City of North Kansas City, Missouri v. Sharp

• Decision Date: 10 September 1969
• Docket Number: No. 19206.,19206.
• Citation: 414 F.2d 359
• Parties: CITY OF NORTH KANSAS CITY, MISSOURI, Appellant, v. P. Clifford SHARP, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

414 F.2d 359 (1969)

CITY OF NORTH KANSAS CITY, MISSOURI, Appellant, v. P. Clifford SHARP, Appellee.

No. 19206.

United States Court of Appeals Eighth Circuit.

August 8, 1969.

Rehearing Denied September 10, 1969.

Wm. Harrison Norton, of Williams, Norton & Pollard, North Kansas City, Mo., for appellant, David L. Wells, North Kansas City, Mo., with him on the brief and reply brief.

John A. Ross, Kansas City, Mo., for appellee, Popham, Thompson, Popham, Trusty & Conway, Kansas City, Mo., with him on the brief.

Before BLACKMUN, GIBSON and HEANEY, Circuit Judges.

BLACKMUN, Circuit Judge.

P. Clifford Sharp instituted this diversity action against the City of North Kansas City, Missouri, to recover damages for himself and as trustee for Haskins, Sharp and Ordelheide, a partnership, for breach of an engineering contract. The case was tried to Judge Collinson without a jury. He approached it, first, on the issue of liability and then, having resolved that question in the plaintiff's favor, on the issue of damages. His separate opinions on those respective issues are not reported. The ultimate result was the entry of a judgment for the plaintiff and against the City for $131,262 plus interest.

The City appeals and asserts (1) nonliability because of the lack of authorization to enter into the contract; (2) nonassignability of the contract without the City's consent, ratification, or waiver; (3) termination of the contract; and (4) errors in the computation of damages.

The basic facts. There is no real controversy about most of the facts. Prior to November 1957 the City had employed Haskins, Riddle and Sharp, a partnership of consulting engineers, on various projects. Mr. Haskins died in 1956 but William G. Riddle and the plaintiff Sharp continued in business under the old name. On November 12, 1957, when these two were the only partners, a "Memorandum of Agreement for Professional Engineering Services" was entered into with the City. This was executed on behalf of the partnership by Riddle and on behalf of the City by R. D. Scharz, Mayor, with Blanche E. Ford, City Clerk, attesting, and with the City Attorney approving in writing "as to form and legality". The agreement called for the performance by the partnership of specified engineering services in connection with proposed sanitary sewage projects.

The contract dealt initially with "Preliminary Phase Services" to be performed by the engineers. These included surveys and studies as to existing sanitary sewage works, growth trends, the adequacy of the existing works, recommendations for improvement, cost estimates, presentation of a report to the Division of Health of Missouri and to the City, assistance in pre-bond election activities, and assistance in obtaining a federal grant.

The agreement then referred to "Design and Supervision Services." The first paragraph under this heading read:

"6. When so instructed by the City, prepare complete contract and bid documents including detailed plans and specifications approved by the Division of Health of Missouri for the construction of recommended improvements."

Then followed provisions for assistance in obtaining bids, general supervision during the construction period and assistance to the City in overseeing and general administration of the construction, a final inspection and report, and, at the City's option, the furnishing of a competent resident engineer during construction.

The remainder of the agreement concerned the compensation to be paid the engineers.

Lorenz E. Ordelheide was admitted to the partnership in 1958.¹

The City admits that the partnership properly performed all the work required of it under the heading "Preliminary Phase Services." The partnership was paid for those services. A bond issue election was held in 1960 and was favorable, and a federal grant was obtained.

Then:

1. On January 24, 1961, Riddle, as first party, and Sharp and Ordelheide, as second parties, executed an agreement effective as of December 31, 1960. This described them as "co-partners doing business as Haskins, Riddle and Sharp, Consulting Engineers" and provided for "the voluntary withdrawal" of Riddle; for nonauthorization of the use of the Riddle name by Sharp and Ordelheide; for Riddle's freedom "to use his own name in any new business venture which he may hereafter undertake"; for Riddle's assignment to Sharp and Ordelheide of his interest in the partnership assets; for the assumption by Sharp and Ordelheide of the firm's liabilities; for the payment to Riddle, on or before April 1, 1961, of a stated percentage of the partnership's net profits for calendar 1960; and for the payment to him, as received, of amounts specified as Riddle's share of accounts receivable and work in progress. It also recited,

"It is contemplated that each of the parties hereto will continue in the consulting engineering profession and will or may become competitors. As such, in the future each of the parties shall be free to serve any person, corporation, municipality or governmental agency without restriction, and regardless of whether or not such person, corporation, municipality or governmental agency may have heretofore employed the partnership of Haskins, Riddle and Sharp."

