HB Zachry Company v. Travelers Indemnity Company
| Decision Date | 08 December 1966 |
| Docket Number | Civ. A. No. 2137. |
| Citation | 262 F. Supp. 237 |
| Parties | H. B. ZACHRY COMPANY, Plaintiff, v. The TRAVELERS INDEMNITY COMPANY, and Miles & Sons Trucking Service, Inc., and Sierra Construction Company, Inc., a Joint Venture or Partnership under the name of Miles-Sierra, Defendants. UNITED STATES for the Use of MILES & SONS TRUCKING SERVICE, INC., a corporation, and Sierra Construction Company, Inc., a corporation, a Joint Venture doing business under the name of Miles-Sierra, General Contractors, Third-Party Plaintiffs, v. H. B. ZACHRY COMPANY, a corporation, and Standard Accident Insurance Company, a corporation, Third-Party Defendants. |
| Court | U.S. District Court — Northern District of Texas |
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Stanley P. Wilson, Abilene, Tex., Sidney Callender, Chester Johnson, San Antonio, Tex., for plaintiff.
Josh H. Groce, San Antonio, Tex., Gordon Johnson, San Francisco, Cal., for defendants.
This suit was brought under the Miller Act for damages for alleged breach of contract in connection with the construction of the Twin Buttes Dam in Tom Green County, Texas, for the Bureau of Reclamation of the Department of Interior.
H. B. Zachry Company, herein called "Zachry", the prime contractor on the project, sues Miles-Sierra, General Contractors, a joint venture composed of Miles & Sons Trucking Service, Inc., and Sierra Construction Company, Inc., and the Travelers Indemnity Company, herein called "Travelers". Miles-Sierra was the subcontractor to do the riprap work for Zachry in connection with the construction of the dam, and Travelers was the surety on the performance and payment bonds for Miles-Sierra. Zachry sought damages in excess of $1,000,000.00 for failure of Miles-Sierra to complete its work under the subcontract.
A cross-claim and third-party complaint sought damages for Miles-Sierra from Zachry and Standard Accident Insurance Company, herein called "Standard", the surety on the payment bond under the prime contract, for the alleged unlawful and wrongful taking over by Zachry of the work subcontracted to Miles-Sierra. The amount of damages claimed was $373,327.03, representing the difference between what Miles-Sierra spent on the subcontract work and the amount it had been paid by Zachry.
Each one of the parties is a private corporation chartered by a state other than Texas, with a permit to do business in Texas. Zachry is the only one which has its main office and place of business in this State.
By agreement of the parties, the liability issues on both claims were severed from those on damages for separate and preliminary trial, as provided for in Rule 42(b), F.R.Civ.P. However, the Court's determination that there is no liability either on the plaintiff's action or on the third-party action and cross-claim makes all issues of damages moot and finally disposes of the entire case.
While the volume of evidence and nature of the case necessarily require that this opinion be somewhat lengthy, every effort has been made to condense the facts and the discussion of the issues where possible. The typewritten record of the testimony comprises about 1400 pages. There are over 100 exhibits, most of which are documentary in nature. Some of them are voluminous contracts with material, highly technical specifications. The trial briefs for each side filed since the record was written up exceed 175 pages. The case has been well tried by all counsel, and their highly competent briefs have been of material help.
All matters stipulated or admitted, as well as all those established conclusively by the evidence are found as facts, whether formally included herein or not; and they have been considered by the Court. However, where credibility of a witness is involved, no matter is found as a fact even though it is undisputed, if it does not support the findings and conclusions set out herein.
