Dravo Corporation v. Litton Systems, Inc.

• Decision Date: 08 August 1974
• Docket Number: Civ. A. No. 72S-166(R).
• Parties: DRAVO CORPORATION et al., Plaintiffs, v. LITTON SYSTEMS, INC., et al., Defendants.
• Court: U.S. District Court — Southern District of Mississippi

379 F. Supp. 37

DRAVO CORPORATION et al., Plaintiffs, v. LITTON SYSTEMS, INC., et al., Defendants.

Civ. A. No. 72S-166(R).

United States District Court, S. D. Mississippi, S. D.

August 8, 1974.

G. Hamp Uzzelle, III, Mobile, Ala., for plaintiffs.

Woods E. Eastland, Jackson, Miss., for defendants.

OPINION OF THE COURT

DAN M. RUSSELL, Jr., Chief Judge.

Dravo Corporation, organized under the laws of Pennsylvania with its principal place of business in Pittsburgh, and Walter C. Ernest, III, Billie Ann Carrigan and Mrs. Walter C. Ernest, Jr., partners doing business as Ernest Construction Company, Mobile, Alabama, filed this diversity action against Litton Systems, Inc., a Maryland corporation with its principal place of business in Los Angeles, California, seeking to recover as damages sums of money expended by plaintiffs in prevention of hurricane damage and for repairs caused by the hurricane to a graving dock constructed by plaintiffs for the defendant at its Ingalls Shipbuilding site at Pascagoula, Mississippi.

This cause was submitted to the Court on the pleadings, a pre-trial order, depositions, exhibits, and briefs for the Court, first, to determine liability, and, second, the amount of damages should plaintiffs be entitled to recover.

Plaintiffs, as joint venturers, executed a contract with defendant on August 28, 1968, to construct a graving dock at an original price of $4,705,000.00. Five change orders, not involved herein, increased the price to $4,800,280.00, all of which was paid to plaintiffs. On the night of August 17, 1969, when the graving dock was largely completed, Hurricane Camille hit the area causing wide spread damage. Plaintiffs alleged that they incurred expenses totaling $123,163.00 in preparing for the hurricane and in making repairs, the repairs costing the sum of $80,885.00. Plaintiffs seek to recover the latter amount, claiming that, under the contract, damages occasioned by an "act of God" should be borne by the defendant.

The parties admit the following facts:

(a) The execution of the contract on August 28, 1968.

(b) The execution of five written change orders subsequent to August 28, 1968.

(c) The occurrence of Hurricane Camille on August 17, 1969, causing damage to the graving dock before its completion.

(d) The hurricane damage was an act of God, without fault or omission on the part of plaintiffs or defendant.

(e) Plaintiffs submitted a claim for the repair of damages caused by the hurricane in the sum of $80,885.00.

(f) The defendant declined to pay this claim.

(g) The defendant has paid plaintiffs the full contract price for the construction of the graving dock.

(h) Articles II, XIX and XXIX of the contract were initially drafted by the defendant and were not modified by plaintiffs in the negotiations leading up to the execution of the contract, although other portions were modified at plaintiffs' request prior to execution.

The issue is simply which party shall bear the loss under the contract.

Plaintiffs concede that under the general rule in Mississippi when a contractor has agreed to construct an entire structure, the contractor bears the risk of loss of the structure being damaged by act of God prior to its completion, citing United States Fidelity & Guaranty Co. v. Parsons, 147 Miss. 335, 112 So. 469. However, if the contract is divisible and severable allowing the contractor to recover for work which he has performed prior to the full completion of the contract, plaintiffs contend that the risk of loss is on the owner and not the contractor, citing Ganong & Chenoweth v. Brown, 88 Miss. 53, 40 So. 556, and Clark v. Till, 177 Miss. 891, 172 So. 133. Here, plaintiffs claim that the contract by its terms is divisible. Defendant claims contrariwise. Plaintiffs also contend that if the Articles quoted below are ambiguous, the contract should be construed in plaintiffs' favor as Litton drafted said articles.

Both parties rely on three portions of the contract which are as follows:

"ARTICLE II

Once a month, except as hereinafter provided, the Engineer shall make an estimate in writing of the total amount and value of the work performed through the end of the month. On receipt of a properly executed and duly certified invoice from the Contractor which is approved by the Engineer and the Owner's on-site representative, the Owner will make a monthly progress payment to the Contractor within twenty (20) days, an amount, which when added to previous payments to the Contractor, represents ninety (90%) percent of the Engineer's estimate thru the month. The Owner will retain ten (10%) percent of the Engineer's estimate as part security for the fulfillment of this contract by the Contractor. The Owner may cause estimates and payments to be made more frequently than once in each month. No progress estimate or payment need be made when in the judgment of the Engineer, the total value of the work done since the last estimate amounts to less than Five Thousand ($5,000.00) Dollars.

All material and work covered by progress payments made shall thereupon become the sole property of the Owner, but this provision shall not be construed as relieving the Contractor from the sole responsibility for all materials and work upon which payment has been made or the restoration of any work damaged by the Contractor, or as a waiver of the right of the Owner to require the fulfillment of all the terms of the contract or as acceptance of any part of the work before its entire completion and final acceptance.

ARTICLE XIX

(a) the Contractor hereby assumes entire responsibility and liability for any and all persons, including the Contractor's employees and Owner's and Engineer's officers, agents and employees and for any and all damages to property, including damage to Owner's or Engineer's property caused by or resulting from or arising out of any act or omission on the part of the Contractor, its subcontractor, agents or employees under or in connection with this Contract or the prosecution of the work hereunder and shall indemnify and save harmless the Owner and Engineer, their respective officers, agents and employees, against and from risk of claims, demands or damages by third parties arising or alleged to have arisen out of the performance of this Contract. The Contractor, if requested, shall assume and defend, at its own expense, any such suits brought against the Owner.

ARTICLE XXIX

Nothing in this contract shall be construed as vesting in the Contractor any right or property in the materials used after they have been attached or affixed to the work or the soil, but all such materials, shall, upon being so attached or affixed, become the property of the Owner."

Defendants also cite Article XXXI which expressly provides that the contract be construed in accordance with the laws of Mississippi.

Three depositions and...