Dallas-Fort Worth Regional Airport Bd. v. Combustion Equipment Associates, Inc.

• Decision Date: 13 August 1980
• Docket Number: No. 78-2781,DALLAS-FORT,78-2781
• Citation: 623 F.2d 1032
• Parties: 6 Fed. R. Evid. Serv. 1127 WORTH REGIONAL AIRPORT BOARD, a Joint Agency of the City of Dallas, Texas, and the City of Fort Worth, Texas, Plaintiff-Appellee Cross-Appellant, v. COMBUSTION EQUIPMENT ASSOCIATES, INC. and Fidelity and Deposit Company of Maryland, Defendants-Appellants Cross-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1032

623 F.2d 1032

6 Fed. R. Evid. Serv. 1127

DALLAS-FORT WORTH REGIONAL AIRPORT BOARD, a Joint Agency of the City of Dallas, Texas, and the City of Fort Worth, Texas, Plaintiff-Appellee Cross-Appellant, v. COMBUSTION EQUIPMENT ASSOCIATES, INC. and Fidelity and Deposit Company of Maryland, Defendants-Appellants Cross-Appellees.

No. 78-2781.

United States Court of Appeals Fifth Circuit.

Aug. 13, 1980.

Harold Hoffman, Donald C. McCleary, Dallas, Tex., for Combustion equipment co.

James K. Peden, III, Frank L. Skillern, Jr., Dallas, Tex., for Fidelity and Deposit Co. of Maryland.

Charles C. Wells, C. Merrill Bierfeld, Asst. City Attys., Dallas, Tex., for plaintiff-appellee cross-appellant.

Appeals from the United States District Court for the Northern District of Texas.

Before FAY, KRAVITCH and RANDALL, Circuit Judges.

FAY, Circuit Judge:

This diversity action arose from a construction contract dispute between the Dallas-Fort Worth Regional Airport Board (Board) and Combustion Equipment Associates, Inc. (CEA). CEA had contracted to build an incinerator to burn the airport's solid wastes, but failed to fulfill its contractual obligations by the date initially specified in the written contract. The Board sued CEA for reimbursement of the payments made to CEA during the course of construction and for liquidated damages. CEA and its surety, Fidelity and Deposit Company of Maryland, now appeal from an adverse judgment of $816,987.41, granted to the Board after a month-long jury trial. On appeal, CEA claims that the Board, after waiving the written contract's specified completion date, breached the contract by evicting CEA from the jobsite without giving written notice and a reasonable time thereafter to complete construction. CEA also challenges several evidentiary rulings and jury instructions. Additionally, CEA claims that the evidence was insufficient to support either the verdict or the jury's responses to several interrogatories submitted to them by the court. Finally, CEA contends that the trial judge erred in selecting and computing prejudgment and postjudgment interest rates. On cross-appeal, the Board challenges the trial court's decision to overrule the jury's grant of liquidated damages to the Board. Because of conflicting jury responses to interrogatories, we reverse the trial court's denial of liquidated damages and remand for redetermination of whether CEA owes the Board contractual damages for the delay, and, if so, how much. Finding no reversible error in any of the other claims, we affirm the judgment in all other respects.

FACTS AND PROCEEDINGS

Following competitive bidding, CEA executed a construction contract with the Board ¹ on August 1, 1972. The contract required CEA to construct for the Board a solid waste disposal system in accordance with the job's plans and specifications. Incorporated by reference was CEA's bid proposal, which specified the composition of wastes to be incinerated by CEA's system. Thereafter, Fidelity and Deposit Company of Maryland issued a performance bond. On September 26, 1972, the parties executed a supplemental agreement, which modified the contract's requirements and reduced the contract price from $1,111,111 to $800,000. By June 25, 1973, the parties had reached a second supplemental agreement, which further modified the contractual requirements and extended the completion deadline to September 30, 1973. The second agreement also granted CEA an extra thirty days to make adjustments to comply with environmental protection regulations.

After construction began in late spring, 1973, the Board began making periodic payments which would eventually total $736,250. On January 18, 1974, long after the contract completion date, the Board notified CEA that no further payments would be forthcoming until CEA fulfilled its contractual obligations.

In response, CEA continuously reassured the Board that the incineration system would soon be operational. By May 1, 1974, however, CEA had begun to inform the Board that engineering problems spawned by installing an "innovative" system might On May 11, 1974, however, a jobsite fire destroyed CEA's construction efforts. Notwithstanding CEA's renewed commitment after the fire to attain a functional system within eight weeks, CEA did not resume onsite construction efforts. Consequently, on June 28, 1974, the Board notified CEA and its surety of its intent to terminate the contract and turn construction responsibility over to the surety. At CEA's request, the parties conferred at the airport on July 26, 1974. At that conference they agreed that within fourteen weeks CEA would repair the fire damage and have the incineration system working.

delay completion. CEA nonetheless continued to promise full and prompt performance.

