Floyd v. Ring Const. Corporation

• Decision Date: 01 June 1946
• Docket Number: No. 1330.,1330.
• Citation: 66 F. Supp. 436
• Parties: FLOYD v. RING CONST. CORPORATION.
• Court: U.S. District Court — District of Minnesota

66 F. Supp. 436

FLOYD v. RING CONST. CORPORATION.

No. 1330.

District Court, D. Minnesota, Fourth Division.

June 1, 1946.

Leonard, Street & Deinard, of Minneapolis, Minn., for plaintiff.

Brill, Maslon, Grossman & Brill, of Minneapolis, Minn., for defendant.

JOYCE, District Judge.

This suit is on an employment contract. Defendant is a construction contractor. Plaintiff was one of its superintendents and had for many years worked as an estimator and superintendent of construction for defendant. His compensation was fixed by a contract executed June 3, 1941, at a stated salary plus a percentage of the net profits on construction work that he estimated and supervised. In 1942 defendant bid on and was awarded by the United States Government two construction contracts at Camp McCoy, Sparta, Wisconsin, on what was known as Areas C and E. There is a dispute as to whether plaintiff did any substantial amount of the estimating on these projects but in any event the parties entered into a supplemental agreement providing that plaintiff was to supervise only Area C and was to receive ten per cent of the net profits on that Area alone with a minimum of $3,500 per month from April 1, 1942, to the date of the completion of the construction. This supplemental agreement is dated April 1, 1942, but was actually signed later in the year when construction was almost completed. However, the 1941 contract, except as modified, remained in full force and effect and it is the language of that contract that is the basis of this litigation. The contract is in the form of a letter written by plaintiff to defendant confirming their agreement and is signed by both parties. The pertinent part reads:

"I am to receive ten percent of the net profits of each and every job estimated by me which is awarded to you, and the monies arising from the profits will not become due to me until the work undertaken has been completed and accepted and full settlement is received by Ring Construction Corporation from the owner, and in connection with such jobs I am to act as Superintendent. Net profits as used herein is understood and agreed to be the difference between the contractors price and the total cost of labor, materials, subcontracts, insurance and social security taxes and all special taxes that may be imposed by the State, in other words, all licenses, permits and taxes to be paid from this project except the United States Federal Income Tax only; freight and cartage, telephone and telegrams, hotel rooms or office at the job. Itemized transportation expenses which is definitely incurred in securing the award of any such contracts or which are necessarily incurred in connection with the supervision of the job after award. Any equipment placed on the job is to be charged as expense at the prevailing rental rate in the locality of the job or job depreciation depending on which is the lesser. All expenditures made by the Minneapolis office such as freight, stamps and telephones directly in connection with the job that I am supervising will be charged against the job cost. This job will reimburse Ring Construction Corporation offices and expenditures as outlined above. If the Ring Construction Corporation has other work that I have not estimated or for which I have not made prior agreements or executed same in writing, I will have no claim or any interest in such work that Ring Construction may have under construction."

The meaning of the terms "full settlement", "contractor's price" and "net profits", as used in the contract as quoted, in view of subsequent developments is the kernel of this dispute. The construction work on these projects commenced in April, 1942. On April 28, 1942, the Renegotiation Act, 50 U.S.C.A.Appendix, § 1191, became effective which by its terms subjects defendants contract with the government to renegotiation. The project was substantially completed by November, 1942, and was accepted by the government. The full contract price was paid and defendant realized a profit of some $4,000,000. Using this figure as a basis, plaintiff computes his percentage on Area C at $120,000 and is suing for this amount less the $24,500 he has already received on the fixed monthly compensation arrangement previously mentioned. Since the completion of the project defendant and the government have been engaged in numerous renegotiation proceedings without reaching a settlement. Defendant's case is now pending in the Tax Court where defendant is attacking both the constitutionality of the renegotiation act and the amount of the demand under the act as determined by the Assistant Secretary of War (the demand which defendant has refused to pay is $1,365,000). It is defendant's position that there has yet been no "full settlement" and that "net profits" have not been and cannot be determined until the renegotiation proceedings are finally ended, and that the action should be dismissed for being prematurely brought. Plaintiff's position is that the Renegotiation Act has no effect on his contract, that as the contract price has been paid defendant has had a full settlement and that plaintiff's percentage is now due computed on the "net profits" before or in disregard of renegotiation.

The issue is prdincipally one of law. Counsel have expended considerable energy in an analysis of the renegotiation law, its underlying philosophy, its legislative history and probable constitutionality in whole or in part. I do not believe that many of these questions are pertinent here. The only issue in this case is the meaning of the contract between plaintiff and defendant. Plaintiff insists that the contract is not ambiguous and therefore the evidence bearing on the construction the parties placed on it is irrelevant. This argument is particularly urged in relation to the definition of "net...