Commercial Contractors, Inc. v. U.S. Fidelity & Guaranty Co.

• Decision Date: 29 September 1975
• Docket Number: No. 74-2026,74-2026
• Citation: 524 F.2d 944
• Parties: COMMERCIAL CONTRACTORS, INC., Plaintiff-Appellant, v. UNITED STATES FIDELITY & GUARANTY COMPANY, Defendant-Third-Party Plaintiff-Appellee, v. R. B. ETHRIDGE & ASSOCIATES, INC., et al., Third-Party Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 944

524 F.2d 944

COMMERCIAL CONTRACTORS, INC., Plaintiff-Appellant, v. UNITED STATES FIDELITY & GUARANTY COMPANY, Defendant-Third-Party Plaintiff-Appellee, v. R. B. ETHRIDGE & ASSOCIATES, INC., et al., Third-Party

Defendants-Appellees.

No. 74-2026.

United States Court of Appeals, Fifth Circuit.

Sept. 29, 1975.

As Modified on Denial of Rehearing Nov. 21, 1975.

James E. Clark, Birmingham, Ala., W. Gerald Stone, Bessemer, Ala., Champ Lyons, Jr., Montgomery, Ala., for plaintiff-appellant.

Tommy E. Hill, Birmingham, Ala., for R. B. Ethridge & Associates, Inc. and others.

Ollie L. Blan, Jr., S. R. Starnes, H. L. Ferguson, Jr., Birmingham, Ala., for U. S. Fidelity & Guaranty Co.

Appeal from the United States District Court for the Northern District of Alabama.

Before BROWN, Chief Judge, WISDOM and COLEMAN, Circuit Judges.

COLEMAN, Circuit Judge.

Although building construction contracts generally fall within the more elementary ambits of the law, this appeal, taken from the results of a prolonged jury trial, presents us with a labyrinthian confusion of law and facts. A general contractor sued his subcontractor and the surety on the performance bond for damages allegedly sustained by nonperformance of a masonry subcontract. This terminated in a judgment for the subcontractor and against the general contractor for $185,000.

We reverse and remand for a new trial.

Perhaps the best way to accomplish a clarification of the maze would be first to recite the facts.

I Facts

In the summer of 1970, Commercial Contractors, the general contractor, undertook plans to build for Urban Turnkey Housing, Inc. (Commercial's wholly owned subsidiary) a 200 unit low cost housing project in Bessemer, Alabama. Upon completion, Urban Turnkey planned to convey the facility to the Bessemer Housing Authority.

The September 9, 1970 sales agreement between Urban Turnkey and the Bessemer Housing Authority called for delivery of the facility no later than July 16, 1971. The September 17, 1970 construction agreement between Commercial and Urban Turnkey stipulated project completion by July 1, 1971.

In anticipation of coming events, Commercial Contractors had already put the job out for bids from interested subcontractors.

On August 17, 1970, R. B. Ethridge & Associates (Ethridge) submitted bids on the concrete and masonry portions of the project. Ethridge was eventually awarded these subcontracts. Ethridge completed the concrete work and was paid accordingly. We are now concerned only with the masonry subcontract.

On September 21, 1970, Commercial mailed Ethridge the written contract for the masonry subcontract, priced at $700,000.

On September 25, Commercial mailed the Bessemer construction schedule to all subcontractors. The accompanying letter explained that this schedule was the one referred to in the subcontract agreement. The schedule was prepared in the form of a "bar chart", which is a graphic display indicating the sequence and allotted time for each item of work on the project. This tells a contractor when he is expected to begin and finish each task on the job. The critical item of the schedule was that it allotted twenty two weeks for the completion of the masonry work.

The cover letter explained that specific calendar dates were not included in the bar chart. A worker's strike made it impossible to specify a date for the work to begin the dates would be inserted when the strike ended. Ethridge was requested to acknowledge receipt of the schedule by initialing the cover letter and by returning it along with the executed subcontract.

The cover letter and attachments reached Ethridge's office on September 28. One of the firm's engineers placed the name of the firm and his initials on the cover letter only and returned it to Commercial, received there on September 30.

It was not until November 10, 1970 that Ethridge's executed masonry contract reached Commercial. This was of no moment because the strike was still in progress and no work could have begun in any event.

When the cover letter of September 25 was received, R. B. Ethridge was out of town and testified that he never saw the accompanying construction schedule. The initialing engineer testified that he never opened the packet which accompanied the letter. We digress here long enough to say that assuming this testimony to be true, we attribute no legal significance to it.

