Fluor Corp. v. United States ex rel. Mosher Steel Co.

• Decision Date: 11 February 1969
• Docket Number: No. 21307,21307B and 21307C.,21307
• Citation: 405 F.2d 823
• Parties: FLUOR CORPORATION, Ltd., et al., Union Tank Car Company, Ward Industries Corporation, Appellants and Cross-Appellees, v. UNITED STATES of America ex rel. MOSHER STEEL COMPANY, Appellees and Cross-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

405 F.2d 823 (1969)

FLUOR CORPORATION, Ltd., et al., Union Tank Car Company, Ward Industries Corporation, Appellants and Cross-Appellees, v. UNITED STATES of America ex rel. MOSHER STEEL COMPANY, Appellees and Cross-Appellants.

Nos. 21307, 21307A, 21307B and 21307C.

United States Court of Appeals Ninth Circuit.

January 6, 1969.

Rehearing Denied February 11, 1969.

Evans, Kitchel & Jenckes, Phoenix, Ariz., Hull, Terry & Bret Harte, Boyle, Bilby, Thompson & Shoenhair, Tucson, Ariz., Thomas C. McConnell, Chicago, Ill. (argued), Lotterman & Weiser, New York City, for appellants & cross-appellees.

Locke, Purnell, Boren, Laney & Neely, Dallas, Tex., Cusick, Watkins & Frey, Tucson, Ariz., for appellees.

Before HAMLIN, BROWNING and ELY, Circuit Judges.

BROWNING, Circuit Judge:

The district court rendered judgment in favor of Mosher Steel Company and against the various appellants for prices agreed to be paid for materials furnished and services rendered by Mosher in the fabrication of steel used in the construction of missile launch facilities in Arizona and California.¹ We affirm the trial court's judgment except as it denied prejudgment interest. As to this, we reverse and remand for further proceedings.

Appellants strongly attack many of the trial court's findings. We have, therefore, examined the record with care. We find substantial conflicts in the testimony and the documentary evidence, and even greater differences in the construction which the parties place on events leading to the litigation and the inferences which they draw from them.² We have not asked ourselves whether we would have resolved the conflicts and ambiguities as the trial judge did, nor whether we would have drawn the same inferences. United States v. Nat. Ass'n of Real Estate, 339 U.S. 485, 495-496, 70 S.Ct. 711, 94 L.Ed. 1007 (1950). We have, however, satisfied ourselves that upon an examination of the entire evidence we are not "left with the definite and firm conviction that a mistake has been committed" in any of the trial court's findings. United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 (1948); see Commissioner of Internal Revenue v. Duberstein, 363 U.S. 278, 291, 80 S.Ct. 1190, 4 L.Ed.2d 1218 (1960). We therefore accept those findings, and base the statements of fact in this opinion upon them.

Fluor Corporation, Ltd., was the prime contractor for the construction of the Arizona launch facilities, and the insurance company appellees were sureties on on Fluor's performance bond. Matich Bros. and M. M. Sundt Construction Corp., who are not parties to this litigation, were the prime contractors for the California launch facilities.

Fluor and Matich & Sundt entered into separate first tier subcontracts with Union Tank & Mfg. Co.³ Union, in turn, entered into second tier subcontracts for steel fabrication work with IMI-Ward, a joint venture created by Idaho-Maryland Industries Inc. and Ward Industries Corporation.

When IMI-Ward fell behind schedule in the performance of its subcontract, Union, on October 10 or 11, 1961, instructed an IMI-Ward official to "farm out" the steel fabricating work, and approved the selection of Mosher to perform it. Because the IMI-Ward official did not think Mosher would accept an IMI-Ward purchase order, Union agreed that if a satisfactory contract could be worked out with Mosher, Union would give Mosher a Union purchase order.

On October 13, the IMI-Ward official negotiated a detailed contract with Mosher for the required work. As anticipated, Mosher would not accept IMI-Ward's credit. The IMI-Ward official then advised Mosher that a Union purchase order would be issued. On October 16, Mosher set out the agreed-upon terms in a letter addressed to the IMI-Ward official. That official signed the letter on behalf of Union and sent copies of the executed writing to Union. Mosher then began performance of the work.

Union told Mosher on October 23 that Union's purchase order would be issued within two or three weeks, and that the October 16 letter would serve as an interim purchase order until the formal purchase order could be mailed. Thereafter, on October 31, IMI-Ward asked Mosher, as a matter of accounting convenience for IMI-Ward, to change the designated customer on the job from Union to IMI-Ward, and to accept IMI-Ward purchase orders in place of those of Union. Mosher agreed, provided Union would be responsible for payment.

IMI-Ward sent Mosher two purchase orders on November 3 covering the work to be done. Mosher informed Union that the completed material would not be shipped until Mosher received confirmation that Union would be responsible for payment.

