Glens Falls Insurance Company v. Newton Lumber & Mfg. Co., 8779
| Decision Date | 24 October 1967 |
| Docket Number | 8780.,No. 8779,8779 |
| Citation | 388 F.2d 66 |
| Parties | GLENS FALLS INSURANCE COMPANY, Appellant, v. NEWTON LUMBER & MFG. CO., and Perfection Truss Co., Inc., Appellees. D M H ENTERPRISES, INC., Appellant, v. NEWTON LUMBER & MFG. CO., and Perfection Truss Co., Inc., Appellees. |
| Court | U.S. Court of Appeals — Tenth Circuit |
H. Gayle Weller, Denver, Colo., and Norman E. Walton, Colorado Springs, Colo., for appellants.
Robert E. Anderson, Colorado Springs, Colo. (Horn, Anderson & Johnson, Daniel P. Edwards and Love, Cole & Murphy, Colorado Springs, Colo., on the brief) for appellees.
Before PHILLIPS, LEWIS and HILL, Circuit Judges.
DMH Enterprises, Inc.,1 on March 27, 1964, entered into a written contract with the United States Air Force, whereby D MH agreed, as the prime contractor, to furnish all labor and materials and do all the work required to construct a 200-unit family housing project near the Ent Air Force Base in Colorado.
DMH, as principal, and Glens Falls Insurance Company,2 as surety, executed a payment bond, pursuant to the provisions of § 1 of the Miller Act, 40 U.S. C.A. § 270a(a) (2), c. 642, § 1, 49 Stat. 793.
On February 26, 1965, an action in the name of the United States for the use and benefit of Newton Lumber & Mfg. Co.3 and Perfection Truss Co., Inc.,4 was brought to recover from DMH and Glens Falls on the bond, sums due Newton and Perfection for materials furnished by them to Whiteside Construction Company, Inc.5
In the complaint it was alleged that Whiteside Construction was a subcontractor of DMH and such materials "were required by * * * DMH" to carry out its prime contract and were furnished "with the knowledge, consent and approval" of DMH.
In their answer DMH and Glens Falls alleged that Earl M. Campbell, doing business as Construction Industries of Colorado, was a subcontractor of DMH and that Whiteside Construction was a subcontractor of Campbell, and therefore neither Newton nor Perfection was entitled to recover on the bond.
From a judgment in favor of Newton and Perfection, DMH and Glens Falls have taken separate appeals.
On April 20, 1964, Campbell and DMH executed a writing which purported to be a subcontract, whereby Campbell agreed to furnish the materials and perform the labor necessary to complete the carpentry and millwork and the installation of weatherstripping and thresholds in compliance with the requirements of the prime contract.
Campbell and Whiteside Construction executed a writing, dated May 6, 1964, which purported to be a subcontract between Campbell and Whiteside Construction, whereby the latter agreed to furnish the materials and perform the work necessary to complete such carpentry and millwork, which were virtually all of the materials, labor and work which Campbell undertook to furnish under his purported subcontract with DMH.
The case was tried to the court, without a jury.
The trial court found that the contract between DMH and Campbell was a sham; that in substance Campbell was the agent of DMH, and that Whiteside Construction was the subcontractor of DMH.
The following facts were established by substantial evidence:
Darrell M. Hills was the president of DMH. He and Campbell were married to sisters and were close friends. For a time, prior to early May, 1964, Campbell had engaged in the full-time practice of dentistry at Minneapolis, Minnesota. Later, from time to time, he practiced dentistry only part-time and engaged in the construction of houses in Minneapolis. Early in May, 1964, he sold his dental practice and moved to Colorado Springs, Colorado.
Campbell saw an invitation for bids in a Government publication for the construction of the housing project here involved. Being desirous of getting into the contracting business, Campbell brought the invitation to the attention of Hills. Hills submitted a bid for the housing project, which was accepted, and culminated in the contract of March 27, 1964. Hills and Campbell reached an understanding about the part Campbell would play with respect to the carrying out of the work on the housing project.
