Frank Sullivan Company v. Midwest Sheet Metal Works

• Decision Date: 31 July 1964
• Docket Number: No. 17406.,17406.
• Citation: 335 F.2d 33
• Parties: FRANK SULLIVAN COMPANY, Appellant, v. MIDWEST SHEET METAL WORKS, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

335 F.2d 33 (1964)

FRANK SULLIVAN COMPANY, Appellant, v. MIDWEST SHEET METAL WORKS, Appellee.

No. 17406.

United States Court of Appeals Eighth Circuit.

July 31, 1964.

Vincent P. Courtney, of Allen & Courtney, St. Paul, Minn., made argument for appellant and filed brief with Joseph P. Coughlin, Cambridge, Mass.

James Geraghty of Altman, Geraghty & Mulally, St. Paul, Minn., made argument for appellee and filed brief.

Before VOGEL, MATTHES and BLACKMUN, Circuit Judges.

BLACKMUN, Circuit Judge.

Midwest Sheet Metal Works, a Minnesota partnership, instituted this diversity suit against Frank Sullivan Company, a Boston contractor, to recover damages for breach of contract. The jury returned a verdict in favor of Midwest for $85,000. Judge Devitt denied Sullivan's motion for judgment n. o. v. or a new trial. 215 F.Supp. 607. The controversy arises out of the project for the extension and remodeling of the United States Post Office and Customs House at Saint Paul. Minnesota law controls. Although Sullivan asserts twenty separate points on its appeal, these come down essentially to four primary issues:

1. The identity of Midwest's Exhibit 5 as the agreement between the parties, and its effectiveness as a contract.

2. The effect of the absence of the prime contractor's consent to the agreement.

3. The authority of Sullivan's agent to sign the agreement.

4. Damages.

The prime contractor on the project was Electronic & Missile Facilities, Inc., of New York City (EMF). On December 4, 1961, EMF and Sullivan executed a lengthy and detailed subcontract whereby Sullivan undertook all plumbing, heating apparatus, air conditioning, and ventilation work on the job for an agreed price of $1,650,000. This contract was executed on behalf of Sullivan by Francis J. Sullivan (Frank) as its president.

In the fall of 1961, before the formal execution of the agreement between EMF and Sullivan, Frank had contact with Michael J. Elnicky, the dominant partner of Midwest, about Midwest's taking on the sheet metal and air conditioning portion of Sullivan's subcontract. Sullivan had even invited a quotation from Midwest for this work. On November 1 Midwest quoted a figure in excess of a million dollars. Frank by telephone told Elnicky that this bid was about $200,000 too high. Elnicky indicated he might reduce his price somewhat but could not approach Sullivan's suggested figure. Frank testified that he then told Elnicky, "Well, look, we have got a fellow going out there, and I will show you that these are not prices that we dreamed up, these are prices that we used in making our bid, and we got them confirmed by letters by reputable people".

Near the close of 1961 EMF told Sullivan that it was imperative that the work in Saint Paul be started. Sullivan promised EMF that it would get a superintendent, a foreman, and men and material on the job by the end of January. Sullivan sent John Sullivan (Jack) from Boston to Saint Paul in early January. On this trip he conferred with EMF's superintendent on the project. Jack was back in Minnesota later in the same month with Byers who was to be Sullivan's general superintendent on the job. Before he left Boston on this second trip Jack had been instructed by Frank to look over the labor situation in the area, to check in with prospective subcontractors, to see Elnicky and give him quotations which "will back up the reduction of his bid", and to "get the job started". Frank gave Jack the job estimates which had been prepared by Sullivan but he was not given and had not seen the prime contract.

Upon their arrival Byers called upon local union business agents, purchased material and tools, received other equipment from Boston, and placed four steamfitters on the job.

On Monday, January 22, Jack came to Midwest's office. This was the first time Elnicky saw him. Elnicky and some of his employees testified that Jack told him on this visit that he was "part of the Sullivan organization" and had "a piece of it". Jack denied that he made any such statement. Elnicky conceded that he made no attempt to check Jack's authority with the Sullivan home office and that he did not ask for written evidence of it.