This agreement made no mention of the partnership's contract with the City. There is evidence in the record that Riddle promised Sharp and Ordelheide to hold himself available to complete the firm's outstanding contracts, that he did so work collectively with them, that he would have worked with them on the contract with the City if so requested, and that his willingness as to this was not communicated to the City.

2. On January 27, 1961, Sharp and Ordelheide sent to the City (and to other clients) a formal announcement that they "have acquired the interest of W. G. Riddle in the former firm." On the same day they also wrote a letter to Mayor Scharz, with a copy to City Clerk Ford, to the same effect and also stating:

"* * * We further wish to advise that there has been no dissolution of the partnership and that Mr. Riddle sold his interest in the formerly existing partnership to us including any interest which he may have had in any contracts existing as of December 31st, 1960.

"We further wish to advise that this office will continue to perform under our presently existing agreement with you, and that the work as required under the contract is going ahead without interruption."

3. On February 1 the City Attorney wrote the plaintiff stating that he had the letter of January 27 "relating to the dissolution of your partnership with Mr. Riddle." He went on to say:

"* * * It is my understanding that all preliminary phase services provided for in the memorandum have been completed by the partnership, Haskins, Riddle & Sharp, but that matters relating to design and supervision of services were to be begun only upon further instruction by the City. Thus, there remains nothing left to be done under preliminary phase services and nothing further to be done without further instruction by the City.

* * * * * *

"The City has been advised by their legal counselors that the dissolution of the partnership works a termination of any previous agreement or understanding.

"As you are aware, there are future plans relating to sewage problems in the City and it is felt that the City should be free to renegotiate any contracts or agreements involving such matters."

4. The plaintiff's attorney replied by a letter dated February 6, 1961. In it he stated (a) that the partnership of Haskins, Riddle and Sharp had not been dissolved; (b) that he did not agree that the agreement with the City had been terminated; (c) that the "present principals of the firm of Haskins, Sharp and Ordelheide stand prepared to continue their services under" the 1957 agreement; (d) that when plans and specifications and supervision under that contract were required, his clients would perform for the agreed fees; (e) that they could not comply with the suggestion that a release be executed to the City; and (f) that they did not agree that the City was free to renegotiate the contract.

5. On February 21, 1961, the City Council adopted a resolution reciting that the contract had terminated and authorizing the mayor to negotiate for the employment of consulting engineers to develop plans for sewer improvements.² Scharz promptly wrote Sharp a letter quoting that resolution.

6. The City Council thereafter formed a sewer committee to solicit proposals from engineering firms for completion of the work. Among those so solicited were Mr. Riddle and the firm of Haskins, Sharp and Ordelheide. Sharp, on behalf of his firm, replied by letter dated May 24, 1961, that "in our opinion we have a contractual arrangement with North Kansas City," and declined to submit a new bid. By another letter written by its attorney the partnership again asserted its willingness "to continue the performance required under the contract."

Judge Collinson found:

"* * * The evidence also discloses that Mr. Riddle, the retired partner, was attempting to secure a contract for the balance of the work for another engineering firm which would then make him a member. The Mayor and Mr. Riddle were evidently quite friendly and he had every assurance that he would receive the work. And the other firm, on its promise to take in Mr. Riddle, was recommended by the Mayor for employment at a substantially higher fee than that provided in the original contract.

"Before the recommendation was accepted however a City Council fight developed, there were accusations made by City Council members against the Mayor, the firm recommended withdrew their offer, and the Mayor resigned. Thereafter an engineering firm with which neither Mr. Riddle nor Mr. Sharp were connected was employed by the City to complete, and did complete, the balance of the work contemplated by the original contract."

The engineering firm employed to do the balance of the work was...