Jack L. Whiteside6 was president of Whiteside Construction. Prior to April 2, 1964, Whiteside called Hills by telephone with respect to bidding as a subcontractor on the "framing" on the housing project. As a result of the conversation, Whiteside met with Hills at the latter's office in Colorado Springs, Colorado. Hills furnished Whiteside with a set of the plans and specifications for the housing project and they discussed the scope of the work. In the latter part of April, 1964, Whiteside submitted to Hills a bid to furnish certain labor and materials for the project. Hills advised Whiteside his bid was greater than one submitted by another subcontractor and asked him to refigure the job and revise his bid downward. Whiteside did refigure the job and reduced his bid to $452,000. Whiteside advised Hills that Whiteside Construction could not furnish a performance bond. Thereupon, Hills stated that a fee of one per cent would have to be paid to Campbell, and Hills and Whiteside agreed on a final price of $447,500 for the furnishing of the materials and labor embraced in the contract between Whiteside Construction and Campbell, which was the amount of Whiteside's earlier bid, less approximately one per cent.
After the price was agreed on, Hills advised Whiteside that a Mr. Campbell in Minneapolis would sign the contract with Whiteside Construction. Thereafter, Whiteside had a telephone conversation with Campbell. Campbell told Whiteside that Hills had checked Whiteside Construction and Whiteside with their banker and had received a favorable report and that a contract would be drafted. Virtually all the negotiations with respect to the contract between Campbell and Whiteside Construction were carried out between Hills and Whiteside. Hills advised Whiteside his original bid would have to be reduced to meet a bid of another subcontractor, and later advised Whiteside that he and his wife would have to execute a personal note to Campbell for $44,750 to secure Campbell against loss, and that Whiteside's revised bid would have to be further reduced one per cent to provide a fee of one per cent of the bid to Campbell, because Whiteside Construction could not give a performance bond. Whiteside agreed with Hills to reduce his bid to $447,500.
After the telephone conversation between Whiteside and Campbell, the contract, dated May 6, 1964, was prepared by DMH and submitted to Whiteside. When so submitted, Campbell had not signed the contract and was not present. The contract was signed, It was later signed
Early in 1964, William M. Hardwicke, the general manager of Perfection, submitted to Hills a bid to provide the roof trusses on the housing project. At that time, Hills told Hardwicke he was negotiating with a Mr. Whiteside to furnish the labor and materials for the framing work and that Whiteside Construction was going to be the framing subcontractor. Hills then asked Hardwicke if the prices he had submitted to Hills could be used by Whiteside and Hardwicke said it would be all right. Hardwicke never heard of Campbell until after Perfection had furnished much of the materials to Whiteside Construction and was having difficulty in obtaining payment therefor from Whiteside Construction. Hardwicke advised Hills he was having trouble collecting from Whiteside Construction and Hills advised him to take the matter up with Campbell. Prior thereto, Hardwicke had been on the job quite often and had never seen Campbell there.
Hills told Vernon M. Hallenbeck, general manager of Newton, that Whiteside Construction would be the framing subcontractor. Hallenbeck testified he saw Campbell on the job from time to time, but believed he was a representative of DMH.
The L & M Builders Supply furnished materials for the housing project. Jack LaRock, the head of that firm, was introduced to Whiteside by a representative of DMH, who told LaRock that Whiteside was the carpentry subcontractor on the job and that all scheduling and delivery would have to be gone over with Whiteside. LaRock had no contacts with Campbell until late in 1964.
When problems arose, as the work progressed, Whiteside talked with Leonard Sweeny, the general superintendent of DMH, or Hills, not with Campbell. Hills and Sweeny frequently gave directions to Whiteside Construction.
Campbell had no workmen on the job until after Whiteside Construction was unable to complete the work under its contract and had left the project in December, 1964. Campbell occupied space with DMH without charge until December 1, 1964, at which time he rented a trailer not being used by DMH. All of Campbell's secretarial work was done by...
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