Explosives Corp. of America v. Garlam Enterprises Corp., s. 86-1303
| Decision Date | 05 February 1987 |
| Docket Number | Nos. 86-1303,86-1362 and 86-1650,s. 86-1303 |
| Citation | 817 F.2d 894 |
| Parties | EXPLOSIVES CORPORATION OF AMERICA, et al., Plaintiffs, Appellants, v. GARLAM ENTERPRISES CORPORATION, et al., Defendants, Appellees. (Two Cases) EXPLOSIVES CORPORATION OF AMERICA, Plaintiff, Appellee, v. GARLAM ENTERPRISES CORPORATION, Defendant, Appellant. . Heard |
| Court | U.S. Court of Appeals — First Circuit |
Stuart G. Oles with whom Oles, Morrison & Rinker, Seattle, Wash., and Salvador Antonetti and Fiddler, Gonzalez & Rodriguez, San Juan, P.R., were on brief, for plaintiffs, appellants.
Charles A. Cordero with whom Cordero, Colon & Miranda, Old San Juan, P.R., were on brief, for defendants, appellees.
Before COFFIN, BOWNES and TORRUELLA, Circuit Judges.
This appeal stems from a contract between Garlam Enterprises Corporation (Garlam) and Explosives Corporation of America (Explo). On January 3, 1972, Explo sued Garlam for breach of contract. Garlam filed an answer and brought a counterclaim alleging breach of contract by Explo. After two jury-waived trials, one on liability and one on damages, Explo was found liable to Garlam in the amount of $2,423,177. 1 Explo has appealed the liability finding, the damages award, and the award of postjudgment interest. It also claims that the adjudications made by the Superior Court of Puerto Rico in a suit brought by Garlam against the Puerto Rico Highway Authority were binding on Garlam and the district court and require a reversal of the judgment. Garlam has appealed from a denial of its motion to substitute Rockor, Inc., for Explo as the defendant-appellant in the contract action. Garlam also appeals the district court's refusal to award it attorney's fees, costs and prejudgment interest.
The district court made extensive and detailed findings of fact which we have reviewed pursuant to the command of Federal Rule of Civil Procedure 52: "Findings of fact, whether based on oral or documentary evidence, shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge of the credibility of the witnesses." Based on our examination of the trial transcript, depositions and exhibits, we conclude that the district court did not make any clearly erroneous findings of fact. Our summary of the evidence and findings follows.
Garlam was the successful low bidder for the construction of one section of a highway in Puerto Rico running from San Juan to Ponce. It entered into a contract with the Puerto Rico Highway Authority to do the work for an estimated total price of $13,489,412.39. The contract was advertised and bid as a series of forty-one different work items. Garlam submitted a separate bid price for each. Garlam's total bid was calculated by multiplying each work unit price by the estimated quantities of work to be done and then adding up the amounts for each of the forty-one work items. The estimated quantities of work were supplied by the Highway Authority.
Two work items are of special significance. Item 4, entitled Unclassified Excavations, required, inter alia, the mass blasting of rock wherever found. Garlam's bid was $2.03 per cubic meter on an estimated quantity of 4,680,000 cubic meters of material to be excavated. Garlam had to excavate the material from the job site and deposit it in designated embankment areas as fill. Item 35 covered presplitting, which is a procedure for limiting the effects of rock blasting to a restricted area. Garlam's bid price for this work was $1.40 per lineal foot on an estimated quantity of 300,000 lineal feet; the total bid price was $420,000.
After a period of negotiations between Raymond Garffer, president of Garlam, John W. Goode, division general manager for Explo, and Hugh E. Oswald, general counsel for Explo, a contract was executed on April 28, 1971. An amendment to the contract executed May 5, 1971, stated that Explo would begin work "on May 12, 1971, for a total of four hundred eighty-nine (489) calendar days and shall terminate said work September 22, 1972." The contract stated that "time was of the essence."
