPORATED, Third Party Defendant.

Civ. No. A78-2072.

United States District Court, D. North Dakota, Northeastern Division.

September 30, 1980.

Lewis C. Jorgenson, Devils Lake, N. D., for plaintiff.

Robert Vaaler, Vaaler, Gillig, Warcup, Woutat & Zimney, Grand Forks, N. D., for St. Paul Fire & Marine and Barbarossa and Sons; James J. Ryan, George C. King, Thomas, King, Swenson & Collatz, P.A, St. Paul, Minn., of counsel.

Wickham Corwin, Charles Feste, Conmy, Feste & Bossart, Ltd., Fargo, N. D., for Koehnlein, Lightowler, Johnson, Inc.

MEMORANDUM OF DECISION AND ORDER FOR JUDGMENT

BENSON, Chief Judge.

The above entitled diversity action, removed from state court, involves a dispute arising out of a contractor's bid on a storm and sanitary sewer separation project constructed in the City of Devils Lake, North Dakota. Plaintiff brought the action against defendant St. Paul Fire & Marine Insurance Company (hereinafter referred to as St. Paul) seeking forfeiture of a bid bond, and against Koehnlein, Lightowler, Johnson, Inc. (hereinafter referred to as Koehnlein), consulting engineer for the project. The two defendants asserted cross-claims against each other seeking contribution or indemnity. Koehnlein also impleaded Barbarossa and Sons (hereinafter referred to as Barbarossa), the bidding contractor secured by St. Paul's bond, seeking contribution or indemnity, alleging negligence in the preparation of its bid.

Trial was had to the court without a jury. At the close of plaintiff's case, the court granted a 41(b) motion of dismissal against plaintiff on its claim against Koehnlein on the grounds that upon the facts and the law, plaintiff had shown no right to relief. At the close of all the evidence, the court granted defendant St. Paul Fire and Marine Insurance Company's motion for a directed verdict of dismissal on plaintiff's claim against St. Paul. This memorandum and order is entered pursuant to the requirements of Rule 52(a).

FINDINGS OF FACT

The sewer and water separation project which is the subject of this action was jointly funded by the City of Devils Lake and the federal government. It was constructed in two parts, Phases I and II and Phases III-VI. The bids on the first two phases had been let about a year before the bids on Phases III-VI, which is the portion of the construction project at issue here. Phases III-VI included as a material part of the project the installation of concrete drain pipe under U.S. Highway 2 and State Highway 19.

Koehnlein is an architectural and engineering firm located in Fargo and was the consulting engineer for the City for Phases I and II and a portion of Phases III-VI. It prepared the drawings and specifications for all phases of the project. Its employee, John Olson, supervised the preparation of the plans and specifications. At the time of construction, Olson was project engineer. At the time of trial, he was employed by plaintiff as its City Engineer.

In July 1978 the City advertised for bids to be submitted by July 31, 1978, for the construction of Phases III-VI. Copies of the plans and specifications were provided to interested contractors on request.

Barbarossa is a family owned construction company located in Long Lake, Minnesota, specializing and experienced in installing underground utilities. It was a relatively small contractor that had an annual net profit of $175,000.00 in 1978. It requested and received a copy of the drawings and specifications on Phases III-VI. Paul Flykt, chief estimator for Barbarossa, examined the drawings and specifications and also inspected the site.

Section 1, paragraph 1.5(c) of the technical specifications provided:

Railroad and Highway Crossings — Shall be measured for payment by the lineal foot of crossing installed. The respective size and class of pipe used will be paid for on a per foot basis; therefore, this item shall include the extra costs, i. e. jacking pits, railroad insurance, highway signing required by the Highway Department, attributed to railroad or highway crossings.

Koehnlein intended this specification to require that the concrete pipe be "jacked" under the highway, and prior to the bid opening had made an application to the state highway department for a crossing permit utilizing the jacking method. The jacking method utilized special equipment which pushed the pipe under the roadway without disturbing the surface.

The "open cut" method involved laying the pipe in an excavated trench cut across the roadway. After the pipe was laid, the trench was filled and the roadway resurfaced at the point of the cut. The cost of an open cut crossing was substantially less than a jacked crossing. The difference in the cost on plaintiff's project Phases III-VI was $112,000.00.

Five contractors, including Barbarossa, bid the project. The bids were opened on July 31, 1978. Barbarossa submitted a bid of $2,411,793.50, which was accompanied by a 5% bid bond as required by N.D.C.C. § 40-22-20. St. Paul was surety on the Bond. The Barbarossa bid was the low bid. The second lowest bid was submitted by George E. Haggart, Inc. Its bid was in the amount of $2,943,552.80.

Barbarossa had interpreted the specifications to call for open cut crossings, and had bid the crossings at $46,000.00. Haggart had bid the crossings at $155,940.00. At the time of the bid opening there was no mention of the method of crossing, but the next day Barbarossa's chief estimator, Paul Flykt, through a conversation with a representative of another bidder, learned that plaintiff intended the contract to require that the crossings be constructed by utilizing the jacking method.

Barbarossa had also bid Phases I and II of the project and its representative had attended the bid opening. On Phases I and II, road crossings were constructed by utilizing the open cut method. Conditions would have been more favorable for an open cut method of crossings on Phases III-VI than they were on Phase I and II. Class 2 pipe was specified on Phases III-VI, and Barbarossa's experience had been that where jacking was to be utilized pipe much heavier than Class 2 had always been specified. Further, it was Barbarossa's experience that where jacking was required, the invitation for bids customarily carried jacking as a separate bid item. Barbarossa knew that the railroad never permitted a crossing of its line except through the use of the jacking method and attributed the reference to jacking in the specifications as relating only to railroad crossings.

Barbarossa had contemplated a $75,000.00 profit. If forced to enter into the contract on the basis of its bid it would have been commencing construction with the knowledge that it was starting a project on which there would be an estimated loss in excess of $40,000.00. It immediately notified plaintiff of its mistake and requested that if awarded the contract it be permitted to proceed on the basis of open cut construction, or on some other basis that would compensate it for the...