Delhi Pipeline Corp. v. Lewis, Inc., 138

• Court: Texas Civil Court of Appeals
• Writing for the Court: SHARPE; NYE; SHARPE; NYE
• Citation: Delhi Pipeline Corp. v. Lewis, Inc., 408 S.W.2d 295 (Tex. Ct. App. 1966)
• Decision Date: 28 April 1966
• Docket Number: No. 138,138
• Parties: DELHI PIPELINE CORPORATION, Appellant, v. LEWIS, INC., Appellee. . Corpus Christi

Page 295

408 S.W.2d 295

DELHI PIPELINE CORPORATION, Appellant, v. LEWIS, INC., Appellee.

No. 138.

Court of Civil Appeals of Texas Corpus Christi.

April 28, 1966.

First Rehearing Denied Oct. 20, 1966.

Second Rehearing Denied Nov. 17, 1966.

Geary, Brice & Lewis, Dallas, James P. Ryan, of Fischer Wood, Burney & Nesbitt, Corpus Christi, for appellant.

Homer E. Dean, Jr., of Lloyd, Lloyd, Dean & Ellzey, Alice, Toufic Nicolas, of Horkin, Nicolas & Nicolas, Corpus Christi, for appellee.

OPINION

SHARPE, Justice.

This appeal is from a judgment rendered in a jury trial for Lewis, Inc., appellee, plaintiff below, in the sum of $31,303.07, against Delhi Pipeline Corporation, defendant below. The parties will sometimes be referred to as 'Lewis' and 'Delhi'.

Lewis sued for damages in the amount of $25,914.76 for alleged breach of oral and written contracts, the latter having been executed on October 3, 1963, and the former having been entered into shortly thereafter, all covering pipeline projects in Victoria County, Texas; for $50,000.00 as exemplary damages and $8,000.00 for attorney's fees. By way of cross-action, Delhi sued for $4,932.45 due to alleged breach of contract by Lewis. Lewis is in the business of constructing pipeline systems and Delhi is a gas transmission company. It is undisputed that Lewis was an independent contractor and that Delhi terminated the contracts before completion of the work by Lewis.

The jury verdict established the amount of Lewis' damages as follows: $17,451.00 for expenses incurred prior to termination of the contracts; $7,500.00 for loss of profit; $5,000.00 for attorney's fees; and $15,000.00 for exemplary damages. The trial court granted Delhi's motion for judgment non obstante veredicto and to disregard the jury findings concerning exemplary damages only and denied Lewis a recovery in such respect. The judgment allowed interest on the amount of $24,951.50 from October 17, 1963 to its date of entry on September 12, 1964.

Appellant Delhi urges 37 points of error which are briefed in six groups. Appellee Lewis urges 7 reply points, similarly briefed, and one counterpoint concerning the refusal of the trial court to award exemplary damages. The points will be discussed as grouped for briefing by the parties.

Under the first group of points (1--6), relating primarily to Special Issue 1, Delhi contends that the trial court should not have rendered judgment based upon such jury finding; that there is no evidence and it is factually insufficient to raise such issue and support the answer thereto; that the trial court should have granted judgment non obstante veredicto on the entire case pursuant to Delhi's motion; and, in any event, should have granted a new trial.

Special Issue 1, its accompanying definition and the jury answer are as follows:

'Special Issue No. 1.

'Do you find from a preponderance of the evidence that under all the circumstances which existed on or prior to October 17, 1963, Plaintiff Lewis, Inc., was proceeding with due diligence on his contracts with Defendant Delhi Pipeline Corporation to install the pipelines in question?

Answer 'yes' or 'no'.

Answer: Yes.

'By the term 'due diligence' as used herein is meant such diligence as would be required for Plaintiff to complete the contracts in accordance with the terms and provisions of the contracts between Plaintiff and Defendant and the plans and specifications.'

Delhi's argument under its first group of points is that Lewis had agreed to perform the work in a manner satisfactory to Delhi's representative, Mr. C. P. Butler, and this was the real issue; that Lewis' work was not satisfactory to Butler, and his dissatisfaction was conclusive on the question of performance and breach; that the question submitted by special issue 1 was immaterial; that Lewis' failure to plead, prove and secure a jury finding of bad faith on the part of Delhi's representative is fatal to Lewis' recovery; that, in any event, there is no evidence and it is factually insufficient to raise and support the jury finding on special issue 1 that Lewis was proceeding with due diligence. Lewis contends that the trial court correctly submitted the ultimate and controlling issue of diligent compliance with the contracts and that the jury answer is amply supported by evidence. We agree with Lewis.