On November 15, after securing IMI-Ward's approval, Union advised Mosher that Union would pay Mosher directly and deduct the payments from the amounts Union was to pay IMI-Ward under the latter's subcontract.⁴ Mosher understood, and Union intended Mosher to understand, that its commitment extended to all the work covered by IMI-Ward's purchase orders of November 3. Upon receiving Union's commitment, Mosher changed the customer's name from Union to IMI-Ward, completed the work, and delivered the fabricated steel to the job sites.

On February 2, 1962, IMI filed a voluntary petition under Chapter 11 of the Bankruptcy Act. Mosher submitted a proof of claim in these proceedings, and was issued IMI stock under a plan of reorganization. Except for this stock, Mosher was not paid for its work.

The district court gave judgment against Union, finding that the commitment Union gave Mosher on November 15 and Mosher's completion and delivery of the work thereafter created a contract between Union and Mosher obligating Union to pay Mosher directly. Judgment was rendered against Fluor and its sureties under the Miller Act, 40 U.S.C. § 270a.⁵ The district court entered judgment against Ward on the ground that IMI-Ward's November 3 work orders and Mosher's fabrication and delivery of material pursuant to such orders created a contract between Mosher and IMI-Ward obligating Ward to pay Mosher in accordance with the terms and conditions of those orders.

Union contends that Mosher performed the work for IMI-Ward; that Union's agreement, if any, was only a guarantee to pay Mosher if IMI-Ward did not; and that, being oral, this agreement to answer for the debt of another was unenforceable under the Statute of Frauds.

Ward, on the other hand, contends that the only viable contract was an oral agreement between Mosher and Union arising on October 13, binding Mosher to perform the work and Union to pay for it. If there was a November agreement between Mosher and IMI-Ward, Ward argues, it required nothing of Mosher which Mosher was not already obligated to do under its October agreement with Union, and, therefore, any promise by IMI-Ward was not supported by consideration. Furthermore, the only consideration for which Mosher bargained was Union's unconditional promise to pay Mosher directly. Consequently, any promise by IMI-Ward was not bargained for and hence was unenforceable under our decision in Colorado Nat'l Bank of Denver v. Bohm, 286 F.2d 494 (1961).

As we read the district court's findings, the court determined that both Union and IMI-Ward assumed direct obligations to pay Mosher for the work. IMI-Ward contracted directly with Mosher to have Mosher perform the work described in the November 3 work orders in return for payment by IMI-Ward of the prices fixed in those orders. This agreement was subject, however, to the condition precedent that Union also agree to be directly liable for payment. When Union agreed to pay Mosher, it became directly bound to Mosher. Union's promise also satisfied the condition precedent to the direct contractual obligations between IMI-Ward and Mosher.⁶

In view of Union's obligations under its subcontract with Fluor and Matich & Sundt, Union had a substantial interest in assuring performance of the work by Mosher. As the district court found, "in agreeing to pay Mosher directly, Union * * * acted primarily to protect and advance its own interests under its subcontracts * * *." Since Union's promise to pay was a direct and original undertaking rather than a collateral promise to pay IMI-Ward's debt, it was not within the Statute of Frauds, even though IMI-Ward was also obligated to pay for the work. Holmes v. Suffrin, 198 Ill.App. 45 (1916); Peters v. Raven, 159 Ill.App. 122 (1910); Leisman & Co. v. Otto, 64 Ky. (1 Bush) 225 (1866); cf. Granite City Lime & Cement Co. v. Board of Educ. of School Dist. 126, 203 Ill.App. 134 (1916). See 4 Corbin on Contracts § 926, p. 705.⁷

As to Ward's argument that any promise made by Ward to Mosher in November was without consideration because of Mosher's pre-existing contractual obligation to perform the same work for Union, it should be noted that the district court did not conclude that a Union-Mosher contract arose in October. Even if such a prior Union-Mosher contract existed, IMI-Ward's subsequent promise would still be supported by consideration. Under the arrangement finally agreed to, Mosher, at IMI-Ward's solicitation, undertook the additional obligation to designate IMI-Ward, rather than Union, as the customer, and to accept the IMI-Ward purchase orders. These new undertakings were sufficient to support IMI-Ward's promise to pay.⁸

Ward's reliance upon Colorado Nat'l Bank of Denver v. Bohm, supra, 286 F.2d 494, is also misplaced. Mosher's insistence upon a direct commitment from Union does not mean that this was the only consideration for which Mosher bargained. Mosher also sought and obtained a promise of payment from IMI-Ward. The fact that IMI-Ward's promise alone was not enough to satisfy Mosher, or that Union's promise alone might have been sufficient, is irrelevant. See Granite City Lime & Cement Co. v. Board of Educ. of School Dist. 126, supra, 203 Ill.App. 134; Peters v. Raven, supra, 159 Ill.App. 122; Restatement of Contracts §§...