By the fall of 1974, CEA had repaired the fire damage but had consistently refused to submit the incineration system to the Board's testing. By a letter dated December 12, 1974, the Board advised CEA that it would commence contract termination procedures immediately unless CEA's system passed the Board's testing, which was to be administered without fail on December 23, 1974. CEA agreed to the test. A full day of testing on the scheduled date revealed that the promised system still was not functional.

On February 5, 1975, the Board gave CEA and its surety notice of contract termination. On March 5, 1975, the Board evicted CEA from the jobsite.

The Board thereafter brought a diversity action against CEA and its surety. Pursuant to a jury verdict for the Board, the trial court granted the Board $636,000. Subtracting $100,000, the jury's estimate of the value of scrap left on the jobsite, from $736,000, the approximate sum of the periodic payments to CEA, gave that amount of recommended compensatory damages. Conflicting jury answers to interrogatories, however, led the trial court to overrule the jury's grant of $225,000 to the Board for liquidated damages. The court, granting both prejudgment and postjudgment interest on the Board's damages, rendered a final judgment against CEA totalling $816,987.41.

CONTRACT TERMINATION

On appeal, CEA challenges the trial court's denial of a directed verdict or judgment n.o.v. for CEA. CEA contends that the Board's waiver of the written contract's specified deadline and the subsequent failure to set a new completion date completely foreclosed lawful unilateral termination of the contract. Accordingly, CEA claims that the Board's decision to evict CEA from the jobsite on March 5, 1975, ² constituted a contract breach which prevented performance by CEA. Under CEA's rationale, the Board was responsible for CEA's failure to complete construction and should not collect damages from CEA, notwithstanding the eighteen-month delay from contractual deadline to final eviction.

In support of its contentions, CEA cites numerous cases which require one who has waived the initial completion date to give written notice of a new deadline and a reasonable time to complete before unilateral termination of the contract. In A. L. Carter Lumber Co. v. Saide, 140 Tex. 523, 168 S.W.2d 629 (1943), the Supreme Court of Texas found that by repeatedly accepting the buyer's late payments, a seller of certain realty had waived his contractual right to forfeit the sales contract. According to the court, only giving explicit notice of a renewed intention to enforce payment deadlines and providing a reasonable time for the buyer to comply would have restored the seller's right to strictly enforce the contract's forfeiture provisions. Accord, Hoover v. General Crude Oil Co., 147 Tex. 89, 212 S.W.2d 140 (1948); Young v The Board directly controverts CEA's blanket assertion that written notice of a definite new deadline is an indispensable prerequisite to lawful contract termination, regardless of the time lapse between the original contract deadline and final eviction. To bolster its argument, the Board cites Texas cases which indicate that if no new completion date is set after the contract deadline has been waived, a reasonable time for compliance is implied. In Ryan v. Thurmond, 481 S.W.2d 199 (Tex.Civ.App.-Corpus Christi 1972, writ ref'd n.r.e.), the court that when the owner waived the original contract completion date and failed to set a new deadline, a reasonable time for completion was nonetheless implied. In J. W. Crowdus Drug Co. v. Nichols, 194 S.W. 484 (Tex.Civ.App. Dallas 1917), the court held that the drugstore owner who hired a repairman to fix a leaky basement could expect performance within a reasonable time, notwithstanding the owner's waiver of his right to terminate after the repairman's initial failure to timely fulfill his contractual obligations.

Fitts, 138 Tex. 136, 157 S.W.2d 873 (1942); Boddeker v. Olschewske, 127 Tex. 598, 94 S.W.2d 730 (1936). Moreover, this court reached a similar interpretation of Texas Law in Boswell v. United States, 123 F.2d 213 (5th Cir. 1941) (holding that when a performance deadline has been waived, one who would terminate for delay must give proper notice and a reasonable time to perform).

For the purpose of resolving whether notice was indispensable to lawful termination, we will assume that the Board waived the initial deadline and set no new completion date. The jury in fact did find that the Board waived the first deadline, and the Board admitted in its pleadings that no new date was set. However, the Board claims on appeal that the evidence indicates no actual deadline "waiver" in the technical legal sense, but only its decision to permit CEA's continued performance subject to a liquidated damages claim. Alternatively, the Board contends that letters and meetings late in the parties' contractual relationship effectively noticed a new deadline which gave CEA ample time to complete, especially since so much time had expired since the original deadline passed. Its admission that no new deadline was set, the board implies, was an...