Galveston Causeway Const. Co. v. Galveston, H. & S.A. Ry. Co.

• Decision Date: 15 August 1922
• Docket Number: 154.
• Citation: 284 F. 137
• Parties: GALVESTON CAUSEWAY CONST. CO. et al. v. GALVESTON, H. & S.A. RY. CO. et al.
• Court: U.S. District Court — Southern District of Texas

284 F. 137

GALVESTON CAUSEWAY CONST. CO. et al. v. GALVESTON, H. & S.A. RY.

CO. et al.

No. 154.

United States District Court, S.D. Texas, Houston Division.

August 15, 1922

Hunt &amp Teagle and Presley K. Ewing, all of Houston, Tex. (J. A McCullough, of Baltimore, Md., of counsel), for complainants.

Terry Cavin & Mills and C. H. Theobald, all of Galveston, Tex., and Baker, Botts, Parker & Garwood, of Houston, Tex. (J. W Terry, of Galveston, Tex., and Palmer Hutcheson and J. H. Tallichet, both of Houston, Tex., of counsel), for defendants.

HUTCHESON District Judge.

This controversy presents a bill in equity brought by the Galveston Causeway Construction Company and the United States Fidelity & Guaranty Company against the steam railroad corporations Galveston, Harrisburg & San Antonio Railway Company, Gulf, Colorado & Santa Fe Railway Company, and Galveston, Houston & Henderson Railroad Company, and the interurban railway Galveston-Houston Electric Railway Company, and also against the county of Galveston, to obtain equitable relief against a certain contract of September 15, 1917, for the construction and reconstruction in part of a specified causeway across Galveston Bay between Galveston Island and Virginia Point in Galveston county, and a counterclaim by the named defendants setting up the making of the contract, its breach by complainants, and the damage flowing to defendants from the breach, measured by the amount over and above the contract price which the counterclaimants alleged they had been compelled to pay to complete the contract.

The underlying facts are in the main undisputed, and a brief preliminary statement of these facts will make clear the contentions of the parties, and serve as a proper introduction to the court's opinion as to them.

On December 15, 1908, Galveston Island then being connected with the mainland by only one railroad bridge, and by no bridge whatsoever for vehicles and foot passengers, which condition had existed since the storm of September, 1900, the county of Galveston, as lessor, and the Gulf, Colorado & Santa Fe Railway Company, Galveston, Houston & Henderson Railroad Company, the Galveston, Harrisburg & San Antonio Railway Company, and Galveston-Houston Electric Railway Company, as lessees, entered into a certain contract of lease which had theretofore been authorized, and was afterwards explicitly ratified by appropriate legislative action, under the terms of which the original Galveston causeway was constructed and thereafter operated.

The companies owning the three steam lines are the lessees of a certain portion of said causeway, and the company owning the electric or interurban line is the lessee of another and distinct portion thereof. This lease was for a term of 999 years from and after December 15, 1908.

On August 16 and 17, 1915, the causeway was damaged and in part destroyed. The steam lines immediately built on the site of the destroyed portion of the causeway a pile trestle, and thereafter all their trains, together with the trains of the interurban company, entered Galveston by means of said trestle. The county afterwards replaced the destroyed portion of its roadway with a pile wagon bridge. These facilities were being maintained and operated during the years 1916 and 1917, when it was agreed by all parties to reconstruct the destroyed portion of the causeway and repair the remainder within a limit of cost of $1,500,000.

The causeway owners, as the county of Galveston, the three steam railroads, and the interurban are, for convenience, designated, settled their differences as to the type of structure to be used by agreeing to accept the plans of William Mueser, of New York, for the type of structure recommended to them by a board of arbitrators.

Thereafter the said William Mueser prepared complete plans and specifications in accordance with the award of the arbitrators, and bids for the performance of the work in accordance with said plans and specifications and of the contract to be thereafter prepared and agreed upon were requested of a limited number of contractors.

Larkin & Sangster, who had theretofore done business as a copartnership, obtained the privilege of bidding on the work in the name of a corporation with limited liability, called Larkin & Sangster, Inc.