The contract provided that Explo would perform all the mass blasting necessary under Item 4 of the prime contract between Garlam and the Highway Authority at a unit price of .51 cents per cubic meter of material. Explo also agreed to do the presplitting Immediately after the contract was executed on April 28, 1971, Garlam instructed Explo to begin blasting. Explo, however, did not start until early in June. After the first few blasting shots, Garlam informed Explo that the rock fragments were too large and contrary to the contract specifications. Explo did not challenge Garlam's interpretation of the contract until September 22, 1971, when it stated in a letter to Garlam that the rock-size clause meant "an average maximum" of fifteen inches.
required under Item 35 of the prime contract at the rate of .70 cents per lineal foot. The unit price clause of the contract contained the following provision: "Blasted rock fragments shall average up to a maximum of 15 inches in size." This language was the result of negotiations between Garffer, Goode and Oswald. The words "up to a maximum" were inserted at the insistence of Garffer; the word "average" came from Goode. Oswald drafted the composite clause. Garffer testified that he expected that ninety to ninety-five percent of the blasted material would be less than fifteen inches in size. He acknowledged that inevitably some large boulders would be produced, but anticipated that they would be reduced in size by secondary blasting. Garffer also testified that when he first met with Albert Teller and John Goode, who were in charge of Explo's field operations in Puerto Rico, he asked them if they could give him an average product four to six inches in size and they assured him that they could
Explo had blasted very little rock of any size by September of 1971 and had received no payments from Garlam for what blasting it had done. Explo retained the law firm of DeGarmo, Liedy, Oles and Morrison of Seattle. They contracted for the services of Arner W. Erickson, a civil engineer, who had considerable experience in highway construction and blasting operations. Erickson came to Puerto Rico on September 5, 1971, to investigate the situation. He met with Garffer of Garlam the next day and inspected the job site.
Erickson's testimony included statements to the following effect: He did not attempt to resolve the controversy over the rock size. He saw blasted rocks ranging in size from six and seven feet down to one foot. Garlam had good reasons for wanting rocks less than fifteen inches in size; the blasted material would be easier to handle and move and it was more suitable for use as fill in the embankment. Large boulders could not be used for fill.
Erickson returned to Seattle before September 11. He advised Explo to replace some of its personnel in Puerto Rico and to increase the amount of equipment it was using. Explo replaced the two men in Puerto Rico in charge of its operations, Teller and Goode, with Messrs. Cronin and Herrera. Cronin and Herrera arrived sometime in late September. Beginning in October, the quantity and quality of the blasting material produced by Explo improved. Garlam had continuously insisted that the rock blasted should not exceed fifteen inches in size, but Explo regularly and consistently exceeded that size.
In the morning of November 3, 1971, Garffer met with Attorney Oles and W.E. Johnson of Explo. Johnson had been hired by Explo to manage all its Puerto Rico jobs 2 from October of 1971 to March, 1972. Oles informed Garffer that, unless its price for mass blasting was raised to .82 cents per cubic yard and its presplitting increased by some negotiated amount, Explo would be forced to leave the project. Garffer told them that he would think it over and give them his decision that afternoon. Garffer told Oles and Johnson in the afternoon of November 3 that he would not renegotiate the contract prices. Oles then informed Garffer orally that Explo terminated the contract. This oral termination was confirmed in a letter dated November 9.
The reason advanced by Explo for its slow progress on the job was that Garlam had no available written work schedule and that Explo, therefore, was unable to properly program its blasting activities. Garlam followed the critical path method in Under the contract, there were to be partial payments to Explo for its production at the agreed unit price within ten days after Garlam had been paid by the Highway Authority for that particular work. Garlam made no payments to Explo, although it had received payments from the Highway Authority for work done by Explo. Garlam made no payments to Explo for two reasons. First, it felt that payment was not warranted because of the great number of rocks in excess of fifteen inches. In connection with this, there was some discussion of reducing the payments by fifty percent because of the oversized blasted fragments, but no agreement was reached. The second reason for Garlam's failure to make any payments was that Explo owed it money for the use of Garlam's equipment, personnel, and other services. The amount due Garlam from Explo was greater than any payments due Explo for blasting.
scheduling its work. It provided the Highway Authority with its work schedules, which under the prime contract had to be programmed on a weekly and daily schedule. Copies of the critical path schedules were available to Explo in Garlam's construction-site office. One of Garlam's supervisors met daily with Explo and advised it of the work schedule. Explo was also advised of the weekly work schedule that Garlam was following.
The critical findings of the district court can be stated...
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