Gardner Engineering Corp. v. Page Engineering Co.

• Decision Date: 01 August 1973
• Docket Number: No. 72-1771.,72-1771.
• Citation: 484 F.2d 27
• Parties: GARDNER ENGINEERING CORPORATION et al., Appellees, v. PAGE ENGINEERING COMPANY, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

484 F.2d 27 (1973)

GARDNER ENGINEERING CORPORATION et al., Appellees, v. PAGE ENGINEERING COMPANY, Appellant.

No. 72-1771.

United States Court of Appeals, Eighth Circuit.

Submitted May 14, 1973.

Decided August 1, 1973.

Henry Woods, McMath, Leatherman & Woods, Little Rock, Ark., and Harry H. Ruskin, Ruskin & Rosenbaum, Chicago, Ill., for appellant.

Martin G. Gilbert, Coleman, Gantt, Ramsay & Cox, Pine Bluff, Ark., for appellees.

Before GIBSON, HEANEY and ROSS, Circuit Judges.

GIBSON, Circuit Judge.

This diversity suit on an anticipatory repudiation of a contract, between a prime contractor and a subcontractor, was brought in the Eastern District of Arkansas. The District Court¹ in a jury waived trial found for the plaintiffs in the amount of $91,423.46. We affirm the judgment of the District Court.

Because jurisdiction and venue are challenged a brief description of the parties is mandated. Plaintiffs are: (1) M. Clare Miller, C. Dale Miller, and Lloyd W. Miller, a Kansas partnership operating under the name of San Ore Construction Company; (2) Gardner Engineering Corporation, a Texas corporation; subsequently added as plaintiffs were (3) Miller Bros. Inc., a Kansas corporation; and (4) Geco, Inc., a Texas corporation. Original plaintiffs had formed a joint venture. S.O.G. — San Ore-Gardner, for the purpose of bidding on alterations on the Benzal railroad bridge² spanning the White River near Benzal, Arkansas. Defendant Page Engineering Company, an Illinois corporation, had its principal place of business in Illinois. None of the original parties had qualified to do business in Arkansas, but Geco, Inc. was qualified to do business in Arkansas. The plaintiffs hereafter will be collectively referred to as S.O.G. Plaintiffs for the most part are engaged in the heavy construction business; the defendant in manufacturing.

In July 1968, S.O.G. sent out invitations for bids from its Pine Bluff, Arkansas, office to various subcontractors including Page, while apparently at the same time Page had sent notices that it was preparing a bid to all general contractors interested in the project, including S.O.G. This notice was sent to the Pine Bluff, Arkansas, office of S.O.G. Page's notice apparently was not in response to S.O.G.'s invitation but was offered at Page's initiative. Thereafter, in August, 1968, Page delivered to a representative of S.O.G. in St. Louis, Missouri, Page's proposal for furnishing all of the required cast steel, operating machinery, sheaves, trunnions, trunnion bearings, wire rope and attachments. Bids were opened in St. Louis in August, 1969. S.O.G. was awarded the primary contract. Subsequently, in December, 1968, S.O.G. from its office in Houston, Texas, sent to Page in McCook, Illinois, a purchase order for three of the items on Page's proposal, omitting the cast steel, at the item bid cost of $205,964. All of these materials and equipment were to be delivered to the jobsite in Arkansas and Page was to furnish a field engineer to supervise construction and start up the machinery. All invoices were to be sent to S.O.G. in Houston, Texas. On December 17, 1968, Page at its office in Illinois signed the acceptance copy of the purchase order "Subject to Ltr. 12-17-68 Attached" and returned the acceptance copy and letter to S.O.G. in Houston, Texas.

Page's attached letter objected to the delivery terms of the purchase order "to fit contractor's schedule" and requested that S.O.G. "provide us by return mail a delivery schedule of each of the items required for this order. . . ." On January 6, 1969, Page again requested of S.O.G. a definite shipping schedule of the equipment and materials to be furnished. S.O.G. replied on January 9, 1969, that "we intend to give you a schedule for delivery of equipment. . . . However at this time a work order had not been issued by the railroad . . . it is anticipated that the need for the machinery will come in the winter of 1970. I will advise you from time to time as the schedule gets more definable."