Each side made numerous objections to the admission of evidence during the trial. Since there was no jury, the Court followed the generally accepted practice of conditionally overruling most of the objections so that they could be considered and passed upon after all the evidence was concluded. Though such re-examination has been made, it would unduly lengthen this opinion to comment now on the final conclusion reached as to each objection. However, the Sweet Report, offered as P.Ex. 64, is of such importance that record will be made of the fact that the Court's final opinion was that the portions of the report objected to were inadmissible, and of the further fact that they were not considered for any purpose. The report was of an investigation made by R. W. Sweet, a Washington representative of the Bureau of Reclamation, in carrying out "a special assignment concerning the production and placement of riprap for the Twin Buttes Dam." The investigation was made on September 3, 1961 and shortly thereafter. The report, prepared on the following September 11th, contained information and conclusions narrated to Sweet by persons purporting to have knowledge about the subject matter of the investigation, and Sweet's own conclusions based thereon. The effect of the report was that Miles-Sierra was not qualified or equipped to do the rip-rap work called for by the subcontract. Zachry claimed that the entire report was admissible under the official records statute. In briefs filed since the conclusion of the evidence, Zachry relies primarily upon Moran v. Pittsburgh-Des Moines Steel Co., 3 Cir., 183 F.2d 467 (1950), and Bisno v. United States, 9 Cir., 299 F.2d 711 (1961), as support for the admissibility of the report. Bisno is not in point and Moran has been expressly rejected by the Fifth Circuit in Chapman v. United States, 194 F.2d 974 (1952), and Matthews v. United States, 217 F.2d 409, 50 A.L.R.2d 1187 (1954). Investigative reports lack the reliability of routine clerical records kept in the regular course of business, and are not usually admissible as original evidence under the business or official records statutes, as they have been construed in Palmer v. Hoffman, 318 U.S. 109, 63 S.Ct. 477, 87 L.Ed. 645, 144 A.L.R. 719; Gordon v. Robinson, 3 Cir., 210 F.2d 192, 196 (1954); Olender v. United States, 9 Cir., 210 F.2d 795 (1954); Hartzog v. United States, 4 Cir., 217 F.2d 706, 709 (1954); Standard Oil Co. of Cal. v. Moore, 9 Cir., 251 F.2d 188, 214 (1957); Missouri Pacific R. R. Co. v. Austin, 5 Cir., 292 F.2d 415, 422 (1961). The Court has therefore sustained the objections to and excluded the following portions of the report:
(a) That part of the first full paragraph on page 2 commencing with the words "I understand" in the sixth line of the paragraph and running through to the end of the paragraph, the last line of which reads "date was July 11, 1961."
(b) That portion of the last paragraph on page 2 commencing with the words "such an agreement" in the 11th line of said paragraph and running through to the end of the paragraph at the bottom of the page, the last line thereof reading "for both Miles-Sierra and Zachry."
(c) That part of the report commencing with the phrase "In discussing the results" on the 7th line of the only full paragraph on page 2 and continuing through to the end of the report on page 5.
Zachry claims that due to lack of qualified personnel, suitable equipment and diligent operation, Miles-Sierra failed to comply with its express obligation under the subcontract to schedule its operations as required by Zachry and to complete the riprap work in accordance with the program of allied operations of Zachry and its other subcontractors, and that as a result thereof, Miles-Sierra completed the placement of less than one-half of one per cent of the total amount of riprap at the expiration of one-third of the performance time allowed by the prime contract for the entire dam project. Zachry says that no improvement in the riprap work was made by Miles-Sierra after numerous complaints by the Bureau of Reclamation and by Zachry itself, over a considerable period of time, and that it finally gave the five day notice provided for in the subcontract demanding compliance by the subcontractor, all to no avail. Zachry contends that it was forced to take over and complete the riprap work to avoid the risk of the $1200.00 penalty for each day of delayed completion of the project beyond the 1200 calendar days allowed by the prime contract. It rests its authority for such action on the provision of the subcontract giving the contractor the right to take over and complete the work provided for in such contract, at the cost and expense of the subcontractor, in the event of default by the subcontractor or in the event its work should interfere with or in any way impede the allied operations on the project.
Miles-Sierra denies Zachry's contentions that it was lacking in qualified personnel, equipment and diligence. It insists that it understood that the embackment would be built in five foot lifts so that it could place the riprap by dumping it over the sides from back-end dump trucks, and that instead of building the dam in that manner Zachry prepared some of it in forty foot heights, thereby requiring placement of riprap by cranes instead of dump trucks.
Miles-Sierra claims that the subcontract required it to exercise an option as to whether it would procure the riprap material from Site 1 or Site 2, which were general areas designated on maps attached to the subcontract and the prime contract; that the only tract in Site 1 on which Zachry had a lease at the time of the execution of the subcontract permitting the quarrying of riprap material was one composed of 15 acres along a limestone ridge on property owned by Doc Willeke; that it elected to get the riprap material from that 15 acre tract, and it was thereby confined thereto for the source of its material for the job; that the subcontract contained a provision guaranteeing that the material in either Site 1...
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