Food Management, Inc. v. Blue Ribbon Beef Pack, Inc.

• Court: U.S. Court of Appeals — Eighth Circuit
• Writing for the Court: VOGEL, MATTHES and BRIGHT, Circuit
• Citation: Food Management, Inc. v. Blue Ribbon Beef Pack, Inc., 413 F.2d 716 (8th Cir. 1969)
• Decision Date: 30 July 1969
• Docket Number: No. 19048,19072.,19048
• Parties: FOOD MANAGEMENT, INC., Appellant, v. BLUE RIBBON BEEF PACK, INC., Appellee. BLUE RIBBON BEEF PACK, INC., Appellant, v. FOOD MANAGEMENT, INC., Appellee.

413 F.2d 716 (1969)

FOOD MANAGEMENT, INC., Appellant, v. BLUE RIBBON BEEF PACK, INC., Appellee.

BLUE RIBBON BEEF PACK, INC., Appellant, v. FOOD MANAGEMENT, INC., Appellee.

Nos. 19048, 19072.

United States Court of Appeals Eighth Circuit.

July 30, 1969.

COPYRIGHT MATERIAL OMITTED

John J. Greer and Jerry C. Estes, of James, Greer, Nelson & Bertell, Spencer, Iowa, for Food Management, Inc., Frank B. Nelson and James Q. Doran, of Cohen, Baron, Todd & Hogan, Cincinnati, Ohio, on the briefs.

C. Frederick Beck and David J. Butler, of Beck, Butler & Pappajohn, Mason City, Iowa, for Blue Ribbon Beef Pack, Inc.

Before VOGEL, MATTHES and BRIGHT, Circuit Judges.

VOGEL, Circuit Judge.

Food Management, Inc., an Ohio corporation, instituted this action against Blue Ribbon Beef Pack, Inc., an Iowa corporation, seeking recovery of the balance alleged due under a contract for architectural, engineering and other services. Blue Ribbon Beef counterclaimed for restitution of money paid to Food Management under the contract. Both parties appeal from a judgment against the claim and counterclaim. Federal jurisdiction is based upon diversity of citizenship and the requisite statutory amount in controversy. The substantive law of the State of Iowa controls. The parties will be referred to as in the court below.

Defendant Blue Ribbon is the successor by merger to Peter Piper Packers, Inc., also an Iowa corporation. On July 8, 1965, plaintiff Food Management entered into a written "turn key" contract with Peter Piper Packers whereby Food Management would design, supervise construction of and initially manage a meat packing plant at LeMars, Iowa. Food Management had previously completed a feasibility study for Peter Piper for which a price of $5,000 had been agreed upon and paid.

The written contract provided that whereas Peter Piper intended to construct and equip a facility to slaughter, chill and ship approximately 50 head of cattle per hour, expandable to a maximum potential of 70-75 per hour, it agreed to pay Food Management (the "Engineer") a fee of 8% of the cost of the work for the following services:

"1. The Engineer\'s Services

"A. The Engineer\'s professional services shall consist of the necessary conferences, the preparation of preliminary studies, working drawings, specifications, detail drawings for architectural, structural and mechanical work as well as for U. S. Department of Agriculture approval; assistance in the drafting of forms of proposals and contracts and assistance in selecting the Contractor or Contractors to perform the work. * * *

"B. The Engineer will make four (4) trips or as many trips as may be necessary for conferences, inspection, and coordination of the work. * * *

"C. The Engineer will furnish qualified personnel, to insure * * * proper construction, installation and operation of equipment. A qualified engineer will remain at the facility for a period of six weeks and such additional period as may be required after completion of construction for shakedown and personnel instruction.

"D. The Engineer will furnish a detailed estimate of cost, together with a detailed equipment list for the Packer\'s approval before architectural and mechanical drawings are started. The Engineer will obtain M. I. D. Meat Inspection Division, Department of Agriculture approval for the project and assures workability of the layout and that all drawings meet local and state building requirements.

"E. The Engineer shall furnish a complete manning list for all production jobs at specified production rates, with basic costs for each classification appropriate for the LeMars Labor market."

The contract also provided that Food Management would use its best efforts to obtain a qualified major meat distributor willing to enter into a custom slaughter or "captive" contract with Peter Piper. Under such arrangement, the major packer would buy the cattle, ship them to the plant, pay Peter Piper for the slaughtering and processing services, and then would sell the beef. Food Management also agreed to assist Peter Piper to negotiate such a contract.

There was no cost limitation expressed in the contract.