Said corporation, after making such investigation as its officers desired or deemed necessary, submitted a bid guaranteeing to perform the whole work contemplated by the plans and specifications for the sum of $1,704,000. Said bid, being in excess of the amount which the several causeway owners were willing to expend for the work, was not accepted.

Thereafter the said corporation, through its officers, negotiated with the causeway owners, including the county of Galveston, and a committee of citizens representing the county, and as a result submitted a revised or amended bid in which it offered to complete the entire work for the actual cost of the work, plus the sum of $250,000, which was to constitute the contractors' sole and only compensation for its services of all kinds, and in which it guaranteed that the total cost would not exceed $1,645,000.

Other expenses in connection with the work, but not included in the bid or contract, were estimated at the sum of $80,000. This cost and expense was wholly separate and apart from any and all cost and expense of the work covered by said contract.

Thereafter the several causeway owners made and entered into a supplemental contract of lease in which the county of Galveston guaranteed to the other parties that the whole cost of the work, that undertaken by the contractor, $1,645,000, and the outside and additional expenses above referred to, $80,000, should not in any event exceed the sum of $1,725,000, and said county agreed and bound itself, being induced to do so by the bid and guarantee of the contractor, which was subsequently reduced to writing in the form of a contract and surety bond, that it would pay and bear any and all cost of the work in excess of said sum of $1,725,000.

An agreement pursuant to the bid of the contractor was prepared by counsel for the causeway owners. Various changes and amendments were discussed and adopted, and same was fully and completely accepted and agreed upon by all the causeway interests and officers of the contractors.

Prior to September 15, 1917, which date was the date borne by said agreement, as well as by the supplemental contract of lease, the agreement, with the bond which accompanied it, was delivered to the officers of the contractor in printed form, but with spaces for all signatures left blank. It was executed by the contractors on or about September 15, 1917, and by the complainant United States Fidelity & Guaranty Company on September 28, 1917. Thereafter, and during the remainder of the year 1917, it was at various times signed by the other parties, except the Galveston, Houston & Henderson Railroad Company, which did not sign it until November 16, 1919.

At or about the time of the execution of the bond the surety company received its premium for two years, together with a deposit by way of security in the sum of $50,000, all of which it has ever since retained.

The complainants, in describing this contract in their bill, say:

'That complainant Larkin & Sangster, Inc., entered into written contract, bearing date September 15, 1917, with the defendants steam railway companies, recited as acting for themselves and for the defendant county of Galveston, and with the defendant Galveston Houston Electric Company, parties of the first part, hereinafter styled railway companies, for the reconstruction and repair on the terms and conditions therein set forth of those certain portions of the causeway across Galveston Bay between Galveston Island and Virginia Point, in Galveston county, Tex., described in the general specifications as the extension of the present arch and bridge toward Virginia Point on the mainland and Galveston Island, by the addition to said present arch bridge of specified arch construction, together with the complete rehabilitation of the then remaining portions of the original protected roadway (except as to superstructure consisting of ballast and tracks on the railroad and interurban sections, and pavement of the county road section) comprising the causeway in its entirety, save and except the original arch bridge and original lift bridge as heretofore constructed and now existing; such work to be prosecuted, performed, and completed to the satisfaction of the supervising engineer therein mentioned, and in strict conformity with the general specifications and plans thereby referred to, and such further details and instructions as such supervising engineer might, in writing, from time to time furnish or issue for the purpose of insuring the thorough execution of the work in a most thorough manner, and within the time therein specified.

'(2) That said railway companies were to pay for such work $1,645,000, according to the terms and conditions of such contract, to include all necessary labor, materials, tools, appliances, apparatus, ways, machinery, tugs, barges, pile drivers, plant, and equipment, but in such price there was figured $250,000, to constitute the sole and only compensation for the services of all kinds of complainant Larkin & Sangster, Inc., including its compensation for the use, as also depreciation, loss, and damages and destruction, of all large tools, apparatus, appliances, ways, machinery, tugs, barges, pile drivers, plant, and equipment used or intended to be used on or about such work, and also premiums for its bond in the undertaking, and its profit, said complainant Larkin & Sangster, Inc., thereby guaranteeing or insuring the

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