Page again wrote S.O.G. on March 23, 1969, stating in part that the purchase order could not be released for procurement and production until "a more specific shipment schedule can be established." S.O.G. replied on April 2, 1969, that it was setting delivery of all machinery for July 15, 1970. Page being unable to relate the July 15, 1970, date to the original intention of "winter of 1970" and expressing concern about the absence of an exact shipment sequence wrote S.O.G. on April 10, 1969, stating in part ". . . it presently appears that this required delivery date of July 15, 1970 may be critical for us and request that you keep us closely advised of actual required delivery date for each major element or component to be furnished by us."

Page contends that their understanding of the phrase, "winter of 1970," contained in the letter from S.O.G. dated January 9, 1969, was that delivery would begin about December, 1970, and that this earlier date would not be satisfactory. A series of letters between the parties concerning the delivery date ensued. The next significant letter was from Page to S.O.G. under date of June 10, 1969. It read in pertinent part:

"Unless we have advice from you with reasonable dispatch confirming delivery for the winter beginning December 1970, we shall be compelled to regard your April 2 letter, which sets up the July 15, 1970 date, as a material change in the understanding between us and as making it impossible to have a binding agreement between us."

In the meantime, government fund shortages had caused the proposed substructure work on the bridge to be delayed. S.O.G. communicated this fact to Page and further told Page, by letter dated July 8, 1969, that:

"Due to uncertainty of available funds from the government for the new fiscal year, the railroad company has suggested we delay substructure work. Delivery of the materials covered by reference purchase order in December, 1970 to January, 1971 is now considered satisfactory. Due to jobsite handling conditions we will want all materials delivered at the same time. Please schedule your delivery accordingly."

After further negotiations between the parties, and their attorneys, Page notified S.O.G. by letter of November 13, 1969, that it had canceled the contract. This lawsuit ensued.

Despite all of the controversy on the projected and actual delivery date desired, Page must have known that construction progress was dependent on a number of factors, including government financing, river stages, and the necessary coordination between suppliers of materials and equipment together with the work force needed in the step by step process of carrying out this project. Page requested and was entitled to a tentative schedule of the delivery date insofar as it affected its operation in order to effectively utilize its facilities and work force; and a tentative schedule was received. Finally, after all of the letters respecting possible or intended delivery dates were exchanged and after Page said it would not deliver prior to December, 1970, S.O.G. agreed in its letter of July 8, 1969, that delivery in December, 1970 to January, 1971 would be satisfactory. Meanwhile Page had taken no steps to fabricate and manufacture the items of its subcontract, and when Page's revised calculations indicated an anticipatory loss of $110,000 if it performed the subcontract, Page canceled on November 13, 1969. Upon Page's cancellation, S.O.G. re-submitted the item for bids. The accepted bid exceeded Page's original bid by $91,423.46, the amount awarded in judgment by the trial court.

Page raises five issues on appeal: (1) lack of personal jurisdiction over Page, (2) improper venue, (3) no contract existed between the parties, (4) S.O.G. had given Page cause to be insecure regarding payment, and (5) S.O.G. failed to act in good faith toward Page. We examine each issue seriatim.

Jurisdiction: Jurisdiction in this case is based on Ark.Stat.Ann. § 27-2502 (1971 Supp.). This statute provides in pertinent part:

"27-2502. Bases of personal jurisdiction over persons outside this state. —

* * * * *

"C. Personal jurisdiction based on conduct.

"1. A court may exercise personal jurisdiction over a person who acts directly or by an agent, as to a (cause of action) (claim for relief) arising from the person\'s

* * * * *

"(b) contracting to supply services or things in this State . . ."

There is no real dispute that the activities of the defendant fall within the terms of the statute. The question raised by Page is whether or not, under the facts of this case, there is the minimum contact with the State of Arkansas necessary to satisfy Fourteenth Amendment due process requirements on personal jurisdiction. We think there is.

The operative facts are undisputed. Neither the original plaintiffs nor the defendant are residents of the State of Arkansas or qualified to do business there. Defendant agreed to supply custom fabricated items, intended solely for use in the State of Arkansas, by delivery FOB jobsite and also agreed to furnish a field engineer to oversee installation and start up of the machinery.

Likewise, the broad legal principles are not in dispute. Both parties cite the leading Supreme Court decisions on this issue. Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958); McGee v. International Life Ins. Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957); International Shoe Co. v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). These decisions establish the broad framework within which the lower federal courts must operate. Ultimately each question of jurisdiction must be decided on a case-by-case basis. Velandra v. Regie Nationale des Usines Renault, 336 F.2d 292, 295 (6th Cir. 1964). International Shoe Co. v. State of Washington, supra at 316, at 158 of 66 S.Ct. holds that:

". . . due process requires only that in order to subject a defendant to a judgment

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