Delhi relies upon the rule that a contract may require that one party's performance shall be to the satisfaction of the other party or, in some instances, to that of a designated third party such as an architect or engineer. See Atlas Torpedo Co. v. United States Torpedo Co., 15 S.W.2d 150 (Tex.Civ.App .1929, n.w.h.); Dixie Oil Co. v. McBurnett, 6 S.W.2d 83 (Tex.Com.App .1928, Judg.App.); Griffith v. Thomson, 244 S.W.2d 722 (Tex.Civ.App.1951, n.w.h.); Golden State Mutual Life Insurance Co. v . Kelley, 380 S.W.2d 139 (Tex.Civ.App.1964, wr. ref., n.r.e.); Goodrum v. State, 158 S.W.2d 81 (Tex.Civ.App.1942, wr. ref., w.m.); City of San Antonio v. McKenzie Const. Co., 136 Tex. 315, 150 S.W.2d 989 (1941); Coppinger v. Republic Natural Gas Co. (10 Cir. 1948), 171 F.2d 4; Thompson-Starrett Co. v. La Belle Iron Works, (2 Cir. 1927), 17 F.2d 536. But that rule is operative only where it appears from express terms of the contract or from plain language therein that it was the intention of the parties that the determination of the person to whom the decision is entrusted would be final and conclusive; and such a provision is not to be implied. Black v. Acers, 178 S.W.2d 152 (Tex.Civ.App.1944, wr. ref.); Eckert-Fair Construction Company v. Flabiano, 342 S.W.2d 629 (Tex.Civ.App.1960, wr. ref., n.r.e.).

The sole provision concerning termination is found in the written contracts as follows:

'Contractor agrees to commence said work within --- days from the date of this contract and to complete said work with due diligence and, in the event Contractor fails to commence said work within the time above specified or, having begun said work, abandons it or for any reason suspends or refuses to continue it for a period of five days (unless Contractor is prevented from continuing by reasons beyond his control), Company shall have the right to take over said work and complete it at Contractor's expense.'

The provisions as to satisfaction of the representative of Delhi in certain particulars are contained only in the specifications which were incorporated by reference into the contracts. We agree with appellant that in such case we must consider the agreements made by the parties in the specifications along with those contained in the job contracts. Tower Contracting Co., Inc. v. Flores, 157 Tex. 297, 302 S.W.2d 396 (1957); 17A C.J.S. Contracts § 299, pp. 136--137. However, there is no provision in the specifications or the job contracts that the determination of dissatisfaction by Delhi's representative would be final, binding or conclusive; neither is there a provision that such dissatisfaction would furnish a basis for Delhi to terminate the contracts. None of the provisions for termination by Delhi is shown to exist.

The trial court correctly submitted the controlling issue, as hereinabove set out, and the jury found upon factually sufficient evidence that Lewis was proceeding with due diligence on his contracts with Delhi to install the pipelines in question on and prior to October 17, 1963, the date upon which Delhi refused to allow Lewis to proceed with the work and terminated the contracts. On the record here, on issue of bad faith on the part of Delhi's representative was not required. Delhi's first group of points (1--6) is overruled.

Under Delhi's second group of points (7--19) relating primarily to special issues 2 and 3, the contentions are made that there is no evidence and that the evidence is factually insufficient to raise such issues and to support the answers thereto; that the court erred in awarding Lewis a judgment for all expenses (under issue 2) and for porfit (under issue 3), part of which was under the oral contracts, on which no right of recovery was established; that neither issues 2 or 3 represent the proper measure of damages; and that the amounts found were excessive. Special issues 2 and 3, together with the jury answers thereto, read as follows:

'SPECIAL ISSUE NO. 2.

'What amount of money do you find from a preponderance of the evidence would cover the reasonable and necessary expenses incurred by Lewis, Inc. in performance of the contracts in question before the termination of the contracts by Defendant Delhi Pipeline Corporation?

Answer in dollars and cents.

Answer: $17,451.00'

'SPECIAL ISSUE NO. 3.

'From a preponderance of the evidence what do you find would have been the amount of profit, if any, which Plaintiff Lewis, Inc., would have reasonably expected to derive if it had been permitted to perform its contracts with Defendant Delhi Pipeline Corporation to completion?

'In this connection, you are instructed that loss in profits is measured by the difference between the contract price and what it would have cost the contractor to carry out the contract in accordance with its provisions and the plans and specifications.

Answer in dollars and cents.

Answer: $7,500.00.'

The applicable rules may be stated as follows:

'Where the contractor is prevented by the owner from doing any work under the contract, or from completing the work after partial performance, or where he is justified in abandoning further performance because of a breach by the owner, he may recover, in addition to compensation for the work already done, any damages that he may have sustained by reason of the owner's breach of the contract, including the profits that he would have made had he been permitted to perform, expense incurred in the performance of the contract up to the time of the breach, less any materials purchased by reason of the contract but not used, and damages sustained by his being compelled to sell at a loss material prepared for use under the...