In the first place, the letter received at Ethridge's office was notice of the completion date, regardless of whether any officer or responsible employee chose to read it. In the second place, even if a jury should believe that a contractor would sign a $700,000 contract without bothering to learn the specified completion date, it nevertheless remains the law, at least in Alabama, that in the absence of fraud or misrepresentation, one who executes a written contract in ignorance of its contents cannot plead that ignorance to avoid the obligation, Colburn v. Mid State Homes, Inc., 1972, 289 Ala. 255, 266 So.2d 865; Eley v. Brunner-Lay Southern Corporation, Inc., 1972, 289 Ala. 120, 266 So.2d 276; Grady v. Williams, 1954, 260 Ala. 285, 70 So.2d 267; Ben Cheeseman Realty Company v. Thompson, 1927, 216 Ala. 9, 112 So. 151.

About December 29 the worker's strike was near settlement and Ethridge received a construction schedule from Commercial which had the specific dates filled in on the time axis, showing the same sequence for the masonry work as specified on September 25 and specifying the same twenty-two weeks for the performance of the work.

When he saw the schedule R. B. Ethridge became concerned about the manpower requirements of the subcontract. He immediately asked his project manager for the Bessemer job to calculate the number of masons required to maintain the schedule. Lipscomb calculated that the sequence of work, as stated in the December 29 schedule, would place a stringent burden on Ethridge's manpower capabilities.

On January 4, 1971, R. B. Ethridge and Fred Lipscomb attended a preconstruction conference called by Commercial, whose attending representatives were Cecil Williams, senior vice president in charge of construction and design; Mac Saxon, project manager for the Bessemer job; and C. C. McDuff, on-site supervisor for the Bessemer job. At this January 4 meeting R. B. Ethridge raised objections to the sequence of work set forth in the December 28 construction schedule. He felt that the sequence should be altered so that there would be a more even distribution of manpower throughout the entire job.

The significant point is that Mr. Ethridge expressed no objection to the twenty two weeks allotted for completion of the masonry work.

Commercial allowed Ethridge to submit a revised schedule so as to level the manpower curve on the job. This was done in mid-January and it was incorporated in Commercial's revised schedule dated January 29, 1971. The revised schedule continued to show the total time for performance as twenty two weeks, so Ethridge was due to complete the masonry subcontract on June 11, 1971, the same completion date required by the December 28, 1970 schedule.

Ethridge also talked to Cecil Williams about alterations in the schedule due to bad weather conditions. Ethridge testified that Williams told him the schedule would be updated every couple of weeks so as to reflect adjustments for bad weather. On March 25, 1971, Commercial sent out a revised schedule which indicated adjustments for bad weather conditions through March 10, 1971. The cover letter enclosed with the new schedule stated that the dates reflected on this schedule were the maximum dates allowable for performance. According to this schedule, Ethridge was to complete all masonry work by July 16, 1971. This allowed five weeks of additional time over that set forth in the revised schedule of January 29, 1971.

Under subcontract change order number 1, dated May 6, 1971, Ethridge, by mutual agreement, had been relieved of responsibility for work on ten of the forty buildings on the project, which reduced the total of Ethridge's original contract by $142,000.

About the middle of June, an out-of-town masonry subcontractor was employed on a cost plus basis to do the masonry on the ten buildings which Ethridge had dropped. This subcontractor began paying his brick masons twenty five cents an hour above the union scale, plus seven dollars a day traveling expenses. When Ethridge's masons learned of this some of them defected to the higher paying employer. By about July 1, this discernibly slowed Ethridge's operations. When this was called to Commercial's attention, it arranged with the cost plus contractor not to hire any more of Ethridge's masons.

In mid-July the carpenter subcontractor was terminated and there was a shortage of carpenters until another carpenter subcontractor could be found. This, to some extent, slowed Ethridge's progress.

The evidence, however, clearly indicates that the prime cause of Ethridge's difficulties was its inability to hire a sufficient number of brick masons, and this factor existed from the very outset of the project. Moreover, it appears that in the early stages of the project Ethridge did not order the materials required to allow the work to proceed on schedule.

As of August 2, 1971, Ethridge had completed no more than 65% of the masonry work on the thirty buildings remaining in its subcontract. On that day Commercial notified Ethridge that its contract would be terminated as of 5 p. m., August 5.

II The Litigation

Commercial set the litigation in motion on September 27, 1971, by a complaint filed against United States Fidelity and Guaranty Company on its Ethridge performance bond dated September 21, 1970. Commercial charged that Ethridge breached its subcontract by (1) failing and refusing to pursue the work in accordance with Commercial's schedule, (2) by failing and refusing to correct deficiences required by its contract, and (3) by failing to furnish...