Elnicky also testified that Jack early in this first meeting suggested that Midwest price off "the whole works"; in any event, Elnicky indicated that he was interested in taking over the entire Sullivan job. Jack did not object and said that he would try to get a copy of the prime contract for him. The two men met again on Tuesday when Jack permitted Elnicky and his people to review the bids Sullivan had received. By Wednesday Jack obtained a copy of the prime contract from EMF's office on the job. He gave it to Elnicky who kept it over night. Meanwhile, Jack talked with other prospective subcontractors. Elnicky and Jack met further, and sometimes socially, during the same week. Jack told him that Sullivan would have to have a minimum of $100,000 if Elnicky took over. On Thursday Jack told Frank by telephone of the discussions he was having with Midwest. As to this conversation Frank testified that he told Jack that this could not be done; that EMF wanted Sullivan on the job; and that Jack should "Pick up what you got and come home". Midwest finished its estimating on Saturday, January 27. That evening Jack was at Elnicky's home with Elnicky and two of the latter's men. They discussed costs and what Elnicky might offer to do the job but no conclusion was reached.

Early in the afternoon of the next day, Sunday, Elnicky came to Jack's hotel room. Jack was planning to return to Boston. Elnicky arrived with a fifth of scotch. The men were together for three and one-half hours, discussing the job and drinking the entire fifth. Byers was present but left for a time to get the copy of the prime contract which had been left elsewhere. Elnicky made an offer of $1,550,000 to perform the work. This was discussed as was the question of what to do with the equipment and materials which Sullivan already had on the job. Jack then started to write something out. Elnicky dictated part of it. Several drafts were made. Later Jack dictated a draft to a hotel typist and he and Elnicky signed it. Elnicky then took Jack to the airport. The typed draft is Midwest's Exhibit 5^* and is the document in controversy. It was admitted in evidence over Sullivan's objection.

The testimony as to the execution of the exhibit is in sharp conflict. Jack testified that he told Elnicky that this agreement was subject to approval by Frank and EMF; that there was no sense in working out other details until this was done; that it was his intention that Exhibit 5 be merely a proposal by Elnicky to Sullivan; and that he did not intend thereby to turn the Sullivan contract over to Midwest. Byers testified that Jack told Elnicky that it had to be approved by Frank and EMF; that Elnicky acknowledged this; and that he, Byers, had expressed a hope that Frank would approve it so he "could go home". Elnicky flatly denied that Jack had said Exhibit 5 was subject to approval by Frank and EMF.

The next day, Monday the 29th, Jack called Byers from Boston to see if Elnicky had someone on the job as the writing provided. Byers called Elnicky who told him he would have someone there on Tuesday. On Tuesday Jack and Elnicky conferred by telephone. Byers then sent Elnicky's men away from the job. On the same day, January 30th, Jack, signing on behalf of the Sullivan Company, wrote Midwest that "The agreement made on January 28th, 1962, between the Midwest Sheet Metal Company and the Frank Sullivan Company is hereby cancelled", and that they would try to arrange for Midwest to quote on the job's ventilating, air conditioning, and refrigeration. Jack testified that he wrote this letter without discussion with Frank. Midwest's receipt of that letter led to the present suit.

Jack Sullivan's status is obviously of vital importance. In January 1962 he was 29 years of age. He was a high school graduate and had had one year of "night college". He held a plumber's union card and a journeyman plumber's license. He had worked for Sullivan for ten years. He had started there as a plumber and, by 1959, was a job superintendent. About mid-1960 he became an "outside superintendent". In this capacity he traveled to various jobs, examined labor and material situations and reported back to Sullivan. He did no hiring or firing. He did not order materials. He did make recommendations. He was not an officer, director, or shareholder of Sullivan. He was not related to Frank. He had nothing to do with obtaining or negotiating subcontracts. He had had no experience in sheet metal or air conditioning. He had done no estimating. He had been given no specific authority to sign any contract for Sullivan or to assign Sullivan's subcontract with EMF.

In January 1962 Elnicky was about 52. He had been in sheet metal and similar work for many years and had run his own business since 1947.

A. The contract. Sullivan's basic argument here is, first, that Midwest's lawsuit is concededly bottomed on Plaintiff's Exhibit 5 but Midwest utterly failed to prove that Exhibit 5 was the actual contract, if one existed at all, between the parties, and second, that Exhibit 5 in any event is not sufficiently clear and definite to be valid and to constitute an enforceable contract. It argues that Elnicky's own testimony on cross-examination disclosed the presence of several provisions (reimbursement to Sullivan for job costs already incurred; Midwest's undertaking the expense of continuing Byers on the job until its own men could be lined up; Sullivan's guaranty of the bids it had received) which were vital but which did not appear in Exhibit 5; that the exhibit at best was incomplete; and that the court's rulings on evidence and its instructions were prejudicial to the extent they were inconsistent with this approach.

Under Minnesota law one who confines his pleading to an express contract and...