A. F. Conner & Sons v. Tri-Cty. Water Supply

• Decision Date: 02 September 1976
• Docket Number: No. 4866,TRI-COUNTY,4866
• Parties: A. F. CONNER & SONS, INC., Appellant, v.WATER SUPPLY CORPORATION, Appellee.
• Court: Texas Court of Appeals

Page 856

541 S.W.2d 856

A. F. CONNER & SONS, INC., Appellant, v. TRI-COUNTY WATER SUPPLY CORPORATION, Appellee.

No. 4866.

Court of Civil Appeals of Texas,

Eastland.

Sept. 2, 1976.

Supplemental Opinion Sept. 23, 1976.

Rehearing Denied Sept. 23, 1976.

John Fulbright, Wiley Stem, Jr., Wilson, Olson, Stem & Farr, Waco, for appellant.

Leonard L. Gorin, Clark, Fisher, Gorin, McDonald & Ragland, Waco, for appellee.

McCLOUD, Chief Justice.

Tri-County Water Supply Corporation, a non-profit corporation, sued A. F. Conner & Sons, Inc., and Fidelity & Deposit Company of Maryland, the surety on Conner's performance bond, for damages resulting from Conner's failure to perform its obligations under a written contract to construct a water distribution system. The jury found that the contract was not substantially performed because Conner used material and workmanship which were not of good quality in constructing the pipeline. Judgment was rendered for plaintiff against defendants for $389,815.85, plus prejudgment interest of $75,282.25, for a total of $465,098.10. The judgment provides that Fidelity & Deposit recover over against Conner. Defendants have appealed.

Conner contracted to build a rural water distribution system containing five plants or pump stations and approximately 178 miles of pipeline. The pipeline was to be constructed of PVC (poly vinyl chloride) pipe varying in size from one inch to eight inches. The pipe was put together with 'glue' or 'cement' in sections from twenty to theiry feet in length. Tri-County paid Conner $522,480.13 for constructing the water system. $389,815.85 of the contract figure represented the cost of the pipeline.

By the time of trial approximately 1,000 leaks had been repaired since the completion of the system. Most of these leaks were pipeline leaks, but several were 'adapter' leaks. Plaintiff contended the pipeline had no market value and the leaks were caused by poor workmanship and material. Defendants argued the leaks resulted from improper design, hot water, excessive pressure, and improper maintenance.

In special issues 1 and 2 the jury found that Conner used materials and workmanship in construction of the pipeline which were not of good quality.

Special issue 3 and the answer thereto are as follows:

'ISSUE NO. 3:

Do you find from a preponderance of the evidence that the contract by A. F. Conner & Sons, Inc. to construct the water distribution system in question was not substantially performed because of the use of material and workmanship that were not of good quality in the construction of the pipeline (if you have so found)?

By 'SUBSTANTIALLY PERFORMED' as used in the above issue, is meant that there must have been performance of all material and essential particulars required by the written contract, and permits only such deviations and omissions as can be corrected without great expense and which do not impair the water distribution system in the performance of the purpose for which it was intended.

Answer 'WE FIND THE CONTRACT WAS NOT SUBSTANTIALLY PERFORMED,' or 'WE DO NOT SO FIND'.

ANSWER: We find the contract was not substantially performed.'

Conner argues the definition given is erroneous because it does not take into consideration defects which might be repaired at small cost or unessential defects or omissions which could be remedied without impairment of the water distribution system as a whole.

The court in Hutson v. Chambless, 157 Tex. 193, 300 S.W.2d 943, 945 (1957) said:

"Where it is necessary, in order to make the building comply with the contract, that the structure, in whole or in material part, must be changed, or there will be damage to parts of the building, or the expense of such repair will be great, then it cannot be said that there has been a substantial performance of the contract. Generally, where there has not been such substantial performance, the measure of the owner's damage is the difference between the value of the building as constructed and its value had it been constructed in accordance with the contract. Such a recovery would be just to both parties. It is manifest that to measure the owner's damage by the cost necessary to make the building conform to the contract would often be an injustice, because in many instances such cost would amount to almost as much as the original contract price.'

That rule was followed in Totten v. Houghton, Tex.Civ.App., 2 S.W.2d 530, no writ history, and authorities therein cited. It is announced in practically the same language in 9 American Jurisprudence, Building and Construction Contracts, Sec. 43, p. 33. Many authorities supporting the rule are annotated in 23 A.L.R. 1436, 38 A.L.R. 1383, and 65 A.L.R. 1298.'