On September 30, 1965, Food Management entered into a written contract with Johnson Jamerson Associates, licensed architects and engineers in Iowa, for the performance of part of the work under the general contract. This contract provided in part:

"2. THE PRINCIPAL CONSULTANT Food Management AGREES to provide the Associate Engineer Johnson Jamerson with complete information concerning the requirements of This Part of the Project and to perform the following services:

"A. Furnish Associate Engineer complete site information including topographic survey, property lines, utilities, soil test data and site plan showing proposed building location, walks, drives, railroad spur track and parking area. In general, the Principal Consultant shall assume the responsibility for all layout and design work beyond a line 5\'-0" distant from the exterior walls of the proposed building. This work shall include:

"(1) Stock pens, drives and ramps

"(2) Grading and area drain location

"(3) Access roads

"(4) Water supply

"(5) Sewage disposal

"(6) Area lighting locations

"(7) Area drainage requirements

"(8) Heating requirements for room heat and watering tanks

"The exception to this condition shall be that work necessary to provide the layout of Plumbing, Heating and Electrical facilities for areas outside the boundary line mentioned above which shall be part of the design work furnished by the Associate Engineer. Within the building proper the Principal Consultant shall assume the responsibility for: Building layouts and those drawings required for M. I. D. approval and processing equipment layout and specifications. He shall also furnish to the Associate Engineer the following data:

"(1) Rail layout, rail loads, heights and clearances

"(2) Design live loads for floors and roofs

"(3) Room temperature requirements and product loads

"(4) Refrigeration loads in various rooms to be refrigerated

"(5) Lighting levels for various rooms

"(6) Ventilation requirements in air changes per hour

"(7) Water demand

"(8) Boiler load data

"(9) Utility requirements and connecting point of various items of equipment. * * *

* * * * * *

"C. Consideration of the Associate Engineer\'s Work: The Principal Consultant shall give thorough consideration to all reports, sketches, drawings, specifications, proposals and other documents presented by the Associate Engineer, and shall inform the Associate Engineer of his decision within a reasonable time so as not to delay the work of the Associate Engineer.

"D. Standards: The Principal Consultant shall furnish the Associate Engineer with a copy of any design and construction standards he shall require the Associate Engineer to follow in the preparation of drawings and specifications for This Part of the Project."

Food Management contacted major packers on Peter Piper's behalf concerning the possibility of a custom slaughter contract. On December 15, 1965, Food Management informed Peter Piper that in order to enter into a captive contract with the prospective packer, Armour and Company, construction of a plant providing for a 70-75 head per hour kill rate and at a cost of $1,567,000 would be required. Peter Piper thereafter directed Food Management to proceed with the original plans for a 50 head per hour kill rate. On February 24, 1966, Peter Piper decided not to enter into a captive contract with Armour.

On or about March 8, 1966, Peter Piper signed a merger agreement with Blue Ribbon and informed Food Management that it would like a plant with a 40 head per hour capacity. On March 25, 1966, Peter Piper cancelled the contract with Food Management on the ground "Food Management had defaulted". At this point, Peter Piper had paid $24,000 to Food Management for services under the contract.

On the basis that Food Management had not designed a $1,000,000 plant, as Blue Ribbon alleges was orally agreed upon and was imposed as a cost limitation, Peter Piper refused to make any further payments to Food Management and demanded the return of the $24,000 which it had paid.

Food Management instituted this action to recover the balance due for services rendered under the contract, in the amount of $32,085.61. Blue Ribbon counterclaimed for recovery of the $24,000 Peter Piper had paid to Food Management.

None of Food Management's officers or employees was licensed to practice architecture or engineering in the State of Iowa during the period it performed services for Peter Piper under the contract.

In a trial to the court without a jury, the Honorable Edward J. McManus, Chief Judge, presiding, Blue Ribbon presented testimony to the effect that Food Management stated that the plant could be constructed for approximately $900,000, exclusive of land and architect's fee, or for $1,000,000 with facilities for hide curing and edible rendering, and that these figures were imposed upon Food Management as a cost limitation. Blue Ribbon also introduced evidence that the Food Management plans were for a plant that would have required over $1,800,000 to construct and equip. Food Management presented testimony to the effect that there was no cost limitation, but merely an estimate or approximation, and that the increase in cost of $1,567,000 resulted from following Peter Piper's instructions to increase the plant's kill rate from 50 to 70-75 head per hour in order to obtain a custom slaughter agreement with Armour and Company.

In an unpublished opinion, the trial court held:

1. "In performing the general contract plaintiff practiced professional engineering and architecture in violation of Iowa law. Iowa Code, §§ 114.1, 114.26, 118.15, 118.21 (1966)." In a footnote accompanying this holding, the court stated:

"Although plaintiff retained a registered Iowa architecture and engineering firm, it is the court\'s view that plaintiff was `in

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