In County of Tarrant v. Butcher & Sweeney Construction Company, 443 S.W.2d 302, 307 (Tex.Civ.App.--Eastland 1969, writ ref. n.r.e.), this court stated:

'The rule is stated in McCormick on Damages, 1935, Section 168, at pages 648--649, as follows:

'In whatever way the issue arises, the generally approved standards for measuring the owner's loss from defects in the work are two: First, in cases where the defect is one that can be repaired or cured without undue expense, so as to make the building conform to the agreed plan, then the owner recovers such amount as he has reasonably expended, or will reasonably have to spend, to remedy the defect. Second, if, on the other hand, the defect in material or construction is one that cannot be remedied without an expenditure for reconstruction disproportionate to the end to the attained, or without endangering unduly other parts of the building, then the damages will be measured not by the cost of remedying the defect, but by the difference between the value of the building as it is and what it would have been worth if it had been built in conformity with the contract.'

To the same effect is the Restatement of Contracts, Section 346(1)(a)(II); J. E. Hollingsworth & Co. v. Leachville Special School Dist., 157 Ark. 430, 249 S.W. 24; Campbell v. Koin, 154 Colo. 425, 391 P.2d 365; Boggs v. Shadburn, 65 Ga.App. 683, 16 S.E.2d 234; H. P. Droher & Sons v. Toushin, 250 Minn. 490, 85 N.W.2d 273; 5 Corbin on Contracts, 1964, Section 1090.'

The submitted definition of 'Substantially Performed' specifically permits deviations and omissions which can be corrected without great expense and which do not impair the water distribution system. Conner's point is overruled.

Special issues 8 and 9 and the jury's answers thereto are as follows:

'ISSUE NO. 8:

What do you find from a preponderance of the evidence would have been the reasonable market value on December 12, 1970, of the water distribution system built by defendant A. F. Conner & Sons, Inc. if the pipeline of said system had at that time contained only material and workmanship of good quality?

Answer in dollars and cents.

ANSWER: $522,480.13.'

'ISSUE NO. 9:

What do you find from a preponderance of the evidence was the reasonable market value on December 12, 1970, of the water distribution system built by defendant A. F. Conner & Sons, Inc., in the actual condition which such system then was containing the material, if any, and workmanship, if any, that were not of good quality which had been used by defendant A. F. Conner & Sons, Inc. in the construction of the pipeline in question?

Answer in Dollars and Cents.

ANSWER: $132,664.28.'

Fidelity argues the court erred in using the December 12, 1970 date because the correct measure of damages is the difference in value as of the time of trial and the value had the system been constructed in accordance with the contract. Fidelity has no point or assignment of error raising an objection that issues 8 and 9 should have used the time of trial as the proper date. Therefore, the argument and authorities cited for that contention are inapplicable.

Fidelity further argues the certification of completion was dated June 4, 1970, rather than December 12, 1970. Conner repaired, at its expense, all leaks in the system until December 12, 1970. Since that date Tri-County has repaired all leaks. Fidelity has failed to show reversible error.

Defendants urge that the court erred in admitting the testimony of William Garner given at a former trial of the case. We disagree.

In the first trial Garner testified that the pipeline had no value because of the excessive number of the leaks. This testimony was read to the jury in the instant trial. The testimony of Garner at the former trial was given on the same issues, before the same parties, and full opportunity existed for cross-examination.

The rule to be followed was recently announced in Hall v. White, 525 S.W.2d 860, 862 (Tex.1975) as follows:

". . . The only question is the unavailability of the witness. Former testimony is not admissible if a witness is available at the subsequent trial. The party offering the former testimony must therefore prove unavailability, which means in Texas 'that the witness is dead, or that he had become insane, Or is physically unable to testify, or is beyond the jurisdiction of the court, or that his whereabouts is unknown and that diligent search has been made to ascertain where he is, or that he has been kept away from the trial by the adverse party.' Lone Star Gas Co. v. State, 137 Tex. 279, 153 S.W.2d 681, 697 (1941); Houston Fire & Casualty Insurance Co. v. Brittian, 402 S.W.2d 509 (Tex.1966).' (Emphasis added.)

Garner was hospitalized at the time of trial. He was scheduled for immediate lumber disc surgery. Plaintiff properly proved that the witness was 'physically unable to testify'. Missouri-Kansas-Texas Railroad Co. v. Bush, 310 S.W.2d 404 (Tex.Civ.App.--Austin 1958, writ ref. n.r.e.); Harris v. Reeves, 421 S.W.2d 689 (Tex.Civ.App.--Waco 1967, writ ref. n.r.e.). Defendants' reliance upon Houston Fire & Casualty Insurance Co. v. Brittian, 402 S.W.2d 509 (Tex.1966) is misplaced. There the court noted that none of the exceptions permitting the introduction of testimony given...